Growlife Inc (OTCMKTS:PHOT) Is Today's Cannabis Focus

Growlife Inc (OTCMKTS:PHOT) is back and looks to be making all the right moves under CEO Marco Hegyi. He's keeping shareholders abreast of the latest developments on his blog and is putting his money where his mouth is by recently buying 1 million shares. He is certainly an improvement over former CEO Sterling Scott and has accomplished the amazing task of getting Growlife listed on the OTC again.PHOT getting its listing back is happening just in time. The marijuana industry is primed to benefit from the coming tide of legislative changes that will transform the industry. We think 2016 will be a great year for the marijuana industry. The reason being is that the marijuana industry has a lot of tailwinds heading into 2016. Roughly 14 states could legalize marijuana this year, adult-use cannabis or possibly both, either at the ballot box or through state legislatures. While it’s doubtful all those states will be successful, there’s a good chance at least a handful will legalize in 2016. No other single year has offered such incredible promise in terms of the sheer volume of states that could legalize, thanks to other pioneering marijuana markets and growing support for cannabis in general.The ArcView Group just reported that legal sales of cannabis grew to $5.4 billion in 2015, up from $4.6 billion in 2014. Demand is expected to remain strong this year and the research firm forecasts sales of $6.7 billion. Nonmedicinal adult use accounted for $998 million of the total sales in 2015, up from $351 million in 2014, according to the ArcView/New Frontier report summary.Growlife "aims to become the nation’s largest cultivation service provider for cultivating organics, herbs and greens and plant-based medicines. Our mission is to best serve more cultivators in the design, build-out and expansion of their facilities with products of high quality, exceptional value and competitive price. Through a nationwide network of local representatives, regional centers and its e-Commerce team, GrowLife provides essential goods and services including media (farming soil), industry-leading hydroponics equipment, plant nutrients, and thousands more products to specialty grow operations in 17 states."The latest 10-K shows that last year revenues declined from $8.5 million to $3.5 million in 2014 and 2015, respectively. Operating expenses were lowered from $7.9 to $2.7 million year over year, resulting in a reduced loss of $2.2 million in 2015, instead of $6.5 million in 2014.As we said back in March, the problem the market is having with Growlife is that investors are worried about execution. Yes, regaining listing status is a huge positive. However, what does that mean for shareholders? Is the company going to resort to old tactics and engage in toxic financings and dilute existing shareholders? This is what had the market worried and why the February rally was not sustainable. The stock backed off as nervous investors awaited the company’s next move.The good news is that CEO Marco Hegyi is executing. Growlife just announced its intent to acquire Go Green Hydroponics, a Southern California hydroponic retailer, and new funding with investment firms to expand and better manage its financial needs. The acquisition of Go Green gives PHOT a strong position in California. CEO Marco Hegyi said on his blog:

Beyond improving the Company’s financial condition, I am pleased to announce that we are making solid progress in our acquisition expansion strategy. We recently signed a non-binding LOI for the acquisition of Go Green, a successful hydroponics store in Southern California. Go Green’s sales for 2015 were approximately the same as GrowLife’s 2015 revenues. Thus, the combined 2015 sales would double GrowLife’s 2015 revenue and contribute to our revenue recovery and positive cash flow priorities. However, regaining a solid foothold in a strategic market is a key move for us.

California is a highly competitive market with equally great opportunity. California has more than 7x the population of Colorado and, with this November’s election, may make it the largest market in the nation for GrowLife. Therefore, if we complete the acquisition, Go Green can provide GrowLife many benefits including greater purchasing power. In comparison, Go Green’s 2015 sales performance was 400–500% that of GrowLife’s former Southern California store.

Currently trading with a market cap of $19 million, we are becoming believers in the Growlife story again due to CEO Marco Hegyi. While there's still plenty of work to be done, tremendous progress is being made. We believe shares have gotten oversold and are due for a strong bounce. We will be updating Insider Financial as soon as we know more. For continuing coverage on PHOT, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in PHOT and have not been compensated for this article.