UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended December 31, ~~2021~~2022

☐ TRANSACTION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transaction period from ________ to ________

Commission file number 000-50385

GrowLife, Inc.

(Exact name of registrant as specified in its charter)

Delaware

90-0821083

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

11335 NE 122nd Way, Suite 105

Kirkland, WA 98034

(Address of principal executive offices and zip code)

(866) 781-5559

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.0001

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer (Do not check if a smaller reporting company)	☐	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 30, ~~2021~~2022 (the last business day of our most recently completed second fiscal quarter), based upon the last reported trade on that date, the aggregate market value of the voting and non-voting common equity held by non-affiliates (for this purpose, all outstanding and issued common stock minus stock held by the officers, directors and known holders of 10% or more of the Company’s common stock) was $7,176,550.

As of ~~May~~June 105, ~~2022~~2023, there were ~~145~~30,~~517~~977,~~397~~857 shares of the issuer’s common stock, $0.0001 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

The following discussion, in addition to the other information contained in this report, should be considered carefully in evaluating us and our prospects. This report (including without limitation the following factors that may affect operating results) contains forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act") regarding us and our business, financial condition, results of operations and prospects. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions or variations of such words are intended to identify forward-looking statements but are not the exclusive means of identifying forward-looking statements in this report. Additionally, statements concerning future matters such as revenue projections, projected profitability, growth strategies, development of new products, enhancements or technologies, possible changes in legislation and other statements regarding matters that are not historical are forward-looking statements.

Forward-looking statements in this report reflect the good faith judgment of our management and the statements are based on facts and factors as we currently know them. Forward-looking statements are subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, but are not limited to, those discussed below and in "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as those discussed elsewhere in this report. Readers are urged not to place undue reliance on these forward-looking statements which speak only as of the date of this report. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report.

Table of Contents

TABLE OF CONTENTS

		Page
PART 1

ITEM 1.	Description of Business		4

ITEM 1A.	Risk Factors		6

ITEM 1B	Unresolved Staff Comments		6

ITEM 2.	Properties		6

ITEM 3.	Legal Proceedings		6

PART II

ITEM 5.	Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		7

ITEM 6.	Selected Financial Data

ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		10

ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk		14

ITEM 8.	Financial Statements and Supplementary Data		14

ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		14

ITEM 9A.	Controls and Procedures		14

ITEM 9B.	Other Information		15

PART III

ITEM 10.	Directors, Executive Officers and Corporate Governance		16

ITEM 11.	Executive Compensation		18

ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		23

ITEM 13.	Certain Relationships and Related Transactions, and Director Independence		24

ITEM 14.	Principal Accounting Fees and Services		25

PART IV

ITEM 15.	Exhibits, Financial Statement Schedules		26

	SIGNATURES		29

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

THE COMPANY AND OUR BUSINESS

GrowLife, Inc. (“GrowLife” or the “Company”) is incorporated under the laws of the State of Delaware and is headquartered in Kirkland, Washington. We were founded in 2012 with the Closing of the Agreement and Plan of Merger with SGT Merger Corporation.

~~The~~Also ~~Company’s~~previously ~~total~~reported, ~~revenue~~we ~~declined~~did ~~11%. Our~~not ~~revenue~~fund ~~reduction~~the purchase of ~~approximately~~the ~~$0.8~~remaining ~~million~~49% of stock of EZ-CLONE that was due on July 15, 2020 and the ~~result~~founders of aEZ-CLONE ~~major~~entered ~~decline~~into oflitigation against the ~~hydroponics~~Company. ~~business~~Effective ~~during~~December ~~2021. On~~29, 2022 the ~~positive~~Company ~~side,~~entered ~~annual~~into ~~sales~~a ofSettlement ~~our~~Agreement and Mutual General Release (“SAMGA”) whereby the Company and the founder of EZ-CLONE ~~subsidiary~~resolved ~~rose~~all ~~14%~~disputes ~~during~~between the ~~year~~parties. As ~~and~~a ~~gross~~result ~~margin~~of ~~increased~~the ~~from~~SAMGA ~~42.6%~~the Company’s ownership percentage has been reduced to 4619.36% ~~year~~thereby toeliminating ~~over~~the ~~year~~consolidation of EZ-CLONE at such date and ~~operating~~the ~~expenses~~results ~~were~~of ~~reduced~~EZ-CLONE ~~10%~~operations tofor ~~$4.4~~the ~~million~~years ended December 31, 2022 and 2021are included in the consolidated financial statements as discontinued operations.

~~Also~~The ~~previously~~GrowLife ~~reported,~~executive weteam ~~did~~has ~~not~~focused ~~close~~on ~~the~~exploring ~~purchase~~new ofbusiness alternatives for the ~~remaining~~Company ~~49%~~and ofsettlement ~~stock~~on ofthe EZ-CLONE litigation matter. As a result, the Company has decided to divest away from the hydroponics business and focused on functional mushroom business opportunities. We see a growing market, intend to service our existing distribution channel and will build on opportunities in the medicinal mushroom industry. On January 7, 2023 the Company acquired the assets of Bridgetown Mushrooms and assumed certain debt that was ~~due~~secured onby ~~July~~such 15assets. We believe this is an opportunity for our customers, ~~2020~~shareholders and one where GrowLife is uniquely positioned to capitalize on. The Company’s goal is to become the ~~founders~~nation’s largest mushroom supplier focused on serving more providers of EZmushroom-~~CLONE~~based ~~entered~~products ~~into~~of ~~litigation~~high ~~against~~quality, ~~the~~exceptional ~~Company~~value and competitive price.

