[Cautionary Statement](index=4&type=section&id=Cautionary%20Statement) The report contains forward-looking statements based on current management expectations, which involve substantial risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements based on current management expectations, which involve substantial risks and uncertainties that could cause actual results to differ materially[11](index=11&type=chunk) - Key risk factors include business prospects, impact of the COVID-19 pandemic, product development uncertainty, regulatory changes (especially cannabis laws), competitive pressures, operational effectiveness, customer and supplier relationships, general economic conditions, supply chain disruptions, changes in business strategy, ability to attract and retain personnel, capital raising ability, acquisition integration, future revenue, backlog conversion, and the company's intention not to pay dividends[12](index=12&type=chunk)[14](index=14&type=chunk) [PART I — FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents CEA Industries Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in shareholders' equity, and cash flows, along with detailed explanatory notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets show a significant increase in total assets and a shift from shareholders' deficit to positive equity, primarily due to an equity offering Condensed Consolidated Balance Sheets | Metric | March 31, 2022 (Unaudited) ($) | December 31, 2021 ($) | | :----------------------------------- | :------------------------- | :------------------ | | **ASSETS** | | | | Cash and cash equivalents | $22,033,664 | $2,159,608 | | Total Current Assets | $25,055,565 | $3,991,098 | | Total Noncurrent Assets | $1,265,324 | $1,290,864 | | **TOTAL ASSETS** | **$26,320,889** | **$5,281,962** | | **LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)** | | | | Total Current Liabilities | $7,107,219 | $4,406,269 | | Total Noncurrent Liabilities | $459,482 | $486,226 | | **TOTAL LIABILITIES** | **$7,566,701** | **$4,892,495** | | Total Temporary Equity | $- | $3,960,000 | | Total Shareholders' Equity (Deficit) | $18,754,188 | $(3,570,533) | - Total assets significantly increased from **$5.28 million** at December 31, 2021, to **$26.32 million** at March 31, 2022, primarily driven by a substantial increase in cash and cash equivalents due to an equity offering[19](index=19&type=chunk) - Shareholders' equity shifted from a deficit of **$3.57 million** to a positive equity of **$18.75 million**, reflecting the impact of the equity raise and the conversion of Series B Preferred Stock[19](index=19&type=chunk) [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements of operations reflect a decrease in revenue and gross profit, alongside a widening operating and net loss, primarily due to supply chain delays and increased operating expenses Condensed Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2022 ($) | Three Months Ended March 31, 2021 ($) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue, net | $1,744,427 | $2,366,529 | | Cost of revenue | $1,653,919 | $2,021,923 | | Gross profit | $90,508 | $344,606 | | Total operating expenses | $1,701,710 | $1,030,256 | | Operating loss | $(1,611,202) | $(685,650) | | Total other income (expense) | $188,260 | $(107,718) | | Loss before provision for income taxes | $(1,422,942) | $(793,368) | | Net loss | $(1,422,942) | $(793,368) | | Net Loss Available to Common Shareholders | $(1,898,925) | $(793,368) | | Loss per common share – basic and dilutive | $(0.41) | $(0.50) | | Weighted average number of common shares outstanding, basic and dilutive | 4,622,427 | 1,576,844 | - Revenue decreased by **26%** year-over-year, from **$2.37 million** in Q1 2021 to **$1.74 million** in Q1 2022, primarily due to supply chain delays[23](index=23&type=chunk)[201](index=201&type=chunk) - Gross profit declined by **74%** to **$90,508** in Q1 2022, with the gross profit margin decreasing from **14.6%** to **5.2%**, mainly due to increased fixed costs as a percentage of lower revenue[23](index=23&type=chunk)[203](index=203&type=chunk) - Operating loss widened by **135%** to **$(1.61) million** in Q1 2022, driven by a **65%** increase in total operating expenses, particularly selling, general, and administrative expenses[23](index=23&type=chunk)[207](index=207&type=chunk)[211](index=211&type=chunk) - Net loss increased by **79%** to **$(1.42) million** in Q1 2022, further impacted by convertible preferred stock dividends and a deemed dividend on down round[23](index=23&type=chunk)[213](index=213&type=chunk) [Condensed Consolidated Statements of Changes in Shareholders' Equity (Deficit)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity%20%28Deficit%29) This statement details the conversion of a shareholders' deficit to positive equity, driven by significant common share and warrant issuances for cash and preferred stock conversion - Shareholders' deficit of **$(3,570,533)** at December 31, 2021, converted to a positive equity of **$18,754,188** by March 31, 2022[25](index=25&type=chunk) - This significant change was primarily due to **$21,711,131** from common shares and warrants issued for cash, and **$1,980,000** from common shares and warrants issued on conversion of Series B preferred stock[25](index=25&type=chunk) - The company also recognized a net loss of **$(1,422,942)** and incurred dividends and deemed dividends on Series B preferred stock totaling **$(475,983)**[25](index=25&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The cash flow statements indicate a decrease in operating cash flow but a substantial increase in financing cash flow, primarily from an equity offering Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2022 ($) | Three Months Ended March 31, 2021 ($) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $192,857 | $484,373 | | Net cash used in investing activities | $(13,948) | $(12,326) | | Net cash provided by financing activities | $19,695,147 | $514,200 | | Net change in cash and cash equivalents | $19,874,056 | $986,247 | | Cash and cash equivalents, end of period | $22,033,664 | $3,271,128 | - Net cash provided by operating activities decreased from **$484,373** in Q1 2021 to **$192,857** in Q1 2022, primarily due to an increased net loss and higher working capital funding needs[27](index=27&type=chunk)[221](index=221&type=chunk) - Net cash provided by financing activities significantly increased to **$19,695,147** in Q1 2022, driven by **$21,711,131** in cash proceeds from the sale of common stock and warrants, partially offset by the redemption of Series B preferred stock[27](index=27&type=chunk)[224](index=224&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the company's accounting policies, significant transactions, and financial position, including business overview, lease accounting, inventory, and equity changes [Note 1 – General](index=11&type=section&id=Note%201%20%E2%80%93%20General) This note outlines CEA Industries Inc.'s business in Controlled Environment Agriculture, details key accounting policies, and discusses the impact of the COVID-19 pandemic and a reverse stock split - CEA Industries Inc. designs, engineers, and sells environmental control and other technologies for the Controlled Environment Agriculture (CEA) industry, serving commercial growers in the U.S., Canada, and internationally[28](index=28&type=chunk) - The COVID-19 pandemic has caused significant delays in equipment receipt and revenue recognition, impacting sales, project implementation, supply chain, operating margins, and working capital, with continued adverse effects expected[29](index=29&type=chunk)[30](index=30&type=chunk) - On January 27, 2022, the company implemented a one-for-one hundred and fifty reverse stock split, reducing outstanding common shares from 240,125,224 to 1,600,835[37](index=37&type=chunk) Revenue by Source | Revenue Source | Three Months Ended March 31, 2022 ($) | Three Months Ended March 31, 2021 ($) | | :------------------------- | :-------------------------------- | :-------------------------------- | | Equipment and systems sales | $1,642,572 | $2,163,468 | | Engineering and other services | $86,049 | $181,083 | | Shipping and handling | $15,806 | $21,978 | | Total revenue | $1,744,427 | $2,366,529 | - As of March 31, 2022, the company's backlog (remaining performance obligations) was **$11,179,000**, with **$2,217,000 (20%)** not expected to be realized until 2023, if at all, due to significant uncertainties[65](index=65&type=chunk)[68](index=68&type=chunk) Share-Based Compensation Expense | Share-Based Compensation Expense | Three Months Ended March 31, 2022 ($) | Three Months Ended March 31, 2021 ($) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Cost of revenue | $791 | $14,135 | | Advertising and marketing expenses | $2,762 | $6,474 | | Product development costs | $- | $6,694 | | Selling, general and administrative expenses | $88,964 | $31,833 | | Total share-based compensation expense | $92,517 | $59,136 | - One customer accounted for **35%** of revenue in Q1 2022, highlighting customer concentration risk[77](index=77&type=chunk) [Note 2 – Leases](index=21&type=section&id=Note%202%20%E2%80%93%20Leases) This