Surna Inc (OTCMKTS:SRNA) Bounces Up The Chart
On August 17 the stock of Surna Inc (OTCMKTS:SRNA) climbed to a high of 25 cents per share. Just five sessions later, however, the ticker found itself closing at $0.14 for a cumulative loss of more than 43%. The downtrend was severe but yesterday the stock finally bounced climbing back up by close to 21.5% and returning to $0.17. Will yesterday’s performance turn into a more prolonged recovery though?
Compared to the majority of the pennystock ventures SRNA’s financial state is definitely not that bad. Last Wednesday the company submitted its financial report for the second quarter of the year and according to it at the end of June they had:
• $145 thousand cash
• $2.1 million total current assets
• $3.3 million total current liabilities
• $1.6 million revenue
• $976 thousand net loss
It is not that often for a pennystock to report quarterly revenues of over a million but SRNA did exactly that. Compared to the previous quarter the revenues increased nearly twice while for the same period last year the company had less than $350 thousand in revenues. Unfortunately, this impressive feat simply cannot offset the rest of the balance sheet. For the first half of 2015 the net loss stood at nearly $2.4 million above the net loss of $2.17 million for the first half of 2014. SRNA has minimal cash reserves and a working capital deficit of $1.2 million.
In order to fund its operations the company has been relying on its equity and as a result the balance sheet now carries approximately $1.6 million in convertible debt. The series 1 convertible notes issued by SRNA can be turned into common shares at the lesser of $1 or 80% of the prior thirty day weighted average market price for the common stock. Receiving shares at a 20% discount is quite lucrative and it is no wonder that the holders of the notes have decided to convert them. For the six months ending June 30 8.9 million shares saw the light of day as a conversion of debt while, as the subsequent events section of the report informs us, the company has received notices to issue another 10 million shares.
Investors should keep in mind that SRNA will need to raise additional funds and if the terms of the new financing deals contain a conversion feature the dilution of the common stock could reach alarming levels. That is why before committing to any trades involving the stock you should do your own due diligence.