The GrowLife executive team has focused on exploring new business alternatives for the Company and settlement on the EZ-CLONE litigation matter. As a result, the Company has decided to divest away from any Cannabis-related investments and focused on functional mushroom business opportunities. We see a growing market, intend to service our existing distribution channel and will build on opportunities in the medicinal mushroom industry. We believe this is an opportunity for our customers, shareholders and one where GrowLife is uniquely positioned to capitalize on. The Company’s goal is to become the nation’s largest mushroom supplier focused on serving more providers of mushroom-based products of high quality, exceptional value and competitive price.

FINANCIAL PERFORMANCE

Net revenue for the year ended December 31, 2021, decreased by $801,700 to $6,199,000 from $7,001,000 for the year ended December 31, 2020. The decrease resulted a major decline in our involvement in the hydroponics business in 2020. The reduction of the hydroponics sales personnel and the impact of the pandemic on the hydroponics segment during the year ended December 31, 2020 and early 2021, resulted in hydroponics revenue declining to $35,000 in 2021 as compared to $1,568,000 for the year ended December 31, 2020. The EZ-CLONE revenue from its line of products for the year ended December 31, 2021 was $6,164,000 as compared to $5,433,000 for the year ended December 31, 2020.

Employees

As of December 31, ~~2021~~2022, we had 13two full-time employees. ~~Marco Hegyi, our Chief Executive Officer, and the Company remains based in Kirkland, Washington. In addition, we employ 12 full-time employees at EZ-CLONE in Sacramento, CA.~~ None of our employees are subject to a collective bargaining agreement or represented by a trade or labor union.

Key Partners

Our key customers have become the cultivation buyers of cloning systems throughout various states and these products are sold through direct sales, retailers and distributors. Therefore, our key suppliers include distributors and manufacturers including EZ-CLONE. All the products purchased and resold are applicable to indoor growing for organics, greens, and plant-based medicines.

Competition

Covering two countries across all cultivator segments creates competitors that also serve as partners. Large commercial cultivators have found themselves willing to assume their own equipment support by buying large volume purchased directly from certain suppliers and distributors such as Hawthorne and HydroFarm. Other key competitors on the retail side consist of local and regional hydroponic resellers of indoor growing equipment. On the e-commerce business our competition includes GrowersHouse.com, Hydrobuilder.com and smaller online resellers using Amazon and eBay e-commerce market systems.

Intellectual Property and Proprietary Rights

Our intellectual property consists of brands and their related trademarks and websites, customer lists and affiliations, product know-how and technology, and marketing intangibles. Our other intellectual property is primarily in the form of trademarks and domain names. We also hold rights to several website addresses related to our business including websites that are actively used in our day-to-day business such as www.growlifeinc.com and www.ezclone.com. We have a policy of entering into confidentiality and non-disclosure agreements with our employees, some of our vendors and customers as necessary.

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Acquisition and Reduction of ownership of EZ-CLONE

On October 15, 2018, we closed the Purchase and Sale Agreement with EZ-CLONE Enterprises, Inc., a California corporation (the “Agreement”). On November 5, 2019, we amended the Agreement with one 24.5% shareholder of EZ-CLONE Enterprises, Inc. (“EZ-CLONE”), to extend the date to purchase the remaining 49% of stock of EZ-CLONE in exchange for a 20% extension fee (a total of $171,000 for the 49% or $85,500 for each 24.5% shareholder) of the $855,000 cash payable at the earlier of the closing of $2,000,000 in funding or nine months (July 2020). The Company did not ~~close~~fund the purchase of the remaining 49% of stock of EZ-CLONE by the extended deadline.

On September 15, 2020, we received notice that William Blackburn and Brad Mickelsen (“Plaintiffs”), minority shareholders of EZ-CLONE Enterprises, Inc., a majority owned subsidiary of the Company, filed a complaint against the Company and its officers ~~Marco Hegyi and Mark Scott (“Officers”), in~~ the Superior Court of California, County of Sacramento (“Complaint”) for claims related to breach under the Purchase and Sale Agreement dated October 15, 2018 between the Company and Plaintiffs. The Complaint also alleges that the Company and its Officers made certain false representations and other claims to consummate the Transaction and as a result has failed to complete the second closing as required under Purchase and Sale Agreement. ~~As of December 4, 2020, the Company’s officers were dismissed from the case.~~ The Plaintiffs are seeking rescission of the Purchase and Sale Agreement, unspecified damages in excess of ten thousand dollars, and other equitable relief.

On September 15, 2020, we filed a notice of removal with the California Superior Court, County of Sacramento and the United States District Court for the Eastern District of California. The case was removed to Federal District Court for the Eastern District of California and Plaintiffs filed an Ex Parte Application for TRO and an Order for Preliminary Injunction with the Federal Court. The TRO was granted on September 16, 2020 and a preliminary injunction hearing was scheduled for September 29, 2020. After reviewing all pleadings and oral arguments at the hearing, the Court issued a ruling granting Plaintiffs’ request for a preliminary injunction. The parties provided legal briefs to the Federal court to determine if rescission should be granted. The Court did not reach a decision on this issue, and denied without prejudice, the Company’s effort to reverse the preliminary injunction. ~~The Company is currently reviewing all options in this matter including settlement discussions.~~

As of December 31, 2021, we ~~have~~ recorded a liability of $2,131,000 related to the acquisition of which a $1,105,000 is payable in stock and $1,026,000 is payable in cash.

