Investor Relations

Information on GrowLife Inc.'s Rights Offering

IMPORTANT: This offering is exclusively available to current shareholders of GrowLife, Inc. (OTC: PHOT). If you are NOT a current shareholder your form will be denied and no further action will be taken

Deadline Extended to Nov. 30th

Rights Offering FAQ

We are distributing to holders of our Common Stock as of the Record Date, October 12, 2018, at no charge, non-transferable subscription rights to purchase Units. We have granted to you, as a stockholder on the Record Date, 6:00 p.m. Eastern Time, on October 12, 2018, one subscription right for each share of Common Stock that you owned or were deemed to own at such time. If you hold your shares of Common Stock in the name of a broker, dealer, bank or other nominee who uses the services of The Depository Trust Company, or DTC, one subscription right will be issued by DTC to the nominee for each share of Common Stock that you own or are deemed to own at the Record Date. Each subscription right will entitle the holder to a basic subscription right and if the basic subscription right is exercised in full, an over-subscription right.

We are conducting the Rights Offering to raise additional capital for working capital and general corporate purposes, including development and enhancement of our products, capital expenditures and expansion of operations, and new product development. Please read “Use of Proceeds.”

The basic subscription right gives our stockholders the opportunity to purchase one Unit at a subscription price of $0.012 per Unit. Each Unit consists of one share of our Common Stock and two ½ warrants, one ½ warrant which will be exercisable for one share of our Common Stock at an exercise price of $0.018 per share and one ½ warrant exercisable for one share of our Common Stock at an exercise price of $0.024. Each Warrant will be exercisable upon issuance and will expire three years from the date of issuance, unless accelerated. For example: if you subscribe for 100 Units you will receive 100 common stock shares and 100 warrants (50 of which will be exercisable at $0.018 and 50 of which will be exercisable at $0.024).  The shares of Common Stock and Warrants will be immediately separable upon closing of the Rights Offering. You may exercise all or a portion of your basic subscription right, or you may choose not to exercise any subscription rights. However, if you exercise fewer than all of your basic subscription right, you will not be entitled to purchase any additional Units pursuant to the over-subscription right. No fractional shares or warrants will be issued upon exercise of subscription rights in the Rights Offering.

We do not expect all of our stockholders to exercise all of such holder’s basic subscription right. If you fully exercise your basic subscription right (other than those subscription rights to acquire less than one whole Unit, which cannot be exercised) and other stockholders do not fully exercise their basic subscription right, you may also exercise an over-subscription right to purchase additional Units that remain unsubscribed at the expiration of the Rights Offering, subject to availability, at the same subscription price of $0.012 per Unit. To the extent the number of unsubscribed Units is insufficient to satisfy all of the properly exercised over-subscription right requests, the available Units will be prorated among those who properly exercised over-subscription rights in proportion to their respective basic subscription right. Any excess payments will be returned without interest or penalty as soon as practicable after the expiration of the Rights Offering.

 

In order to properly exercise your over-subscription right, you must deliver the subscription payment for exercise of your over-subscription right before the expiration of the Rights Offering. Because we will not know the total number of unsubscribed Units before the expiration of the Rights Offering, if you wish to maximize the number of Units you purchase pursuant to your over-subscription right, you will need to deliver payment in an amount equal to the aggregate subscription price for the maximum number of Units available, assuming that no stockholder other than you has purchased any Units pursuant to their basic subscription right and over-subscription right. Please read “The Rights Offering — The Subscription Rights — Over-Subscription Right.”

Yes. While we are distributing to holders of our Common Stock one subscription right for every share of Common Stock owned or deemed owned on the Record Date, we are only seeking to raise $6,000,000 dollars in gross proceeds in this Rights Offering. As a result, based on 2,997,279,413  shares of Common Stock outstanding as of September 17, 2018; we are granting subscription rights to acquire approximately 2,997,279,413  Units but will only accept subscriptions for 500,000,000 Units. Accordingly, sufficient Units may not be available to honor your subscription in full. If exercises of basic subscription rights exceed the number of Units available in the Rights Offering, we will allocate the available Units pro rata among the record holders exercising the basic subscription rights in proportion to the number of shares of our Common Stock each of those record holders owned or were deemed to own on the Record Date, relative to the number of shares owned on the Record Date by all record holders exercising the basic subscription right. If this pro rata allocation results in any record holders receiving a greater number of Units than the record holder subscribed for pursuant to the exercise of the basic subscription rights, then such record holder will be allocated only that number of Units for which the record holder subscribed, and the remaining Units will be allocated among all other record holders exercising their basic subscription rights on the same pro rata basis described above. The proration process will be repeated until all Units have been allocated. Please see “The Rights Offering—The Subscription Rights—Over-Subscription Right” for a description of potential proration as to the over-subscription right and certain stock ownership limitations.

