PHOT Growlife Inc (CE)

Item 1.01   Entry into a Material Definitive Agreement.

Securities Purchase Agreement and Convertible Promissory Note

On October 17, 2022, Growlife, Inc. a Delaware corporation (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with 1800 Diagonal Lending LLC, a Virginia limited liability company (the “Investor” or “1800 Diagonal”), pursuant to which the Company sold 1800 Diagonal a convertible promissory note in the principal amount of $88,000 (the “Note”). The Note accrues interest at a rate of 8% per annum (22% upon the occurrence of an event of default) and has a maturity date of October 17, 2023. The 1800 Diagonal Note included an original issue discount of $8,000 and was purchased for an aggregate of $80,000. The Note was funded by the Investor as on October 19, 2022.

The Company has the right to prepay the Note at any time during the first 60 days the Note is outstanding at the rate of 110% of the unpaid principal amount of the note plus interest and during the period beginning on the 61^st day extending through the 180^th day the Note is outstanding at the rate of 115% of the unpaid principal amount of the note plus interest. The Note may be prepaid after the 180^th day following the issuance date if the Investor agrees to such repayment and such terms.

The Investor may in its option, at any time beginning 180 days after the date of the Note, convert the outstanding principal and interest on the Note into shares of our common stock at a conversion price per share equal to 75% of the lowest daily volume weighted average price (“VWAP”) of our common stock during the 15 trading days prior to the date of conversion. We agreed to reserve five times the number of shares of our common stock which may be issuable upon conversion of the Note.

The Note provides for standard and customary events of default such as failing to timely make payments under the Note when due, the failure of the Company to timely comply with the Securities Exchange Act of 1934, as amended, reporting requirements and the failure to maintain a listing on the OTC Markets. The Note also contains customary positive and negative covenants. The Note includes penalties and damages payable to 1800 Diagonal in the event we do not comply with the terms of such note, including in the event we do not issue shares of common stock to the Investor upon conversion of the Note within the time periods set forth therein. At no time may the Note be converted into shares of our common stock if such conversion would result in the Investor, or its affiliates owning an aggregate of more than 4.99% of the then outstanding shares of our common stock.

The description of the Note and Securities Purchase Agreement above is not complete and is qualified in its entirety by the full text of the Note and Securities Purchase Agreement, filed herewith as Exhibits 10.1 and 10.2, respectively, which are incorporated by reference into this Item 1.01.