On December 29, 2022, we entered into a Settlement Agreement and Mutual General Release (“Settlement Agreement”) with EZ-CLONE Enterprises whereby our ownership percentage was reduced to 19.6%. The Settlement Agreement provides that the Company and Mr. Blackburn dismiss the claims against one another and that EZ-CLONE retains all obligations under the warehouse lease. As a result, we have not consolidated the balance sheet of EZ-CLONE at December 31, 2022, however the results of operations for the period through the date of the Settlement Agreement and for the year ended December 31, 2021 are reported as Discontinued Operations.

OUR COMMON STOCK

As of March ~~4, 2019, we began to trade on the Pink Sheet stocks system. Our bid price had closed below $0.01 for more than 30 consecutive calendar days. As of March~~ 17, 2020, we commenced trading on the OTCQB Market ("OTCQB") ~~after successfully up-listing from the OTC Pink Market~~.

PRIMARY RISKS AND UNCERTAINTIES

We are exposed to various risks related to legal proceedings, our need for additional financing, the sale of significant numbers of our shares, the potential adjustment in the exercise price of our convertible debentures, including warrants, and a volatile market price for our common stock. ~~These risks and uncertainties are discussed in more detail below in Part II, Item 1A.~~

WEBSITE ACCESS TO UNITED STATES SECURITIES AND EXCHANGE COMMISSION REPORTS

We file annual and quarterly reports, proxy statements and other information with the Securities and Exchange Commission ("SEC"). You may read and copy any document we file at the SEC's Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information concerning filers. We also maintain a web site at http://www.growlifeinc.com that provides additional information about our Company and links to documents we file with the SEC. The Company's charters for the Audit Committee, the Compensation Committee, and the Nominating Committee; and the Code of Conduct & Ethics are also available on our website. The information on our website is not part of this Form 10-K.

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ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Operating Leases

The Company is obligated under the following leases for its various facilities.

On May 31, ~~2020~~2022, the Company rented space in Kirkland, Washington ~~for~~on ~~$623~~a ~~per~~ month-to-month basis for the Company’s corporate office and use of space in the Regus network~~, including California~~. ~~The Company’s agreement expires May 31, 2022.~~

On December 14, 2018, GrowLife, Inc. entered into a lease agreement with Pensco Trust Company for a 28,000 square feet industrial space at 10170 Croydon Way, Sacramento, California 95827 used for the assembly and sales of plastic parts by EZ-CLONE. The monthly lease payment is $17,500 and increases approximately 3% per year. The lease expires on December 31, 2023. As part of the Settlement Agreement, GrowLife, Inc. is no longer obligated under the lease agreement.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may become subject to various legal proceedings that are incidental to the ordinary conduct of its business. Although we cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, it makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current information and may be adjusted from time to time according to developments.

On October 15, 2018, we closed the Purchase and Sale Agreement with EZ-CLONE Enterprises, Inc., a California corporation (the “Agreement”). On November 5, 2019, the Company amended the Agreement with one 24.5% shareholder of EZ-CLONE Enterprises, Inc. (“EZ-CLONE”), to extend the date to purchase the remaining 49% of stock of EZ-CLONE in exchange for a 20% extension fee (a total of $171,000 for the 49% or $85,500 for each 24.5% shareholder) of the $855,000 cash payable at the earlier of the closing of $2,000,000 in funding or nine months (July 2020). We did not close the purchase of the remaining 49% of stock of EZ-CLONE by the extended deadline.

On September 15, 2020, we received notice that William Blackburn and Brad Mickelsen, minority shareholders of EZ-CLONE Enterprises, Inc. (“Plaintiffs”), a majority owned subsidiary of the Company, filed a complaint against the Company and its officers (“Officers”), in the Superior Court of California, County of Sacramento (“Complaint”) for claims related to breach under the Purchase and Sale Agreement dated October 15, 2018 between the Company and Plaintiffs. On September 15, 2020, the Company filed a notice of removal with the California Superior Court, County of Sacramento and the United States District Court for the Eastern District of California. The case was removed to Federal District Court for the Eastern District of California and Plaintiffs filed an Ex Parte Application for TRO and an Order for Preliminary Injunction with the Federal Court. The TRO was granted on September 16, 2020 and a preliminary injunction hearing was scheduled for September 29, 2020. After reviewing all pleadings and oral arguments at the hearing, the Court issued a ruling granting Plaintiffs’ request for a preliminary injunction. The parties provided legal briefs to the Federal court to determine if rescission should be granted. The Court did not reach a decision on this issue, and denied without prejudice, the Company’s effort to reverse the preliminary injunction. The Company is currently reviewing all options in this matter including settlement discussions.

As of December 31, 2020, we recorded a liability of $2,131,000 for the acquisition payable of which a $1,105,000 is payable in stock and $1,026,000 is payable in cash.

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PART II

General

The following description of our capital stock and provisions of our articles of incorporation and bylaws are summaries and are qualified by reference to our articles of incorporation and the bylaws. We have filed copies of these documents with the SEC as exhibits to our Form 10-K.

Authorized Capital Stock

On October 9, 2019, we approved the reduction of authorized capital stock, whereby the total number of our authorized common stock decreased from 6,000,000,000 by a ratio of 1 for 50, to 120,000,000 shares. On November 20, 2019, we filed a Certificate of Amendment of Certificate of Incorporation with the Secretary of State of the State of Delaware. The 1 for 150 reverse stock split was effective at the open of business on November 27, 2019, whereupon the shares of common stock began trading on a split-adjusted basis under the new CUSIP, 39985X203.