If for any reason the amount of Units allocated to you is less than you have subscribed for, then the excess funds held by the Subscription Agent on your behalf will be returned to you, without interest, as soon as practicable after the Rights Offering has expired and all prorating calculations and reductions contemplated by the terms of the Rights Offering have been effected, and we will have no further obligations to you.

In determining the subscription price for exercising the rights, the board of directors considered a number of factors, including the likely cost of capital from other sources, our business prospects, historical and current trading prices of our Common Stock, the value of the Warrants being issued as components of the Unit, general conditions of the securities markets, and our need for liquidity and capital. The subscription price is not necessarily related to our book value, net worth or any other established criteria of value. After the date of this prospectus, our Common Stock may trade at a price below the subscription price for each Unit. In that event, the board of directors, in its sole discretion, may determine to cancel or otherwise alter the terms of the Rights Offering.

No. We will not issue fractional shares of Common Stock or Warrants. If the number of subscription rights you exercise would otherwise permit you to purchase a fractional share of Common Stock or Warrant, the number of shares of Common Stock and number of Warrants that you may purchase will be rounded down to the nearest whole share or Warrant, as applicable.

No. You may exercise any whole number of your subscription rights, or you may choose not to exercise any subscription rights. If you do not exercise your basic subscription right in full, you will not be entitled to participate in the over-subscription right.

No. You may not sell, transfer or assign your subscription right to anyone. Subscription rights will not be listed for trading on any stock exchange or market. Rights certificates may only be completed by the stockholder who receives them.

Holders of our equity awards to employees, officers and directors, including outstanding stock options, will not receive rights in the Rights Offering in connection with such equity awards, but will receive subscription rights in connection with any shares of our Common Stock held as of the Record Date.

We expect the aggregate proceeds, net of expenses and fees, from the Rights Offering will be approximately $5.95 million, assuming all subscription rights are exercised and after paying an estimated $50,000 in fees associated with the Rights Offering. Please see “Use of Proceeds.”

Yes. Unless waived by us in our sole discretion, in no event may any subscriber purchase Units in the Rights Offering that, when aggregated with all of the shares of Common Stock otherwise beneficially owned (as defined by Rule 13(d) of the Exchange Act) by the subscriber and its affiliates, would immediately following the closing of this Rights Offering represent 25% or more of our issued and outstanding shares. If the amount of subscription rights that you exercise is limited, any amount not used for purchases will be refunded.

If you received a rights certificate, the subscription rights may be exercised at any time before the expiration of the Rights Offering, which is on November 12, 2018, at 6:00 p.m. Eastern Time. Please read “The Rights Offering” for detailed information on the procedure and requirements for exercising your subscription right. If you elect to exercise any rights, the Subscription Agent must actually receive all required documents from you, and your payment must have cleared, before that time. If your required subscription exercise documentation is received by the Subscription Agent after the expiration of the Rights Offering, we may, in our sole discretion, choose to accept your subscription, but will be under no obligation to do so.

 

If you hold your shares of Common Stock in name of a broker, dealer, bank, or other nominee, your nominee may establish a deadline before the expiration of the Rights Offering by which you must provide such nominee with your instructions to exercise your subscription right along with the required payment. We reserve the option of extending the expiration of the subscription period in our sole discretion.

If you wish to participate in the Rights Offering, you must:

1. Deliver payment to the Subscription Agent using one of the methods outlined under the section entitled “The Rights Offering — Method of Exercising Subscription Rights” and “— Form of Payment”, which payment must have cleared before 6:00 p.m. Eastern Time, on November 12, 2018; and

 

2. Deliver a properly completed rights certificate to the Subscription Agent before the expiration of the offering period, which is November 12, 2018.

 

Any stockholder who cannot deliver its rights certificate to the Subscription Agent before the expiration time may use the procedures for guaranteed delivery described under the section entitled “The Rights Offering—Guaranteed Delivery Procedures.” In some cases, you may be required to provide additional documentation.

If you hold your shares of Common Stock through a broker, dealer, bank or other nominee as record holder, complete and return to your record holder the form entitled “Beneficial Owner Election Form” or such other appropriate documents as provided by your nominee related to your subscription right prior to the deadline established by your nominee.

If your shares are held in the name of a broker, dealer, bank or other nominee as record holder, then you should send your subscription documents, rights certificate, notices of guaranteed delivery (if applicable) and subscription payment to that nominee.