note details the company's lease accounting under ASC 842, including the new facility lease in Louisville, CO, and related financial metrics - The company adopted ASC 842 (Leases) as of January 1, 2019, electing the 'package of practical expedients' and the short-term lease exemption[84](index=84&type=chunk)[85](index=85&type=chunk) - A new facility lease for 11,491 square feet in Louisville, CO, commenced November 1, 2021, with monthly rent of **$10,055** starting February 2022, increasing **3%** annually[88](index=88&type=chunk) Lease Metrics | Lease Metric | As of March 31, 2022 ($) | | :----------------------------------- | :------------------- | | Operating lease right-of-use asset | $540,444 | | Operating lease liability, current | $112,072 | | Operating lease liability, long-term | $459,482 | | Remaining lease term | 4.8 years | | Discount rate | 3.63% | [Note 3 – Inventory](index=23&type=section&id=Note%203%20%E2%80%93%20Inventory) This note provides a breakdown of inventory components, highlighting a significant increase in net inventory, particularly finished goods and inventory in transit Inventory Components | Inventory Component | March 31, 2022 ($) | December 31, 2021 ($) | | :----------------------------------- | :------------------- | :------------------ | | Finished goods | $913,887 | $272,199 | | Work in progress | $971 | $1,050 | | Raw materials | $186,115 | $196,456 | | Allowance for excess & obsolete inventory | $(95,055) | $(91,379) | | Inventory, net | $1,005,918 | $378,326 | - Net inventory increased significantly from **$378,326** at December 31, 2021, to **$1,005,918** at March 31, 2022, with finished goods seeing the largest increase[94](index=94&type=chunk) - The March 31, 2022, inventory balance includes **$692,195** for inventory in transit, delivered to customers in April 2022[95](index=95&type=chunk) - Prepaid expenses included approximately **$1,579,000** in advance payments for inventory as of March 31, 2022, up from **$1,069,000** at December 31, 2021[95](index=95&type=chunk) [Note 4 – Property and Equipment](index=24&type=section&id=Note%204%20%E2%80%93%20Property%20and%20Equipment) Note 4 provides a summary of the company's property and equipment, net of accumulated depreciation. It shows a slight decrease in net property and equipment and details the depreciation expense for the period Property and Equipment, Net | Property and Equipment | March 31, 2022 ($) | December 31, 2021 ($) | | :----------------------------------- | :------------------- | :------------------ | | Furniture and equipment | $271,056 | $274,472 | | Vehicles | $15,000 | $15,000 | | Total gross property and equipment | $286,056 | $289,472 | | Accumulated depreciation | $(208,817) | $(212,126) | | Property and equipment, net | $77,239 | $77,346 | - Depreciation expense for the three months ended March 31, 2022, was **$8,556**, allocated across cost of sales, inventory, and selling, general, and administrative expenses[98](index=98&type=chunk) [Note 5 – Accounts Payable and Accrued Liabilities](index=24&type=section&id=Note%205%20%E2%80%93%20Accounts%20Payable%20and%20Accrued%20Liabilities) Note 5 details the components of accounts payable and accrued liabilities, showing a slight increase in total liabilities from the end of the previous year. Key components include accounts payable, accrued payroll, and product warranty accruals Accounts Payable and Accrued Liabilities | Liability Component | March 31, 2022 ($) | December 31, 2021 ($) | | :----------------------------------- | :------------------- | :------------------ | | Accounts payable | $729,040 | $616,056 | | Sales commissions payable | $9,107 | $27,592 | | Accrued payroll liabilities | $266,456 | $322,873 | | Product warranty accrual | $187,702 | $186,605 | | Other accrued expenses | $196,723 | $192,463 | | Total | $1,389,028 | $1,345,589 | - Total accounts payable and accrued liabilities increased slightly to **$1,389,028** at March 31, 2022, from **$1,345,589** at December 31, 2021[99](index=99&type=chunk) [Note 6 – Note Payable and Accrued Interest](index=24&type=section&id=Note%206%20%E2%80%93%20Note%20Payable%20and%20Accrued%20Interest) This note describes a note payable that was fully forgiven by the bank in November 2021, resulting in a gain on loan forgiveness recorded as Other Income - A **$514,200** note payable, entered into on February 10, 2021, for working capital, was fully forgiven by the bank on November 30, 2021, including **$2,832** in accrued interest[100](index=100&type=chunk)[102](index=102&type=chunk) - The gain on loan forgiveness was recorded as Other Income in the Statement of Operations for the year ended December 31, 2021[102](index=102&type=chunk) [Note 7 – Commitments and Contingencies](index=25&type=section&id=Note%207%20%E2%80%93%20Commitments%20and%20Contingencies) This note outlines the company's commitments and contingencies, including a settled litigation with a former employee and ongoing litigation risks - The company settled litigation with a former employee in March 2021, issuing 6,667 shares of common stock (valued at **$67,000**) as part of a total **$107,000** settlement cost, recognized in Other Expenses in 2021[104](index=104&type=chunk) - The company is subject to litigation matters and claims in the normal course of operations, with outcomes difficult to predict, and records liabilities for probable and estimable contingent losses[105](index=105&type=chunk) - Other commitments include inventory purchase agreements and indemnifications to various parties, including directors and officers[107](index=107&type=chunk) [Note 8 – Temporary Equity](index=25&type=section&id=Note%208%20%E2%80%93%20Temporary%20Equity) This note details the Series B Convertible Preferred Stock, its classification as temporary equity, and its subsequent redemption and conversion into common stock and warrants - On September 28, 2021, the company sold 3,300 shares of Series B Convertible Preferred Stock for **$3,000,000**, with an **8%** annual dividend and an initial conversion price of **$8.55**[108](index=108&type=chunk)[109](index=109&type=chunk) - The Series B Preferred Stock was classified as temporary equity and adjusted to its redemption value of **$3,960,000**, resulting in a **$2,262,847** non-cash redemption value adjustment in 2021[112](index=112&type=chunk) - On February 16, 2022, 1,650 shares were redeemed for **$2.016 million** cash, and the remaining 1,650 shares were converted into 362,306 common shares and 703,069 warrants[112](index=112&type=chunk)[113](index=113&type=chunk) - A deemed dividend of **$439,999** was recognized due to the conversion price being reduced from **$8.55** to **$3.0975** (**75%** of the public offering price of **$4.13**)[113](index=113&type=chunk) - As of March 31, 2022, no Preferred Shares remained outstanding[114](index=114&type=chunk) [Note 9 – Stockholders' Equity (Deficit)](index=26&type=section&id=Note%209%20%E2%80%93%20Stockholders%27%20Equity%20%28Deficit%29) This note details changes in stockholders' equity, including director remuneration, a reverse stock split, and a significant equity raise, along with authorized and outstanding share capital - In January 2022, the company issued non-qualified stock options and restricted stock units (RSUs) to directors as part of their compensation[115](index=115&type=chunk)[116](index=116&type=chunk) - A one-for-one hundred and fifty reverse stock split was implemented on January 27, 2022, reducing outstanding common shares and retroactively adjusting all per share amounts[118](index=118&type=chunk)[119](index=119&type=chunk) - The authorized capital was reduced to 200,000,000 shares of common stock and 25,000,000 shares of preferred stock[121](index=121&type=chunk) - On February 15, 2022, the company completed a public offering, receiving approximately **$22 million** in net proceeds from the sale of 5,811,138 common shares and 6,572,808 warrants[122](index=122&type=chunk) - As of March 31, 2022, 7,784,444 common shares were issued and outstanding, with no preferred shares outstanding[123](index=123&type=chunk) [Note 10 – Equity Incentive Plans](index=27&type=section&id=Note%2010%20%E2%80%93%20Equity%20Incentive%20Plans) This note outlines the company's 2017 and 2021 Equity Incentive Plans, detailing authorized shares, award activity, and compensation expenses for stock options and RSUs - The 2017 Equity Incentive Plan authorized 333,333 shares for equity awards, with 148,905 options outstanding and 20,736 shares available as of March 31, 2022[124](index=124&type=chunk)[125](index=125&type=chunk) - The 2021 Equity Incentive Plan authorized 666,667 shares, with 578,906 shares remaining available for future awards as of March 31, 2022[126](index=126&type=chunk)[131](index=131&type=chunk) - During Q1 2022, 3,367 common shares were issued to new independent directors, and 21,167 non-qualified stock options were granted to employees, along with 6,250 non-qualified stock options to directors[129](index=129&type=chunk)[130](index=130&type=chunk) - Unrecognized compensation expense for unvested options and RSUs totaled **$222,707** at March 31, 2022, to be recognized over