CEA Industries Inc. (CEAD)

[mick]

F-9 - srna
http://ih.advfn.com/p.php?pid=nmona&article=63974329



Litigations

Company is subject to certain legal proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity. As of filing date, there was no outstanding litigation.

Lease Obligations

The Company has entered into a lease agreement for its manufacturing and office space consisting of approximately 18,000 square feet. The lease term extends through September 30, 2016 and calls for yearly payment as follows:

Year ended December 31, 2014 $ 137,209
Year ended December 31, 2015 184,538
January 1 through September 30, 2016 138,404
Total $ 460,151


Subsequent to year end, Surna, Inc. assumed the lease obligations and acquired the Company (see following Note 10 - Subsequent Events).

NOTE 10 – SUBSEQUENT EVENTS

Effective as of July 1, 2014, we entered into a Modification and Amendment (the “Hydro Amendment”) to the previously executed March 31, 2014 Membership Purchase Agreement we entered into with Surna, Inc., a Nevada corporation (“Surna”), under the terms of which Surna would acquire 100% of the Company. Pursuant to the terms of the Hydro Amendment, Surna is to pay the Keens $250,000 by the delivery to the Keens of a $250,000 promissory note from Surna (the “Surna Note”). The Surna Note bears interest at the rate of 6% per annum and is payable in monthly installments of $5,000 with a balloon payment for the balance of accrued interest and principal due on July 18, 2016. The Surna Note may be prepaid in whole or in part at any time.

As additional consideration for the purchase of Hydro, the Company entered into employment agreements with the Keens. Pursuant to the terms of Brandy Keen’s employment agreement, the Company agreed to employ Brandy Keen as its Vice President of Operations for a period of three years beginning on July 18, 2014 and pay her an annual base salary of $96,000 which is subject to review annually by the Company’s Board of Directors. Brandy Keen will be entitled to stock compensation in an amount and on terms to be agreed on at a later date, vacation, leave and other benefits as may be in effect at the Company’s discretion from time to time and reimbursement of out of pocket expenses for business entertainment in connection with his duties. Brandy Keen’s employment is at-will and may be terminated at any time, with or without cause. Brandy Keen is subject to a restriction on competition following termination of her employment agreement for a period of one year.

Pursuant to the terms of Stephen Keen’s employment agreement, the Company agreed to employ Stephen Keen as its Vice President of Research and Development for a period of three years beginning on July 18, 2014 and pay him an annual base salary of $96,000 which is subject to review annually by the Company’s Board of Directors. Stephen Keen will be entitled to stock compensation in an amount and on terms to be agreed on at a later date, vacation, leave and other benefits as may be in effect at the Company’s discretion from time to time and reimbursement of out of pocket expenses for business entertainment in connection with his duties. Stephen Keen’s employment is at-will and may be terminated at any time, with or without cause. Stephen Keen is subject to a restriction on competition following termination of his employment agreement for a period of one year.

F-10







Exhibit 99.2

Hydro Innovations, LLC
Unaudited Condensed Financial Statements
For the Six Months Ended June 30, 2014 and 2013

TABLE OF CONTENTS

Condensed Balance Sheets as of June 30, 2014 and December 31, 2013 (Unaudited) F-1

Condensed Statement of Operations for the six months ended June 30, 2014 and 2013 (Unaudited) F-2

Condensed Statement of Cash Flows for the six months ended June 30, 2014 and 2013 (Unaudited) F-3

Notes to Unaudited Condensed Financial Statements F-4 to F-9


Hydro Innovations, LLC
Condensed Balance Sheets

June 30, 2014 December 31, 2013
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 2,637 $ 19,176
Accounts receivable 76,444 121,908
Inventory 17,631 49,502
Total current assets 96,712 190,586

Property and equipment 72,617 63,416
Accumulated depreciation (42,809 ) (36,726 )
29,808 26,690

Intangible assets 5,178 5,178
Accumulated amortization (3,747 ) (3,663
1,432 1,515

