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Solis Tek Inc (OTCMKTS:SLTK) Sell Off Presents Opportunity

Solis Tek Inc (OTCMKTS:SLTK) Sell Off Presents Opportunity
Written by
Jarrod Wesson
Published on
June 5, 2017
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In our last piece regarding Solis Tek Inc (OTCMKTS: SLTK), we noted that its inclusion in the U.S. Marijuana Index and the increasing demand for its lighting products were very good reasons to believe that the company was going to turn into a microcap runner. We were right. The last article was published on April 25, 2017. A few days later, on May 8, 2017, the next quarterly earnings were released, and the market reacted by pushing up the share price from $1.75 to $3.50. Have a look at the price action:SourceRecent DevelopmentsSLTK's business objective is "the manufacturing of advanced & efficient lighting products", which are widely used by Cannabis producers. As cannabis producers are enjoying a rise in demand due to the legalization of marijuana in US and Canada, the demand for SLTK's products is also rising. The numbers reported in the last article were extremely profitable:

"The company reported record revenues of $8,563,751 for the year ended December 31, 2016 as compared to revenue of $7,713,456 in 2015. This is 11% increase as compared to the year 2015. Additionally, gross profits increased 15% over the previous year. However, the most astonishing figure was the gross margin reported as 36.5%." Source

The Q1 2017 report released on May 8, 2017 was even better. The company showed record revenues of $2,901,826 for the quarter ended March 31, 2017 as compared to revenue of $2,584,668 in the first quarter of 2016. This is a 12% increase from the same period in 2016. Again, the gross profit was even better for this quarter. It was an increase of 21% from the Q1 2016. The figure reported this time was $1,120,522 and the increase was "due to continued focus on internal efficiencies." Furthermore, the gross margin also increased to 38.6% in 2017 from 35.8% in the first quarter of 2016. To sum up, the increasing demand for the company's products is still pushing up revenues, and the company is, at the same time, checking the costs to deliver better gross margins in every new quarter. The CEO, Dennis G. Forchic, newly elected in 2017, explained the reasons behind the good quarter:

"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." Source

In another press release, it noted the communication work that the company did at the Marijuana Business Conference & Expo on May 17-19, 2017 at the Gaylord National Harbor Hotel & Conference Center, Washington, D.C. The CEO:

"We are looking forward to connecting with the cannabis community at the conference and demonstrating how our solutions reduce costs, increase yield and help the cultivators maximize their return on investment," said Dennis G. Forchic, Chief Executive Officer of Solis Tek." Source

Its financial condition is solid.We had a look at the latest balance sheet and saw that the company's financial condition is solid. The most relevant assets and liabilities are the following. Note that the assets/liabilities ratio is close to 1.5x, and long term debt is very small:

  • Cash: $275,000
  • Inventory: $2,880
  • Total Assets: $4,097
  • Accounts Payable: $552,000
  • Long Term Debt: $35,000
  • Total liabilities: $2,692

Additionally, the company reported 36,530,577 outstanding shares, and the company does not have convertible preferred shares outstanding, or any convertible debt. That is quite positive, as the dilution risk is little. For interested market participants, Action Stock Transfer Corporation is the transfer agent.ConclusionSLTK keeps growing at a high pace. The latest quarterly results were better than expected. The demand for lighting products as well as the focus on internal efficiencies boosted revenues and the gross margin. Thus, the market pushed up the share price. Additionally, we saw that the financial condition is solid, and the company does not have dilutive securities. To sum up, the outlook is positive for Solis Tek Inc., and we encourage subscribers to be alert. We will be updating our subscribers as soon as we know more. For the latest updates on SLTK, sign up below!Disclosure: We have no position in SLTK and have not been compensated for this article.

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