approximately 3 years[132](index=132&type=chunk) Stock Option Activity (Employees/Consultants) | Stock Option Activity (Employees/Consultants) | Number of Options | Weighted Average Exercise Price ($) | | :----------------------------------- | :---------------- | :------------------------------ | | Outstanding, December 31, 2021 | 158,174 | $10.99 | | Granted | 21,167 | $3.55 | | Forfeited | (13,333) | $9.15 | | Outstanding, March 31, 2022 | 166,007 | $10.18 | | Exercisable, March 31, 2022 | 118,828 | $11.89 | Stock Option Activity (Directors) | Stock Option Activity (Directors) | Number of Options | Weighted Average Exercise Price ($) | | :----------------------------------- | :---------------- | :------------------------------ | | Outstanding, December 31, 2021 | 50,872 | $10.02 | | Granted | 6,250 | $4.80 | | Outstanding, March 31, 2022 | 57,122 | $9.44 | | Exerciseable, March 31, 2022 | 57,122 | $9.44 | [Note 11 – Warrants](index=31&type=section&id=Note%2011%20%E2%80%93%20Warrants) This note provides a comprehensive summary of outstanding warrants to purchase common stock, detailing their issuance, exercise prices, and remaining terms Warrant Activity | Warrant Activity | Number Outstanding | Weighted Average Exercise Price ($) | | :----------------------------------- | :----------------- | :------------------------------ | | Outstanding at December 31, 2021 | 227,719 | $9.59 | | Issued | 7,566,435 | $4.89 | | Outstanding at March 31, 2022 | 7,794,154 | $5.03 | - A total of 7,566,435 warrants were issued in Q1 2022, primarily from the public offering (5,811,138 investor warrants, 761,670 overallotment warrants, 290,557 underwriter warrants) and the conversion of Series B Preferred Stock (170,382 pre-funded conversion warrants, 532,688 conversion warrants)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[156](index=156&type=chunk) - As of March 31, 2022, 7,794,154 warrants were outstanding, with a weighted average exercise price of **$5.03** and a weighted average remaining life of 58 months (excluding 170,382 indefinite life warrants)[146](index=146&type=chunk)[147](index=147&type=chunk) [Note 12 – Income Taxes](index=33&type=section&id=Note%2012%20%E2%80%93%20Income%20Taxes) This note discusses the company's income tax position, including U.S. federal and state net operating losses (NOLs) and the full valuation allowance against deferred tax assets - As of March 31, 2022, the company had approximately **$22,514,000** in U.S. federal and state net operating losses (NOLs)[157](index=157&type=chunk) - The use of NOLs may be limited by Section 382 of the Internal Revenue Code due to cumulative ownership changes exceeding **50%** within a three-year period, which the company's recent securities sales will need to be considered for[158](index=158&type=chunk) - A full valuation allowance was recorded against net deferred tax assets as of March 31, 2022, as management believes it is more likely than not that the company will not be able to utilize these assets in the foreseeable future[158](index=158&type=chunk) [Note 13 – Related Party Transactions](index=33&type=section&id=Note%2013%20%E2%80%93%20Related%20Party%20Transactions) This note discloses a manufacturer representative agreement with RSX Enterprises, a related party with a significant ownership interest held by a current director - The company has a manufacturer representative agreement with RSX Enterprises, in which a current director, James R. Shipley, holds a significant ownership interest[159](index=159&type=chunk) - Under this agreement, RSX acts as a non-exclusive representative for the company in North America, and **$7,555** in commissions were paid during the three months ended March 31, 2022[160](index=160&type=chunk) [Note 14 – Subsequent Events](index=33&type=section&id=Note%2014%20%E2%80%93%20Subsequent%20Events) This note reports subsequent events after March 31, 2022, specifically the issuance of non-qualified stock options to employees in April 2022 - On April 1, 2022, 31,793 non-qualified stock options were issued to 21 employees under the 2021 Annual Incentive Awards, with immediate vesting, a 10-year term, and an exercise price of **$2.51**[161](index=161&type=chunk) - The expense for these options had been fully accrued in 2021[161](index=161&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, covering business overview, strategic initiatives, and detailed financial analysis [Non-GAAP Financial Measures](index=34&type=section&id=Non-GAAP%20Financial%20Measures) This section explains the company's use of non-GAAP measures like net bookings and backlog to supplement GAAP results, adjusting for non-cash expenses - The company uses non-GAAP measures such as net bookings, backlog, and adjusted net income (loss) to supplement GAAP results, adjusting for non-cash expenses like stock-based compensation, debt-related items, and depreciation[165](index=165&type=chunk) - Net bookings represent new sales contracts executed during the quarter with initial deposits, net of adjustments. Backlog and remaining performance obligations may not be indicative of future operating results due to potential renegotiations or terminations[165](index=165&type=chunk)[166](index=166&type=chunk) [Overview](index=34&type=section&id=Overview) This overview describes CEA Industries Inc. as an engineering and design company providing environmental control technologies to the Controlled Environment Agriculture (CEA) industry - CEA Industries Inc. is an engineering and design company providing environmental control and other technologies to the Controlled Environment Agriculture (CEA) industry, primarily serving commercial indoor cannabis facilities[167](index=167&type=chunk)[169](index=169&type=chunk) - The company offers architectural design, liquid-based process cooling, air handling, LED lighting, automation, and preventive maintenance services, leveraging its expertise to optimize crop quality, yield, and energy efficiency[168](index=168&type=chunk) - The company's core assets include strong relationships with CEA industry stakeholders, specialized engineering know-how from over 800 projects, and proprietary environmental control products[175](index=175&type=chunk) [Impact of the COVID-19 Pandemic on Our Business](index=36&type=section&id=Impact%20of%20the%20COVID-19%20Pandemic%20on%20Our%20Business) This section discusses the ongoing impact of the COVID-19 pandemic, causing unexpected delays in product supply and shipments, with uncertain future financial and operational effects - The COVID-19 pandemic continues to cause unexpected and uncontrollable delays in international product supply and shipments from vendors, leading to severe congestion and extensive wait times at U.S. ports[179](index=179&type=chunk) - These disruptions have impacted the company's operations, and the full extent of the pandemic's financial and operational impact remains uncertain and unpredictable[180](index=180&type=chunk) [Impact of Ukranian Conflict](index=36&type=section&id=Impact%20of%20Ukranian%20Conflict) The company believes the Ukrainian conflict has no direct impact on its North American operations but anticipates general economic effects like supply chain challenges and inflation - The company believes the conflict between Ukraine and Russia has no direct impact on its operations, financial condition, or reporting, as its operations are limited to North America[181](index=181&type=chunk) - The conflict's general impact is expected to be similar to other businesses, including international sanctions, potential goods shortages, supply chain challenges, and inflationary pressures[181](index=181&type=chunk) [Our Corporate Strategy](index=36&type=section&id=Our%20Corporate%20Strategy) The company's growth strategy focuses on aggressive organic expansion into non-cannabis CEA facilities and executing consolidation opportunities through strategic acquisitions - The company's growth strategy is based on two pillars: aggressive organic growth and executing on consolidation opportunities[182](index=182&type=chunk) - Organic growth initiatives include expanding into non-cannabis CEA facilities (doubling addressable market), broadening product and service offerings to cover nearly all technical infrastructure needs (e.g., architectural design, lighting, sensing & control, CO2 dosing, maintenance services), and rebranding to CEA Industries Inc. to reflect this broader focus[183](index=183&type=chunk)[184](index=184&type=chunk)[186](index=186&type=chunk)[188](index=188&type=chunk) - The company aims to seek strategic relationships, mergers, and acquisitions to add to its existing business, leveraging its industry knowledge and public stock to identify complementary partners and create value through consolidation[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) [Our Bookings, Backlog and Revenue](index=38&type=section&id=Our%20Bookings%2C%20Backlog%20and%20Revenue) This section analyzes net bookings, backlog, and revenue, highlighting a decrease in bookings and significant uncertainties in revenue recognition from backlog - Net bookings for the three months ended March 31, 2022, were **$2,105,000**, a **47%** decrease from **$3,993,000** in Q4 