[X]
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QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2013
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OR
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Large Accelerated Filer
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[ ]
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Accelerated Filer
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[ ]
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Non-accelerated Filer
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[ ]
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Smaller Reporting Company
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[X]
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(Do not check if smaller reporting company)
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Page
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PART I.
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Item 1.
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FINANCIAL STATEMENTS.
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5
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Item 2.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
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13
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Item 3.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
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19
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Item 4.
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CONTROLS AND PROCEDURES.
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19
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PART II.
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Item 1A.
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RISK FACTORS.
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20
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Item 6.
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EXHIBITS.
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20
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Signatures
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21
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Exhibit Index
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22
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·
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Code of Ethics
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·
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Charter for our Audit Committee
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·
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Charter for our Disclosure Committee
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·
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“China” or “PRC” refers to the People’s Republic of China, and excludes Hong Kong, Macau and Taiwan;
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·
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“we”, “us”, “our company” and “our” refer to Surna Inc., and, unless the context requires otherwise, its wholly-owned subsidiaries, including Surna Media Inc., a British Virgin Islands company, Surna Hongkong Limited, a Hong Kong company, and Flying Cloud Information Technology Co. Ltd., a PRC company.
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·
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We have limited financial resources and accordingly may not be able to continue to operate as a going concern unless we obtain additional financing;
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·
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Our lack of resources may make it difficult or impossible to stabilize and strengthen our position as an online game developer in China;
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·
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We may not be successful in our efforts to develop and launch additional online games;
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·
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Our various initiatives to implement our business strategies may not prove successful despite the costs incurred to pursue them;
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·
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Our competitors have significantly more resources than we do, and as a result we might not be able to compete successfully;
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·
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The regulatory environment in China and other countries relating to the Internet and Internet content providers, including online game developers and operators, may hinder or impair our ability to conduct our online gaming business as we intend; and
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June 30,
2013
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December 31,
2012
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|||||
(Unaudited)
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|||||
ASSETS
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||||||
Current Assets
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||||||
Cash
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$
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987
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$
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1,197
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Accounts receivable
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59
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-
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||||
Prepaid expenses
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-
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250
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||||
Total Current Assets
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1,046
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1,447
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||||
Equipment, net of accumulated depreciation
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10,001
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16,668
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||||
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||||||
TOTAL ASSETS
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$
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11,047
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$
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18,115
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||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT
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||||||
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||||||
CURRENT LIBILITIES
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||||||
Accrued liabilities
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$
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69,435
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$
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83,509
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||
Amounts due to related parties
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2,545,439
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2,371,861
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||||
Total Current Liabilities
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2,614,874
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2,455,370
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||||
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||||||
TOTAL LIABILITIES
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2,614,874
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2,455,370
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||||
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||||||
STOCKHOLDERS’ DEFICIT
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||||||
Preferred stock, $0.00001 par value; 150,000,000 shares authorized;
0 shares issued and outstanding
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-
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-
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||||
Common stock, $0.00001 par value; 350,000,000 shares authorized;
99,375,000 issued and outstanding
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994
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994
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||||
Paid in capital
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148,507
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148,507
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||||
Accumulated other comprehensive loss
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(9,541)
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(4,304)
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Accumulated deficit
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(2,743,787)
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(2,582,452)
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Total Stockholders' Deficit
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(2,603,827)
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(2,437,255)
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||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
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$
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11,047
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$
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18,115
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Three months ended June 30,
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Six months ended June 30,
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|||||||
2013
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2012
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2013
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2012
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|||||
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||||||||
Revenue
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$
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13
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$
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0
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$
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36
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$
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47,831
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Cost of revenue
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- | - | - | - | ||||
Gross margin
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13
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0
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36
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47,831
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||||
Operating Expenses:
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||||||||
Depreciation expenses
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3,333
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3,333
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6,666
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6,666
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||||
Product development cost
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-
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11,839
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-
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29,272
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||||
General and administrative expenses
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65,846
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217,539
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154,705
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406,523
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Total operating expenses
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69,179
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232,711
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161,371
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442,461
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Operating loss
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||||||||
Other income (expense):
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||||||||
Other expenses
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-
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-
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-
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-
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Loss from continuing operations before
provision for income taxes
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(69,166)
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(232,711)
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(161,335)
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(394,630)
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Provision for income taxes
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-
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-
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-
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-
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||||
Loss from continuing operations