TOTAL ASSETS $ 127,951 $ 218,791

LIABILITIES AND MEMBERS’ DEFICIT

CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 46,992 $ 2,459
Payroll taxes payable 54,138 7,621
Short term line of credit 21,386 20,336
Short term loans 260,000 250,000
Advances from others 28,186 21,932
Advances from Surna, Inc. 84,681 -

Total current liabilities 495,383 302,348

Long Term Debt
Line of credit 13,632 26,156

TOTAL LIABILITIES 509,015 328,504

COMMITMENTS AND CONTINGENCIES

MEMBERS’ DEFICIT
Members’ deficit (381,064 ) (109,713 )

TOTAL LIABILITIES AND MEMBERS’ DEFICIT $ 127,951 $ 218,791


See accompanying notes to the unaudited condensed financial statements

HYDRO INNOVATIONS, LLC
CONDENSED STATEMENTS OF CASH FLOW
(Unaudited)

For the six months ended June 30,
2014 2013

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (271,351 ) 77,709

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expenses 6,167 7,128
Operating expenses incurred by related party on behalf of the Company 9,501

Changes in operating assets and liabilities:
Accounts receivable 45,464 (28,417 )
Inventory 31,871 1,450
Accounts payable and accrued liabilities 97,304 (34,884 )
Cash (used) provided by operations (90,545 ) 32,487

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (9,201 ) -
Net cash used in investing activities (9,201 ) -

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of related party advances - (24,273 )
Proceeds from short term loan 94,681
Repayment of line of credit (11,434 ) (10,116 )
Net cash provided by (used in) financing activities 83,207 (34,389 )

Net increase/(decrease) in cash $ (16,539 ) (1,902 )
Cash, beginning of period 19,176 5,953
Cash, end of period $ 2,637 $ 4,051

Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 2,266 2,544
Cash paid during the year for income taxes $ - -

Non cash Investing and Financing activities:


See accompanying notes to the unaudited condensed financial statements

F-3




Hydro Innovations, LLC
Notes to Unaudited Condensed Financial Statements
For the Six Months Ended June 30, 2014 and 2013

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Nature of Company

The Company manufactures and sells equipment for the indoor gardening industry. The Company’s primary products are indoor climate systems and equipment based upon water chillers (“WCS”) rather than conventional heating, ventilation and air conditioning (commonly referred to as HVAC) and targets the indoor gardening industry through direct and third party distribution channels. The Company manufactures and/or assembles its WCS products.

Basis of presentation

Hydro Innovations LLC, a Texas limited liability company (the “Company”, “we”, “our”) was formed on January 8, 2008.

The accompanying unaudited condensed financial statements for the six months ended June 30, 2014 and 2013 have been prepared in accordance with generally accepted accounting principles (“US GAAP”) in the United States of America and the rules of the U.S. Securities and Exchange Commission and do not conform in all respects to the disclosure and information that is required for annual financial statements. These interim financial statements should be read in conjunction with the Company’s December 31, 2013 audited financial statements and related notes.

In opinion of management, all adjustments, all of which are of a normal recurring nature, considered necessary for fair statement have been included in these interim financial statements.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates:

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates

Cash and Cash Equivalents:

All highly liquid investments with original maturities of three months or less at the date of purchase are considered to be cash equivalents.

Property and Equipment:

Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property and equipment are depreciated using the straight-line method over their estimated useful lives.

Intangible Assets:

Organizational costs, patent costs, trademarks and other intangibles are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated amortization are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, intangible assets are amortized using the straight-line method over their estimated useful lives.

The balance at June 30, 2014 and December 31, 2013 amounted to $1,432 and $1,515, respectively.

F-6




NOTE 3 – GOING CONCERN

The accompanying unaudited condensed financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company had a net loss for the six months ended June 30, 2014 of $271,351 and has a $398,671 and $111,762 working capital deficit (current liabilities exceeds current assets) at June 30, 2014 and December 31, 2013, respectively.