If you are the record holder, then you should send your subscription documents, rights certificate, notices of guaranteed delivery (if applicable) and subscription payment by hand delivery, first class mail or courier service to the Subscription Agent, Direct Transfer, LLC:

By mail: By hand or overnight courier:
Direct Transfer, LLC

Attn: Rights Offering

500 Perimeter Park Drive Suite D,

Morrisville NC 27560

Tel: (888) 301-2498

Direct Transfer, LLC

Attn: Rights Offering

500 Perimeter Park Drive Suite D,

Morrisville NC 27560

Tel: (888) 301-2498

You are solely responsible for completing delivery of your subscription documents, rights certificate and payment to the Subscription Agent or, if you are not a record holder to your broker, dealer, custodian bank or other nominee. We urge you to allow sufficient time for delivery of your subscription materials to the Subscription Agent or your broker, dealer, custodian bank or other nominee. If you send a payment that is insufficient to purchase the number of Units you requested, or if the number of Units you requested is not specified in the forms, the payment received will be applied to exercise your subscription right to the fullest extent possible based on the amount of the payment received.

No. All exercises of subscription rights are irrevocable, even if you later learn information that you consider to be unfavorable to the exercise of your subscription right, or the market price of Common Stock falls below the subscription price of the Units, including during any extension of the subscription period. However, if we amend the Rights Offering to make a material change to the terms set forth in this prospectus, you may cancel your subscription and receive a refund of any money you have advanced. You should not exercise your subscription right unless you are certain that you wish to purchase Units at a subscription price of $0.012 per Unit.

If you hold your shares of Common Stock in the name of a broker, dealer, bank or other nominee as record holder, then your broker, dealer, bank or other nominee is the record holder of the shares you own or are deemed to own and the record holder must exercise the subscription rights on your behalf for the Units that you wish to purchase. If you wish to participate in the Rights Offering and purchase Units, contact your broker, dealer, bank or other nominee promptly. You should complete and return to your nominee the form entitled “Beneficial Owner Election Form.” You should receive this form from your broker, dealer, bank or other nominee with the other Rights Offering materials. You should contact your broker, dealer, bank, or other nominee if you believe that you are entitled to participate in the Rights Offering but have not received any Rights Offering materials.

Certain holders of our warrants to purchase Common Stock will have the right to participate in the Rights Offering, such warrants are exercised prior to the Record Date. As of the Record Date, there are warrants to purchase 595,000,000 shares of Common Stock issued and outstanding. 

If you do not exercise any subscription rights or choose not to exercise your subscription right in full, the number of shares of Common Stock that you own will not change; however, you will own a smaller proportional interest of Common Stock than if you had timely exercised all or a portion of your subscription right. If other stockholders fully exercise their subscription rights or exercise a greater proportion of their subscription rights than you exercise, the percentage of our Common Stock owned by these other stockholders will increase relative to your ownership percentage, and your voting and other rights in the Company will likewise be diluted. Further, the shares issuable upon the exercise of the Warrants to be issued pursuant to the Rights Offering will dilute the ownership interest of stockholders not participating in this Rights Offering. Subscription rights not exercised prior to the expiration of the Rights Offering will expire.

Yes. Exercising your subscription right involves the purchase of Units and should be considered as carefully as you would consider any other investment. Stockholders who exercise subscription rights risk investment loss on new money invested. We cannot assure you that anyone purchasing Units at the subscription price will be able to sell the shares of Common Stock or shares issued upon the exercise of the Warrants included in the Unit in the future at the same price or a higher price. Among other things, you should carefully consider the risks described under the heading “Risk Factors” in this prospectus and the documents incorporated by reference herein.

Shares of Common Stock and Warrants included in the Units purchased in the Rights Offering will be issued only in book-entry form (i.e. no physical stock certificates will be issued). If you are the holder of record of Common Stock (whether you hold share certificates or your shares are maintained in book-entry form by our transfer agent, Direct Transfer, LLC), you will receive a statement of ownership reflecting the shares of Common Stock and Warrants included in the Units purchased in the offering as soon as practicable after the expiration of the Rights Offering. If your shares of Common Stock are registered in the name of a broker, dealer, bank or other nominee, your shares of Common Stock and Warrants included in the Units will be issued to the same account, and you may request a statement of ownership from the nominee following the expiration of the Rights Offering.

Yes. The Subscription Agent will hold all funds it receives in escrow until completion of the Rights Offering. If the Rights Offering is not completed, all subscription payments received by the Subscription Agent will be returned, without interest, as soon as practicable. If you hold your shares of Common Stock through a broker, dealer, bank or other nominee as record holder, the Subscription Agent will return payments to the record holder of the shares.

We will not mail this prospectus or the rights certificates to stockholders whose addresses are outside the United States or who have an army post office or foreign post office address, because their exercise of rights may be prohibited by the laws of the country in which they live. Instead, the Subscription Agent will hold the rights certificates for their account. To exercise subscription rights, our foreign stockholders must notify the Subscription Agent on or before 6:00 p.m. Eastern Time, on November 12, 2018 and timely follow the procedures described in the section entitled “The Rights Offering — Foreign Stockholders.”

