CEA Industries Inc. (CEAD)

[pauly3]

Surna Reports Q1 2021 Results
Mentioned: SRNA
Announces $11.6 million in Backlog, second highest in Company history, and 37% higher than previous quarter

Surna Inc. (OTCQB: SRNA), operating as Surna Cultivation Technologies, announced today operating and financial results for the three months ended March 31, 2021.

We will be hosting an investor conference call to discuss our Q1 2021 financial results and to provide updates on our recent business developments and our strategic growth plan. The call will be held on Thursday, May 13, 2021 at 4:00 p.m. Eastern Time.

To access the investor call via telephone: Dial-In Number: 1-973-528-0008 Access Code: 755823 To access the investor call via the Internet: Webcast URL: https://www.webcaster4.com/Webcast/Page/2020/41253
Interested parties, with contact information supplied, may submit questions to the Company prior to the call to [e-mail]. These questions, along with all live questions, will be answered in the time available. For those unable to participate in the investor conference call at that time, a replay will be available on the investor relations section of our website at https://surna.com/investor-relations/ beginning on May 14, 2021 at 4:00 p.m. Eastern Time (and will remain available until July 1, 2021).

Financial Highlights

� Our Q1 2021 revenue was $2.4 million, which represents a 31% increase compared to Q1 2020 revenue. � For Q1 2021, our operating loss and net loss was $686,000 and $793,000, respectively. This compares to a Q1 2020 operating loss and net loss of $946,000 and $938,000, respectively. � Our Q1 2021 adjusted net loss was $650,000, compared to a Q1 2020 adjusted net loss of $718,000. � Our Q1 2021 gross profit margin was 14.6% compared to 25.2% for Q1 2020, a decrease of 10.7 percentage points. � As of March 31, 2021, our cash, cash equivalents and restricted cash was $3,271,000, compared to $2,285,000 as of December 31, 2020. We generated $484,000 in cash flow from our operating activities during Q1 2021. Our working capital deficit was $2,349,000 as of March 31, 2021, compared to a working capital deficit of $2,220,00 as of December 31, 2020.
"Adjusted net income (loss)" means our GAAP net income (loss), after adjustment for non-cash equity compensation expense, other non-cash equity expense, debt-related items, and depreciation expense.

Recent Sales Contract and Backlog Growth; Production and Vendor Delays

During the first quarter of 2021 we entered into new sales contracts totaling approximately $5.5 million. Our backlog grew to $11.6 million, which is the second highest in our history. However, our recognized revenue was hampered by production and shipping delays from certain suppliers. COVID-19 is disrupting shipping around the U.S. and globally. Shipping companies are operating with reduced personnel and there are strict screening actions in U.S. ports causing a backup of imported parts deliveries. While we believe this is a temporary issue, the reduction in revenue caused a lower gross margin as compared to Q4 2020, primarily due to the lack of absorption of our fixed costs.

For the quarter ended March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 March 31, 2021Backlog, beginning balance $ 9,558,000 $ 8,875,000 $ 5,592,000 $ 8,198,000 $ 8,448,000Net bookings, current period $ 1,127,000 $ (1,601,000 ) $ 4,241,000 $ 3,637,000 $ 5,497,000Recognized revenue, current period $ 1,810,000 $ 1,682,000 $ 1,635,000 $ 3,387,000 $ 2,367,000Backlog, ending balance $ 8,875,000 $ 5,592,000 $ 8,198,000 $ 8,448,000 $ 11,578,000
Organic Growth Strategy Update

As we noted in our press release of May 4, 2021, we have updated our organic growth strategy to include addressing new markets, adding new products and services, and adopting a new trade name, Surna Cultivation Technologies. We encourage readers to see the MD&A section of our Form 10-Q dated and filed today, for further explanation of this and our corporate strategy.

Tony McDonald, CEO, commented: "Q1 2021 saw the second-best quarter of new project bookings in our history as well as our largest single project ever. Our project backlog is now at the second highest level ever and is 37% higher than where we finished Q4 2020. Our cash position is also nearly $1 million higher than where we ended 2020. Unfortunately, our revenues and therefore gross margins were hampered by production and shipping delays from certain vendors, but we are confident that these will be caught up in Q2 and Q3 2021. We believe that the sales momentum that has been built during the last three quarters will only be accelerated by our newly-announced organic growth strategy and our partnership with RSX Enterprises."

Pandemic Impact and Recovery

During fiscal year 2020, the Company took measures to adjust its operations in response to the COVID-19 pandemic. These actions included measures to cut costs and preserve cash, and encompassed downsizing our workforce, compensation reductions, and reduced hours worked. As the Company gained new contracts, bank funding became available, and the overall business climate improved, we were able to restore our workforce and compensation. The Company continues to actively monitor its operations and sales efforts in light of the continuing effects of the COVID-19 pandemic and will make adjustments to its operations as necessary.