Solis Tek Inc (OTCMKTS:SLTK) is a micro-cap player that has started to make noise as a momentum name in the cannabis segment. The primary catalyst driving the stock’s recent roller coaster action is clearly the company’s financial results for quarter ended March 31, 2017, announced just a few days ago. We’ll get to the numbers momentarily, but let’s start with a recognition of how the market digested the data to grant some context: the data hit the market, and the stock dropped in half.
That’s not to say that this was an awful quarter. We saw revs come in at $2,901,826 compared to revenue of $2,584,668 in the first quarter of 2016. This represents a 12% increase in revenue year-over-year. Gross profit for the quarter ended March 31, 2017 and 2016, was $1,120,522 and $925,957, respectively. According to the company, the gross profit increase of $194,565, or 21%, was primarily due to an increase in revenue and continued focus on internal efficiencies. However, when you see a stock run 250% higher in a month into the numbers, you can bet the market was looking for something dramatically more impressive than 12% growth on the top line.
Solis Tek Inc (OTCMKTS:SLTK) frames itself as a company focused on the research, design, development and manufacturing of advanced, energy efficient greenhouse indoor horticulture lighting and ancillary equipment.
SolisTek’s vision is to apply the latest advances in high-efficiency lighting and controls technology as well as effective manufacturing techniques to deliver highly differentiated products with clear benefits at competitive prices to the greenhouse and indoor horticulture markets.
According to company materials, “Solis Tek Inc. is an importer, distributor, and marketer of digital lighting equipment for the hydroponics industry with specific focus on the research, design, development and manufacturing of advanced, energy efficient indoor/greenhouse horticulture lighting and ancillary equipment. Using its proprietary technologies, the Company provides innovative aptitudes with its ballast, reflector and lamp products. The company’s vision is to apply the latest advances in high efficiency lighting and controls technology as well as advanced manufacturing techniques to deliver highly differentiated products with clear benefits at competitive prices to the greenhouse and indoor horticulture markets. The Company’s customers include retail stores, distributors and commercial growers in the United States and abroad.”
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Management commentary gives some further perspective.
Dennis G. Forchic, Chief Executive Officer of Solis Tek commented, “In the first quarter of 2017, we delivered record top line revenue and significantly improved gross margins. Our strong revenue performance drove record gross profit for Solis Tek and although net income was negative according to GAAP, on a Non-GAAP adjusted basis we were almost break-even for the quarter.” He further stated, “As a company focused on providing products and solutions to commercial and non-commercial cannabis cultivators, we are uniquely positioned to capitalize on the rapid growth of the cannabis market. Solis Tek is a strong nationally recognized brand in lighting for the cannabis industry and has established itself as a supplier of lighting to top growers for nearly a decade. Our first quarter of 2017 was highlighted by a number of new clients acquiring our digital lighting products as well as a number of significant expansion projects from our existing customers. I believe Solis Tek is poised to continue to build market share within the cannabis industry and I am excited to have joined the Company at an inflection point in its growth and path towards maximizing its potential.”
A birds’ eye view on the action in the stock is still impressive. In all, we’ve witnessed 51% during the past month in terms of shareholder gains in the company. This is emblematic of the stock from what we have seen thus far. Moreover, the stock has registered increased average transaction volume recently, with the past month seeing exceeding 190% beyond its prior sustained average level.
This should not be overlooked due to the extremely small float size in the stock (of 16.6M shares). As savvy traders are well aware, a mechanically driven price squeeze can result from this type of mix of small float and ramping attention from traders.
Earning a current market cap value of $65.8M, SLTK has a bankroll ($276K) of cash on the books, which must be weighed relative to about $287K in total current liabilities. SLTK is pulling in trailing 12-month revenues of $8.6M. In addition, the company is seeing major top line growth, with y/y quarterly revenues growing at 12%, as noted above. We will update the story again soon as developments transpire. For continuing coverage on shares of $SLTK stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!