GrowLife Inc (PHOT)

[Sujitta]

So let me give you an example of how a short never covers.

Let's say a stock is at .50 and someone is short 1 million shares...... so he is on the hook at .50 for $500k.

Now, if the stock goes to .60 he will show a $100k deficit in his account.

Now lets say the stock goes down, the company fails and it is kinda stuck under .10

Now his account will show a gain in margin balance of over $400k.

He can use that money anytime he wants, it is a margin balance. And because the closing transaction never took place, he owes no taxes on that money.

Now lets say someone buys the shell and reverses it 100 to one.

Now his breakeven on his short position is $50

Now do you see why a short never has to cover?

Because most of these deals fail and they know it. So they go short, the deal falls apart, either the stock ends up worthless or the entity is sold to another company who promptly reverses it.

Their risk is it goes up but in this case long term the company is in serious trouble.