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(69,166)
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(232,711)
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(161,335)
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(394,630)
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Income from discontinued operations
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-
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-
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-
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11,607
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||||
Net loss
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(69,166)
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(232,711)
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(161,335)
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(383,023)
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Comprehensive loss:
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Net loss
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(69,166)
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(232,711)
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(161,335)
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(383,023)
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Foreign currency translation (loss) gain
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(2,103)
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2,360
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(5,237)
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2,310
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Comprehensive Loss
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$
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(71,269)
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$
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(230,351)
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$
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(166,572)
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$
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(380,713)
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Loss per common share from continuing
operations – basic and diluted
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($0.00)
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($0.00)
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($0.00)
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($0.00)
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Income per common share from discontinued
operations – basic and diluted
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($0.00)
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($0.00)
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($0.00)
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($0.00)
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Net loss per common share – basic and diluted
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($0.00)
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($0.00)
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($0.00)
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($0.00)
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Weighted average number of common shares
outstanding, basic and diluted
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99,375,000
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99,375,000
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99,375,000
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99,375,000
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For the six
months ended
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For the six
months ended
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|||||
June 30,
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June 30,
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|||||
2013
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2012
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|||||
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CASH FLOWS FROM OPERATING ACTIVITIES
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||||||
Net loss
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$
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(161,335)
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$
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(383,023)
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Income from discontinued operation
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-
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11,607
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Loss from continuing operations
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(161,335)
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(394,630)
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Adjustments to reconcile net loss to net cash used in provided
by operating activities:
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||||||
Depreciation expense
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6,666
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6,666
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Changes in operating assets and liabilities:
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||||||
Accounts receivable
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(59)
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(46,346)
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Prepaid expenses
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250
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375
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||||
Accrued liabilities
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(14,074)
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30,209
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Amount due to related parties
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173,578
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399,846
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Cash provided by (used in) operating activities of continuing operations
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5,026
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(3,880)
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||||||
Cash provided by (use in) operating activities of discontinued operations
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-
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2
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Net cash (used in) provided by operating activities
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5,026
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(3,878)
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||||||
CASH FLOWS FROM INVESTING ACTIVITIES
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||||||
Cash flow used in investing activities
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-
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-
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||||||
CASH FLOWS FROM FINANCING ACTIVITIES
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||||||
Capital Contribution
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-
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-
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||||
Net cash provided by financing activities
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-
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-
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||||
Effect of disposal of discontinued operation
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-
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(55)
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||||
Effect of exchange rate changes
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(5,237)
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2,310
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on cash
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-
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-
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||||
Net increase / (decrease) in cash
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(211)
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(1,623)
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||||
Cash, beginning of period
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1,197
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2,798
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Cash, end of period
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$
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986
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$
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1,175
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Supplementary disclosure of cash flow information
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||||||
Cash paid for interest
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$
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-
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$
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-
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Cash paid for income tax
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$
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-
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$
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-
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June 30, 2013
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June 30, 2012
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Period-end HKD: USD exchange rate
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$ 7.80
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$ 7.80
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Average Period HKD: USD exchange rate
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$ 7.80
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$ 7.80
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Period-end RMB: USD exchange rate
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$ 6.17
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$ 6.35
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Average Period RMB: USD exchange rate
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$ 6.20
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$ 6.32
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Surna Networks, Inc. (USD)
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Surna Networks Limited (USD)
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|||||||
Six Months Ended
06/30/2013
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Six Months Ended
06/30/2012
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Six Months Ended
06/30/2013
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Six Month Ended
06/30/2012
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|||||
Revenue
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$
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-
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$
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-
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$
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-
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$
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44,433
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Cost of Revenue
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-
|
-
|
-
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(31,323)
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||||
General & Administrative
|
-
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-
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-
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(1,503)
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||||
Net Income
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$
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-
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$
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-
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$
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-
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$
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11,607
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F8
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ITEM 2.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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·
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Ori-Princess: Spring Cleaning: Development of the iPhone version was completed in October 2012 and it was published on the Apple Appstore from October 25, 2012. Sales from release through June 30, 2013 totaled $36. We have had discussions with third-party mobile publishers in the PRC about publishing an advertising supported version of the game, but to date these have not resulted in any final contracts.
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·
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Ori-Princess: Development work on the Ori-Princess role-playing game was suspended indefinitely on November 9, 2012. It is our intention to explore options for either working with other game developers to complete this project or engaging new development personnel to restart the development program, but so far we have not reached any arrangements for this.
