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Cannabis Earnings Season: The Good, The Bad And The Ugly

Apr 17, 2015 • 3:09 PM EDT
8 MIN READ  •  By Michael Berger
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Blue Line Protection Group, Inc. (BLPG)

Blue Line Protection Group, Inc. provides armed protection, financial solutions, logistics and compliance services for businesses engaged in the legal cannabis industry.  In March 2015, BLPG’s Nevada subsidiary, BLPG, Inc., was granted licenses to provide its suite of protection, transportation and compliance services within the state.

Financial results

BLPG recently started generating revenue from its Colorado subsidiary, Blue Line Colorado.

  • During 2014, BLPG generated $1,032,168 in revenue, all from the Colorado subsidiary.

  • During 2014, BLPG incurred $778,777 in costs related to sales, primarily labor and fuel costs.

  • During 2014, BLPG generated $253,391 in gross profit.

  • Salaries and wages paid during 2014 was $502,032.

  • During 2014, BLPG incurred a net loss of $2,425,941.

BLPG is actively expanding into new jurisdictions and growing their service portfolio.  Management expects to generate increased revenues in 2015 due to the following factors:

  1. Expansion into new geographic regions;

  2. The addition of new accounting and bookkeeping division, Blue Line Advisory Services

  3. Cooperation and cross-promotion agreement with DigiPath, Inc. (DIGP)


BLPG expects to continue to incur net losses for the foreseeable future and management is not sure when they will be profitable. Management believes that the expansion of operations will adversely affect operating results and will lead to net losses for at least the next 12 months of operations.

BLPG expects to require significant capital to expand operations. The company will require additional cash resources, including the sale of equity or debt securities, to meet planned capital expenditures and working capital requirements for the next 12 months.  The sale of additional equity securities will result in dilution to stockholders. 


Surna Inc. (SRNA)

Surna Inc. (SRNA) is a developmental technology company that designs, manufactures, and distributes systems for controlled environment agriculture (CEA). SRNA’s products offer improved process control while reducing the required energy and resources needed to maximize yield. Currently, Surna generates most of its revenue from supplying technology to legal cannabis cultivation facilities, as well as from other indoor agricultural producers.


  • Surna Chillers these are Surna’s cornerstone technology and the products are liquid cooling systems that provide more efficient thermal cooling solutions that have a number of advantages over typical air conditioning products. Surna’s systems can cut the costs associated with cooling facilities by 10-75%, depends on the environment and the version of SRNA’s system.

  • Surna Reflectors. Surna developed a reflector that incorporates their cooling capabilities which lead to greater efficiency gains. It reduces the overall cooling needs and energy costs.

  • Hybridized Greenhouses. SRNA is developing a hybrid structure that combines a greenhouse with an indoor grow operation. SRNA hopes to complete this within the next 12 months.

  • Additional Targeted Products. SRNA plans to develop an integrated software platform that combines all of the indoor agriculture systems into one user-friendly platform.


  • In 2014, SRNA generated $1,838,912 in revenue, but they ended up realizing a net loss of $2,991,969.

  • As of December 31, 2014, SRNA had $2,321,292 total assets and $3,205,044 in total liabilities. The company had $779,387 working capital. SRNA has generated cumulative net losses of $5,767,577 since inception through December 31, 2014.

  • During 2014, SRNA spent $319,430 towards the development of new products such as the lighting reflector, the hybrid building, and integrated software systems.


Surna represents an interesting and attractive investment for investors at current levels due to: 1) Best-in-class products that solve a major need, 2) Improved valuation due to recent selloff, and 3) increasing revenue due to an increased need for their products.

In mid-January, finalized an exclusive $1.1 million contract to design, build and install the climate control systems for grower CWNevada. Revenue from the contract will be recognized throughout 2015 subject to start-date modification by CWNevada. In mid-March, SRNA shipped the beta version of its Surna Reflector. They released 50 reflectors for beta testing to high-end commercial cannabis cultivation facilities located in states where cannabis is legal, including Colorado and Washington.


OXIS International, Inc. (OXIS)

OXIS International, Inc. (OXIS) is a biotech company focused on developing cannabis based drug treatments. After doing some research into the company’s recent developments, our analysts determined that OXIS will face a lot of hurdles if they want to get a drug approved by the Food and Drug Administration (FDA).

OXIS recently released its 2014 operating results which were in line with both our expectations and our concerns. The company is led by Anthony J. Cataldo, CEO, who likes to compare OXIS to GW Pharmaceuticals (GWPH) and INSYS Therapeutics (INSY). OXIS, however, is not GWPH nor INSY.

Technical420 attended the World Moneyshow Convention in Orlando this past February and we were surprised by some of his comments.

At the Moneyshow, Cataldo said, “OXIS has better technology and better management than GW Pharmaceuticals (GWPH) and INSYS Therapeutics (INSY).”

