CARSON, Calif., May 15, 2018 (GLOBE NEWSWIRE) -- Solis Tek, Inc. (OTCQB:SLTK), a vertically integrated cannabis technology innovator, manufacturer and distributor, is pleased to provide an update on its business transition, including expected targets and milestones for its recently acquired cannabis cultivation and processing facility in Arizona, and its first quarter 2018 operating results.

Over the next few weeks, the Board and management plan on rebranding the corporate entity and public company name to better reflect management’s strategy to transition to high growth opportunities in legalized cannabis jurisdictions, including cultivation and processing. The Company will continue to aggressively develop and innovate its lighting division as Solis Tek Digital Lighting and its nutrients division as Zelda Horticulture.

In regard to the recently acquired cannabis cultivation and processing facility in Arizona, the Company has planned for 50,000 square feet of cultivation and 10,000 square feet of processing, which will be funded by the recently raised $2.5 million and future commitments from its previously disclosed financial partner. Management is targeting for processing to begin by November 2018 potentially generating up to $500,000 in processing revenue per month and targeting ramping up to $1 million per month over time. Management also expects to begin the cultivation build out imminently with its sights on a first crop in January 2019, and a capacity of producing 8,000 pounds per year, which would equate to $10 million at current wholesale prices.

Solis Tek Chief Executive Officer, Alan Lien, commented, “We are very excited with the transformation of our business strategy and the incredible growth opportunities our team has identified in the legalized cannabis industry. We look forward to a multi-prong approach in growing our business and creating long-term shareholder value through varying segments of the legalized cannabis industry in the United States and potentially in Canada and overseas. We remain confident in our Solis Tek lighting and newly introduced Zelda Horticulture nutrients, but feel this is the right time and opportunity to expand to the touching the plant segment, which will lead to higher and more predictable revenue growth and profitability. Additional details of our plans will be announced over the next few weeks and we look forward to communicating with our current shareholders and prospective new shareholders.”

Financial Results for the First Quarter Ended March 31, 2018:
Revenue for the three months ended March 31, 2018 and 2017 was $1,011,749 and $2,901,826, respectively, a decrease of $1,890,077 or 65%. The decrease was due to several negative factors during the first quarter of 2018, as compared to the first quarter of 2017.

Such factors included, market instability and uncertainty, reports of over-capacity and price declines at the wholesale level. U.S. Attorney General Jeff Sessions messaging, the Administration’s stance and announcements on marijuana enforcement, particularly the rescinding of the Cole Memorandum and giving the Federal US Attorneys “free-reign” as to enforcement priorities set a very negative tone and caused hesitation from buyers in the cannabis industry. Industry-wide build-outs slowed and were pushed-out.

Specific reasons to beset to Solis Tek, included a change at the Chief Executive Officer level and change of message and direction. Solis Tek had previously been a retail driven company servicing our 500+ hydro-stores targeting the home and hobbyist growers. Solis Tek restructured its sales force to five nationwide commercial cultivation account managers and had to re-program the sales team, change pricing and change marketing strategies. Its recent shift to convert to a commercial mindset, also altered its inventory strategy to longer fulfillment and lead times.

Cost of sales for the three months ended March 31, 2018 and 2017, was $533,925 and $1,781,304, respectively.  Gross profit for the three months ended March 31, 2018 and 2017, was $477,824 and $1,120,522, respectively. The decrease in gross profit of $642,698, or 57% was primarily due to our decrease in revenue. As a percentage of revenue, gross profit for the three months ended March 31, 2018 was 47% compared to 39% for the three months ended March 31, 2017.  The increase in gross profit percentage was due to the change in product mix sold. 
  
Selling, general and administrative expenses for the three months ended March 31, 2018 and 2017 was $3,448,271 and $4,764,655, respectively, a decrease of $1,316,384 or 28%.  For the three months ended March 31, 2018, stock-based compensation expense decrease $1,857,866 to $1,780,288, compared to $3,638,154 for the prior year period.  Excluding stock-based compensation expense, our SG&A increased $541,482 due to the recording of a $449,000 severance obligation to our former Chief Executive Officer, and $92,482 in increased operating expenses to support our operations.   
  
Research and development (“R&D”) expenses for the three months ended March 31, 2018 and 2017 was $51,878 and $82,770, respectively, a decrease of $30,892 or 37%. The decrease in R&D expenses was primarily due to decreased employee compensation and royalty expense. 

