RE:RE:RE:RE:Q1 on sedarHere is exchange between Sam and I regarding revenue recognition:
Sam responded to this quote from my post. “Hopefully we will start to see some system purchases during the summer”
Sam's response: - note – contracts were all signed and initial down payments made upon signing prior to installations in March 2020.
Me: If the grower does not continue with the installation is the down payment returned to them? Aaron mentioned a three tranche payment. Are tranches 2 and 3 equivalent to the down payment or larger?
Sam: Missouri hemp – you will see some revenue from the first of three Missouri hemp greenhouse down payments in our Q1 2020 FS due out shortly.
Some revenue in Q2 from the second payment upon installations and early purchases and some revenue in Q3 from later purchases only.
We keep their first two down payments.
Me: For revenue recognition are there certain milestones that activate payment?
So 1st payment is due upon agreement of a feasibility study
Payment number 2 when installation is completed and;
Payment 3 when the feasibility is completed and they agree to pay for the system.
Does this differ for a multiple year lease? Do they pay the same 2 down payments and the rest of the purchase price is paid over multiple years.
And if my understanding is correct payment number 3 would be the largest payment.
Sam: Yes yes and yes in the case of the Missouri hemp contracts. Third payment would be largest.
So as far as I can understand from this email exchange the Q1 revenue is from the down payment from three installations.To be honest I'm not completely sure what Sam meant his responses are often unclear. I will seek clarity.
One of my major concerns with this company is the complete lack of detail in their filings. This is especially important when their wording has been questionable in the past. I expressed this concern to management. Aaron Archibald was appreciative of the feedback and seemed genuine on wanting to improve but I'm not optimisitic that it improves. You shouldn't have to have an hour long conversation and multiple email exchanges with management to get obvious information investors deserve, ie. why they showed negative revenue in Q4.
Q1:
I have more questions than answers after reading the financials. Burn rate greatly exceeded $50,000 month. They used $300,000 total. I assume Sam will argue that the burn rate starts in Q2 since he told me that a week and a half ago or if you look at cash from operations it was very close to $50,000. I understand burn rate as the total amount of cash used to run/fund the business.
If they are truly at a $50,000 run rate they have until the end of June, maybe July, give or take with the loan and small grant they received. They will see some revenue in Q2 and Q3 that may extend their cash, again if truly at $50,000 a month.
Secondly he said management for "2020 YTD, has not been awarded any shares or options"
945,000 options were issued this quarter. It's unclear to me who these options were issued to if not management (I very well might not be reading the financials correctly so please correct me)
I don't pretend to be an expert on finance or investing so any opinion is appreciated.