GrowLife Inc (PHOT)

[Neight]

Sales or issuances of a large number of shares of common stock in the public market or the perception that sales may occur could cause the market price of our common stock to decline. As of December 31, 2015, there were approximately 891.1 million shares of our common stock issued and outstanding. In addition, as of December 31, 2015, there are also (i) stock option grants outstanding for the purchase of 29.0 million common shares at a $0.028 average strike price; (ii) warrants for the purchase of 565.0 million common shares at a $0.032 average exercise price; (iii) 243.6 million shares related to convertible debt that can be converted at 0.007 per share; (iv) 6.0 million shares that may be issued to a former executive related to a severance agreement; and (v) 15 million shares recorded as contingently redeemable common stock. We issued $2 million in common stock or 115,141,048 shares on April 6, 2016 pursuant to the settlement of the Consolidated Class Action and Derivative Action lawsuits alleging violations of federal securities laws that were filed against the Company in United States District Court, Central District of California. In addition, we have an unknown number of common shares to be issued under the TCA financing agreements. If all stock option grant, warrant and contingent shares are issued, approximately 1.883 billion of our currently authorized 3 billion shares of common stock will be issued and outstanding.

These stock option grant, warrant and contingent shares could result in further dilution to common stock holders and may affect the market price of the common stock.

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