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·
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Serica: Publishing rights for the Simplified Chinese version of the game were licensed to Kunlun (through Jurun) in March 2012, with the first payment of RMB 300,000 due on April 1, 2012, and with subsequent payments of RMB 500,000 in May and RMB 200,000 in July, 2012. Kunlun commenced charging for the game on July 12, 2012, which constituted the start of commercial operations. To-date no payment has been received from Kunlun for any part of the licensing of the game. On January 7, 2013 Jurun, as the official licensor, engaged Receivables Management Services (HK), Limited (“RMS”) to attempt to recover all or some of the amounts owed. RMS’s collection efforts have to-date not met with success, and we are still evaluating what further actions it would be beneficial for us to pursue regarding this project.
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·
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Qia Ke Zhong Shi (Legend of the Kung-Fu Masters): As of August 2012 development work on this game had largely been completed, however YouQu refused to continue any further with its contracted development work or provide the game or agree to support the finished product. Flying Cloud requested from YouQu delivery or return of all the contracted work product, including up-to-date source code, documentation and art work on September 25, 2012; but to date this has not been forthcoming. We are still evaluating what further actions it would be beneficial for us to pursue, including its continued development, and licensing or selling it to a third-party developer or publisher.
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·
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our cost of developing and marketing online games;
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·
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the speed at which we develop and launch new online games and related in-game items;
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·
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the popularity of our games and in-game items compared with those of our competitors;
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·
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the amount of our licensing revenues inside of China; and
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·
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the success of investments and merger and acquisition activities.
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ITEM 3.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
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·
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The Company lacks proper segregation of duties. We believe that the lack of proper segregation of duties is due to our limited resources.
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·
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The Company does not have a comprehensive and formalized accounting and procedures manual.
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Exhibit
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Document Description
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Incorporated by reference
|
Filed
herein
|
||
Form
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Date
|
Number
|
|||
3.1
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Articles of Incorporation
|
S-1
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1/28/10
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3.1
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3.2
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Bylaws
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S-1
|
1/28/10
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3.2
|
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3.3
|
Amended Articles of Incorporation
|
8K
|
6/16/11
|
33
|
|
4.1
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Specimen Stock Certificate
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S-1
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1/28/10
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4.1
|
|
10.1
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Asset purchase agreement with Kopere Limited
|
8-K
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4/28/11
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10.1
|
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10.2
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Debt conversion agreement with Kopere Limited
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8-K
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6/23/11
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10.1
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10.3
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Share exchange agreement for Surna Media Inc.
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8-K
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11/8/11
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10.1
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10.4
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Technical Services Agreement with Jurun Information
Technology (Shanghai) Co. Ltd.
|
10-Q
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5/21/12
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10.4
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31.1
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Certification of Principal Executive Officer and
Principal Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
X
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|||
32.1
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Certification of Chief Executive Officer and Principal
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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X
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|||
101.INS
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XBRL Instance Document.
|
X
|
|||
101.SCH
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XBRL Taxonomy Extension – Schema.
|
X
|
|||
101.CAL
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XBRL Taxonomy Extension – Calculations.
|
X
|
|||
101.DEF
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XBRL Taxonomy Extension – Definitions.
|
X
|
|||
101.LAB
|
XBRL Taxonomy Extension – Labels.
|
X
|
|||
101.PRE
|
XBRL Taxonomy Extension – Presentation.
|
X
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SURNA INC.
(the “Registrant”)
|
||
|
||
BY:
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/s/ ROBERT G. CLARKE
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|
Robert G. Clarke
|
||
CEO (Principal Executive Officer), Chief Financial Officer (Principal Financial Officer, Principal Accounting Officer), Treasurer and a member of the Board of Directors
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Exhibit
|
Document Description
|
Incorporated by reference
|
Filed
herein
|
||
Form
|
Date
|
Number
|
|||
3.1
|
Articles of Incorporation
|
S-1
|
1/28/10
|
3.1
|
|
3.2
|
Bylaws
|
S-1
|
1/28/10
|
3.2
|
|
3.3
|
Amended Articles of Incorporation
|
8K
|
6/16/11
|
33
|
|
4.1
|
Specimen Stock Certificate
|
S-1
|
1/28/10
|
4.1
|
|
10.1
|
Asset purchase agreement with Kopere Limited
|
8-K
|
4/28/11
|
10.1
|
|
10.2
|
Debt conversion agreement with Kopere Limited
|
8-K
|
6/23/11
|
10.1
|
|
10.3
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Share exchange agreement for Surna Media Inc.