On November 8, 2021, the Company filed a Certificate of Amendment of Certificate of Incorporation with the Secretary of State of the State of Delaware to increase the authorized shares of common stock (“Common Stock”) from 120,000,000 to 740,000,000 shares. As a result of the increase, we have 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.

Capital Stock Issued and Outstanding

As of December 31, ~~2021~~2022, we have issued and outstanding securities on a fully diluted basis, consisting of:

· ~~117~~1,~~952~~800 shares of Series A preferred stock,~~697~~ which is convertible into 1,800,000 shares of common stock; · 7,083,254shares of common stock; · Warrants to purchase an aggregate of ~~686~~7,~~667~~917,222 shares of common stock with expiration dates between ~~October~~May ~~2023~~ and ~~October~~November ~~2028~~2027 at anexercise ~~average~~prices ~~exercise~~ranging ~~price~~from of$0.05 to $14.6450 per share; and · An unknown number of common shares to be issued under the Convertible Notes Payable financing agreements.

Voting Common Stock

Holders of our 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.

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~~Non-Voting~~ Preferred Stock

Under the terms of our articles of incorporation, our board of directors is authorized to issue shares of non-voting preferred stock in one or more series without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of non-voting preferred stock.

The purpose of authorizing our board of directors to issue non-voting preferred stock and determine our rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of non-voting preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire or could discourage a third party from seeking to acquire, a majority of our outstanding voting stock. Other than the Series B and C Preferred Stock discussed below, there are no shares of non-voting preferred stock presently outstanding and we have no present plans to issue any shares of preferred stock.

Series A Convertible 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.

The foregoing description of the Series A Preferred Stock does not purport to be complete and is qualified by reference to the Series A Certificate of Designation, a copy of which was filed as Exhibit 3.1 to our Current Report filed November 8, 2022, and is incorporated herein by reference.

Warrants to Purchase Common Stock

As of December 31, ~~2021~~2022, we had warrants to purchase an aggregate of ~~686~~7,~~677~~917,222 shares of common stock with expiration dates between ~~October~~April ~~2023~~ and ~~October~~November ~~2028~~2027 at ~~an average~~ exercise price ofranging 1from $0.64 05 to $4.50 per share. In addition, we have an unknown number of common shares to be issued under the Convertible Notes Payable financing agreements, due to the variable conversion features.

Options to Purchase Common Stock

On November 5, 2021, at our annual shareholder meeting the Second Amended and Restated 2017 Stock Incentive Plan was adopted to increase the shares issuable under the plan from 1,333,333 to 75,000,000 shares. All terms of the Plan shall ~~remained~~remain the same with the exception of the ~~amount~~number of shares reserved for issuance under the Plan. We have 75,000,000 shares available for issuance under the Second Amended and Restated 2017 Stock Incentive Plan. There are no outstanding unexercised stock option grants as of December 31, ~~2021~~2022. The Company filed registration statements on Form S-8 to register 1,333,333 shares of our common stock related to the 2017 Stock Incentive Plan and First Amended and Restated 2017 Stock Incentive Plan.

Dividend Policy

We have not previously paid any cash dividends on our common stock and do not anticipate or contemplate paying dividends on our common stock in the foreseeable future. We currently intend to use all of our available funds to develop our business. We can give no assurances that we will ever have excess funds available to pay dividends.

Change in Control Provisions

Our articles of incorporation and by-laws provide for a maximum of nine directors, and the size of the Board cannot be increased by more than three directors in any calendar year. There is no provision for classification or staggered terms for the members of the Board of Directors.

Our articles of incorporation also provide that except to the extent the provisions of Delaware General Corporation Law require a greater voting requirement, any action, including the amendment of the Company’s articles or bylaws, the approval of a plan of merger or share exchange, the sale, lease, exchange or other disposition of all or substantially all of the Company’s property other than in the usual and regular course of business, shall be authorized if approved by a simple majority of stockholders, and if a separate voting group is required or entitled to vote thereon, by a simple majority of all the votes entitled to be cast by that voting group.

Our bylaws provide that only the Chief Executive Officer or a majority of the Board of Directors may call a special meeting. The bylaws do not permit the stockholders of the Company to call a special meeting of the stockholders for any purpose.

Articles of Incorporation and Bylaws Provisions

Our articles of incorporation, as amended, and bylaws contain provisions that could have the effect of discouraging potential acquisition proposals or tender offers or delaying or preventing a change in control, including changes a stockholder might consider favorable. In particular, our articles of incorporation and bylaws among other things:

	·	permit our board of directors to alter our bylaws without stockholder approval; and

	·	provide that vacancies on our board of directors may be filled by a majority of directors in office, although less than a quorum.

Such provisions may have the effect of discouraging a third party from acquiring us, even if doing so would be beneficial to our stockholders. These provisions are intended to enhance the likelihood of continuity and stability in the composition of our board of directors and in the policies formulated by them, and to discourage some types of transactions that may involve an actual or threatened change in control of our company. These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal and to discourage some tactics that may be used in proxy fights. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure our company outweigh the disadvantages of discouraging such proposals because, among other things, negotiation of such proposals could result in an improvement of their terms.

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However, these provisions could have the effect of discouraging others from making tender offers for our shares that could result from actual or rumored takeover attempts. These provisions also may have the effect of preventing changes in our management.