Other income for the three months ended March 31, 2018 was $2,651,620 as compared to other expense of $24,171 for the three months ended March 31, 2017.  The increase in other income was due to the recording of a gain on the extinguishment of derivatives of $674,254, a gain on the change in fair value of derivative liability of $2,630,052, and financing costs of $607,717, all of which did not exist during the prior year period.  Interest expense increased over the prior year period by $20,798 due to our increase in borrowings.
  
Net loss for the three months ended March 31, 2018 was $370,705 compared to net loss of $3,751,987 for the three months ended March 31, 2017.  The decrease in net loss was due to the increase in other income and expenses, decreased operating expenses, offset by decreased revenues and gross profit as discussed above.

About Solis Tek, Inc.
Solis Tek, Inc. (OTCQB:SLTK) is a vertically integrated technology innovator, developer, manufacturer and distributor focused on bringing products and solutions to commercial cannabis growers in both the medical and recreational space in legal markets across the U.S. For nearly a decade, growers have used Solis Tek's lighting solutions to increase yield, lower costs and grow better to maximize their return on investment. The Company's customers include retail stores, distributors and commercial growers in the United States and abroad. For more information, please visit our website, www.solis-tek.com.

Safe Harbor Statement
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based on the current plans and expectations of management and are subject to a number of uncertainties and risks that could significantly affect the Company's current plans and expectations, as well as future results of operations and financial condition. The Company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

Investors Contact:
Hayden IR
917-658-7878
hart@haydenir.com   

SOLIS TEK INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

    
  March 31,
2018
  December 31,
2017
 
   (Unaudited)     
ASSETS        
Current Assets        
Cash $1,222,553  $967,943 
Accounts Receivable, net of allowance for doubtful accounts and returns
of $285,013 and $396,499
  358,068   417,484 
Inventories, net  2,032,995   1,684,463 
Advances to suppliers – formerly a related party  540,050   735,730 
Prepaid expenses and other current assets  150,275   134,374 
Total current assets  4,303,941   3,939,994 
         
Property and equipment, net  120,333   138,243 
Other assets  52,980   37,980 
TOTAL ASSETS $4,477,254  $4,116,217 
         
LIABILITIES AND SHAREHOLDERS’ DEFICIT        
Current Liabilities        
Accounts payable and accrued expenses $1,253,797  $1,124,349 
Due to former related party vendor  274,125   381,457 
Note payable - related parties  800,000   1,145,000 
Convertible note payable, current portion, net of discount of $1,263,889
and $1,055,556, respectively
  486,111   194,444 
Due to related parties  113,103   146,534 
Capital lease obligations, current portion  6,074   9,665 
Loans payable, current portion  6,429   8,476 
Total Current Liabilities  2,939,639   3,009,925 
         
Loans payable, net of current portion  17,481   17,481 
Convertible note payable, net of current portion, net of discount of $0 and
  $500,000, respectively
  -   - 
Notes payable related parties, net of current portion        
Derivative liability  2,808,041   7,415,000 
Total liabilities  5,765,161   10,442,406 
         
Series-A Convertible Preferred Shares, net of discount of $50,000
  and $351,000, no par value, 50,000 and 351,000 shares issued and
  outstanding at March 31, 2018 and December 31, 2017, respectively
        
         
Commitments and Contingencies        
         
Shareholders’ Deficit        
Preferred stock, no par value, 20,000,000 shares authorized; no shares
  issued and outstanding at March 31, 2018 and December 31, 2017,
  respectively
  -   - 
Common stock, $0.001 par value, 100,000,000 shares authorized;
  41,230,982 and 38,522,034 shares issued and outstanding at March 31,
  2018 and December 31, 2017, respectively
  41,231   38,522 
Additional paid-in-capital  14,483,968   9,077,690 
Accumulated deficit  (15,813,106)  (15,442,401)
Total Shareholders’ Deficit  (1,287,907)  (6,326,189
         
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT $4,477,254  $4,116,217 
 

 The accompanying notes are an integral part of these condensed consolidated financial statements.

