Item 1.01 Entry into a Material Definitive Agreement.
Securities Purchase Agreement and 10% Promissory
Note
On November 9, 2022, GrowLife, Inc. (the “Company”)
entered into a Securities Purchase Agreement (the “Coventry SPA”) by and between the Company and Coventry Enterprises, LLC
(“Coventry”). Pursuant to the terms of the Coventry SPA, the Company agreed to issue and sell, and Coventry agreed to purchase
(the “Purchase”), a promissory note in the aggregate principal amount of $250,000 (the “Coventry Note”). The Coventry
Note has an original issue discount of $50,000, resulting in gross proceeds to the Company of $200,000. The transaction closed upon funding,
which occurred on November 22, 2022 (“Closing Date”). In addition to the foregoing, pursuant to the terms of the Coventry
Note, the Company also agreed to issue 200,000 shares of restricted common stock and 1,800 restricted shares of the Company’s newly
designated Series A Preferred Stock, which shall convert into 1,800,000 shares of restricted common stock.
The Coventry Note bears interest at a rate of 10%
per annum, with guaranteed interest (the “Guaranteed Interest”) of $25,000 which is deemed earned as of the Closing Date.
The Principal Amount and the Guaranteed Interest shall be due and payable in seven equal monthly payments of thirty-nine thousand, two
hundred eighty-five dollars and seventy one cents ($39,285.71), commencing on April 9, 2023 and continuing on the 9th day of each month
thereafter (each, a “Monthly Payment Date”) until paid in full not later than November 9, 2023 (the “Maturity Date”).
Any or all of the principal amount and the Guaranteed Interest may be prepaid at any time and from time to time, in each case without
penalty or premium.
If an Event of Default (as defined in the Coventry
Note) occurs, consistent with the terms of the Note, the Note will become convertible, in whole or in part, into shares of the Company’s
common stock at Coventry’s option, subject to a 4.99% equity blocker (which may be increased up to 9.99% by Coventry). The conversion
price is 90% of the lowest per-share trading price during the 20-trading day period before conversion.
In addition to certain other remedies, if an Event
of Default occurs, consistent with the terms of the Note, the Note will bear interest on the aggregate unpaid principal amount and Guaranteed
Interest at the rate of the lesser of 18% per annum or the maximum rate permitted by law.
The foregoing description of the Coventry SPA and
the Coventry Note does not purport to be complete and is qualified in its entirety by reference to the Coventry SPA and the Coventry Note,
copies of which are filed as Exhibits 10.1 and 10.2 to this Current Report on Form 8-K and which are incorporated herein by reference.
Common Stock Purchase Agreement
In addition to the Coventry SPA and Coventry Note,
on the same day the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Coventry providing
for an equity financing facility (the “Equity Line”). The Purchase Agreement provides that upon the terms and subject to the
conditions in the Purchase Agreement, Coventry is committed to purchase up to Ten Million Dollars ($10,000,000) of shares of the Company’s
common stock (the “Common Stock”) over the 36-month term of the Purchase Agreement (the “Total Commitment”). The
transaction closed upon funding, which occurred on November 22, 2022.
Under the terms of the Purchase Agreement, Coventry
will not be obligated to purchase shares of Common Stock unless and until certain conditions are met, including but not limited to a Registration
Statement on Form S-1 (the “Registration Statement”) becoming effective which registers Coventry’s resale of any Common
Stock purchased by Coventry under the Equity Line. From time to time over the 36-month term of the Purchase Agreement, commencing on the
trading day immediately following the date on which the Registration Statement becomes effective, the Company, in our sole discretion,
may provide Coventry with a draw down notice (each, a “Draw Down Notice”), to purchase a specified number of shares of Common
Stock (each, a “Draw Down Amount Requested”), subject to the limitations discussed below. The actual amount of proceeds the
Company will receive pursuant to each Draw Down Notice (each, a “Draw Down Amount”) is to be determined by multiplying the
Draw Down Amount Requested by the applicable purchase price. The purchase price of each share of Common Stock equals 80% of the lowest
trading price of the Common Stock during the ten (10) business days prior to the Draw Down Notice date (the “Pricing Period”).
The maximum number of shares of Common Stock requested
to be purchased pursuant to any single Draw Down Notice cannot exceed the lesser of (i) 200% of the average daily share volume of the
Common Stock in the ten (10) trading days immediately preceding the Draw Down Notice; (ii) an aggregate value of $250,000; or (iii) the
beneficial ownership limitation, as set forth in the Purchase Agreement.
- 2 -
The Purchase Agreement contains customary representations,
warranties, and covenants by, among, and for the benefit of the parties. The Purchase Agreement also provides for our indemnification
of Coventry and its affiliates in the event that Coventry incurs losses, liabilities, obligations, claims, contingencies, damages, costs,
and expenses related to a breach by us of any of our representations, warranties, covenants, or agreements under the Purchase Agreement
or the other related transaction documents or any action, suit, claim, or proceeding instituted against Coventry or its affiliates due
to the transactions contemplated by the Purchase Agreement or other transaction documents, subject to certain limitations.
In connection with the Purchase Agreement, the Company
also entered into a Registration Rights Agreement, dated November 9, 2022, with Coventry (the “Registration Rights Agreement”),
pursuant to which the Company agreed to register for resale all of the shares issuable in accordance with the Purchase Agreement in a
Registration Statement to be filed with the Securities and Exchange Commission.
The description of certain terms of the Purchase Agreement
and the Registration Rights Agreement set forth herein do not purport to be complete and are qualified in their entirety by the provisions
of such agreements, attached hereto as Exhibits 10.3 and 10.4, respectively, and are incorporated by reference herein.