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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Growlife Inc (CE) | USOTC:PHOT | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.0002 | 9 | 01:00:00 |
☒
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
☐
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
Delaware
(State
or other jurisdiction of
incorporation or
organization)
|
90-0821083
(I.R.S.
Employer Identification No.)
|
Large
accelerated filer
|
☐
|
Accelerated
filer
|
☐
|
Non-accelerated
filer (Do not check if a smaller reporting company)
|
☐
|
Smaller
reporting company
|
☒
|
Emerging
growth company
|
☐
|
|
|
|
||
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Page
Number
|
|
|
|
PART
I
FINANCIAL
INFORMATION
|
|
|
|
|
|
ITEM
1
Financial
Statements (unaudited except as noted)
|
2
|
|
|
|
|
|
Consolidated
Balance Sheets as of June 30, 2017 and December 31, 2016
(audited)
|
2
|
|
|
|
|
Consolidated
Statements of Operations for the three and six months ended
June 30, 2017 and 2016
|
3
|
|
|
|
|
Consolidated
Statements of Cash Flows for the three and six months ended
June 30, 2017 and 2016
|
4
|
|
|
|
|
Notes
to the Consolidated Financial Statements
|
5
|
|
|
|
ITEM
2
Management's
Discussion and Analysis of Financial Condition and Results of
Operation
|
17
|
|
|
|
|
ITEM
3
Quantitative and
Qualitative Disclosures About Market Risk
|
27
|
|
|
|
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ITEM
4
Controls and
Procedures
|
27
|
|
|
|
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PART
II
OTHER
INFORMATION
|
|
|
|
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ITEM
1.
Legal
Proceedings.
|
28
|
|
|
|
|
ITEM
1A.
Risk
Factors
|
28
|
|
|
|
|
ITEM
2
Unregistered Sales
of Equity Securities and Use of Proceeds
|
36
|
|
|
|
|
ITEM
3
Defaults Upon
Senior Securities
|
37
|
|
|
|
|
ITEM
4
Mine Safety
Disclosures
|
37
|
|
|
|
|
ITEM
5
Other
Information
|
37
|
|
|
|
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ITEM
6
Exhibits
|
37
|
|
|
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|
SIGNATURES
|
38
|
|
Three Months Ended,
|
Six Months Ended,
|
||
|
June 30,
2017
|
June 30,
2016
|
June 30,
2017
|
June 30,
2016
|
|
|
|
|
|
NET
REVENUE
|
$
521,358
|
$
261,853
|
$
988,923
|
$
729,348
|
COST
OF GOODS SOLD
|
427,017
|
381,257
|
879,099
|
713,817
|
GROSS
PROFIT
|
94,341
|
(119,404
)
|
109,824
|
15,531
|
GENERAL
AND ADMINISTRATIVE EXPENSES
|
499,693
|
541,293
|
912,955
|
913,941
|
OPERATING
LOSS
|
(405,352
)
|
(660,697
)
|
(803,131
)
|
(898,410
)
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
Change
in fair value of derivative
|
373,047
|
2,090,113
|
2,163,861
|
(378,179
)
|
Interest
expense, net
|
(112,809
)
|
(72,054
)
|
(315,593
)
|
(238,230
)
|
Other
income (expense)
|
-
|
279,222
|
-
|
250,057
|
Loss
on debt conversions
|
(102,445
)
|
-
|
(1,469,845
)
|
-
|
Total
other (expense)
|
157,793
|
2,297,281
|
378,423
|
(366,352
)
|
|
|
|
|
|
(LOSS)
BEFORE INCOME TAXES
|
(247,559
)
|
1,636,584
|
(424,708
)
|
(1,264,762
)
|
|
|
|
|
|
Income
taxes - current benefit
|
-
|
-
|
-
|
-
|
|
|
|
|
|
NET
(LOSS)
|
$
(247,559
)
|
$
1,636,584
|
$
(424,708
)
|
$
(1,264,762
)
|
|
|
|
|
|
Basic
and diluted (loss) per share
|
$
(0.00
)
|
$
0.00
|
$
(0.00
)
|
$
(0.00
)
|
|
|
|
|
|
Weighted
average shares of common stock outstanding- basic and
diluted
|
1,999,108,089
|
1,110,821,354
|
1,912,895,786
|
1,025,436,645
|
|
Six Months Ended,
|
|
|
June 30,
2017
|
June 30,
2016
|
|
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CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
Net
loss
|
$
(424,708
)
|
$
(1,264,762
)
|
Adjustments
to reconcile net loss to net cash (used in)
|
|
|
operating
activities
|
|
|
Depreciation
and amortization
|
1,890
|
4,707
|
Amortization
of intangible assets
|
-
|
53,274
|
Stock
based compensation
|
104,874
|
65,640
|
Common
stock issued for services
|
51,000
|
65,000
|
Amortization
of debt discount
|
121,395
|
(208,439
)
|
Change
in fair value of derivative liability
|
(2,163,861
)
|
378,179
|
Accrued
interest on convertible notes payable
|
166,071
|
84,292
|
Interest
converted on convertible notes payable
|
-
|
-
|
Loss
on debt conversions
|
1,469,845
|
-
|
Changes
in operating assets and liabilities:
|
|
|
Inventory
|
2,711
|
78,613
|
Accounts
payable
|
(222,604
)
|
132,128
|
Accrued
expenses
|
(12,165
)
|
(5,748
)
|
Deferred
revenue
|
(27,995
)
|
(418
)
|
CASH
(USED IN) OPERATING ACTIVITIES
|
(933,547
)
|
(617,534
)
|
|
|
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CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
-
|
-
|
|
-
|
-
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NET
CASH PROVIDED BY INVESTING ACTIVITIES:
|
-
|
-
|
|
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CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
Cash
provided from Convertible Promissory Note with Chicago Venture
Partners, L.P.
