This article was published on CannabisFN
Most people looking for a home alarm system would call up ADT Corp. (NYSE: ADT) or Brink’s Company (NYSE: BCO), which have become synonymous with protecting households from burglars. In the emerging cannabis industry, Canna Security America Inc. (OTC: CSAX) (“CSA”) has become the gold standard with over 130 clients in over 500 facilities across 14 states. These clients have achieved an impressive 100% approval rate when it comes to securing licenses.
Security is a high-stakes endeavor for companies in the cannabis industry. In addition to valuable inventories held on-site, many companies operate in cash transactions since the industry lacks access to the formal banking sector. The industry is also tightly regulated by various state guidelines and the failure to abide by these rules can result in businesses losing their operating permits and being forced to close their doors.
After working in the security industry for over 20 years, CEO Daniel Williams helped the State of Colorado draft the nation’s premier security regulations for its cannabis industry. The complexity of these regulations prompted Mr. Williams to start Canna Security America back in 2009 to install alarm systems, door access systems, and closed-circuit TV systems. And in 2015, the company formed The Cloverton Group to expand these services into other areas of security.
The Cloverton Group provides armored transport, armed and unarmed guards, comprehensive background checks, and site risk assessments. By helping cannabis companies transport cash and products, the company has positioned itself as a key intermediary in the business. This position could be leveraged in the future to expand into other areas of the market, like banking, since it already handles a lot of the compliance in everyday operations.
Many companies operating in the cannabis industry are development-stage operations with a limited operating history and no tangible revenue.
Canna Security America generated $163,614 in revenue during the third quarter of 2015. While this represents a drop from $282,467 in revenue during the year-ago period, management attributed the decline to a change in the way that it handles sales. The company’s expenses also increased to $615,808, but $261,573 was a one-time expense related to the cancellation of a loan receivable to the company’s CEO and $208,944 was related to interest expenses.
Nine-month revenue increased $214,172 year-over-year to $663,255, putting the company on track for a run rate of around $1 million. With 30% gross margins during the latest quarter, the company would need to generate revenue of approximately $1.8 million to break even on a cash flow basis. Management’s expansion plans into the burgeoning industry could quickly close this gap and put the company on the road to profitability.
Canna Security America has been around for 6-7 years, which is a long time in the cannabis industry. With a presence in 14 states, the company is looking to expand into Alaska, Illinois, and Nevada as three new market opportunities through existing consulting deals.
In November, CSA’s addressable market could expand to much greater levels with recreational legalization on the table for states like California and Nevada. ArcView Market Research estimated the legal cannabis industry at $2.7 billion in 2014 and projected that it would increase to around $8 billion by 2017. The company estimates that the security services market for existing states could be worth more than $130 million, assuming an average installation spend of $20,000 per facility and over 6,600 facilities across 14 states and Washington D.C.
The company has a number of competitors, including publicly-traded companies like Blue Line Protection Group Inc. (OTC: BLPG) and local competitors like Security Grade Protective Services and Safe Systems Inc. While some of these companies have greater resources, the CSA sets itself apart with its knowledgeable leadership team, perfect track record in license procurement, and its sizable investments in top-of-the-line equipment and personnel.
Canna Security America has become an industry leader by leveraging its decades of experience in security services. In addition to its perfect compliance track record, the company employs guards with a law enforcement or military background and operates a fleet of Mercedes-Benz Sprinter vehicles equipped with the latest bullet-resistant technology, GPS tracking, and 4-point camera security systems. They have truly become the industry’s gold standard.
With insiders holding nearly 60% of outstanding shares, as of November 2015, management has a vested interest in seeing the company succeed. Investors in the cannabis industry, including companies like Cannabis Science, Inc. (OTC: CBIS) and Agritek Holdings, Inc. (OTC: AGTK), may want to take a closer look at the company given its tangible revenue and potential for expansion over the near-term.
For more information, visit the company’s website at www.cannasecurity.com.