In the course of its activities, the Company has generated net income and also sustained net losses. The Company expects to be profitable and will meet its obligations through its ongoing operations. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Subsequent to June 30, 2014, the Company was acquired by Surna, Inc. (see Subsequent Events Note 10).

NOTE 4 – ACCOUNTS RECEIVABLE

At June 30, 2014 and December 31, 2013, accounts receivable summarized by due dates consists of the following:

June 30, 2014 December 31, 2013
Current $ 33,267 $ 35,929
Past due 1 - 30 days 17,827 70,446
Past due 31 - 60 days 3,692 9,422
Past due 61 days and over 21,658 6,111
Total $ 76,444 $ 121,908


At June 30, 2014 and December 31, 2013, an allowance for doubtful accounts was $-0-.

NOTE 5 – PROPERTY AND EQUIPMENT

At June 30, 2014 and December 31, 2013, property and equipment consists of:

June 30, 2014 December 31, 2013
Furniture & equipment $ 14,425 $ 6,914
Molds 31,063 31,063
Vehicles 15,000 15,000
Leasehold Improvements 12,129 10,439
72,617 63,416
Accumulated depreciation (42,809 ) (36,726 )
$ 29,808 $ 26,690


Depreciation expense amounted to $6,082 and $7,044 for the six months ended June 30, 2014 and 2013, respectively.

NOTE 6 – SHORT TERM NOTES

During 2013, an individual loaned a total of $250,000 to the Company in multiple tranches (the “Advances”) and advanced an additional $10,000 during 2014. The Loan does not carry a stated interest rate or term. As such the Company has imputed interest at the rate of six percent (6%) per annum. The outstanding balance of the advances totals $260,000 and $250,000 at June 30, 2014 and December 31, 2013, respectively.

F-8




Litigations

Company is subject to certain legal proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity. As of filing date, there was no outstanding litigation.

Lease Obligations

The Company has entered into a lease agreement for its manufacturing and office space consisting of approximately 18,000 square feet. The lease term extends through September 30, 2016 and calls for yearly payment as follows:

Year ended June 30, 2015 $ 175,591
Year ended June 30, 2016 184,538
July 1 through September 30, 2016 46,135
Total $ 406,264


Subsequent to June 30, 2014, Surna, Inc. assumed the lease obligations and acquired the Company (see following Note 10 - Subsequent Events).

NOTE 10 – SUBSEQUENT EVENTS

Effective as of July 1, 2014, we entered into a Modification and Amendment (the “Hydro Amendment”) to the previously executed March 31, 2014 Membership Purchase Agreement we entered into with Surna, Inc., a Nevada corporation (“Surna”), under the terms of which Surna would acquire 100% of the Company. Pursuant to the terms of the Hydro Amendment, Surna is to pay the Keens $250,000 by the delivery to the Keens of a $250,000 promissory note from Surna (the “Surna Note”). The Surna Note bears interest at the rate of 6% per annum and is payable in monthly installments of $5,000 with a balloon payment for the balance of accrued interest and principal due on July 18, 2016. The Surna Note may be prepaid in whole or in part at any time.

As additional consideration for the purchase of Hydro, the Company entered into employment agreements with the Keens. Pursuant to the terms of Brandy Keen’s employment agreement, the Company agreed to employ Brandy Keen as its Vice President of Operations for a period of three years beginning on July 18, 2014 and pay her an annual base salary of $96,000 which is subject to review annually by the Company’s Board of Directors. Brandy Keen will be entitled to stock compensation in an amount and on terms to be agreed on at a later date, vacation, leave and other benefits as may be in effect at the Company’s discretion from time to time and reimbursement of out of pocket expenses for business entertainment in connection with his duties. Brandy Keen’s employment is at-will and may be terminated at any time, with or without cause. Brandy Keen is subject to a restriction on competition following termination of her employment agreement for a period of one year.