|
2,424,401
|
577,748
|
Cash
payoff to TCA Global Credit Master Fund, LP
|
(1,515,901
)
|
-
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
908,500
|
577,748
|
|
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NET
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
(25,047
)
|
(39,786
)
|
|
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|
CASH
AND CASH EQUIVALENTS, beginning of period
|
103,070
|
60,362
|
|
|
|
CASH
AND CASH EQUIVALENTS, end of period
|
$
78,023
|
$
20,576
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
Interest
paid
|
$
-
|
$
-
|
Taxes
paid
|
$
-
|
$
-
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
Shares
issued for convertible note and interest conversion
|
$
1,950,923
|
$
1,008,020
|
Shares
issued for debt conversion
|
$
-
|
$
65,640
|
Shares
issued for class action settlements
|
$
-
|
$
2,000,000
|
Shares
issued for mezzanine equity
|
$
-
|
$
300,000
|
Series
B Convertible Preferred Stock converted into convertible notes
payable
|
$
-
|
$
(1,500,000
)
|
Series
B Convertible Preferred Stock converted into convertible notes
payable debt discount
|
$
-
|
$
315,669
|
Common
shares issued for accounts payable
|
$
127,148
|
$
-
|
|
June 30,
|
December 31,
|
|
2017
|
2016
|
|
|
|
Finished
goods
|
$
435,742
|
$
438,453
|
Inventory
reserve
|
(20,000
)
|
(20,000
)
|
Total
|
$
415,742
|
$
418,453
|
|
Weighted Average
|
||
|
Options
|
Exercise Price
|
$
|
Outstanding
as of December 31, 2014
|
40,720,000
|
$
0.058
|
$
2,356,000
|
Granted
|
-
|
-
|
(960,000
)
|
Exercised
|
-
|
-
|
-
|
Forfeitures
|
(11,700,000
)
|
(0.050
)
|
(585,000
)
|
Outstanding
as of December 31, 2015
|
29,020,000
|
0.028
|
811,000
|
Granted
|
-
|
-
|
-
|
Exercised
|
-
|
-
|
-
|
Forfeitures
|
(17,010,000
)
|
(0.041
)
|
(690,500
)
|
Outstanding
as of December 31, 2016
|
12,010,000
|
$
0.010
|
$
120,500
|
Granted
|
2,000,000
|
0.009
|
18,000
|
Exercised
|
-
|
-
|
-
|
Forfeitures
|
-
|
-
|
-
|
Outstanding
as of June 30, 2017
|
14,010,000
|
$
0.010
|
$
138,500
|
|
|
Weighted
|
Weighted
|
|
Weighted
|
|
|
Average
|
Average
|
|
Average
|
Range of
|
Number
|
Remaining Life
|
Exercise Price
|
Number
|
Exercise Price
|
Exercise Prices
|
Outstanding
|
In Years
|
Exerciseable
|
Exerciseable
|
Exerciseable
|
$
0.009
|
2,000,000
|
3.00
|
$
0.009
|
-
|
$
0.009
|
0.010
|
12,000,000
|
2.38
|
0.010
|
9,500,000
|
0.010
|
0.050
|
10,000
|
-
|
0.050
|
8,333
|
0.050
|
|
14,010,000
|
2.47
|
$
0.010
|
9,508,333
|
$
0.010
|
Years
Ended June 30,
|
Total
|
2018
|
$
141,982
|
2019
|
125,414
|
2020
|
-
|
2021
|
-
|
2022
|
-
|
Beyond
|
-
|
Total
|
$
267,396
|
|
|
Less Than
|
|
|
Greater Than
|
Contractual Cash Obligations
|
Total
|
1 Year
|
1-3 Years
|
3-5 Years
|
5 Years
|
Operating
leases
|
$
267,396
|
$
141,982
|
$
125,414
|
$
-
|
$
-
|
Convertible
notes payable
|
1,993,825
|
1,993,825
|
-
|
-
|
-
|
Capital
expenditures
|
25,000
|
25,000
|
-
|
-
|
-
|
|
$
2,286,221
|
$
2,160,807
|
$
125,414
|
$
-
|
$
-
|
|
●
|
expand
our products effectively or efficiently or in a timely
manner;
|
|
●
|
allocate
our human resources optimally;
|
|
●
|
meet
our capital needs;
|
|
●
|
identify
and hire qualified employees or retain valued employees;
or
|
|
●
|
incorporate
effectively the components of any business or product line that we
may acquire in our effort to achieve growth.
|
●
|
Halting
of trading by the SEC or FINRA.
|
|
|
●
|
Announcements
by us regarding liquidity, legal proceedings, significant
acquisitions, equity investments and divestitures, strategic
relationships, addition or loss of significant customers and
contracts, capital expenditure commitments, loan, note payable and
agreement defaults, loss of our subsidiaries and impairment of
assets,
|
|
|
●
|
Issuance
of convertible or equity securities for general or merger and
acquisition purposes,
|
|
|
●
|
Issuance
or repayment of debt, accounts payable or convertible debt for
general or merger and acquisition purposes,
|
|
|
●
|
Sale of
a significant number of shares of our common stock by
shareholders,
|
|
|
●
|
General
market and economic conditions,
|
●
|
Quarterly
variations in our operating results,
|
|
|
●
|
Investor
relation activities,
|
|
|
●
|
Announcements
of technological innovations,
|
|
|
●
|
New
product introductions by us or our competitors,
|
|
|
●
|
Competitive
activities, and
|
|
|
●
|
Additions
or departures of key personnel.
|
Exhibit No.
|
|
Description
|
3.1
|
|
Certificate of Incorporation. Filed as an exhibit to the
Company’s Form 10-SB General Form for Registration of
Securities of Small Business Issuers filed with the SEC on December
7, 2007, and hereby incorporated by reference.
|
3.2
|
|
Amended and Restated Bylaws. Filed as an exhibit to the
Company’s Form 8-K filed with the SEC on June 9, 2014, and
hereby incorporated by reference.
|
3.3
|
|
Second Amended and Restated Bylaws of GrowLife, Inc. dated October
16, 2015. Filed as an exhibit to the Company’s Form 8-K and
filed with the SEC on October 26, 2015, and hereby incorporated by
reference.
|
3.4
|
|
Certificate of Designation for Series B Preferred Stock. Filed as
an exhibit to the Company’s Form 8-K and filed with the SEC
on October 29, 2015, and hereby incorporated by
reference.
|
3.5
|
|
Certificate of Designation for Series C Preferred Stock. Filed as
an exhibit to the Company’s Form 8-K and filed with the SEC
on October 29, 2015, and hereby incorporated by
reference.
|
4.1
|
|
GrowLife, Inc. 2011 Stock Incentive Plan filed as an exhibit to the
Company’s Registration Statement on Form S-1 filed with the
SEC on June 8, 2011, and hereby incorporated by
reference.
|
10.1
|
|
Compilation of Securities Purchase Agreement, Secured Promissory
Notes, Membership Interest Pledge Agreement and Security Agreement.
dated February 1, 2017, entered into by and between GrowLife, Inc.
and Chicago Venture Partners, L.P. Filed as an exhibit to the
Company’s Form 8-K and filed with the SEC on February 7,
2017, and hereby incorporated by reference.
|
|
Certification of Principal Executive Officer Pursuant to Rule
13a-14 Filed herewith.
|
|
|
Certification of Principal Financial Officer Pursuant to Rule
13a-14 Filed herewith.
|
|
|
CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
Filed herewith.
|
|
|
CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
Filed herewith.
|
|
101.INS*
|
|
XBRL Instance Document
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.LAB*
|
|
XBRL Taxonomy Extension Labels Linkbase Document
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
Date: August 11, 2017
|
By:
|
/s/ Marco Hegyi
|
|
|
|
Marco Hegyi
|
|
|
|
Chief Executive Officer and Chairman of the Board
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
Date: August 11, 2017
|
By:
|
/s/ Mark Scott
|
|
|
|
Mark Scott
|
|
|
|
Consulting Chief Financial Officer
|
|
|
|
(Principal Financial and Accounting Officer)
|
|
1 Year Growlife (CE) Chart |
1 Month Growlife (CE) Chart |
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