Surna Inc. (OTCMKTS:SRNA) has announced the signing of two contracts for a combined value of approximately $4.7 million.
$2.2 million construction project
The first contract is for the construction of a new 90,000 square foot facility for an estimated cost of $2.2 million in the Midwest. The company indicated that their customer has already been pre-qualified for a cannabis cultivation license and is expected to move forward with the construction plans. Surna has already received $167,000 in advance for the contract. The amount is a partial payment for the design and engineering services that will be finalized in the second quarter in 2019.
Payment for the rest of the value of the contract of approximately $2.1 million is still uncertain because of the ongoing construction and construction delays that are outside the control of Surna. The remaining payment is mainly for the delivery of HVAC equipment. The company has estimated the equipment payment of the contract to be delivered in the third and fourth quarters of 2019. However, this is seen as just an estimate as there are no assurances as to when the customer will get construction permitting to enable delivery of the HVAC equipment.
2.5 million Facility expansion project
The second contract is for equipment sale of the customer’s 40,000 square foot licensed and operational indoor cultivation facility for a cost of $2.5 million. So far the company has received $500,000 in advance payment for this contract and the preparation of the initial equipment package has already begun. The full value of the contract is expected at the end of the second quarter of 2019 or at the beginning of the third quarter.
With these two contracts, the company is off to an encouraging start in 2019. If the contracts get realized fully they will contribute about 49% of the company’s FY2018 revenue. Surna CEO and President Tony McDonald stated that although there are risks in their projects, the retrofit and expansion projects are already operational and licensed which minimizes associated risks of constructing a new facility.