Growlife Inc (OTCMKTS:PHOT) Looking To Consolidate

Growlife Inc (OTCMKTS:PHOT) quickly proved last month that it can be a microcap runner again after shares moved from trading on the grey sheets back onto the OTC Markets. PHOT resumed being quoted on the OTC Bulletin Board after receiving clearance from the FINRA on its Form 15c2-11. The stock became one of the most active and talked about names again among penny stock investors and posted triple digit gains. Now shares have backed off and are consolidating before they make their next move.Growlife is one of the original pot stocks that captured investor enthusiasm for marijuana in the first green rush back in 2014. This was also when PHOT saw its shares get suspended by the SEC. Since that time, Growlife has been trying to win back its listing status and regain investor's confidence.Going forward, Growlife sees its future via ecommerce and direct-to-consumer channels instead of its 5 retail locations. Greeners.com caters to commercial cultivators, urban farmers, and home growers. On Greners.com, customers can find all the tools for cutting and propagation to complete indoor lighting systems, growing mediums, soils, hydroponics systems, growing accessories, bulbs, ballasts, reflectors, meters, timers and climate control equipment. We see ecommerce as a better business model for Growlife as margins are higher than the brick and mortar stores. CEO Marco Hegyi said in his update:

"Direct marketing programs that reach out to cultivators by call centers and VARs are driving transactions to GrowLife’s e-commerce and leads to our direct sales team. The broad range of products sold by GrowLife includes necessary lighting, HVAC, trimmers, extraction and other demanded equipment, as well as regularly consumed supplies such as organic nutrients, growing mediums, fabric pots and approved pesticides."

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 has the market worried and why the rally was not sustainable. The stock has backed off as nervous investors await the company's next move. The recent announcement that two board members had resigned did not help make things clearer.Furthermore, in looking at the current filings for PHOT, we see $62k in cash, $4.6 million in current liabilities, and just $525 thousand in quarterly revenues. As of November 2015, there were 902 million shares outstanding and the company will need to issue another $2 million in shares to settle lawsuits. This will result in more dilution and weigh on the company’s share price.The one thing Growlife does have going for it is name recognition. It is one of the best known and will be one of the first investors turn to in another green rush. 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.Currently trading with a market cap of $21 million, Growlife is still not out of the woods yet. The company has a lot of proving to do in order to win shareholder confidence back. CEO Marco Hegyi has been attempting to do so via his blog. We’ll be watching closely and seeing what news comes out of the company. We advise new investors to let the market consolidate before jumping in. The good news is that PHOT has proven once again that it still is a micro cap runner. We will be updating Insider Financial as soon as we know more. For continuing coverage on PHOT and our other hot stock picks, 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.