Executive Summary

Q1 2015 marked Surna’s first substantial quarterly revenue at $0.871M, up from $0.0M in Q1 2014, while reporting a net loss of $1.418M driven by operating expenses and financing-related charges .
No Wall Street consensus estimates were available for CEAD/Surna; management declined to provide 2015 revenue guidance on the call, limiting beat/miss analysis (values would be from S&P Global, but are unavailable).
Management highlighted scaling (staff from 4 to 35), 10 engineers, 10 pending patents, and progress on liquid-cooled reflectors (beta positive) and a hybrid greenhouse initiative, positioning for broader CEA markets .
Potential catalysts: execution on the $1.1M CWNevada cooling contract (recognized through 2015), beta-to-launch of reflectors later in 2015, and corporate leadership changes enacted in April 2015 .

What Went Well and What Went Wrong

What Went Well

“We’ve grown from a staff of four people to over 35. We now have 10 engineers on staff full time…we have nine patent applications…we envision significantly more potential IP on the horizon.”
Reflector beta progress: “Initial results…are quite promising…appearing the reflector may result in a more efficient delivery of light…which is going to have many fold benefits both in yield productivity…and energy efficiency.”
Broadening addressable markets: management sees core technologies applicable to organic produce, high-density herbs, flowers, micro-breweries, small data centers, and specialty process manufacturing .

What Went Wrong

Loss-making quarter: net loss of $(1.418)M with operating loss of $(0.880)M; financing costs included $(426.8)k amortization of debt discount and $(160.3)k interest expense .
Internal control weaknesses persisted (lack of segregation of duties; absence of comprehensive accounting procedures manual) per Q1 2015 controls evaluation .
Liquidity/going concern: management disclosed dependence on equity/debt financing and noted substantial doubt about continued operations absent additional capital; working capital deficits and reliance on convertible notes remain headwinds .

Financial Results

Quarterly performance vs prior periods (oldest → newest)

Metric	Q2 2014	Q3 2014	Q1 2015
Revenue ($USD)	$346,559	$859,488	$870,895
Gross Profit ($USD)	$63,954	$481,702	$188,159
Operating Loss ($USD)	$(301,628)	$(459,238)	$(879,546)
Net Income (Loss) ($USD)	$(2,121,567)*	$1,479,202*	$(1,418,443)
EPS (Basic/Diluted, $USD)	$(0.00)	$0.01	$(0.01)

* Q2/Q3 net results reflect large non-cash changes in derivative liabilities (Q2 loss from derivative change; Q3 large gain), materially impacting comparability .

Balance sheet and operating KPIs (levels and changes)

KPI	FY 2014 (12/31)	Q1 2015 (3/31)
Cash ($USD)	$689,963	$365,244
Accounts Receivable ($USD, net)	$394,830	$598,500
Inventory ($USD)	$264,031	$508,641
Deferred Revenue ($USD)	$408,199	$786,987
Convertible Notes (Net, $USD)	$488,544	$1,043,227
Derivative Liabilities ($USD, current)	$1,151,870 (feature + warrants)	$1,337,467 (feature + warrants)

Notes: Growth in receivables/inventory and a step-up in deferred revenue suggest order activity and manufacturing build; cash declined sequentially; convertible debt and derivative liabilities increased .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2015	None provided	None provided	Maintained (no guidance)
Margins/OpEx/Tax/Segments	FY/Q1 2015	None provided	None provided	Maintained (no guidance)