We are not charging any fee or sales commission to issue subscription rights to you or to issue shares of Common Stock and Warrants to you if you exercise your subscription right. However, if you exercise your subscription right through the record holder of your shares, or if you exercise the Warrants included in the Units, you are responsible for paying any fees your nominee may charge you.

No. You will not be entitled to any interest on any funds that are deposited with the Subscription Agent pending completion or cancellation of the Rights Offering. If the Rights Offering is cancelled for any reason, the Subscription Agent will return this money to subscribers, without interest or penalty, as soon as practicable.

For U.S. federal income tax purposes, you generally should not recognize income or loss in connection with the receipt or exercise of subscription rights. You are urged to consult your own tax advisor as to your particular tax consequences resulting from the receipt and exercise of subscription rights and the receipt, ownership and disposition of Units and the Common Stock and Warrants included in the Units. For further information, please read “Certain United States Federal Income Tax Considerations.”

 

All holders of Common Stock as of the Record Date for the Rights Offering will receive, at no charge, non-transferable subscription rights to purchase Units as described in this prospectus. To the extent that our directors and officers held shares of Common Stock holders as of the Record Date, they will receive the subscription rights and, while they are under no obligation to do so, will be entitled to participate in the Rights Offering.

No. The board of directors does not make any recommendation to stockholder’s holders regarding the exercise of rights under the Rights Offering. You should make an independent investment decision about whether or not to exercise your rights based on your own assessment of our business and the Rights Offering.

We expect that, as of the Record Date, we will have approximately 2,997,279,413 shares of Common Stock issued and outstanding and the numbers set forth in this paragraph are based on that expectation. If all of our outstanding warrants as of the Record Date are exercised, we will have approximately 3,997,279,413   shares of Common Stock issued and outstanding as of the Record Date. If the Rights Offering is fully subscribed, meaning that we issue the maximum possible number of Units upon exercise of rights, we will issue an aggregate of 500,000,000 Units, each Unit consisting of one share of Common Stock and two ½ Warrants in exchange for an exercise price of $0.012 per Unit, or aggregate gross proceeds of $6,000,000.

Yes. We reserve the option to extend the Rights Offering and the offering period for exercising your subscription right, in our sole discretion. If we elect to extend the expiration of the Rights Offering, we will issue a press release announcing such extension no later than the next business day after the most recently announced expiration of the Rights Offering. We will extend the duration of the Rights Offering as required by applicable law or regulation and may choose to extend it if we decide to give investors more time to exercise their subscription rights in the Rights Offering.

 

The board of directors may cancel the Rights Offering at any time before the expiration of the Rights Offering for any reason. In the event that the Rights Offering is cancelled, we will issue a press release notifying stockholders of the cancellation and all subscription payments received by the Subscription Agent will be returned, without interest or penalty, as soon as practicable. If you own shares through a broker, dealer, bank or other nominee as record holder, it may take longer for you to receive your subscription payment because the Subscription Agent will return payments through the record holder of your shares.

 

We may amend or modify the terms of the Rights Offering for any reason, including, without limitation, in order to increase participation in the Rights Offering, in our sole discretion. Such amendments or modifications may include a change in the subscription price, although no such change is presently contemplated.

 

If we should make any fundamental changes to the terms set forth in this prospectus, we will file a post-effective amendment to the registration statement in which this prospectus is included, offer potential purchasers who have subscribed for rights the opportunity to cancel their subscriptions, issue a refund of any money advanced by such stockholder and recirculate an updated prospectus after the post-effective amendment is declared effective by the SEC. In addition, upon such event, we may extend the expiration date of the Rights Offering to allow holders of rights ample time to make new investment decisions and for us to recirculate updated documentation. Promptly following any such occurrence, we will issue a press release announcing any changes and the new expiration date.

If you have other questions or need assistance, please contact the Information Agent, Direct Transfer, LLC or the company through its investor relations/public relations contact, CMW Media, directly at (206) 483-0059 or investors@growlifeinc.com.

 

By mail: By hand or overnight courier:
Direct Transfer, LLC

Attn: Rights Offering

500 Perimeter Park Drive Suite D,

Morrisville NC 27560

Tel: (888) 301-2498

Direct Transfer, LLC

Attn: Rights Offering

500 Perimeter Park Drive Suite D,

Morrisville NC 27560

Tel: (888) 301-2498

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COMPANY OVERVIEW

GrowLife, Inc. (PHOT) aims to become the nation’s largest cultivation service provider for cultivating organics, herbs and greens and plant-based medicines. Our mission is to help make our customers successful. Through a network of local representatives covering the United States and Canada, regional centers and its e-Commerce team, GrowLife provides essential goods and services including media, industry-leading hydroponics and soil, plant nutrients, and thousands more products to specialty grow operations. GrowLife is headquartered in Kirkland, Washington and was founded in 2012.

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