2021, after accounting for new contracts, positive change orders, and cancellations[192](index=192&type=chunk) - Backlog at March 31, 2022, increased by **3%** to **$11,179,000**, with **$2,217,000 (20%)** of booked sales orders not expected to be realized until 2023, if at all, due to elevated risk[194](index=194&type=chunk) Bookings, Backlog and Revenue Trends | Metric | March 31, 2021 ($) | June 30, 2021 ($) | September 30, 2021 ($) | December 31, 2021 ($) | March 31, 2022 ($) | | :----------------------------------- | :------------- | :------------ | :----------------- | :---------------- | :------------- | | Backlog, beginning balance | $8,448,000 | $11,578,000 | $7,987,000 | $9,881,000 | $10,818,000 | | Net bookings, current period | $5,497,000 | $919,000 | $5,600,000 | $3,993,000 | $2,105,000 | | Recognized revenue, current period | $2,367,000 | $4,510,000 | $3,706,000 | $3,056,000 | $1,744,000 | | Backlog, ending balance | $11,578,000 | $7,987,000 | $9,881,000 | $10,818,000 | $11,179,000 | - Revenue recognition from backlog is subject to significant uncertainty due to factors like customer financing, licensing, facility construction, and supply chain delays[196](index=196&type=chunk)[197](index=197&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's revenues, costs, operating expenses, and net income (loss) for the period [Revenues and Cost of Goods Sold](index=40&type=section&id=Revenues%20and%20Cost%20of%20Goods%20Sold) Revenue decreased by 26% due to supply chain delays, leading to a 74% decline in gross profit and a reduced gross profit margin - Revenue for Q1 2022 decreased by **$622,000 (26%)** to **$1,744,000** compared to **$2,367,000** in Q1 2021, primarily due to international supply chain delays impacting contract fulfillment[201](index=201&type=chunk) - Cost of revenue decreased by **$368,000 (18%)** to **$1,654,000**, but gross profit decreased by **74%** to **$91,000**, with gross profit margin falling from **14.6%** to **5.2%**[202](index=202&type=chunk)[203](index=203&type=chunk) - The decline in gross profit margin was mainly due to fixed costs increasing as a percentage of lower revenue (**21%** in Q1 2022 vs. **14%** in Q1 2021), despite a decrease in variable costs[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) [Operating Expenses](index=40&type=section&id=Operating%20Expenses) Total operating expenses increased by 65%, primarily driven by higher selling, general, and administrative expenses, including salaries and professional fees - Total operating expenses increased by **$671,000 (65%)** to **$1,702,000** in Q1 2022 from **$1,030,000** in Q1 2021[207](index=207&type=chunk) - This increase was driven by a **$571,000** rise in selling, general and administrative (SG&A) expenses, a **$74,000** increase in advertising and marketing, and a **$26,000** increase in product development costs[207](index=207&type=chunk) - The SG&A increase was primarily due to higher salaries and benefits (**$384,000**), accounting and professional fees (**$87,000**), insurance costs (**$44,000**), and board/investor relations expenses (**$50,000**)[208](index=208&type=chunk) [Operating Income (Loss)](index=41&type=section&id=Operating%20Income%20%28Loss%29) The operating loss widened by 135% to $1.61 million, reflecting the impact of decreased gross profit and increased operating expenses - The operating loss increased by **$926,000 (135%)** to **$1,611,000** in Q1 2022, compared to **$686,000** in Q1 2021[211](index=211&type=chunk) - Excluding non-cash items (stock-based compensation and depreciation/amortization), the operating loss increased by **$902,000 (148%)**[211](index=211&type=chunk) [Other Income (Expense)](index=41&type=section&id=Other%20Income%20%28Expense%29) The company recognized significant other income in Q1 2022, primarily from an insurance settlement, a notable improvement from the prior year's litigation expense - The company recognized other income (net) of **$188,000** in Q1 2022, a significant improvement from other expense (net) of **$108,000** in Q1 2021[212](index=212&type=chunk) - This was primarily due to **$185,000** in income from an insurance settlement in Q1 2022, contrasting with a **$107,000** litigation settlement expense in Q1 2021[212](index=212&type=chunk) [Net Income (Loss)](index=41&type=section&id=Net%20Income%20%28Loss%29) The net loss increased by 79% to $1.42 million, further impacted by convertible preferred stock dividends and a deemed dividend - The net loss increased by **$630,000 (79%)** to **$1,423,000** in Q1 2022, compared to **$793,000** in Q1 2021[213](index=213&type=chunk) - Excluding non-cash items, the net loss increased by **$673,000 (104%)**[213](index=213&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=41&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) This section analyzes the company's cash position, working capital, and capital resources, highlighting the impact of a recent equity offering on liquidity [Cash, Cash Equivalents](index=41&type=section&id=Cash%2C%20Cash%20Equivalents) Cash and cash equivalents significantly increased due to an equity offering, leading to a substantial improvement in working capital - Cash and cash equivalents increased by **$19,874,000** to **$22,034,000** as of March 31, 2022, from **$2,160,000** at December 31, 2021, primarily due to proceeds from a common stock and warrants offering[214](index=214&type=chunk) - Working capital significantly improved from a deficit of **$415,000** at December 31, 2021, to a surplus of **$17,948,000** at March 31, 2022, driven by the increase in cash, inventory, and prepaid expenses, partially offset by deferred revenue[217](index=217&type=chunk) - The company holds deposits exceeding the federally insured amount and faces increasing exposure to accounts receivable risk as it pursues larger projects[214](index=214&type=chunk)[215](index=215&type=chunk) [Summary of Cash Flows](index=42&type=section&id=Summary%20of%20Cash%20Flows) Cash provided by operations decreased, while cash from financing activities significantly increased due to the sale of common stock and warrants Summary of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2022 ($) | Three Months Ended March 31, 2021 ($) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $193,000 | $484,000 | | Net cash used in investing activities | $(14,000) | $(12,000) | | Net cash provided by financing activities | $19,695,000 | $514,000 | | Net increase in cash | $19,874,000 | $986,000 | - Cash provided by operations decreased by **$291,000** to **$193,000** in Q1 2022, primarily due to an increased net loss and higher working capital funding[220](index=220&type=chunk)[221](index=221&type=chunk) - Cash flows from financing activities significantly increased to **$19,695,000** in Q1 2022, driven by **$21,711,000** from the sale of common stock and warrants, offset by Series B preferred stock redemption[224](index=224&type=chunk) [Common Stock Equity Offering](index=43&type=section&id=Common%20Stock%20Equity%20Offering) The company completed a public offering in February 2022, raising approximately $22 million in net proceeds to fund growth initiatives and general corporate purposes - On February 15, 2022, the company closed a public offering, raising approximately **$21,711,000** in net proceeds from the sale of 5,811,138 common shares and 6,572,808 warrants[227](index=227&type=chunk) - The proceeds will fund organic growth, new product initiatives, select acquisitions, and general corporate/working capital purposes[228](index=228&type=chunk) - The company's common stock and warrants commenced trading on the Nasdaq Capital Market under symbols 'CEAD' and 'CEADW' respectively, effective February 10, 2022[228](index=228&type=chunk) [Inflation](index=43&type=section&id=Inflation) The company is experiencing inflationary increases in product costs, which may adversely affect margins, and plans to monitor contract terms to mitigate impact - The company is experiencing inflationary increases in product costs, which may adversely affect margins and financial results, impacting wages, equipment pricing, and service contracts[229](index=229&type=chunk) - Management plans to monitor contract terms and may add clauses to adjust pricing to mitigate the impact of inflation[229](index=229&type=chunk) [Contractual Payment Obligations](index=43&type=section&id=Contractual%20Payment%20Obligations) The company's primary contractual payment obligation as of March 31, 2022, consists of a building lease, as detailed in Note 2 - As of March 31, 2022, the company's primary contractual payment obligation consisted of a building lease, detailed in Note 2 to the financial statements[230](index=230&type=chunk) [Commitments and Contingencies](index=43&type=section&id=Commitments%20and%20Contingencies) The company's commitments and contingencies are discussed in Note 7 of the condensed consolidated financial statements - The company's commitments and contingencies are discussed in Note 7 of the condensed consolidated financial statements[231](index=231&type=chunk) [Off-Balance Sheet Arrangements](index=43&type=section&id=Off-Balance%20Sheet%20Arrangements) As of March 31, 2022, the company had no