Market Price of and Dividends on Common Equity and Related Stockholder Matters

As of March 4, 2019, we began to trade on the OTC Pink Sheet stocks system because our bid price had closed below $0.01 for more than 30 consecutive calendar days. As of March 17, 2020, we commenced trading on the OTCQB Market ("OTCQB") after successfully up-listing from the OTC Pink Market.

The quotations reflect inter-dealer prices, without retail markup, markdown or commission, and may not represent actual transactions. Consequently, the information provided below may not be indicative of our common stock price under different conditions.

Period Ended	High		Low
Year Ending December 31, 2023
March 31, 2023	$	0.075	$	0.032
Year Ending December 31, 2022
March 31, 2022	$	0.043	$	0.016
December 31, 2022	$	0.160	$	0.049
September 30, 2022	$	1.200	$	0.150
June 30, 2022	$	5.250	$	0.900
March 31, 2022	$	6.450	$	2.400
Year Ending December 31, 2021
December 31, 2021	$	07.~~052~~800	$	02.~~018~~550
September 30, 2021	$	014.~~095~~250	$	05.~~038~~700
June 30, 2021	$	026.~~179~~850	$	012.~~080~~150
March 31, 2021	$	085.~~570~~500	$	015.~~106~~900
Year Ending December 31, 2020
December 31, 2020	$	0.225	$	0.097
September 30, 2020	$	0.269	$	0.107
June 30, 2020	$	0.278	$	0.152
March 31, 2020	$	0.490	$	0.130

On October 7, 2022, FINRA (the Financial Industry Regulatory Authority) approved and announced the Reverse Stock Split of 150-for-1.

Transfer Agent

The transfer agent for our common stock is Direct Transfer, LLC, One Glenwood Avenue, Suite 1001, Raleigh, NC, 27603. Their telephone number is 919.744.2722.

Recent Sales of Unregistered Securities

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(a)(2) of the Securities Act of 1933. 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.

We have 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.

During the three months ended December 31, ~~2021~~2022, we had the following sales of unregistered sales of equity securities.

· Lenders converted principal ~~and accrued interest~~ of $~~422~~1,~~189~~682,698 into 195,~~402~~560,~~691~~082 shares of our common stock. at· aThe ~~per~~Company ~~share~~issued ~~conversion~~1,000,000 ~~price~~shares of $0common stock, net, to lenders as commitment fees to secure additional debt financings.~~022~~ · The Company issued 1,800 shares of preferred stock to a lender as a commitment fee to secure additional debt financing.

EQUITY COMPENSATION PLAN INFORMATION

At December 31, ~~2021~~2022 there are no outstanding stock options ~~and there are 686,666 warrants outstanding at an average exercise price of $1~~.~~64. The warrants expire from December 2023 to October 2028.~~

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

InThe ~~2021~~following ~~GrowLife~~table ~~experienced~~presents acertain ~~decline~~consolidated instatements ~~annual revenue~~ of ~~11%~~operations ~~from~~information ~~the year 2020 primarily due to ceasing the hydroponics business by the beginning of 2021~~ and anpresentation ~~increase in EZ-CLONE revenue in 2021. This decline was offset by an improvement in cost~~ of ~~goods~~that ~~sold~~data ofas ~~17%~~a ~~and~~percentage ~~in operating expenses~~ of ~~10%~~change ~~which~~from ~~resulted in a 21% improvement~~ year-to ~~operating loss in 2021 compared to 2020~~-year. ~~In addition, total other expenses declined 22% in 2021 compared to 2020. A more detailed explanation of these changes are provided below.~~

RESULTS OF OPERATIONS

	Years ended December 31, *(Dollars in thousamds)*
	2022			2021			$ Variance			% Variance
Net revenue		-			-			-			-
Cost of good sold		-			-			-			-
Gross profit		-			-			-			-
Operating expenses	$	1,341		$	1,383		$	(42	)		-3	%
Operating (loss)		(1,341	)		(1,383	)		42			-3	%
Other expense
Change in fair value of derivative		(1,348	)		(973	)		(375)			-39	%
Interest expense, net		(1,964	)		(3,243	)		1,279			-39	%
Gain (Loss) on conversions		205			(931	)		1,136			-122	%
Gain on forgiveness/settlement of debt		183			1,025			(842	)		-82	%
Total other expenses		(2,924	)		(4,122	)		1,198			-29	%
Net (Loss) from continuing operations		(4,265	)		(5,505	)		1,240			-23	%
Income (Loss) from discontinued operations net of taxes		(1,931	)		32			(1,963	)		-6134	%
Gain on deconsolidation of discontinued operations		1,713			-			1,713			-100	%
Net Profit (Loss) on discontinued operations		(218	)		32			(250	)		-100	%
Net (loss)	$	(4,483	)	$	(5,473	)	$	990			-18	%

The following table presents certain consolidated statement of operations information and presentation of that data as a percentage of change from year-to-year.

