Nice post. Surna's expanded business model puts the focus on recurring revenues and organic growth. Surna was getting clobbered because of the nature of their account base - start up companies in an illegal business. Unpredictable revenue from unreliable clients.
Surna is now going after established businesses that can be invoiced with normal payment terms. The illegalities remain but are getting more favorable.
from the bottom of page 4.
Strategic Acquisition and Capital Markets Plan
Last quarter, we stated that we had reduced our cash burn rate to a minimum level to still be able to support our current operations, and therefore the only way to improve our cash flow and working capital position was to add revenue and margin to “grow out” of our current situation. While we can point to several positive developments to date, as discussed above, there is significant work ahead for us to execute on our organic growth plan and achieve fiscal self-sustainability. We may not be able to achieve our growth and financial goals until 2020 or after. Based on management’s expectations about our current business, we will need to raise capital sometime in the second half of 2019 in order to execute on our organic growth plan and improve our working capital situation.
Although we are positive about our business operational changes to date, we believe that for us to be in a more financially sustainable position will require us to organically grow our business from its current level 2 to 4 times, or put another way, to increase our revenues to $20 to $40 million. Some of the hurdles we face in achieving break-even and profit sustainability is controlling our operational costs, having the financial resources to invest in marketing, product development and staffing, and being able to cover the embedded costs of being a public company, which include audit, legal and consulting fees, director fees, directors’ and officers’ insurance, SEC compliance costs, OTC Markets listing fees and investors relations costs.
Part of the solution to address the financial issues that face a smaller company such as ours is to adopt an acquisition strategy that will complement our organic growth plans. Our plan is to identify and pursue acquisitions of companies or assets within the cannabis ancillary products and services sector complementary to our current business offerings. Our initial objective is to consummate one or more acquisitions that would add in the range of $10 to $20 million in annual revenues. We believe with our current revenue position and our public company status, there are a number of private companies, and even smaller public companies, that would be interested in partnering with us. If we are able engage in a roll-up type acquisition strategy, using our public status and our stock as all or partial consideration, we believe we can “scale up” our operations to support the expenses of the day-to-day operations of the company, on a combined basis, and be able to better cover the costs of maintaining our public company status.
We believe acquisitions and related capital infusions, combined with the proper execution of our organic growth plan, can accelerate our progress towards cash operating profitability and lower overall operating expenses. If we successfully execute both our organic growth plan and our strategic acquisition and associated capital raise initiative, our goal is to obtain a Nasdaq listing and implement an aftermarket support program that will result in a widely held, actively traded, and fully valued public company.
“For the first time in the Company’s limited history, we now have an organic growth plan that we believe will lead to higher revenue, more predictable revenue, and accelerated revenue recognition,” stated Timothy J. Keating, the Company’s Chairman. “As we execute this organic growth plan, we also believe that it is now timely to initiate a strategic and capital markets plan designed both to rapidly scale-up the business and lead to a widely held, actively traded and fully valued stock,” added Mr. Keating.
We encourage our shareholders to participate in our investor conference call on May 21, 2019 at 4:00 p.m. Eastern time for further updates on these initiatives.