material off-balance sheet arrangements - As of March 31, 2022, the company had no material off-balance sheet arrangements[232](index=232&type=chunk) [Recent Developments](index=43&type=section&id=Recent%20Developments) Significant events occurring after March 31, 2022, are detailed in Note 14 of the condensed consolidated financial statements - Significant events occurring after March 31, 2022, are detailed in Note 12 (likely a typo, should be Note 14) of the condensed consolidated financial statements[233](index=233&type=chunk) [Critical Accounting Estimates](index=43&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates involve significant management judgment across areas such as revenue recognition, asset valuation, equity compensation, and legal contingencies - Critical accounting estimates involve significant management judgment and include allocation of transaction prices, standalone selling prices, timing of revenue recognition on remaining performance obligations, valuation of intangible assets, equity-based compensation, deferred tax assets/liabilities, warranty accruals, accounts receivable/inventory allowances, and legal contingencies[234](index=234&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, CEA Industries Inc. is not required to provide quantitative and qualitative disclosures about market risk under this item - The company is a smaller reporting company and is not required to provide disclosures about market risk[236](index=236&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective due to material weaknesses in internal control over financial reporting, including insufficient accounting expertise and segregation of duties - Disclosure controls and procedures were not effective as of March 31, 2022, due to material weaknesses in internal control over financial reporting[237](index=237&type=chunk) - Identified weaknesses include a lack of sufficient accounting expertise and supervisory review, inadequate segregation of duties, and insufficient controls over the accuracy and completeness of spreadsheets used for financial reporting[238](index=238&type=chunk) - The company intends to improve its financial organization, including expanding accounting staff and improving systems, but full remediation may not be economically feasible due to size and financial resources[239](index=239&type=chunk) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the three months ended March 31, 2022[240](index=240&type=chunk) [PART II — OTHER INFORMATION](index=46&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, unregistered sales of equity securities, and exhibits [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings and is unaware of any pending or threatened litigation that would have a material adverse effect on its business - The company is not currently involved in any material legal proceedings, nor is it aware of any pending or threatened litigation that would materially adversely affect its business[242](index=242&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the comprehensive risk factors detailed in the company's Annual Report on Form 10-K and subsequent SEC filings for potential material adverse effects - Readers should review the risk factors in the Annual Report on Form 10-K for the year ended December 31, 2021, and subsequent SEC filings, as they could materially and adversely affect the company's business, financial condition, and results of operations[243](index=243&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item details the unregistered sale of equity securities related to the conversion of Series B Preferred Stock into common stock and warrants under a private placement exemption - On February 16, 2022, 1,650 shares of Series B Preferred Stock were converted into 362,306 common shares and 703,069 warrants (including 170,382 pre-funded warrants and 532,688 conversion warrants)[244](index=244&type=chunk) - These issuances were made to an accredited investor under a private placement exemption from registration pursuant to Section 4(a)(2) of the Securities Act[244](index=244&type=chunk) [Item 3. Defaults Upon Senior Securities](index=46&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities for the period - None[245](index=245&type=chunk) [Item 4. Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[246](index=246&type=chunk) [Item 5. Other Information](index=46&type=section&id=Item%205.%20Other%20Information) The company reported no other information for the period - None[246](index=246&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from executive officers and Inline XBRL documents - The exhibit index includes certifications from the Principal Executive Officer and Principal Financial and Accounting Officer (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL documents[247](index=247&type=chunk)[254](index=254&type=chunk) [SIGNATURES](index=47&type=section&id=SIGNATURES) The report was signed on May 12, 2022, by the Chief Executive Officer and President, and the Chief Financial Officer - The report was signed on May 12, 2022, by Anthony K. McDonald, Chief Executive Officer and President, and Ian K. Patel, Chief Financial Officer[252](index=252&type=chunk) [EXHIBIT INDEX](index=48&type=section&id=EXHIBIT%20INDEX) The Exhibit Index lists various certifications and Inline XBRL documents filed with the Form 10-Q - The Exhibit Index lists various certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104) filed with the Form 10-Q[254](index=254&type=chunk)

Part I [Business](index=7&type=section&id=Item%201.%20Business) CEA Industries Inc. provides design, technology, and services for controlled environment agriculture, serving cannabis and non-cannabis indoor farming sectors with a focus on expanding into vertical farming and broadening product offerings - The company is an industry leader in Controlled Environment Agriculture (CEA) facility design, technologies, and services, serving indoor facilities, vertical farms, and greenhouses[29](index=29&type=chunk) - Historically, the company has primarily served customers growing cannabis but is strategically expanding to serve other indoor farming sectors, including vertical farms for non-cannabis crops[32](index=32&type=chunk) - The company provides a full suite of services including licensed architectural and MEP engineering, curated HVACD equipment, proprietary controls (SentryIQ®), lighting, and benching products[33](index=33&type=chunk) - In November 2021, the company changed its corporate name from Surna Inc. to CEA Industries Inc. to better reflect its business and prepare for acquisitions and internal growth[94](index=94&type=chunk) [Our Services and Equipment Solutions](index=9&type=section&id=Item%201.%20Business-Our%20Services%20and%20Equipment%20Solutions) The company offers comprehensive indoor agriculture solutions, including architectural and MEP engineering services, proprietary environmental control products, and reselling of cultivation equipment - Service offerings encompass the full facility lifecycle, from architectural design and MEP engineering to equipment installation advice, startup support, and recurring preventative maintenance services[47](index=47&type=chunk)[57](index=57&type=chunk) - Product offerings include a mix of proprietary, white-label, and resold equipment, with key proprietary products including the SentryIQ® controls and automation platform and Surna-branded environmental control systems[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk) - The SentryIQ® sensors, controls, and automation (SCA) platform is a key high-margin product, providing a single-vendor solution for HVACD equipment and controls integration[60](index=60&type=chunk) [Our Corporate Growth Strategy](index=15&type=section&id=Item%201.%20Business-Our%20Corporate%20Growth%20Strategy) The company's growth strategy focuses on organic expansion into non-cannabis CEA markets, strategic M&A, and enhancing its public profile through Nasdaq uplisting and capital raises - Pursue aggressive organic growth by expanding into new markets like non-cannabis vertical farming and expanding product offerings to cover all primary technologies in a CEA facility[89](index=89&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) - Seek strategic mergers and acquisitions, using the company's engineering expertise and public platform to attract smaller component providers[95](index=95&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) - Improve public profile and stock liquidity through its uplisting to the Nasdaq Capital Market (February 2022) and a subsequent public offering that raised approximately **$22 million** net proceeds (February 2022)[100](index=100&type=chunk)[101](index=101&type=chunk) [US Government Regulation](index=19&type=section&id=Item%201.