 SOLIS TEK INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

  
  Three Months Ended
March 31,
 
  2018  2017 
  (Unaudited) 
    
Sales $1,011,749  $2,901,826 
Cost of goods sold (including $412,722 and $1,465,996 from a former related
party)
  533,925   1,781,304 
Gross profit  477,824   1,120,522 
         
Operating expenses        
Selling, general and administrative expenses  3,448,271   4,764,655 
Research and development  51,878   82,770 
Total operating expenses  3,500,149   4,847,425 
         
Loss from operations  (3,022,325)  (3,726,903
         
Other income (expenses)        
Financing costs  (607,717)  - 
Change in fair value of derivative liability  2,630,052   - 
Gain on extinguishment of derivative liability  674,254   - 
Interest expense (including $22,913 and $23,622 to related parties)  (44,969)  (24,171)
Total other income (expenses)  2,651,620   (24,171)
         
Loss before income taxes  (370,705)  (3,751,074
         
Provision for income taxes  -   913 
         
Net loss $(370,705) $(3,751,987
         
BASIC NET LOSS PER SHARE $(0.01) $(0.10
         
DILUTED NET LOSS PER SHARE $(0.01) $(0.10
         
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING        
Basic and Diluted  39,994,645   36,388,724 
         


SOLIS TEK INC.
CONDENSED CONSOLIDATED STAEMENTS OF CASH FLOWS
(UNAUDITED)

  
  Three Month Ended March 31, 
  2018  2017 
  (Unaudited)  (Unaudited) 
Cash Flows from Operating Activities        
Net loss $(370,705) $(3,751,987)
Adjustments to reconcile net loss to net cash used in operating activities        
Provision for allowance for doubtful accounts and sales returns  (111,486  52,487 
Provision for inventory reserves  (4,640  - 
Depreciation and amortization  17,910   17,745 
Fair value of vested stock options  561,671     
Fair value of common stock issued for services  718,200   3,663,154 
Fair value of common stock issued to employees  500,417   - 
Financing costs  607,717   - 
Change in the fair value of derivative liability  (2,630,052  - 
Gain on extinguishment of derivative liability  (674,254)  - 
Changes in Assets and Liabilities        
(Increase) Decrease in:        
Accounts receivable  170,902   (710,169)
Inventories  (343,892  865,984 
Advances to suppliers  195,680   (192,857
Prepaid expenses and other  (15,902)  (2,254)
Other assets  (15,000)  - 
(Decrease) Increase in:        
Accounts payable and accrued expenses  129,448   183,461 
Due to former related party vendor  (107,332)  (661,238)
Due to related parties  (33,431  3,422 
Net cash used in operating activities  (1,404,749)  (532,252
         
Cash Flows from Investing Activities        
Purchase of property and equipment  -   (3,200)
Net cash used in investing activities  -   (3,200)
         
Cash Flows from Financing Activities        
Proceeds from sale of common stock  1,068,000   400,000 
Proceeds from exercise of warrants  941,996   - 
Proceeds from notes payable related parties  -   300,000 
Payments on notes payable related party  (345,000)  (20,000
Payments on capital lease obligations  (3,591)  (3,355)
Payments on loans payable  (2,046)  (2,039)
Net cash provided by financing activities  1,659,359   674,606 
         
Net increase in cash  254,610   139,154 
Cash beginning of period  967,943   275,783 
Cash end of period $1,222,553  $414,937 
         
Interest paid $56,344  $10,999 
Taxes paid $-  $- 
         
Non-Cash Financing Activities        
Extinguishment of derivative liability $1,302,653  $- 
Common shares issued upon conversion of Series A preferred $316,500  $- 
         


SOLIS TEK INC.
RECONCILIATION OF ADJUSTED EBITDA TO NET LOSS
(UNAUDITED)

Adjusted EBITDA (Non-GAAP Financial Measure)

In addition to our GAAP results, we present Adjusted EBITDA as a supplemental measure of our performance. However, Adjusted EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of liquidity. We define Adjusted EBITDA as net income (loss), plus other expense, net, provision for income taxes, depreciation and amortization, and stock-based compensation. Non-GAAP adjustments to our results prepared in accordance with GAAP are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

Set forth below is a reconciliation of Adjusted EBITDA to net loss for the three months ended March 31, 2018 and 2017.

  
  Three Months Ended
March 31,
 
  2018  2018 
  (Unaudited)  (Unaudited) 
         
Net loss $(370,705) $(3,751,987)
Provision for income taxes  -   913 
Other (income) expense, net        
Financing costs  607,717   - 
Gain on extinguishment of derivatives  (674,254)    
Change in fair value of derivative liability  (2,630,052  - 
Interest expense  44,969   24,171 
Total other (income) expense, net  (2,651,620  24,171 
Depreciation and amortization expense  17,910   17,745 
Stock-based compensation expense  1,780,288   3,663,154 
Adjusted EBITDA $(1,224,127) $(46,004)
         

We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Adjusted EBITDA has limitations as an analytical tool, which includes, among others, the following: