10-Q/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-Q/A  

Amendment No. 1

(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2012
OR
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from___________ to ____________
COMMISSION FILE NO. 333-164578
SURNA INC.
(Exact name of Registrant as specified in its charter)
Nevada	27-3911608
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)
1103 United Success Commercial Centre 508 Jaffe Road, Causeway Bay, Hong Kong	NA
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code: (702) 263-1808

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and, (2) has been subject to such filing requirements for the past 90 days.       Yes x       No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (S.232.405 of this chapter) during the preceding 12 months (or for such shorter time period that the registrant was required to submit and post such files). Yes o        No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated file o
Non-accelerated filer o	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o       No x

Registrant had 99,375,000 shares of common stock issued and outstanding as of August 14, 2012.

EXPLANATORY NOTE - AMENDMENT

The sole purpose of this Amendment to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2012 (the “10-Q”), is to furnish the Interactive Data File exhibits pursuant to Rule 405 of Regulation S-T.

No other changes have been made to the 10-Q, and this Amendment has not been updated to reflect events occurring subsequent to the filing of the 10-Q.

ITEM 6. EXHIBITS

     The following exhibits are filed as part of this report:

Exhibit No.	Title of Document
31	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS	XBRL Instance Document **
101.SCH	XBRL Taxonomy Extension Schema Document **
101.CAL	XBRL Taxonomy Extension Calculation Linkbase **
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document **
101.LAB	XBRL Taxonomy Extension Label Linkbase Document **
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document **

* These exhibits were previously included or incorporated by reference in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, filed with the Securities and Exchange Commission on August 14, 2012.

** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibits 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and otherwise are not subject to liability under those sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SURNA INC.

(Registrant)

Date: August 28, 2012

BY: /s/ Richard Clarke

Richard Clarke

President (Principal Executive Officer), Secretary and a member of the Board of Directors

BY: /s/ Walter Lee

Walter Hon-Chiu Lee

Chief Financial Officer (Principal Financial Officer, Principal Accounting Officer), Treasurer
 

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DISCONTINUED OPERATIONS

3 Months Ended

Jun. 30, 2012

DISCONTINUED OPERATIONS:

DISCONTINUED OPERATIONS

NOTE 4 - DISCONTINUED OPERATIONS

On March 27, 2012, Surna Inc sold Surna Networks Inc, and Surna Networks Limited to Chan Kam Ming 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 Ltd was incorporated on August 2, 2011.

The results of discontinued operations of Surna Network Inc and Surna Network Ltd for the one month ended December 31, 2011 and the six months ended June 30, 2012 are summarized as below:

	Surna Networks Inc (USD)		Surna Networks Limited (USD)
	1 Month Ended 12/31/11	6 Months Ended 6/30/12	1 Month Ended 12/31/11	6 Months Ended 6/30/12
Revenue	-	-	2,485	44,433
Cost of Revenue	-	-	(1,898)	(31,323)
Salaries	-	-	(1,564)	-
Product Development Costs	-	-	-	-
General& Administrative	-	-	(917)	(1,503)
Net Income (Loss)	-	-	(1,894)	11,607

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CHANGE IN FISCAL YEAR-END

3 Months Ended

Jun. 30, 2012

CHANGE IN FISCAL YEAR-END:

CHANGE IN FISCAL YEAR-END

NOTE 3 - CHANGE IN FISCAL YEAR-END

On March 19, 2012, we changed 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. This Form 10-Q covers the transition period, in addition to the six months ended June 30, 2012 and 2011. 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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Consolidated Balance Sheets (unaudited) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Current Assets
Cash	$ 1,175	$ 2,798
Account receivable	47,619	4,527
Prepaid expenses	1,418	1,793
Total Current Assets	50,212	9,118
Equipment, net of accumulated depreciation	23,334	30,000
TOTAL ASSETS	73,546	39,118
Current Liabilities
Accounts payable		2,954
Accrued liabilities	50,900	20,691
Amounts due to related parties	2,073,249	1,685,363
Total Current Liabilities	2,124,149	1,709,008
TOTAL LIABILITIES	2,124,149	1,709,008
STOCKHOLDERS' DEFICIT
Preferred stock value
Common stock value	994	994
Additional paid-in capital	148,507	15,148,307
Accumulated other comprehensive loss	(1,994)	(4,304)
Accumulated deficit	(2,198,110)	(16,814,887)
Total Stockholders' Deficit	(2,050,603)	(1,669,890)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 73,546	$ 39,118

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BASIS OF PRESENTATION AND INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3 Months Ended

Jun. 30, 2012

BASIS OF PRESENTATION AND INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS:

BASIS OF PRESENTATION AND INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION AND INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The unaudited consolidated financial statements for the three-month periods ended June 30, 2012 and 2011 and for the transition one-month period ended December 31, 2011 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 March 13, 2012.

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.

Most accounting policies and methods followed in preparing these unaudited 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.