%20Business-US%20Government%20Regulation) The company's business is significantly tied to the federally illegal cannabis industry, creating complex regulatory risks despite state legalizations and historical federal enforcement guidance - The company does not grow or sell cannabis, but nearly all of its products and services are provided to customers who cultivate marijuana[16](index=16&type=chunk) - Cannabis is a Schedule I controlled substance and illegal under federal law, even in states where it has been legalized for medical or recreational use, creating significant legal and financial risk[113](index=113&type=chunk)[114](index=114&type=chunk) - Federal enforcement priorities have shifted over time, from the Obama-era Cole Memorandum to its rescission by the Trump administration, with the Joyce Amendment offering some protection but requiring annual re-enactment[115](index=115&type=chunk)[117](index=117&type=chunk) [Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks from limited revenues, internal control weaknesses, supply chain disruptions, federal cannabis illegality impacting customers, and stock volatility - The company has historically operated with limited revenues and a working capital deficit, and while a February 2022 offering provided **~$22 million**, additional capital may be needed for future growth[123](index=123&type=chunk)[136](index=136&type=chunk) - Material weaknesses in internal controls over financial reporting have been identified, including a lack of sufficient accounting personnel and inadequate segregation of duties, which could affect the accuracy of financial reporting[127](index=127&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) - Because cannabis remains illegal under federal law, strict enforcement against the company's customers would likely result in an inability to execute its business plan, posing a significant risk[132](index=132&type=chunk)[197](index=197&type=chunk) - The company faces supply chain disruptions, including international shipping delays and inflationary cost pressures, which could harm its business, margins, and reputation[129](index=129&type=chunk)[170](index=170&type=chunk) [Properties](index=38&type=section&id=Item%202.%20Properties) The company leases its 11,491 square foot manufacturing and headquarters office in Louisville, Colorado, under a lease term from November 2021 to January 2027 - The company leases its headquarters and manufacturing space at 385 S. Pierce Avenue, Suite C, Louisville, Colorado 80027[255](index=255&type=chunk) - The lease term is from November 1, 2021, to January 31, 2027, for approximately **11,491 square feet** of space[255](index=255&type=chunk) [Legal Proceedings](index=38&type=section&id=Item%203.%20Legal%20Proceedings) The company settled a former employee litigation in March 2021 for **$107,000**, issuing **6,667** common shares, and currently faces no other material legal proceedings - The Company settled a litigation with a former employee on March 30, 2021, by issuing **6,667 shares** of common stock, with the total cost of the settlement being **$107,000**[256](index=256&type=chunk) - The company is not currently a party to any other material legal proceedings[257](index=257&type=chunk) [Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[258](index=258&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=39&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock and warrants trade on Nasdaq, with no foreseeable dividend payments, and it operates two equity incentive plans for stock-based awards - The company's common stock and warrants are quoted on Nasdaq under the symbols "CEAD" and "CEADW"[260](index=260&type=chunk) - The company does not anticipate paying cash dividends on its common stock in the foreseeable future, intending to retain earnings for business development and growth[261](index=261&type=chunk) Equity Compensation Plan Information as of December 31, 2021 | Plan | Shares to be Issued Upon Exercise | Weighted-Average Exercise Price | Shares Available for Future Issuance | | :--- | :--- | :--- | :--- | | **2017 Equity Plan** | 162,238 | $11.70 | 7,403 | | **2021 Equity Plan** | 46,807 | $7.43 | 613,057 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In FY2021, revenue grew **60%** to **$13.6 million**, net loss decreased to **$1.3 million**, and gross margin improved, with a significant **$22 million** equity raise in early 2022 enhancing liquidity Financial Performance Comparison (FY 2021 vs. FY 2020) | Metric | FY 2021 | FY 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $13,639,000 | $8,514,000 | +$5,125,000 | +60% | | **Gross Profit** | $2,926,000 | $1,553,000 | +$1,373,000 | +88% | | **Gross Margin** | 21.5% | 18.2% | +3.3 pts | N/A | | **Operating Loss** | ($1,979,000) | ($2,363,000) | +$384,000 | -16% | | **Net Loss** | ($1,338,000) | ($1,759,000) | +$421,000 | -24% | - Backlog at December 31, 2021, was **$10,818,000**, a **28%** increase from the **$8,448,000** backlog at the end of 2020[304](index=304&type=chunk)[308](index=308&type=chunk) - In February 2022, the company received net proceeds of approximately **$22 million** from a public offering of common stock and warrants, providing significant liquidity to fund its growth strategy[292](index=292&type=chunk)[341](index=341&type=chunk)[354](index=354&type=chunk) - The company's cash and cash equivalents decreased from **$2.3 million** at year-end 2020 to **$2.2 million** at year-end 2021, prior to the February 2022 capital raise[340](index=340&type=chunk) [Controls and Procedures](index=53&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of December 31, 2021, due to material weaknesses in accounting personnel, segregation of duties, and spreadsheet controls, with remediation efforts potentially constrained by financial resources - Management concluded that disclosure controls and procedures were not effective as of December 31, 2021[368](index=368&type=chunk) - A material weakness was identified due to: (i) lack of sufficient personnel with accounting expertise and adequate supervisory review, (ii) inadequate segregation of duties, and (iii) insufficient controls over financial reporting spreadsheets[374](index=374&type=chunk) - These material weaknesses remained unchanged from December 31, 2020, and while the company is committed to improving its financial organization, remediation may be limited by its size and financial resources[375](index=375&type=chunk)[377](index=377&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=56&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company's five-member board, with four independent directors, has established key committees, adopted a Code of Ethics, and appointed Ian K. Patel as the new CFO in March 2022 - The Board of Directors consists of Anthony K. McDonald (Chairman, CEO, President), James R. Shipley, Nicholas J. Etten, Troy L. Reisner, and Marion Mariathasan[384](index=384&type=chunk) - The Board has determined that Messrs. Shipley, Etten, Mariathasan, and Reisner are independent directors[400](index=400&type=chunk) - The Board has established an Audit Committee, a Compensation Committee, and a Nominating Committee, with specified independent director memberships and responsibilities[401](index=401&type=chunk)[406](index=406&type=chunk)[409](index=409&type=chunk) - Ian K. Patel was appointed Chief Financial Officer, Treasurer and Secretary on March 11, 2022, replacing Brian Knaley[428](index=428&type=chunk)[429](index=429&type=chunk) [Executive Compensation](index=64&type=section&id=Item%2011.%20Executive%20Compensation) CEO Anthony K. McDonald's 2021 compensation totaled **$722,339**, independent director compensation was revised post-Nasdaq uplisting, and employment agreements are in place for key executives 2021 Named Executive Officer Compensation | Name and Principal Position | Year | Salary | Bonus | Stock Awards | Option Awards | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Anthony K. McDonald (CEO) | 2021 | $216,731 | $50,000 | $73,498 | $360,378 | $722,339 | | Richard B. Knaley (Former CFO) | 2021 | $120,192 | $0 | $0 | $122,000 | $246,467 | - CEO Anthony K. McDonald's employment agreement provides for an annualized base salary of **$275,000**, which increased to **$350,000** upon the February 2022 qualified offering, plus eligibility for an annual target bonus of **50%** of base salary[471](index=471&type=chunk)[473](index=473&type=chunk) - Independent directors' compensation was revised in January 2022, with the annual cash fee increasing to **$25,000** post-Nasdaq uplisting, supplemented by RSU grants[434](index=434&type=chunk)[441](index=441&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=72&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of March 29, 2022, executive officers and directors collectively owned less than **1%** of common stock, while Lind Global Partners II, LLC and Maier J. Tarlow's group each held over **5%** - As of March 29, 2022, all executive officers and directors as a group beneficially owned **91,488 shares**, representing less than **1%** of the class[484](index=484&type=chunk) 5% or More Stockholders (as of March 29, 2022) | Name of Beneficial Owner | Number of Shares Owned Beneficially | Percentage of Class | | :--- | :--- | :--- | | Lind Global Partners II, LLC | 400,000 | 5.1% | | Maier J. Tarlow | 424,113 | 5.4% | [Certain Relationships and Related Transactions, and Director Independence](index=74&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company engaged in consulting and manufacturer representative agreements with RSX Enterprises, Inc., controlled by a