Management explicitly stated they were “not really providing any guidance for our estimated 2015 numbers” on the call .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2014 / Q3 2014)	Current Period (Q1 2015)	Trend
Scaling & staffing	Early commercialization; initial rev recognized in Q2; limited staff disclosed	Scale-up to 35 staff, 10 engineers; manufacturing and supply chain expansion	Strongly positive scale-up
IP & product pipeline	Filed provisional patents (reflector; water-chilled systems) in 2014	10 pending patents; liquid-cooled reflectors in beta; hybrid greenhouse concept advancing	Accelerating development
Revenue recognition & backlog	$346.6k rev in Q2; rising to $859.5k in Q3; deferred revenue introduced by year-end	$870.9k rev in Q1; deferred revenue up to $786.99k; execution on signed contracts	Continued order flow
Financing/derivatives	Convertible notes issued; large derivative liabilities and non-cash swings	Additional convertible notes; debt discount amortization; derivative liability gain $48.16k	Ongoing financing reliance
Internal controls	Material weaknesses (segregation; manuals) noted	Material weaknesses persist in Q1	Unchanged; remediation underway
Market expansion beyond cannabis	N/A (focus on initial cannabis CEA scale-up)	Targeting produce, herbs, flowers, breweries, data centers	Broadening TAM

Management Commentary

“Surna is an infrastructure technology company…we…provide technology specifically [for] controlled environment agriculture…currently focused on the cannabis sector.”
“We are in the beta phase of a liquid-cooled light reflector…we are also in the early…development of a hybrid building…capture the benefits of the sun and create a controlled environment.”
“Our initial [reflector] feedback…has been very positive…we’re really looking forward to a successful commercial launch which should occur later on this year.”
“It’s safe to say…we’re not really providing any guidance for our estimated 2015 numbers.”

Q&A Highlights

Estimates/Guidance: Management declined to provide 2015 revenue guidance, limiting external forecasting .
Filing timeliness: The 10-K delay was attributed to management transition, start-up scaling, and careful SEC interactions; intent to file 10-Q timely was reiterated .
Leadership changes: CEO Tom Bollich’s departure was described as his decision; interim principal executive function assumed by Tae Darnell; COO Bryon Jorgenson remained COO to focus on operations .
Financing mix: Convertible debt was necessary given start-up stage; non-dilutive debt was not feasible at that time .
Agrisoft acquisition: Diligence ongoing; deal amended to allow termination and conversion of loans to equity at a specified valuation; closing date extended .
Competition: Primarily local HVAC/mechanical contractors; Surna positions with integrated engineering and cultivation expertise .

Estimates Context

No S&P Global consensus estimates (EPS, Revenue) were available for CEAD/Surna; management did not provide guidance. Values would normally be retrieved from S&P Global; however, they were unavailable for this ticker at this time.

Key Takeaways for Investors

Revenue traction is real ($0.871M in Q1), but profitability remains a medium-term objective amid ongoing opex and financing costs .
Deferred revenue and rising receivables/inventory point to order flow and manufacturing ramp; watch cash conversion against working capital needs .
Product pipeline (reflectors, hybrid greenhouse) and IP footprint could expand the addressable market and support margin mix if launched successfully in 2015 .
Financing reliance (convertible notes, derivative liabilities) adds volatility to reported earnings; de-risking capital structure would be a positive catalyst .
Internal control remediation and execution against the $1.1M CWNevada contract (recognition through 2015) are near-term operational milestones .
Leadership transition appears orderly; focus remains on operational scaling and corporate governance improvements .
Lack of external estimates and guidance may dampen near-term trading catalysts; product launches and contract execution likely to drive narrative.

Sources

Q1 2015 Form 10-Q (filed May 19, 2015): financial statements, KPIs, controls .
FY 2014 Form 10-K (filed April 16, 2015): annual metrics, balance sheet, risks .
Q2 2014 Form 10-Q and Q3 2014 Form 10-Q: prior-quarter revenue/margins .
8-K (May 1, 2015): earnings call transcript (April 22/27) .
8-K (Jan 13, 2015): CWNevada $1.1M contract PR .
8-K (Jan 9 & Feb 27, 2015): Agrisoft acquisition announcement and addendum .
8-K (Apr 23, 2015): officer changes (Tae Darnell appointment) .

CEA Industries Inc. (CEAD)·Q1 2015 Earnings Summary