|
8-K
|
11/8/11
|
10.1
|
|
10.4
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Technical Services Agreement with Jurun Information
Technology (Shanghai) Co. Ltd.
|
10-Q
|
5/21/12
|
10.4
|
|
31.1
|
Certification of Principal Executive Officer and
Principal Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
X
|
|||
32.1
|
Certification of Chief Executive Officer and Principal
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
X
|
|||
101.INS
|
XBRL Instance Document.
|
X
|
|||
101.SCH
|
XBRL Taxonomy Extension – Schema.
|
X
|
|||
101.CAL
|
XBRL Taxonomy Extension – Calculations.
|
X
|
|||
101.DEF
|
XBRL Taxonomy Extension – Definitions.
|
X
|
|||
101.LAB
|
XBRL Taxonomy Extension – Labels.
|
X
|
|||
101.PRE
|
XBRL Taxonomy Extension – Presentation.
|
X
|
1.
|
I have reviewed this Amended Form 10-Q for the period ended June 30, 2013 of Surna Inc.;
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2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and,
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant=s most recent fiscal quarter (the registrant=s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant=s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant=s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant=s internal control over financial reporting.
|
Date:
|
August 14, 2013
|
ROBERT G. CLARKE
|
Robert G. Clarke
|
||
Principal Executive Officer and Principal Financial Officer
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
ROBERT G. CLARKE
|
|
Robert G. Clarke
|
|
Chief Executive Officer and Chief Financial Officer
|
NOTE 1 - NATURE, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Exchange Rates (USD $)
|
Jun. 30, 2013
|
Jun. 30, 2012
|
---|---|---|
Exchange Rates [Abstract] | ||
Period-end HKD: USD exchange rate | $ 7.80 | $ 7.80 |
Average Period HKD: USD exchange rate | 7.80 | 7.80 |
Period-end RMB: USD exchange rate | 6.17 | 6.35 |
Average Period RMB: USD exchange rate | $ 6.20 | $ 6.32 |
NOTE 5 - SIGNIFICANT CONCENTRATIONS, RISKS AND UNCERTAINTIES
|
3 Months Ended |
---|---|
Jun. 30, 2013
|
|
Risks and Uncertainties [Abstract] | |
Concentration Risk Disclosure [Text Block] |
NOTE
5 - SIGNIFICANT CONCENTRATIONS, RISKS AND
UNCERTAINTIES
The
majority of the Company's operations are carried out in the
PRC. Due to this the Company's business, financial condition
and results of operations may be influenced by the political,
economic and legal environments in the PRC, and by the
general state of the PRC's economy.
The
Company's operations in the PRC are subject to specific
considerations and significant risks not typically associated
with companies in the North America and Western Europe. These
include risks associated with, among others, the political,
economic and legal environments and foreign currency
exchange. The Company's results may be adversely affected by
changes in governmental policies with respect to laws and
regulations, anti-inflationary measures, currency conversion
and remittance abroad, and rates and methods of taxation,
among other things.
|
NOTE 2 - GOING CONCERN (Details) (USD $)
|
Jun. 30, 2013
|
---|---|
Going Concern Note [Abstract] | |
Working Capital | $ 2,613,828 |
Cumulative Earnings (Deficit) | $ 2,743,787 |
NOTE 1 - NATURE, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
3 Months Ended | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||
Significant Accounting Policies [Text Block] |
NOTE
1 – NATURE, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Nature
of Company
Surna
Inc. was incorporated in the State of Nevada on October 15,
2009. From September through November 2010, the company
placed 4,175,000 shares to 51 individuals at $0.02 per shares
and raised $83,500 excluding expenses. On May 16, 2011 a
stock dividend of 4 new shares for each 1 share held was
declared, with a record date of May 18, 2011. On May 18, 2011
authorized capital was increased from 100,000,000 common
shares to 350,000,000 common shares. On September 1, 2011,
Surna Inc. entered the online game development business by
acquiring Surna Media Inc. and its operating subsidiaries
Surna Hongkong Limited and Flying Cloud Information
Technology Co. Ltd. through the issuance of 20,000,000 common
shares.
Qoo
Games Limited was incorporated in Hong Kong on February 21,
2012. It was intended that this company operate as the
publisher of mobile games, including for the iOS and Android
operating systems, but to-date it has not commenced
operations.
