GrowLife, Inc. is a nationally recognized cultivation brand, providing world-class hydroponic equipment, lighting, nutrients, media, and other cultivation supplies to commercial and urban operations. With a complete selection of cultivation products combined with logistics and distribution services, GrowLife can help responsible cultivation operations efficiently control supply costs, manage build-out investments, track supply usage and streamline workflows.
A Brief Financial Update
Getting past last year was like completing survival training and now, being on the other side this year, we are greatly energized. The Company is lean, fit and making solid progress. In this update I briefly elaborate on recent filings on our financial performance, progress and plans for shareholders.
During the 22 months after the SEC halt, the Company chose to continue operations and finance its public status with the intention of rebuilding shareholder value after PHOT obtained its 211 approval. When PHOT resumed trading on February 18, 2016, Management immediately began to strengthen the financial condition of the Company by focusing on revenue recovery, positive cash flow and clearing up its balance sheet.
The 2015 10-K shows that last year revenues declined from $8.5 to $3.5 million in 2014 and 2015, respectively. With aggressive cost controls, 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. In summary, GrowLife significantly leaned out operations and took corrective action to traverse this demanding period.
GrowLife also kept its cash position low by design and avoided borrowing more money than was needed because of the steep financing terms. As for the debt default mentioned in the 10-K, on Sunday April 17th, the Company reached an agreement with its senior secured lender by instilling greater confidence in the Company’s future and successfully obtained their forbearance of the default.
As for going forward, last month GrowLife announced a $2.5 million financing agreement with Chicago Venture Partners that is aligned with an S-1 registration statement, which will be filed shortly. This will provide GrowLife with the necessary working capital to help build up its business. This new financing is under more flexible terms and enables GrowLife to avoid incurring more of the expensive, pre-211 debt. As mentioned before, the pre-211 financing instruments, which were necessary at the time, are systematically being retired and GrowLife’s balance sheet is strengthening.
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.
I remain committed to the long-term growth of PHOT shareholder value that is available to GrowLife as demand for indoor cultivation increases across the country. GrowLife is finally on the right track and I see the current $0.02 share price as significantly under-valuing GrowLife’s potential. As a result and with the board’s approval, I purchased 1,000,000 shares of PHOT last month.
Finally, earlier this week the board determined that it is in shareholder’s best interest to schedule and conduct its upcoming shareholder meeting this summer virtually, through a third-party provider, to enable the tens of thousands of PHOT shareholders to cost-effectively attend and participate in the meeting.