Our concern was how is a company that has been around for less than one year and has a $22 million market cap better than a company that has been around for 16 years and has a $1.5 billion dollar market cap? OXIS for now, does not have better technology or better management. The company only has 2 full time employees; GWPH and INSY have 294 and 382 employees respectively.

Financial Highlights

  • Incurred $2.4 million in selling, general and administrative expenses ($935,000 in 2013). This was due to an increase in stock based compensation and consulting fees.

  • Interest expenses were $5.1 million in 2014 ($1.2 million in 2013). The increase is due to additional notes payable incurred in 2014.

  • As of December 31, 2014, OXIS had $885,000 in cash and cash equivalents

  • OXIS has a $28.9 million working capital deficit.

  • OXIS has an accumulated deficit of $112,956,000 through December 31, 2014.

OXIS stated that the cash on hand is sufficient to fund administrative expenses for the next 12 months. The company obtained over $2,000,000 in funding through a private placement of convertible debentures with attached warrants and OXIS plans to raise additional capital in 2015.


Investors need to understand that there are significant costs associated with pre-clinical and clinical testing. OXIS will need to continue to raise capital through all of 2015 if they want to execute on their business plan. The financing section shows that OXIS has been consistently raising money through a number of purchase agreements which will prove to be dilutive to existing shareholders.

OXIS has been a good short term investment for investors who have been able to capitalize on the stock’s volatility. Shares of OXIS tend to bounce between the $0.03-$0.05 range and short term investors can take advantage of this volatility. We do not recommend OXIS as a long term investment.Technical420 thinks that OXIS could be successful in the cannabis industry, but for now the risks outweigh the rewards and fort that reason we remain on the sidelines.


Kaya Holdings, Inc. (KAYS)

Kaya Holdings, Inc. (KAYS) recently changed its name and symbol from Alternative Fuels Americas, Inc. (AFAI). In January 2015 KAYS decided to discontinue its biofuel development activities and focus on the legal medical and recreational marijuana market in the U.S. KAYS only owns 55% of Marijuana Holdings Americas, Inc., the subsidiary that operates the marijuana dispensary and cultivation facility.

Operational Developments

On July 3, 2014, KAYS opened its first Kaya Shack Medical Marijuana Dispensary in Portland, Oregon.

 In April 7, 2015 KAYS opened its first medical marijuana grow operation. The grow operation makes KAYS as the first US publicly traded company to own a majority interest in a vertically integrated legal marijuana enterprise in the United States.

Less than a week later, KAYS employees and contractors harvested the final round of its first medical marijuana crop rotations which yielded nearly 25 pounds. The grow operation will rotate within the perpetual harvest room to include more than 30 strains of marijuana. KAYS expects to expand the grow operation throughout 2015, increasing capacity and strains.

Future Growth

KAYS has established a firm position in the emerging Florida market through founding and sponsoring of the Florida Cannabis Industry Association and alliances with other groups. The company expects to be well positioned to obtain licenses in Florida once the market finally opens.

KAYS plans on entering new state markets in the U.S that have legalized marijuana. Potential future target markets include Alaska, Arizona, California, Colorado, Connecticut, Illinois, Michigan, Nevada, New Jersey, New York, Ohio, Pennsylvania, Texas, Vermont, Washington D.C., Washington State and others.

Financial Results

  • During 2014, KAYS generated $74,527 in revenue. The company incurred $1,092,555 in total operating expenses. Selling, general and administrative expenses accounted for 82.3% of operating expenses, salaries covered the remainder.

  • During 2014, KAYS incurred a net loss of $1,180,197 and has a working capital deficiency of $627,017 and is totally dependent on its ability to raise capital. Management recognizes that they must generate additional funds to successfully develop its operations and activities.

  • KAYS has been operating at extremely low levels of liquidity which affects their ability to raise capital. The increase in expenses is related to the opening of our retail location. Selling, general and administrative expenses increased due to an increase in the number of consultants and management professionals as well as their fees.


Since January 2014, KAYS has raised $900,000, in a series of private placements. As of December 31, 2014, the company had a working capital deficiency of $625,287 and limited cash. The company’s consolidated financial statements were been prepared on a going concern basis.



Technical420 LLC is not a FINRA member firm. Technical420 LLC is responsible for the preparation and distribution of research created in the United States. Technical420 LLC is located at 40 SW 13th St. Suite 1002, Miami, FL 33130.

Technical 420 LLC, and any of its directors, officers, employees, affiliates, or subsidiaries does not accept any form of compensation from companies in return for writing reports on them. Also Technical 420 LLC, and any of its directors, officers, employees, affiliates, or subsidiaries do not hold any stock positions in companies covered by Technical420LLC.

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.


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