director, paying **$19,500** for consulting and **$42,639** in commissions in 2021, with related party transaction policies in place - In 2021, the Company entered into a consulting agreement and a manufacturer representative agreement with RSX Enterprises, Inc., a company controlled by director James R. Shipley[493](index=493&type=chunk)[494](index=494&type=chunk) - Total payments to RSX Enterprises, Inc. in 2021 were **$19,500** for consulting and **$42,639** for sales commissions[493](index=493&type=chunk)[495](index=495&type=chunk) [Principal Accountant Fees and Services](index=74&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Sadler, Gibb & Associates, L.L.C. served as the independent auditor for FY2021 and FY2020, with total fees of **$105,350** and **$137,000** respectively, and all services pre-approved by the Audit Committee Accountant Fees (2021 vs 2020) | Fee Type | 2021 | 2020 | | :--- | :--- | :--- | | Audit Fees | $97,500 | $116,000 | | Audit-Related Fees | $0 | $32,800 | | Tax Fees | $7,850 | $21,000 | | **Total** | **$105,350** | **$137,000** | Part IV [Exhibits and Financial Statement Schedules](index=76&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section includes CEA Industries Inc.'s consolidated financial statements and exhibits, with no separate financial statement schedules filed as information is integrated - The consolidated financial statements of CEA Industries Inc. are filed as part of the report[508](index=508&type=chunk) - No financial statement schedules are filed because they are not required or the necessary information is already presented in the financial statements[510](index=510&type=chunk) Financial Statements and Supplementary Data [Report of Independent Registered Public Accounting Firm](index=78&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The independent auditor issued a fair opinion on the financial statements but identified revenue recognition for multi-obligation contracts as a critical audit matter due to significant management judgment - The auditor's opinion states that the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020[516](index=516&type=chunk) - A Critical Audit Matter was identified concerning Revenue Recognition, specifically the management judgment required to identify distinct performance obligations in contracts and allocate the transaction price among them[522](index=522&type=chunk)[523](index=523&type=chunk) [Consolidated Financial Statements](index=80&type=section&id=Consolidated%20Financial%20Statements) As of December 31, 2021, total assets were **$5.3 million**, total liabilities **$4.9 million**, and shareholders' deficit **$3.6 million**, with 2021 revenue of **$13.6 million** and a net loss of **$1.3 million** Consolidated Balance Sheet Highlights (as of Dec 31) | Account | 2021 | 2020 | | :--- | :--- | :--- | | Total Current Assets | $3,991,098 | $3,683,293 | | **Total Assets** | **$5,281,962** | **$4,813,266** | | Total Current Liabilities | $4,406,269 | $5,903,689 | | **Total Liabilities** | **$4,892,495** | **$6,146,964** | | **Total Shareholders' Deficit** | **($3,570,533)** | **($1,333,698)** | Consolidated Statement of Operations Highlights (Year Ended Dec 31) | Account | 2021 | 2020 | | :--- | :--- | :--- | | Revenue, net | $13,638,558 | $8,514,272 | | Gross Profit | $2,925,995 | $1,552,967 | | Operating Loss | ($1,978,515) | ($2,362,624) | | **Net Loss** | **($1,337,923)** | **($1,758,716)** | Consolidated Statement of Cash Flows Highlights (Year Ended Dec 31) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash (used in)/provided by operating activities | ($3,207,000) | $818,000 | | Net cash used in investing activities | ($57,000) | ($9,000) | | Net cash provided by financing activities | $3,139,000 | $554,000 | [Notes to Consolidated Financial Statements](index=87&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, including a January 2022 1-for-150 reverse stock split, 2021 revenue primarily from equipment sales, and significant early 2022 events like a Nasdaq uplisting and a **$22 million** equity raise - A 1-for-150 reverse stock split was approved and became effective in January 2022, with all share and per-share amounts in the report presented retroactively to reflect this split[552](index=552&type=chunk)[553](index=553&type=chunk) - In September 2021, the company sold **3,300 shares** of Series B Redeemable Convertible Preferred Stock and warrants to an institutional investor for an aggregate price of **$3 million**[661](index=661&type=chunk) - As of December 31, 2021, the company had U.S. federal and state net operating losses (NOLs) of approximately **$21.1 million**, the future use of which may be limited by ownership changes[734](index=734&type=chunk) - Subsequent to year-end, the company uplisted to Nasdaq (Feb 2022), raised approximately **$22 million** in a public offering (Feb 2022), and redeemed or converted all outstanding Series B Preferred Stock (Feb 2022)[753](index=753&type=chunk)[754](index=754&type=chunk)[755](index=755&type=chunk)[756](index=756&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q3 2021 was $3.7 million, representing a 127% increase compared to Q3 2020 [28] - Gross profit margin for Q3 2021 was 20.2%, down from 32.2% in Q3 2020, a decrease of 12 percentage points [29] - Operating loss for Q3 2021 was $443,000, a 57% increase compared to the prior year [30] - Year-to-date revenue through September 30, 2021, was $10.6 million, a 106% increase from $5.1 million in the same period last year [32] - Adjusted net loss for Q3 2021 was $363,000, representing a 95% increase compared to the same quarter last year [31] Business Line Data and Key Metrics Changes - Bookings for Q3 2021 were approximately $5.6 million, a 32% increase compared to Q3 2020 and a 509% increase compared to Q2 2021 [35] - The company has expanded its product and service offerings, including new partnerships and product lines, to enhance its market position [10][11] Market Data and Key Metrics Changes - The controlled environment agriculture (CEA) market, particularly indoor cannabis cultivation, is projected to grow at a compound annual growth rate of over 20% [14] - The company has begun to serve the non-cannabis controlled environment agriculture market, particularly indoor food farming, indicating diversification in market focus [6][7] Company Strategy and Development Direction - The company aims to pursue aggressive organic growth, strategic relationships, mergers and acquisitions, and uplisting to a national exchange [13][14] - The focus on preventative maintenance contracts is seen as critical for maximizing customer uptime and supporting long-term relationships [40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the organic growth strategy gaining traction and expected continued success in the second half of the year [38] - Supply chain disruptions were acknowledged, with anticipated revenue impacts pushing into Q4 2021 and possibly Q1 2022 [42] Other Important Information - The company completed a PIPE financing and issued Series B preferred shares, raising approximately $2.6 million after fees [36] - The company has not raised capital in over three years and is focused on financial discipline while seeking growth opportunities [21][23] Q&A Session Summary Question: Importance of preventative maintenance contracts - Management believes these contracts maximize customer uptime and support throughout the project lifecycle [40] Question: Update on uplisting efforts - Management confirmed completion of PIPE financing as a necessary first step towards uplisting to a national exchange [41] Question: Impact of supply chain disruptions - Management indicated that delays would affect revenue, pushing some into Q4 2021 and possibly Q1 2022 [42] Question: Relationship with grill advisors - Management confirmed the end of the relationship with grill advisors [43]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered N/A N/A N/A FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-54286 SURNA INC. (Exact name of registrant as specified in its charter) Neva ...

Surna Inc. (SRNA) Q2 2021 Earnings Conference Call August 17, 2021 4:00 PM ET Company Participants Tony McDonald - Chief Executive Officer Brian Knaley - Chief Financial Officer Operator Good afternoon, ladies and gentlemen and welcome to the Surna Inc. Q2 2021 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions after the presentation. [Operator Instruction] It is now my pleasure to turn the floor over to your host, Su ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered N/A N/A N/A FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-54286 SURNA INC. (Exact name of registrant as specified in its charter) Nevada 27 ...

Surna Inc. (SRNA) Q1 2021 Earnings Conference Call May 13, 2021 4:00 PM ET Company Participants Tony McDonald - Chairman & Chief Executive Officer Conference Call Participants Operator Good afternoon, ladies and gentlemen. And welcome to the Surna Inc. Q1 2021 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and we’ll open the floor for your questions after the presentation. [Operator Instruction] It is now my pleasure to turn the floor over to your host, Surn ...

