Surna Inc (OTCMKTS:SRNA) Is A Pot Stock On The Move

Our readers will remember our previous coverage of Surna Inc. (OTCMKTS:SRNA), which supplies industrial technology and products to commercial indoor cannabis grow facilities. In November 2017, we wrote our last piece on this name, wherein we said that the company was very well positioned to capitalize on the current growth in the cannabis industry. A new website and brand strategy had been announced, and the company was said to be becoming a leader in indoor growth cultivation. It was a good name to follow in the marijuana space.But, that was not the most important.In our opinion, the key in that piece was what we pointed out about the marijuana industry in California. We said that in this state, the legal sale of recreational marijuana would be commencing in January of 2018. So, we expected that 2018 would be a good year for the cannabis industry as a whole, including SRNA.As of today, we can say that we were right in pointing that out before the year 2017 ended.In December, many market participants realized that good news would be coming to the market in January, which made the demand for the stock increase. As a result, the share price spiked at the end of December. From the resistance of $0.15, the share price increased to almost hit the one-year highs of $0.30. The movement represents astonishing stock returns even for a microcap stock, and the best is that we could foresee it in previous reports.Have a look at the share price action: The 1-year chart for SRNAWhat's new?First of all, we received the next quarterly report for the period ended September 30, 2017. The revenues were worth $1,566,256; an increase of 34% concerning the same quarter in 2016. The cost of revenue of $1,175,047 and the selling, general and administrative expenses of $1,396,957 made the company return a net loss of $1,478,478. The market usually focuses on the revenue growth rather than the net income results in emerging businesses like SRNA. Thus, we are not worried about the losses in this quarter.Regarding the balance sheet, the company showed $1,300,706 in cash, $680,267 in intangible assets, and $3,121,204 in total assets. The amount of total liabilities is equal to $2,979,618. We appreciate that the company was able to go from a negative net asset of $2,111,044 to show, in this period, a positive net asset of $141,586.

"Overall, we are pleased with the progress our team has made in the third quarter, particularly with the generation of almost $2.4 million in new sales contracts. Based on the current status of our projects, we are tracking toward the completion of more than half of our current backlog by year's end." Chris Bechtel, the Company's CEO said.

Why are the sales increasing?As noted, revenues for the quarter increased. The company explained that it commenced implementing a two-tiered sales model in Q3 of 2017. The first tier involves direct sales in several areas in the U.S. and Canada. The second level includes two technical advisors with expertise that help the direct sales force. Additionally, it was said that the CEO is now also helping sell in California, wherein he can bring his experience. Furthermore, the company also noted that it is hiring and has already hired a few new sales personnel. We believe that the company's excellent performance is the result of this new sales model, and we also think that the company expects the sales to keep increasing. We get this impression from the hiring of new personnel.Additionally, it was noted that new contracts worth $2,385,000 were awarded for Q3 of 2017 and the company estimated that at least 50% of the Q3 2017 backlog could be recognized as revenue in Q4 2017. This is already a large number of sales. Thus we will have to be ready to assess the new figures, as they may surprise the market.The company will be raising more capitalThe market also got to know in November that the management is expecting to raise debt or equity in the first half of 2018. The money received will be used to continue operations and achieve our growth targets. It shows that it is finding projects with positive expected returns. We hope that the company can receive money in the form of debt, as equity financing could make the share price decline. In any case, it seems that the company can contact market participants to finance itself. We made this impression after reading on December 13, 2017, that the company had received $1,768,080 in a private placement.

"We are also gratified that a number of our existing stockholders expressed continued confidence in the plan by increasing their investments in the company, and we believe it is also noteworthy that Surna's own management team subscribed for 18% of the units in this offering," Chris Bechtel, the company's CEO said.

ConclusionCurrently trading with a market cap of $59 million, SRNA is an exciting story among small caps. With 206,248,522 total outstanding shares and a float of only 99,615,225 shares, we expect a lot of share price volatility in the market. We say this for those readers who appreciate volatility plays in the OTC universe. They have a new microcap runner to assess.To sum up, there is a lot to like and lot to assess on this name. For the full story, check out our complete coverage on SRNA.We will be updating our subscribers as soon as we know more. For the latest updates on SRNA, sign up below!Disclosure: We have no position in SRNA and have not been compensated for this article.Image courtesy of Dr. Brainfish via Flickr