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	Years ended December 31,(Dollars in thousamds)
	2021			2020			$ Variance			% Variance
Net revenue		6,199			7,001			(802	)		-11	%
Cost of good sold		3,406			4,021			(615	)		-15	%
Gross profit		2,793			2,980			(187	)		-6	%
Operating expenses		4,318			4,870			(552	)		-11	%
Operating (loss)		(1,525	)		(1,890	)		365			-19	%
Other expense
Change in fair value of derivative		(973	)		199			(1,172	)		-589	%
Interest expense, net		(3,252	)		(1,090	)		(2,162	)		198	%
Loss on debt conversions		(931	)		(984	)		53			-5	%
Gain on extinguishment of debt		1,025			39			986		2528		%
Loss on debt settlement					(2,422	)		2,422			-100	%
Gain on debt forgiveness		206						206			100	%
Total othere expenses		(3,926	)		(4,258	)		332			-8	%
(Loss) before income taxes		(5,451	)		(6,148	)		697			-11	%
Income taxes		(22	)		(232	)		210			-91	%
Net (loss)		(5,473	)		(6,380	)		907			-14	%

YEAR ENDED DECEMBER 31, 2022 COMPARED TO THE YEAR ENDED DECEMBER 31, 2021

YEAR ENDED DECEMBER 31, 2021 COMPARED TO THE YEAR ENDED DECEMBER 31, 2020

Net revenue for the year ended December 31, 2021 decreased by $802,000 to $6,199,000 from $7,001,000 for the year ended December 31, 2020. The decrease resulted from lower hydroponic sales from the decision during 2020 to exit the hydroponics business and the elimination of the hydroponics sales personnel and the impact of the pandemic on the hydroponics segment during the year ended December 31, 2021. The hydroponics revenue for the year ended December 31, 2021 was $35,000 as compared to $1,568,000 for the year ended December 31, 2020. The EZ-CLONE revenue from its line of products for the year ended December 31, 2021 was $6,164,000 as compared to $5,433,000 for the year ended December 31, 2020..

Cost of Goods Sold

Cost of sales for the year ended December 31, 2021 decreased by $615,000 to $3,406,000 from $4,021,000 for the year ended December 31, 2020. The decrease resulted from lower sales in the hydroponics segment, offset by increased EZ-CLONE sales as discussed above.

Gross profit was $2,793,000 for the year ended December 31, 2021 as compared to a gross profit of $2,980,000 for the year ended December 31, 2020. The gross profit percentage was 45.1% for the year ended December 31, 2021 as compared to 42.6% for the year ended December 31, 2020. The increase was due to lower sales in the hydroponics segment, offset by increased EZ-CLONE sales, as discussed above.

Operating Expenses

Operating expenses for the year ended December 31, ~~2021~~2022 were $41,~~318~~341,000 as compared to $41,~~870~~383,000 for the year ended December 31, ~~2020~~2021. The ~~variances~~primary ~~were~~reason asfor ~~follows:~~the ~~(i) an increase in EZ-CLONE expenses of $394,000, consisting of increase in rent of $60,000, promotion and trade show expenses of $80,000 and payroll of $243,000; offset by (ii) a~~ decrease inwas ~~Hydroponic~~compensation ~~expenses of $156,000; (iii) a decrease in payroll of $905,000;~~ and ~~offset~~related ~~by an increase in professional services of $165,000~~expenses.

Non-cash operating expenses for the year ended December 31, 2021 of $748,000 including (i) depreciation of $37,000; (ii) amortization of intangible assets of $672,000; (iii) stock based compensation of $15,000 related to stock option grants and warrants; and (iv) common stock issued for services of $24,000.

Non-cash operating expenses for the year ended December 31, 2020 of $846,000 including (i) depreciation of $37,000; (ii) amortization of intangible assets of $672,000; (iii) stock based compensation of $125,000 related to stock option grants and warrants; and (iv) common stock issued for services of $12,000.

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Other Expense

Other ~~expense~~expenses for the year ended December 31, ~~2021~~2022, ~~was~~were $32,~~926~~924,000 as compared to $4,~~258~~122,000 for the year ended December 31, ~~2020~~2021. The other expense for the year ended December 31, ~~2021~~2022, included (i) ~~loss~~change ~~from the increase~~ in ~~derivative~~fair ~~liability~~value of ~~$973,000;~~the ~~(ii)~~derivative ~~gain~~liability ~~on extinguishment~~ of ~~debt of~~ $1,~~025~~348,000 ~~related to prior shutdown of retail operations~~; ~~and offset by~~ (~~iii~~ii) interest expense of $31,~~252~~964,000; (iviii) ~~loss~~gain on ~~debt~~ conversions of $~~931~~205,000; and (viv) gain on debt forgiveness of $~~206~~183,000. The change in derivative liability is the non-cash change in the fair value and relates to our derivative instruments. The ~~increase~~decrease in non-cash interest related to accrued interest expense, write-off of original issue discount and the derivative liability calculated on our notes payable. ~~The loss on debt conversions related to the conversion of our notes payable at prices below the market price.~~

On April 5, 2021, we entered into a Warrant Settlement Agreement dated March 31, 2021, with St. George and Iliad to resolve a dispute related to the calculation of shares issuable under warrants issued in prior financings whereby we agreed that upon the exercise of the warrant of up 14,250,000 shares of our common stock that the balance of the warrant related to a 2018 financing agreement would be cancelled. We recorded a loss on debt settlement of $2,422,000 as of December 31, ~~2020~~2021. The 14,250,000 warrants were exercised during 2021. In 2021, the Company recognized a gain on extinguishment of $1,025,000 due to the change in the fair value of the shares.

The other expense for the year ended December 31, ~~2020~~2021 included (i) ~~benefit~~change ~~from the reduction~~ in derivative liability of $~~199~~973,000; ~~offset by~~ (ii) interest expense of $13,~~090~~243,000; and (iii) loss on debt conversions of $~~984~~931,000; ~~and~~offset by (iv) gain on ~~debt~~settlement ~~extinguishment~~of debt of $371,025,000. The change in derivative liability is the non-cash change in the fair value and relates to our derivative instruments. The non-cash interest related to accrued interest expense on our notes payable. The loss on debt conversions related to the conversion of our notes payable at prices below the market price.

