MJ Stocks Analysis

[newmedman]

I just started going through the terms of this JV.... I have a couple other points I'll get back to, but this one jumped out at me like WTF ? page 16.. tsk tsk, PHOT. Nice to see how you protect your bagholders..

http://www.sec.gov/Archives/edgar/data/1161582/000107997413000746/ex10_1.htm

Acknowledgement Regarding CANX’s Trading Activity.

Anything in this Agreement or elsewhere herein to the contrary notwithstanding, it is understood and acknowledged by GrowLife that: (i) none of CANX has been asked by GrowLife to agree, nor has CANX agreed, to desist from purchasing or selling, long and/or short, securities of GrowLife, or “derivative” securities based on securities issued by GrowLife or to hold the Securities for any specified term; (ii) past or future open market or other transactions by CANX, specifically including, without limitation, short sales or “derivative” transactions, before or after the effective date of this Agreement of this or future private placement transactions, may negatively impact the market price of GrowLife’s publicly-traded securities; (iii) CANX, and counter- parties in “derivative” transactions to which CANX is a party, directly or indirectly, presently may have a “short” position in the Common Stock, and (iv) CANX shall not be deemed to have any affiliation with or control over any arm’s length counter- party in any “derivative” transaction. GrowLife further understands and acknowledges that (y) CANX may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the Warrant Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing stockholders’ equity interests in GrowLife at and after the time that the hedging activities are being conducted. GrowLife acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.

Edit :
For anyone who doesn't understand what I am getting at

This is a blueprint for what is lovingly known as a toxic death spiral convertible... They short it down every time they go to convert their warrants then flood the O/S with new shares and repeat the process.

Eventually the O/S doesn't keep up with the pps and highs get lower and lower and lower each time they rinse and repeat.