Pursuant to the terms of Stephen Keen’s employment agreement, the Company agreed to employ Stephen Keen as its Vice President of Research and Development for a period of three years beginning on July 18, 2014 and pay him an annual base salary of $96,000 which is subject to review annually by the Company’s Board of Directors. Stephen Keen will be entitled to stock compensation in an amount and on terms to be agreed on at a later date, vacation, leave and other benefits as may be in effect at the Company’s discretion from time to time and reimbursement of out of pocket expenses for business entertainment in connection with his duties. Stephen Keen’s employment is at-will and may be terminated at any time, with or without cause. Stephen Keen is subject to a restriction on competition following termination of his employment agreement for a period of one year.

Surna, Inc.
Unaudited Combined Pro Forma Balance Sheet
as of June 30, 2014

June 30, 2014
(Unaudited) Pro Forma (Unaudited)
Surna Hydro Adjustments Combined
ASSETS
CURRENT ASSETS
Cash $ 214,067 $ 2,637 $ - $ 216,704
Accounts receivable 68,399 76,444 - 144,843
Advance to related party 84,681 - (84,681 ) -
Assets held for sale - - - -
Inventory 2,507 17,631 - 20,138
Total current assets 369,654 96,712 (84,681 ) 381,685

Property and equipment 128,188 72,617 - 200,805
Accumulated depreciation (5,366 ) (42,809 ) - (48,175 )
122,822 29,808 - 152,630

Intangible assets 13,500 5,178 (1)(2) 631,064 649,742
Accumulated amortization - (3,747 ) - (3,747 )
13,500 1,432 631,064 645,995

TOTAL ASSETS $ 505,976 $ 127,951 $ 546,383 $ 1,180,310

LIABILITIES AND MEMBERS’ DEFICIT

CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 62,469 $ 46,992 $ $ 109,461
Payroll taxes payable 54,138 54,138
Short term line of credit 21,386 21,386
Short term loans 260,000 260,000
Advances from others 28,186 28,186
Advances from Surna, Inc. 84,681 (1)(2) (84,681 ) -
Current portion of promissory note (1) 60,000 60,000
Amounts due to related parties held for sale - -
Total current liabilities 62,469 495,383 (24,681 ) 533,171

LONG TERM DEBT
Vehicle loan 46,571 46,571
Promissory note issued for purchase (1) 190,000 190,000
Long term line of credit 13,632 13,632
Convertible promissory notes 759,283 759,283
Debt discount on convertible notes (691,118 ) (691,118 )
Total long term debt 114,736 13,632 190,000 318,368

NONCURRENT LIABILITIES
Derivative liability on convertible debt 2,497,425 2,497,425

TOTAL LIABILITIES 2,674,630 509,015 165,319 3,348,964

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ AND MEMBERS’ DEFICIT
Members’ deficit (381,064) (2) 381,064 -
Shareholders’ deficit (2,168,654 ) - (2,168,654 )
(2,168,654 ) (381,064 ) 381,064 (2,168,654 )

TOTAL LIABILITIES AND MEMBER’S DEFICIT $ 505,976 $ 127,951 $ 546,383 $ 1,180,310


See accompanying notes to the financial statements

FOR IMMEDIATE RELEASE

Surna Reports Hydro’s Pro Forma Combined Results;
Surna Posts Prelim Nine Months Gross Revenue

Boulder, CO – October 8, 2014 — Surna Inc. (OTCQB: SRNA), a company that develops, acquires, produces and sells equipment for the legal marijuana industry with a focus on disruptive technology, today announced it has filed the audited FY 2013 and 2012 financial results for its July 1, 2014 acquisition of Hydro Innovations (“Hydro”) as well as its unaudited, pro forma combined financial results for the six months ended June 30, 2014. Additionally, the Company reports its preliminary proforma gross revenue for the nine months ended September 30, 2014.

The financial results presented herein are summary highlights. Readers are encouraged to read the complete report Surna is filing today on Form 8-K/A with the SEC, under the Company’s website “Investors” tab at www.surna.com, along with its other relevant reports on Forms 10-Q and 10-K.