Earnings (Loss) from Discontinued Operations

On December 29, 2022, we entered into a Settlement Agreement and Mutual General Release (“Settlement Agreement”) with EZ-CLONE Enterprises whereby our ownership percentage was reduced to 19.6%. As a result, EZ-CLONE results for the year ended December 31, 2022 are reflected as loss on discontinued operations of $1,931,00 as compared to a profit for the year ended December 31, 2021 of $32,000. Eliminating the various assets and liabilities relating to EZ-CLONE at December 31, 2022 resulted in a gain of $1,713,000.

Net Loss

Net loss for the year ended December 31, ~~2021~~2022 was $54,~~473~~483,000 as compared to $65,~~380~~473,000 for the for the year ended December 31, ~~2020~~2021 for the reasons discussed above.

Net loss for the year ended December 31, 2021 included non-cash expenses of $4,267,000 including (i) depreciation of $37,000; (ii) amortization of intangible assets of $672,000; (iii) amortization of debt discount of $644,000; (iv) stock based compensation of $15,000 related to stock option grants; (v) common stock issued for services of $24,000; (vi) non-cash interest of $772,000; (vii) loss on debt conversions of $931,000; (viii) change in derivative liability of $973,000; (ix) fair value of derivatives expensed at issuance of $1,429,000;and offset by (x) gain on debt settlement of current liabilities of $1,025,000; and (xi) gain on debt forgiveness of $206,000.

Net loss for the year ended December 31, 2020 included non-cash expenses of $5,076,000 including (i) depreciation of $37,000; (ii) amortization of intangible assets of $672,000; (iii) stock based compensation of $125,000 related to stock option grants and warrants; (iv) common stock issued for services of $12,000; (v) non cash interest and amortization of debt discount of $1,061,000; (vi) loss on debt settlement of $2,422,000; (vii) loss on debt conversion of $945,000; and offset by (vii) benefit from the reduction in derivative liability of $199,000.

We expect losses to continue as we implement our business plan.

LIQUIDITY AND CAPITAL RESOURCES

Financial Accounting Standards Board’s (“FASB”) Accounting Standard Codification (“ASC”) Topic 205-40, Presentation of Financial Statements – Going Concern, requires that management evaluate whether there are relevant conditions and events that, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern and to meet its obligations as they become due within one year after the date that the financial statements are issued.

The accompanying financial statements have been prepared assuming that we will continue as a going concern. However, since inception, we have sustained significant operating losses and such losses are expected to continue for the foreseeable future. As of December 31, ~~2021~~2022, we had an accumulated deficit of $~~160~~164 million, cash and cash equivalents of $~~364~~94,000 and a working capital deficit of $~~885~~3,400,000 excluding ~~derivative liability,~~ convertible debt, ~~acquisition to be paid in stock~~ and ~~right~~the ofderivative ~~use~~ liability. Additionally, we used cash in operating activities of $1,~~463~~537,000 and $13,~~951~~656,000 for the years ended December 31, ~~2021~~2022 and ~~2020~~2021, respectively, excluding discontinued operations. We will require additional cash funding to fund operations beyond ~~May~~June 3115, ~~2022~~2023. Accordingly, management has concluded that we do not have sufficient funds to support operations within one year after the date the financial statements are issued and, therefore, we concluded there was substantial doubt about the Company’s ability to continue as a going concern.

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To fund further operations, we will need to raise additional capital. We may obtain additional financing in the future through the issuance of its common stock, or through other equity or debt financings. Our ability to continue as a going concern or meet the minimum liquidity requirements in the future is dependent on its ability to raise significant additional capital, of which there can be no assurance. If the necessary financing is not obtained or achieved, we will likely be required to reduce its planned expenditures, which could have an adverse impact on the results of operations, financial condition and our ability to achieve its strategic objective. Historically, the Company has been successful in its ability to raise the financing necessary to continue operations without interruption. There can be no assurance that financing will be available on acceptable terms, or at all. The financial statements contain no adjustments for the outcome of these uncertainties. These factors raise substantial doubt about our ability to continue as a going concern and have a material adverse effect on our future financial results, financial position and cash flows.

Operating Activities

Net cash used in operating activities from continuing operations for the year ended December 31, ~~2021~~2022 was $1,~~463~~537,000. This amount was primarily related to a ~~(i)~~ net loss of $54,~~473~~265,000, ~~and~~from ~~(ii)~~continuing ~~net working capital decrease of $294~~operations,~~000;~~ ~~offset~~reduced by ~~(iii)~~ non-cash expenses of $42,~~267~~560,000 including ~~(iv) depreciation of $37,000~~; (vi) amortization of intangible assets of $672,000; (vi) amortization of debt discount of $644,000; (vii) stock based compensation of $15,000 related to stock option grants; (viii) common stock issued for services of $24,000; (ix) non-cash interest ofexpense ~~$772,000; (x) loss on debt conversions~~ of $~~931~~1,882,000; (xiii) change in derivative liability of $~~973~~1,348,000; (~~xii~~iii) ~~fair~~net ~~value~~working ofcapital ~~derivatives~~increase ~~expensed at issuance~~ of $177,~~429,~~000; and offset by; (~~xiii~~iv) gain on debt ~~settlement~~conversions of ~~current liabilities of~~ $1205,~~025,~~000; and (ixv) gain on debt forgiveness of $~~206~~183,000.