Revenue Recognition

The Company provided 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.

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GOING CONCERN

3 Months Ended

Jun. 30, 2012

GOING CONCERN:

GOING CONCERN

NOTE 2 - GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company currently has working capital deficit, no sources of recurring revenue and has generated cumulative net losses of $2,198,110 during the period from inception through June 30, 2012.

In the course of its development activities, the Company has sustained and continues to sustain losses. The Company cannot predict if and when the Company will generate profits. The Company expects to finance its operations primarily through debt or equity financing.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required until such time as it can generate sources of recurring revenues and to ultimately attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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Consolidated Balance Sheets (parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Accumulated depreciation for equipment	$ 16,666	$ 10,000
Preferred stock, par value	$ 0.00001	$ 0.00001
Preferred stock, shares authorized	150,000,000	150,000,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.00001	$ 0.00001
Common stock, shares authorized	350,000,000	350,000,000
Common stock, shares issued	99,375,000	99,375,000
Common stock, shares outstanding	99,375,000	99,375,000

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DISCONTINUED OPERATIONS (Details) (USD $)	Mar. 27, 2012
Total sales price	$ 1
Assumed liabilities	$ 9,286

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Document and Entity Information	3 Months Ended
	Jun. 30, 2012
Document and Entity Information
Entity Registrant Name	Surna Inc.
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Entity Central Index Key	0001482541
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding	99,375,000
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2

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DISCONTINUED OPERATIONS: Results of discontinued operations (Details) (USD $)	1 Months Ended	6 Months Ended
	Dec. 31, 2011	Jun. 30, 2012
Revenue - discontinued operations	$ 2,485	$ (55)
Cost of Revenue - discontinued operations	(1,898)	(31,323)
Salaries - discontinued operations	(1,564)
General & Administrative - discountinued operations	(917)	(1,503)
Net Income (Loss) - discontinued operations	$ (1,894)	$ 11,607

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Consolidated Statements of Operations and Comprehensive Income (unaudited) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended
	Dec. 31, 2011	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
REVENUE	$ 335			$ 47,831
Operating expenses
Salaries	50,496	154,246	130,448	297,595	193,448
Compensation expenses			769,231		769,231
Product development costs	13,256	11,839	76,453	29,272	76,453
General and Administrative expenses	20,759	66,608	59,639	115,594	88,314
Loss from operations	(84,176)	(232,711)	(1,035,771)	(394,630)	(1,127,446)
Loss on extinguishment of debt			(10,000)		(10,000)
Loss from continuing operations	(84,176)	(232,711)	(1,045,771)	(394,630)	(1,137,446)
Income (loss) from discontinued operations	(1,894)			11,607
Net loss	(86,070)	(232,711)	(1,045,771)	(383,023)	(1,137,446)
Foreign currency translation gain (loss)	(2,934)	(50)		(50)
Comprehensive Loss, net of tax	$ (89,004)	$ (230,351)	$ (1,046,928)	$ (380,713)	$ (1,138,603)
Net loss per share, basic and diluted	$ 0	$ 0	$ (0.01)	$ 0	$ (0.01)
Weighted average number of common shares outstanding, basic and diluted	99,375,000	99,375,000	99,196,978	99,375,000	99,186,050

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REVERSAL OF PRIOR RESTATEMENT

3 Months Ended

Jun. 30, 2012

REVERSAL OF PRIOR RESTATEMENT:

REVERSAL OF PRIOR RESTATEMENT

NOTE 7 - REVERSAL OF PRIOR RESTATEMENT

On September 1, 2011, we acquired Surna Media Inc. for 20,000,000 common shares, an acquisition that included a partially-developed game acquired by that company as of May 1, 2011. In the Annual Report on Form 10-K filed on March 13, 2012 we had reported this acquisition as accounted for as an entity under common control. In the Quarterly Report on Form 10-Q for the fiscal first quarter filed on May 21, 2012, we incorrectly amended the accounting for the acquisition to purchase method. Following the submission of last quarterly report, we did further examination of the ownership structure of Surna Media Inc. Based on ASC 805-50-25 “Business Combinations - Transactions Between Entities Under Common Control”, we concluded the acquisition should be accounted as an entity under common control, as it had originally been in the last Annual Report. Adjustments to paid in capital and the deficit accumulated during the development stage as presented in the previous Quarterly Report have both been reversed to take into account this reversion to the initial treatment.

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RELATED PARTY TRANSACTIONS

3 Months Ended

Jun. 30, 2012

RELATED PARTY TRANSACTIONS:

RELATED PARTY TRANSACTIONS

NOTE 6 - RELATED PARTY TRANSACTIONS

As of June 30, 2012 and December 31, 2011, the Company had a balance due to related parties of $2,073,249 and $1,685,363, respectively. This balance is from various advances from the Company’s directors and which are non-interest bearing, unsecured and due on demand.