[PART I — FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This section covers the company's unaudited financial statements, management's analysis, market risk, and internal controls [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited Q1 2021 financials show revenue growth, a net loss, and a 'Going Concern' warning due to capital needs [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a significant increase in total assets and liabilities, primarily driven by cash and deferred revenue Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | March 31, 2021 ($) | December 31, 2020 ($) | | :--- | :--- | :--- | | **Total Assets** | **$6,964,539** | **$4,813,266** | | Cash, cash equivalents and restricted cash | $3,271,128 | $2,284,881 | | **Total Liabilities** | **$8,889,829** | **$6,146,964** | | Deferred revenue | $6,087,093 | $3,724,189 | | **Total Shareholders' Deficit** | **($1,925,290)** | **($1,333,698)** | - Total assets increased by **44.7%** from year-end 2020, primarily due to a **43.2%** increase in cash and a **99%** increase in prepaid expenses. Total liabilities grew by **44.6%**, largely driven by a **63.5%** increase in deferred revenue[17](index=17&type=chunk) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statement of operations shows a year-over-year revenue increase but a decline in gross profit and a narrowed net loss Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended March 31, 2021 ($) | Three Months Ended March 31, 2020 ($) | | :--- | :--- | :--- | | **Revenue, net** | **$2,366,529** | **$1,809,925** | | Gross profit | $344,606 | $456,524 | | Operating loss | ($685,650) | ($946,338) | | **Net loss** | **($793,368)** | **($938,313)** | | Loss per common share | ($0.00) | ($0.00) | - Revenue increased by **30.8%** year-over-year, but gross profit decreased by **24.5%** due to higher cost of revenue. The company narrowed its operating loss and net loss compared to the same period in the prior year[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flow statements indicate positive operating cash flow in Q1 2021, driven by deferred revenue and a new note payable Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2021 ($) | Three Months Ended March 31, 2020 ($) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $484,373 | ($727,887) | | Net cash used in investing activities | ($12,326) | $0 | | Net cash provided by financing activities | $514,200 | $0 | | **Net change in cash** | **$986,247** | **($727,887)** | - The company generated positive cash flow from operations in Q1 2021, a significant improvement from the cash burn in Q1 2020, primarily driven by a large increase in deferred revenue. Financing activities consisted of proceeds from a new note payable[25](index=25&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes provide critical details on the company's business, going concern uncertainty, backlog, and recent financial events - The company designs, engineers, and sells environmental control technologies for the Controlled Environment Agriculture (CEA) industry, with customers primarily in the U.S. and Canada. It does not produce or sell cannabis[27](index=27&type=chunk) - There is substantial doubt about the Company's ability to continue as a going concern, as management believes cash balances and cash flow from operations will be insufficient to fund operations for the next 12 months without raising additional capital[35](index=35&type=chunk) - As of March 31, 2021, the company's backlog (remaining performance obligations) was **$11.58 million**. The company expects to recognize approximately **$11.13 million** of this backlog in 2021 and **$0.45 million** in 2022[60](index=60&type=chunk)[61](index=61&type=chunk) - In February 2021, the company entered into a note payable with its bank for **$514,200**. The loan has a **1%** interest rate and is potentially forgivable[93](index=93&type=chunk)[94](index=94&type=chunk) - A legal dispute with a former employee was settled on March 30, 2021. The company agreed to pay **$40,000** in cash and issue **1,000,000 shares** of common stock. The total settlement cost of **$107,000** was recognized as an expense in Q1 2021[96](index=96&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2021 revenue growth, declining gross margins, improved operating loss, increased backlog, and persistent 'Going Concern' concerns [Overview and Corporate Strategy](index=26&type=section&id=Overview%20and%20Corporate%20Strategy) The company's overview details its CEA industry focus and a three-pillar strategy for organic growth, M&A, and uplisting - The company is an integrated provider of MEP (mechanical, electrical, plumbing) engineering design and proprietary environmental control equipment for the Controlled Environment Agriculture (CEA) industry, historically focused on cannabis cultivation[132](index=132&type=chunk)[137](index=137&type=chunk) - The company's three-pillar corporate strategy includes: 1) Pursuing aggressive organic growth, 2) Seeking strategic relationships and M&A, and 3) Pursuing an uplisting to a national exchange and raising growth capital[144](index=144&type=chunk) - The updated organic growth strategy involves expanding into new markets (broader CEA, vertical farming), offering new products and services (full CEA technical infrastructure), and adopting a new trade name, "Surna Cultivation Technologies," to reflect these changes[153](index=153&type=chunk)[154](index=154&type=chunk) [Bookings, Backlog and Revenue](index=32&type=section&id=Bookings%2C%20Backlog%20and%20Revenue) This section analyzes the company's sales performance, highlighting significant increases in net bookings and ending backlog Bookings and Backlog Trend (in thousands) | Metric | Q1 2020 ($ thousands) | Q2 2020 ($ thousands) | Q3 2020 ($ thousands) | Q4 2020 ($ thousands) | Q1 2021 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | Beginning Backlog | $9,558 | $8,875 | $5,592 | $8,198 | $8,448 | | Net Bookings | $1,127 | ($1,601) | $4,241 | $3,637 | $5,497 | | Recognized Revenue | $1,810 | $1,682 | $1,635 | $3,387 | $2,367 | | **Ending Backlog** | **$8,875** | **$5,592** | **$8,198** | **$8,448** | **$11,578** | - Net bookings for Q1 2021 were **$5.5 million**, a **51%** increase from Q4 2020 and a **388%** increase from Q1 2020[165](index=165&type=chunk)[166](index=166&type=chunk) - Backlog increased by **37%** to **$11.6 million** at the end of Q1 2021. **83%** of this backlog is from 'partial equipment paid contracts,' which have a higher certainty of revenue recognition[167](index=167&type=chunk)[173](index=173&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Results of operations show a 31% revenue increase but a 10-point gross margin decline due to lower selling prices Q1 2021 vs Q1 2020 Performance | Metric | Three Months Ended March 31, 2021 ($) | Three Months Ended March 31, 2020 ($) | | :--- | :--- | :--- | | Revenue | $2,367,000 | $1,810,000 | | Gross Profit | $345,000 | $457,000 | | Gross Margin | 15% | 25% | | Operating Expenses | $1,030,000 | $1,403,000 | | Operating Loss | ($686,000) | ($946,000) | | Net Loss | ($793,000) | ($938,000) | - Revenue increased **31%** YoY, but gross profit margin decreased by **ten percentage points** from **25%** to **15%**, primarily due to a decrease in the selling price of equipment[176](index=176&type=chunk)[178](index=178&type=chunk) - Operating expenses decreased by **27%** YoY, mainly due to a **$369,000** reduction in SG&A expenses, which included a **$141,000** decrease in stock-related compensation[183](index=183&type=chunk)[184](index=184&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=35&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) The company's financial condition shows increased cash but a growing working capital deficit and persistent 'Going Concern' concerns - As of March 31, 2021, the company had cash, cash equivalents, and restricted cash of **$3.3 million**, a **43%** increase from year-end 2020, driven by operating cash flow and a **$514,000** loan[191](index=191&type=chunk) - The company had a working capital deficit of **$2.3 million** as of March 31, 2021, an increase from the **$2.2 million** deficit at year-end 2020, primarily due to a **$2.4 million** increase in deferred revenue[192](index=192&type=chunk) - A 'Going Concern' warning is noted, as management states that cash balances and cash flow from operations are believed to be insufficient to fund operations for the next 12 months, necessitating additional capital raising[203](index=203&type=chunk)[207](index=207&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Surna Inc. is exempt from providing quantitative and qualitative market risk disclosures - As a smaller reporting company, Surna Inc. is exempt from the requirement to provide quantitative and qualitative disclosures about market risk[217](index=217&type=chunk) [Controls and Procedures](index=38&type=section&id=Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective due to a material weakness in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of March 31, 2021[218](index=218&type=chunk) - The ineffectiveness is due to a material weakness in internal control over financial reporting, characterized by: - Lack of sufficient personnel with adequate accounting expertise - Inadequate segregation of duties - Insufficient controls over the accuracy and completeness of spreadsheets used in financial reporting[219](index=219&type=chunk) [PART II — OTHER INFORMATION](index=39&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section includes information on legal proceedings, risk factors, equity sales, and exhibits [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company settled litigation with a former employee, agreeing to cash payments and stock issuance, with no other material legal proceedings - Litigation with a former employee regarding alleged consulting fees was settled effective March 30, 2021[224](index=224&type=chunk) - Settlement terms required the company to pay **$40,000** in cash over eight months and issue **1,000,000 shares** of common stock[224](index=224&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) No material changes were reported to the significant risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes were reported to the significant risk factors affecting the business as described in the Annual Report on 10-K for the year ended December 31, 2020[226](index=226&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the quarter - The company reported no unregistered sales of equity securities during the quarter[226](index=226&type=chunk) [Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - The Exhibit Index lists documents filed with the report, including Sarbanes-Oxley certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and XBRL interactive data files (Exhibit 101 series)[229](index=229&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____ TO _______ Commission File Number: 000-54286 SURNA INC. (Exact name of registrant as specified in its charter) Nevada 27-3911608 (State or other jurisdiction of inco ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-54286 SURNA INC. (Exact name of registrant as specified in its charter) Nevada 27-3911608 (State or other jurisdiction of incorporation or organization) (I.R.S. Emp ...