Surna Gross Revenues

Beginning with the third quarter of 2014, the Company will report consolidated financial results combining Surna and Hydro. Surna’s unaudited combined pro forma growth is as follows:

? $380,000 in gross revenues for the three months ended March 31, 2014,

? $996,000 in gross revenues for the six months ended June 30, 2014,

? $1,800,000 in gross revenues estimated for the nine months ended September 30, 2014.


Surna’s Robust Growth: On Plan

“One of the most exciting aspects of the Company’s robust growth is that we have accelerated revenues from the first quarter simply from our existing infrastructure and product offerings,” said Tom Bollich, Surna Chairman and Chief Executive Officer. “Although still operating at a loss, Surna has a tremendous opportunity in front of us with states such as Nevada and Illinois initiating legal sales soon and Washington just beginning to develop its infrastructure. We are successfully executing on an aggressive business plan that calls for investing heavily in people, R&D, technology, products and marketing — to quickly capture a leading share of the incipient but burgeoning North American legal cannabis market.

“This includes the Company’s recent announcement of hiring Todd Whitaker, a veteran design engineer with extensive NASA project experience who joins us as sixth professional in the engineering department,” Mr. Bollich added. “We are focused on creating a technological lead over the rest of the industry so wide that, by the time the industry begins to realize its full potential, our position will have reached a critical mass that dominates the tech side of this business. We now have a sales and marketing department of five savvy professionals complementing the rapid growth of our team, we’ve more than doubled the size of our corporate headquarters and have obtained the support of Newbridge Financial for M&A and financial advisory services. Add to this several patent filings made, or in process, and the products slated for launch throughout 2015, we are blazing the trail with disruptive, high-end, cultivation technology.






“We are confident that with those new products and others in the development pipeline, combined with ramping up our robust multi-channel marketing campaign, that Surna is well-positioned for accelerating financial performance into 2015.

“Both our challenge, and our opportunity,” Mr. Bollich concluded, “Will be keeping up to capitalize on the exponential industry growth over the next few years — which is why we are investing heavily today.”

According to Bloomberg Industries, national legalization has the potential to start a $35 billion to $45 billion a year industry. At that level, the Company noted, cannabis would eclipse the US wine market’s $34.6 billion – which is the world’s largest wine market.

HI-14 Combined Pro Forma Operations

The unaudited, condensed, combined, pro forma operations of Surna and Hydro for the six months ended June 30, 2014 had combined gross revenues of $996,484 with an operating loss of ($610,901).

About Surna, Inc.

Led by Tom Bollich, the visionary technologist who co-founded famed gaming company Zynga which ultimately rose to a $10 billion market valuation, Surna’s mission is to acquire intellectual property and scalable operating companies in the nascent, legal marijuana industry with a focus on disruptive technology, equipment and related support services (www.surna.com) Through its wholly owned subsidiary, Hydro Innovations, the Company offers a comprehensive line of commercial and small business indoor agriculture equipment (www.hydroinnovations.com).

The Company represents a pure play on explosive growth in the cannabis industry, while being agnostic as to the escalating proliferation of regulated, commodity cannabis growers & seller, winners or losers; its business model excludes the production or sale of marijuana.

Safe Harbor Statement

This news release contains statements that involve expectations, plans or intentions (such as those relating to future business or financial results, new features or services, or management strategies) and other factors discussed from time to time in the Company’s Securities and Exchange Commission filings. These statements are forward-looking and are subject to risks and uncertainties, so actual results may vary materially. You can identify these forward-looking statements by words such as “may” “should,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan” and other similar expressions. Our actual results, such as the Company’s ability to finance, complete and consolidate acquisition of IP, assets and operating companies, could differ materially from those anticipated in these forward-looking statements as a result of certain factors not within the control of the company such as a result of various factors, including future economic, competitive, regulatory, and market conditions. The company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Investor Relations

David Kugelman
Atlanta Capital Partners, LLC
[phone]
[phone] Toll Free - U.S. And Canada

At the Company

Tae Darnell
VP and General Counsel
[phone]
[e-mail]

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