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RELATED PARTY TRANSACTIONS (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Balance due to related parties	$ 2,073,249	$ 1,685,363

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DISCONTINUED OPERATIONS: Results of discontinued operations (Tables)

3 Months Ended

Jun. 30, 2012

Results of discontinued operations:

Results of discontinued operations

The results of discontinued operations of Surna Network Inc and Surna Network Ltd for the one month ended December 31, 2011 and the six months ended June 30, 2012 are summarized as below:

	Surna Networks Inc (USD)		Surna Networks Limited (USD)
	1 Month Ended 12/31/11	6 Months Ended 6/30/12	1 Month Ended 12/31/11	6 Months Ended 6/30/12
Revenue	-	-	2,485	44,433
Cost of Revenue	-	-	(1,898)	(31,323)
Salaries	-	-	(1,564)	-
Product Development Costs	-	-	-	-
General& Administrative	-	-	(917)	(1,503)
Net Income (Loss)	-	-	(1,894)	11,607

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SERVICE AGREEMENT

3 Months Ended

Jun. 30, 2012

SERVICE AGREEMENT:

SERVICE AGREEMENT

NOTE 8 - SERVICE AGREEMENT

During March, 2012, the Company entered into an agent agreement with Jurun Information Technology (Shanghai) Co. Ltd. (“Jurun”), and Jurun entered into a technical service agreement with Kunlun Wanwei Information Technology Company Ltd (“Kunlun”).  Under the agreements, the Company provided the license of the online game to Jurun and on the same date the license was transferred from Jurun to Kunlun for a period of five years. The Company will receive upfront fees of RMB 1 million payable in the following installments: 1) 30% after the first closed-beta testing; 2) 50% after the second closed-beta testing and 3) 20% after the first open-beta testing. In addition, the Company will receive 20% of game-related revenue from Kunlun during the agreement term. All amounts due from Kunlun will be transferred to Jurun and Jurun will return 100% of the fees back to the Company.

The Company was notified that the first closed-beta testing was reached in late March 2012. Therefore, the Company recognized the first 30% of the RMB 1 million fee as revenue in the first quarter 2012 in accordance with ASC 985-605-25-3 “Software Not Requiring Significant Production, Modification, or Customization.”  The Company was notified in June 2012 that the second closed-beta testing was satisfactorily completed, but no payments have been received for either the first or second testing.  Hence, no additional revenue has been recognized pending receipt of payment.

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BASIS OF PRESENTATION AND INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS: Revenue Recognition (Policies)

3 Months Ended

Jun. 30, 2012

Revenue Recognition:

Revenue Recognition

Revenue Recognition

The Company provided 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.

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GOING CONCERN (Details) (USD $)	32 Months Ended
	Jun. 30, 2012
Cumulative net losses	$ 2,198,110

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Consolidated Statements of Cash Flows (unaudited) (USD $)	1 Months Ended	6 Months Ended
	Dec. 31, 2011	Jun. 30, 2012	Jun. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (86,070)	$ (383,023)	$ (1,137,446)
Income (loss) from discontinued operations	(1,894)	11,607
Net loss from continuing operations	(84,176)	(394,630)	(1,137,446)
Adjustments to reconcile net loss from continuing operations to net cash:
Loss on extinguishment of debt			10,000
Depreciation expense	1,111	6,666	3,333
Changes in operating assets and liabilities:
Accounts receivable	(335)	(46,346)
Prepaid expenses	(565)	375	346
Accrued liabilities	(4,233)	30,209	3,716
Net cash from (used by) continuing operations	(88,198)	(403,726)	(1,120,051)
Net cash flow from (used by) discontinued operations	(118)	2
Net cash from (used) by operating activities	(88,316)	(403,724)	(1,120,051)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from related party	90,466	399,846	1,086,336
Capital contribution			425
Net cash from financing activities	90,466	399,846	1,086,761
Effect of disposal of discontinued operations		(55)
Effect of exchange rate changes on cash	(2,934)	2,310	(1,157)
Net increase / (decrease) in cash	(784)	(1,623)	(34,447)
Cash, beginning of period	3,582	2,798	70,938
Cash, end of period	2,798	1,175	36,491
Non-Cash Transaction
Stock issued for settlement of debt			$ 40,000

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SIGNIFICANT CONCENTRATIONS, RISKS AND UNCERTAINTIES

3 Months Ended

Jun. 30, 2012

SIGNIFICANT CONCENTRATIONS, RISKS AND UNCERTAINTIES:

SIGNIFICANT CONCENTRATIONS, RISKS AND UNCERTAINTIES

NOTE 5 - SIGNIFICANT CONCENTRATIONS, RISKS AND UNCERTAINTIES

The majority of the Company's operations are carried out in the PRC. Accordingly, 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.

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REVERSAL OF PRIOR RESTATEMENT (Details)	Sep. 01, 2011
Common shares issued for Surna Media Inc.	20,000,000