EQUITY

6 Months Ended

Jun. 30, 2023

Equity [Abstract]

EQUITY

NOTE 10 – EQUITY

Authorized Capital Stock

The Company an aggregate 750,000,000 authorized shares consisting of: (i) 740,000,000 shares of common stock, par value $0.0001 per share, and (ii) 10,000,000 shares of preferred stock, par value $0.0001 per share.

On October 7, 2022, FINRA (the Financial Industry Regulatory Authority) announced the Reverse Stock Split of 150-for-1 of the Company’s common stock. Outstanding shares for all periods of 2022 recognize the impact of this reverse split.

A holder of common stock is entitled to one vote per share of common stock. The holders of common stock have no conversion, redemption or preemptive rights, and shall be entitled to receive dividends when, as, and if declared by the board of directors.

For the six months ended June 30, 2022, the Company had the following common stock transactions:

● $480,300 of convertible debt was converted into 343,785 shares of common stock in accordance with the terms of the convertible debt agreements.

● 50,000 shares of common stock were issued as a commitment fee to secure additional debt, the shares were valued at fair value at the date of issuance.

For the six months ended June 30, 2023, the Company had the following common stock transactions:

● $641,560 of convertible debt was converted into 13,365,884 shares of common stock in accordance with the terms of the convertible debt agreements.

● 3,125,000 shares of common stock were issued as a commitment fee to secure additional debt, the shares were valued at fair value at the date of issuance.

● 4,280,373 shares of common stock were issued for services, the shares were valued at fair value at the date of issuance.

● 583,333 shares of common stock were issued for the cashless exercise of warrants in accordance with the terms of the warrant agreement. As a result, $51,593 of the derivative liability was reduced.

● 5,923,345 shares of common stock were issued in connection with the acquisition of the Bridgetown Mushrooms business, the shares were valued at fair value at the date of issuance.

As of June 30, 2023 and December 31, 2022 the Company had issued and outstanding 35,561,189 and 7,083,254 shares, respectively, of common stock.

Preferred Stock

On November 17, 2022, the Company designated 1,800 shares of its authorized and unissued preferred stock as Series A Preferred Stock and filed a Certificate of Designation of Series A Convertible Preferred Stock of GrowLife, Inc. (the “Series A Certificate of Designation”) with the Delaware Secretary of State.

Each share of Series A Preferred Stock is convertible into 1,000 shares of Common Stock (subject to adjustment as provided in the Series A Certificate of Designation) at any time at the option of the holder, provided that the holder is prohibited from converting the Series A Preferred Stock into shares of Common Stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 4.99% of the total number of shares of Common Stock then issued and outstanding, (the “Beneficial Ownership Limitation”), provided that the holder may reset the Beneficial Ownership Limitation to a higher or lower number (not to exceed 9.99% of the total number of Common Shares issued and outstanding immediately after giving effect to a conversion) upon providing written notice to the Company. Any such notice providing for an increase to the Beneficial Ownership Limitation will be effective 61 days after delivery to the Company.

In the event of the Company’s liquidation, dissolution, or winding up holders of Series A Preferred, any such distribution shall be distributed among the holders of Common Stock, Series A Preferred and any other class or series of preferred stock of the Corporation entitled to participate with the Common Stock in a liquidating distribution, pro rata in proportion to the shares of Common Stock then held by them and the maximum number of shares of Common Stock which they would have the right to acquire upon conversion of shares of Series A Preferred, assuming the full conversion of all Common Stock Equivalents then held by them.

Shares of Series A Preferred Stock generally have no voting rights, except as required by law.

Holders of Series A Preferred Stock are not entitled to receive any dividends payable to holders of Common Stock.

As of June 30, 2023 and December 31, 2022, the Company had issued and outstanding 600 shares and 1,800 shares, respectively, of preferred stock. Such shares were issued as a portion of a commitment fee to obtain financing and are convertible into 1,800,000 shares of common stock. During the three months ended June 30, 2023, 1,200 shares of preferred stock were converted into 1,200,000 shares of common stock. This was done within the terms of the certificate of designation and therefore no gain or loss was recorded on the transaction.

Voting Common Stock

Holders of the Company’s common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. On all other matters, the affirmative vote of the holders of a majority of the stock present in person or represented by proxy and entitled to vote is required for approval, unless otherwise provided in our articles of incorporation, bylaws or applicable law. Holders of common stock are entitled to receive proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of outstanding preferred stock.

In the event of our liquidation or dissolution, the holders of common stock are entitled to receive proportionately all assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.

Unless otherwise indicated, all of the following sales or issuances of Company securities were conducted under the exemption from registration as provided under Section 4(2) of the Securities Act of 1933 (and also qualified for exemption under 4(5), formerly 4(6) of the Securities Act of 1933, except as noted below). All of the shares issued were issued in transactions not involving a public offering, are considered to be restricted stock as defined in Rule 144 promulgated under the Securities Act of 1933 and stock certificates issued with respect thereto bear legends to that effect.

The Company has compensated consultants and service providers with restricted common stock during the development of our business and when our capital resources were not adequate to provide payment in cash.

Warrants

The Company had the following warrant activity during the six months ended June 30, 2023:

On February 1, 2023 the Company issued a common stock purchase warrant to Fourth Man LLC for the purchase of 625,000 shares of the Company’s common stock. The exercise price is $0.08 per share and is exercisable for a term of five years. On April 1, 2023 Fourth Man exercised its right to a cashless exercise of the warrant which resulted in the Company issuing 583,333 shares of common stock for these warrants. The estimated total value of the warrants using the Binomial pricing model described in Derivative Financial Instruments of Note 3 was $51,593.

The Company had the following warrant activity during the year ended December 31, 2022:

On May 18, 2022 the Company issued a common stock purchase warrant to AJB Capital for the purchase of 6,000,000 shares of the Company’s common stock. The exercise price is $0.05 per share and is exercisable for a term of five years. The warrant purchase agreement protected AJB Capital from the impact of any reverse split but afforded them the benefit of any stock split. The warrant were included in the determination of the derivative liability.

On November 2, 2022 the Company issued a common stock purchase warrant to Quick Capital for the purchase of 1,911,111 shares of the Company’s common stock. The exercise price is $0.05 per share and is exercisable for a term of five years. The warrant were included in the determination of the derivative liability.

As the exercise price of the warrants issued to AJB Capital and Quick Capital are adjustable based upon based upon the issuance of other securities with lower purchase prices, management has deemed these warrants should be accounted for as a derivative. See Note 8 for further information on derivative liabilities.

	Six Months Ended		For the Year Ended
	June 30, 2024		December 31, 2023
Beginning balance	7,911,111		1,039,501
Issued	625,000		7,911,111
Exercised	(583,333	)	—
Forfeited	(41,667	)	(1,039,501	)
Ending balance	7,911,111		7,911,111