Surna Inc (OTCMKTS:SRNA) Resumes Its Climb

Surna Inc (OTCMKTS:SRNA) sold off along with the rest of the pot sector after the November elections. The last time we covered Surna Inc was back in October after the stock turned into a winner. Surna has been a name that we've been covering all year and remains a top pick for cannabis investors. The latest third quarter results and the company paying off 60% of its convertible notes reinforces this thesis. Shares have bounced off the November lows and look set to resume their march higher.First up, a little background on the company. Surna Inc is based in Boulder, Colorado and develops innovative technologies and products that monitor, control and or address the energy and resource intensive nature of indoor cannabis cultivation. Currently, the company’s revenue stream is based on its main product offerings – supplying industrial technology and products to commercial indoor cannabis grow facilities.In the third quarter, Surna generated revenues of $1.2 million. This was down from $3.6 million in the prior year due to delays in customer readiness to acceptance equipment. Surna said that it expects quarterly sales to fluctuate due primarily to the timing of state legislation, procedural set up, licensing and general availability. The gross margin increased to 35.6%, compared to 14.0% as the company boosted margins by cutting costs and overhead.For the first nine months of this year, revenues came in at $5.6 million, compared to $6.2 million. Gross margin, which included the impact of the $455,000 warranty charge in the second quarter, increased to 32.7%, compared to 13.7%. The net loss was $2.1 million, or $0.02 per share, compared to $3.7 million, or $0.03 per share last year.Regarding its convertible notes, between October 31, 2014 and February 27, 2015, investors participated in a series of private placements. Surna issued units, each of which consisted of 250,000 shares of Common Stock, a warrant to purchase 50,000 shares of Common Stock and a 10% convertible promissory note in the principal amount of $50,000. As of December 6, Surna entered into Note Conversion and Warrant Amendment Agreements with 33 holders. The Original Notes were amended to reflect a reduced conversion price per share between $0.12 and $0.16 with trading restrictions. Additionally, certain Original Warrants have been amended to reflect a reduced exercise price per share of $0.35, with the exception of the first Agreement signed which amended certain Original Warrants to reflect a reduced exercise price of $0.15 per share.Surna converted the Original Notes with outstanding principal amount of approximately $1,475,000, which represented approximately 60% of the total principal amount under the Original Notes. Surna then issued 12,220,604 shares of Common Stock in connection with the conversion of such Original Notes and amended 1,425,000 Original Warrants. Surna intends to negotiate with the remaining holders of the Original Notes to convert the remaining $1,061,000 of principal and hopes to get them on board with the rest of the note holders.In November, Surna unveiled its proprietary Hybrid Building at the Marijuana Business Conference & Expo in Las Vegas. The Hybrid Building design is a turnkey solution for climate-controlled buildings as a mix of an indoor cultivation facility and greenhouse. Surna worked closely with the senior engineering team at the University of Colorado in designing a scale model that demonstrates the unique features of the building, including proprietary ceiling structure, which allows for sunlight to reach a plant canopy, and the sealed environment, which minimizes the negative effects of outside air contamination such as pests and pathogens. CEO Trent Doucet said at the time:

"We are excited to publicly unveil our scale model of our Hybrid Building - the turnkey solution for climate controlled buildings - at one of the industry's largest trade shows. We hope you can come by and see the incredible advantages this patent-pending platform can bring to cultivators who are looking to advance their production techniques to generate greater volume and consistency while becoming more energy efficient."

Currently trading with a market cap of $24.8 million, SRNA remains a top story for cannabis investors. It's one of the few cannabis names seeing substantial revenue growth. In 2014, the company posted $1.8 million in revenues and in 2015 reported $7.8 million. With the company making strides in reducing the convertible notes on its balance sheet, SRNA looks poised for its next leg higher. 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.