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A Look At Surna Inc (OTCMKTS:SRNA)

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Surna Inc

While the conventional project sales contract of Surna Inc (OTCMKTS:SRNA) is non-cancellable, there are perils that the company may not get the full deal value in a timely way, or at all. Closure of a sales deal is dependent upon company clients’ ability to license, secure and establish their cultivation facility and take ownership of the equipment. In an attempt to resolve these risks, the company has three major milestones built into its contracts.

The details

First, Surna offer its client with engineering programs for which they need an upfront deposit before they commence their services. In numerous cases, the engineering stage is done as part of the building permit process or license application, represents on average around 10% of the total deal value, and takes around 4 to 6 weeks to complete.

The company previously needed a larger initial deposit for engineering and preliminary equipment items, however, starting in early 2017, they started offering their clients a lower preliminary deposit for just engineering. The plan is to lock in the sales deal and start engineering portion of the assignment earlier, which is vital for a number of reasons; the company can help its clients with their design and engineering plans as part of licensing application procedure; it is better positioned to lock in technology for the assignment at an earlier stage; and they are able to help lower the client’s time to market.

Upon conclusion of the engineering stage, it may take client on average 5 months to close the facility build-out, with probable delays due to financing or other factors which are beyond Surna’s control. Client delays in getting financing and completing center build-out make the completion timing of sales deal unpredictable. For their protection, before the company start manufacturing their proprietary equipment products, they need an upfront deposit.

Thirdly, the last stage of the company’s deal comprises procurement and drop-ship supply of third party produced equipment products, which they undertake just upon compensation of the third and final deposit.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of MMJReporter.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure

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