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Surna Inc (OTCMKTS:SRNA) Update On Contract Milestones and Revenue Model

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Surna Inc

During the release of Q2 2017 financial report, Surna Inc (OTCMKTS:SRNA) reported that while company’s typical project sales contract remains non-cancellable, the risk prevails that they may not achieve the full contract value in a timely way, or at all. Conclusion of a sales deal is dependent upon the clients’ ability to secure, license and establish their cultivation facility and take control of the equipment. In order to resolve these concerns, the company has key milestones built into its contracts.

The details

Surna offers their client with engineering plans for which they need an upfront deposit before they commence their services. In many instances, the engineering phase is completed as part of the building permit or license application process, and which showcases on average around 10% of the total deal value, and takes around 4-6 weeks to complete.

The company initially needed a colossal initial deposit that covered initial and engineering equipment items. However, starting this year, they started offering their clients a lower preliminary deposit for engineering services only. The plan is to lock in the sales deal and begin the engineering aspect of the project earlier, which is vital for numerous reasons. Surna can assist its clients with their design and engineering plans as part of its licensing application procedure. It is better positioned to lock in its technology for the project at a preliminary stage, and it is also able to help lower a client’s time to market.

Upon completion of the engineering stage, it may take company’s client on average 5 months to complete the facility structure, with possible delays following financing or other aspects beyond control. Customer delays in getting financing and completing facility structure make the timing of completion of Surna’s sales contract unpredictable. For its protection, before they start manufacturing proprietary equipment items, the company need an upfront deposit that makes the total to around 50% of the contract value.

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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