Basis
of presentation
The
accounting policies and methods followed in preparing these
unaudited condensed consolidated financial statements are
those used by Surna Inc. (the “Company”) as
described in Note 1 of the notes to consolidated financial
statements included in the Annual Report on Form 10-K. The
unaudited condensed consolidated financial statements for the
three and six months ended June 30, 2013 and 2012 have been
prepared in accordance with accounting principles generally
accepted in the United States of America and the rules of the
Securities and Exchange Commission and do not conform in all
respects to the disclosure and information that is required
for annual consolidated financial statements. These interim
consolidated financial statements should be read in
conjunction with the most recent 10-K form of the Company
filed on April 16, 2013.
In
opinion of management, all adjustments, all of which are of a
normal recurring nature, considered necessary for fair
statement have been included in these interim consolidated
financial statements.
Basis
of Consolidation
The
unaudited condensed consolidation financial statements
include the accounts of the Company and its subsidiaries,
including Surna Media Inc, Surna Hongkong Limited, and Flying
Cloud InfoTech Co. Ltd. All significant
intercompany accounts and transactions have been eliminated
in consolidation.
Use
of Estimates
The
preparation of financial statements in conformity with US
GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at
the date of the financial statements and that affect the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates
Reclassifications
Certain
reclassifications have been made to amounts in prior periods
to conform with the current period presentation. All
reclassifications have been applied consistently to the
periods presented.
Cash
and Cash Equivalents
All
highly liquid investments with original maturities of three
months or less at the date of purchase to be cash
equivalents.
Property
and Equipment
Property
and equipment are stated at cost. When retired or otherwise
disposed, the related carrying value and accumulated
depreciation are removed from the respective accounts and the
net difference less any amount realized from disposition, is
reflected in earnings. For financial statement purposes,
property and equipment are recorded at cost and depreciated
using the straight-line method over their estimated useful
lives.
Revenue
Recognition
The
Company provides software development services related to
online games in current fiscal year. Based on ASC
985-605-25-3 “Software Not Requiring Significant
Production, Modification, or Customization”, revenue is
recognized when persuasive evidence of an arrangement exists,
delivery of services has occurred, the service fee is fixed
or determinable and the collectability is reasonably
assured.
Accounts
Receivable and Allowance for Doubtful Accounts
Accounts
receivable are recorded at invoiced amount and generally do
not bear interest. An allowance for doubtful accounts is
established, as necessary, based on past experience and other
factors which, in management's judgment, deserve current
recognition in estimating bad debts. Such factors include
growth and composition of accounts receivable, the
relationship of the allowance for doubtful accounts to
accounts receivable and current economic conditions. The
determination of the collectability of amounts due from
customer accounts requires the Company to make judgments
regarding future events and trends. Allowances for doubtful
accounts are determined based on assessing the
Company’s portfolio on an individual customer and on an
overall basis. This process consists of a review of
historical collection experience, current aging status of the
customer accounts, and the financial condition of Surna
Inc’s customers. Based on a review of these factors,
the Company establishes or adjusts the allowance for specific
customers and the accounts receivable portfolio as a whole.
At June 30, 2013 and December 31, 2012, an allowance for
doubtful accounts was not considered necessary as all
accounts receivable were deemed collectible.
Concentration
of Credit Risk
Financial
instruments that potentially subject Surna Inc. to
concentration of credit risk consist of cash and accounts
receivable. Under Section 343 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, for the two-year period
of January 1, 2011 through December 31, 2012, cash balances
in noninterest-bearing transaction accounts at all
FDIC-insured depository institutions are provided temporary
unlimited deposit insurance coverage. At June 30, 2013, cash
balances in interest-bearing accounts are zero.
Sales
to customers via Apple’s AppStore comprised 100% of
Surna Inc.’s revenues of $13 and $36 for the three and
six months ended June 30, 2013, respectively. At June 30,
2013, Surna Inc.’s accounts receivable from its primary
customer was $59. Surna Inc. believes that, in the event that
its primary customer is unable or unwilling to continue to
purchase Surna Inc.’s production, there are a
substantial number of alternative buyers for its production
at comparable prices.
Foreign
Currency Translation
The
Company translates the foreign currency financial statements
into US Dollars using the year or reporting period end or
average exchange rates in accordance with the requirements of
Accounting Standards Codification subtopic 830-10, Foreign
Currency Matters (“ASC 830-10”). Assets and
liabilities of these subsidiaries were translated at exchange
rates as of the balance sheet date. Revenues and expenses are
translated at average rates in effect for the periods
presented. The cumulative translation adjustment is included
in the accumulated other comprehensive gain (loss) within
shareholders’ equity (deficit). Foreign currency
transaction gains and losses arising from exchange rate
fluctuations on transactions denominated in a currency other
than the functional currency are included in the unaudited
condensed consolidated results of operations.
