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Item 1.01
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Entry into a Material Definitive Agreement.
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On February 26, 2021, GrowLife, Inc., a Delaware corporation
(the “Company”), closed the transactions described below with Bucktown Capital, LLC, a Utah limited liability company (“Bucktown”).
Securities Purchase Agreement, Secured Promissory
Notes and Security Agreement
On February 26, 2021, the Company executed the following
agreements with Bucktown: (i) Securities Purchase Agreement; (ii) Secured Convertible Promissory Note; and (iii) Security Agreement (collectively
the “Bucktown Agreements”). The Company entered into the Bucktown Agreements with the intent to acquire working capital to
grow the Company’s businesses and to repay all outstanding obligations owed to: (i) Labrys Fund, L.P. (“Labrys”) in
the amount of $615,333.34; and (ii) PowerUp Lending Group Ltd. (“PowerUp”) in the amount of $128,858.24.
The total amount of funding under the
Bucktown Agreements is $3,088,000 as represented in the Secured Convertible Promissory Note (“Note”). The total
purchase price for this Note is $2,850,000.00; the Note carries an aggregate original issue discount of $228,000 and a
transaction expense amount of $10,000. TheNote is comprised of two (2) tranches (each, a “Tranche”), consisting
of (i) an initial Tranche in an amount equal to $928,000.00 and any interest, costs, fees or charges accrued thereon or added
thereto under the terms of the Note and the Bucktown Agreements (the “Initial Tranche”), and (ii) an additional
Tranche, which is exclusively dedicated for the purchase of the remaining equity interest in EZ CLONE, in the amount of
$2,160,000.00, plus any interest, costs, fees or charges accrued thereon or added thereto under the terms of the Note and the
Bucktown Agreements (the “Subsequent Tranche”). The Initial Tranche shall correspond to $68,000.00 of the OID and
the Transaction Expense Amount, and may be converted into shares of Common Stock at any time subsequent to the Purchase
Price Date. The Subsequent Tranche corresponds to the Investor Note and $160,000.00 of the aggregate OID.
The Company agreed to reserve three times the number
of shares based on the redemption value with a minimum of 23,340,000 shares of its common stock for issuance upon conversion of the Note,
if that occurs in the future. If not converted sooner, the Note is due on or before February 26, 2022. The Note has an interest rate of
eight percent (8%). The Note is convertible, at Bucktown’s option, into the Company’s common stock at $0.30 per share (“Lender
Conversion Price”), subject to adjustment as provided for in the Note. However, in the event the Market Capitalization (as defined
in the Note) falls below the Minimum Market Capitalization the Lender Conversion Price shall equal the lower of the Lender Conversion
Price and the Market Price as of any applicable date of Conversion.
The Company’s obligation to pay the Note, or
any portion thereof, is secured by all of the Company’s assets as described in Schedule A to the Security Agreement attached hereto
and incorporated herein by this reference.
The Bucktown Agreements are qualified in their entirety
by reference to the Bucktown Agreements, copies of which are attached to this Current Report on Form 8-K as Exhibit 10.1, respectively,
and incorporated by reference into this Item 1.01. Certain capitalized terms used herein but not otherwise defined shall have the meaning
ascribed thereto in the Transaction Documents.