Functional
Currency
The
functional currency of the Company is the United States
Dollars (“USD”). The functional currency of the
Company’s operating subsidiary, Surna HK, is the Hong
Kong Dollar (“HKD”). The functional currency of
the Surna HK’s operating subsidiary in PRC, Flying
Cloud, is the Renminbi (“RMB”), the PRC’s
currency. Monetary assets and liabilities denominated in
currencies other than the functional currency are translated
into the functional currency at rates of exchange prevailing
at the balance sheet dates. Transactions denominated in
currencies other than the functional currency are translated
into the functional currency at the exchange rates prevailing
at the dates of the transaction. Exchange gains or losses
arising from foreign currency transactions are included in
the determination of net income (loss) for the respective
periods.
For
financial reporting purposes, the consolidated financial
statements of the Company are translated into the
Company’s reporting currency, United States Dollars
(“USD”). Balance sheet accounts are translated
using the closing exchange rate in effect at the balance
sheet date and income and expense accounts are translated
using the average exchange rate prevailing during the
reporting period.
The
exchange rates used to translate amounts in HKD and RMB into
USD for the purposes of preparing the consolidated financial
statements were as follows:
Comprehensive
Income (Loss)
The
Company adopted Accounting Standards Codification subtopic
220-10, Comprehensive Income (“ASC 220-10”) which
establishes standards for the reporting and displaying of
comprehensive income (loss) and its components. Comprehensive
income (loss) is defined as the change in stockholders’
equity (deficit) of a business during a period from
transactions and other events and circumstances from
non-owners sources. It includes all changes in
stockholders’ equity (deficit) during a period except
those resulting from investments by owners and distributions
to owners. ASC 220-10 requires other comprehensive income
(loss) to include foreign currency translation adjustments
and unrealized gains and losses on available for sale
securities.
Recent
Accounting Pronouncements
There
were various updates recently issued, most of which
represented technical corrections to the accounting
literature or application to specific industries and are not
expected to a have a material impact on the Company’s
condensed consolidated financial position, results of
operations or cash flows.
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NOTE 3 - CHANGE IN FISCAL YEAR-END
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3 Months Ended |
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Jun. 30, 2013
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Changein Fiscal Year End [Abstract] | |
Changein Fiscal Year End |
NOTE
3 - CHANGE IN FISCAL YEAR-END
On
March 19, 2012, the Board of Directors approved a change to
our fiscal year end from November 30 to December 31 of each
year. With the change effective this 2012 fiscal year, which
will now end December 31, 2012, there is a one fiscal month
transition period covering the fiscal month of December 2011.
Results for this transition period are reported in the
Quarterly Report commencing the first fiscal quarter ended
June 30, 2012 along with the results for the new fiscal
quarters in 2012. Notice of the Company’s election of a
change in fiscal year was made on Form 8-K, which was filed
on March 20, 2012.
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NOTE 6 - RELATED PARTY TRANSACTIONS
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3 Months Ended |
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Jun. 30, 2013
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Related Party Transactions [Abstract] | |
Related Party Transactions Disclosure [Text Block] |
NOTE
6 - RELATED PARTY TRANSACTIONS
As
of June 30, 2013 and December 31, 2012, the Company had a
balance due to related parties of $2,545,439 and $2,371,861,
respectively. This balance is from various advances from the
Company’s directors for working capital purposes and
expenses incurred on behalf of Company and salary due to them
and which are non-interest bearing, unsecured and due on
demand.
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NOTE 4 - DISCONTINUED OPERATIONS
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block] |
NOTE
4 – DISCONTINUED OPERATIONS
On
March 27, 2012, Surna Inc. sold Surna Networks Inc. and Surna
Networks Limited to Kam Ming Chan for a total sales price of
US$1. Surna Inc. assumed liabilities of Surna Networks Inc.
and Surna Networks Limited of US$9,286. Surna Networks Inc.
was incorporated on July 19, 2011 and Surna Networks Limited
was incorporated on August 2, 2011.
The
results of discontinued operations of Surna Networks for the
six month ended June 30, 2013 and 2012 are summarized as
below:
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