Investing Activities

Cash used in investing activities for the year ended December 31, 2022, excluding discontinued operations, represent advances on the purchase of Bridgetown assets of $160,000.

Financing Activities

Net cash provided by financing activities from continuing operations for the year ended December 31, ~~2021~~2022 was $1,~~463~~594,000. The amount related to proceeds from note payable of $21,~~066~~727,000, offset by repayment of ~~notes~~debt ~~payable~~ of $~~603~~123,000 and purchase of shares from the reverse stock split.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements (as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The application of GAAP involves the exercise of varying degrees of judgment. On an ongoing basis, we evaluate our estimates and judgments based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe that of our significant accounting policies (see summary of significant accounting policies more fully described in Note 3 to Form 10-K for the year ended December 31, ~~2021~~2022), the following policies involve a higher degree of judgment and/or complexity:

Accounts Receivable and Revenue – We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which requires the application of the five-step-principles-based-accounting-model for revenue recognition. These steps include (1) a legally enforceable contract, written or unwritten is identified; (2) performance obligations in the contracts are identified; (3) the transaction price reflecting variable consideration, if any, is identified; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when the control of goods is transferred to the customer at a particular time or over time. Our hydroponic sales were cash or credit card. Our EZ-CLONE sales include credit cash, payments in advance, 3% discount upon receipt and, we extend thirty-day terms to select customers. Accounts receivables are reviewed periodically for collectability. As of December 31, 2021 and 2020, the Company has an allowance for doubtful accounts totaling $10,000 and $5,690, respectively.

Fair Value Measurements and Financial Instruments – ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

Level 1 – Quoted prices in active markets for identical assets and liabilities;

Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of December 31, ~~2021~~2022 and ~~2020~~2021 are based upon the short-term nature of the assets and liabilities.

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Derivative financial instruments -We evaluate all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a Binomial pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.

Stock Based Compensation – We have share-based compensation plans under which employees, consultants, suppliers and directors may be granted restricted stock, as well as options to purchase shares of our common stock at the fair market value at the time of grant. Stock-based compensation cost is measured by us at the grant date, based on the fair value of the award, over the requisite service period using an estimated forfeiture rate. For options issued to employees, we recognize stock compensation costs utilizing the fair value methodology over the related period of benefit. Grants of stock options and stock to non-employees and other parties are accounted for in accordance with the ASC 718.

Convertible Securities – Based upon ASC 815-15, we have adopted a sequencing approach regarding the application of ASC 815-40 to convertible securities issued subsequent to December 31, 2015. We will evaluate our contracts based upon the earliest issuance date.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide the information required by this Item. Nevertheless, we have no investments in any market risk sensitive instruments either held for trading purposes or entered into for other than trading purposes.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reference is made to our consolidated financial statements beginning on page F-1 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

~~Dismissal~~There ofwere ~~BPM~~no ~~LLP~~disagreements with our accountants on accounting and financial disclosures.

On October 14, 2021, the Company dismissed BPM LLP as the Company’s independent registered public accounting firm. The decision to change accountants was approved by the Company’s Audit Committee.

The BPM LLP reports on the Company’s consolidated financial statements for the past two fiscal years did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit report of BPM LLP on the Company’s financial statements for fiscal years 2019 and 2020 contained an explanatory paragraph which noted that there was substantial doubt about the Company’s ability to continue as a going concern.

During the Company’s fiscal years ended December 31, 2019 and 2020 and through October 14, 2021, (i) there were no “disagreements” (as defined in Item 304(a)(1)(iv) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) between the Company and BPM LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to BPM LLP’s satisfaction, would have caused BPM LLP to make reference to the subject matter of such disagreements in its reports on the Company’s consolidated financial statements for such years, and (ii) there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K under the Exchange Act) other than the material weaknesses in internal control over financial reporting identified for the years ended December 31, 2019 and 2020 related to: (i) audit committee makeup, and (ii) accounting and reporting governance of complex contractual terms and obligations.

Engagement of Macias Gini & O’Connell LLP

On October 14, 2021 the Company, upon the Audit Committee’s approval, engaged the services of Macias Gini & O’Connell LLP (“MGO”) and as the Company’s new independent registered public accounting firm to audit the Company’s consolidated financial statements as of December 31, 2021 and for the year then ending. MGO will be performing reviews of the unaudited consolidated quarterly financial statements to be included in the Company’s quarterly reports on Form 10-Q going forward.

During each of the Company’s two most recent fiscal years and through the date of this report, (a) the Company has not engaged MGO as either the principal accountant to audit the Company’s financial statements, or as an independent accountant to audit a significant subsidiary of the Company and on whom the principal accountant is expected to express reliance in its report; and (b) the Company or someone on its behalf did not consult with MGO with respect to (i) either: the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements, or (ii) any other matter that was either the subject of a disagreement or a reportable event as set forth in Items 304(a)(1)(iv) and (v) of Regulation S-K.

ITEM 9A. CONTROLS AND PROCEDURES

a) Evaluation of Disclosure Controls and Procedures

We conducted an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive and principal financial officers concluded as of December 31, ~~2021~~2022, that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses in our internal controls over financial reporting discussed immediately below.

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Identified Material Weaknesses

A material weakness in our internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.

Management identified the following material weakness during its assessment of internal controls over financial reporting:

Audit Committee:

The current Audit Committee ~~has~~consists ~~one~~of ~~independent director, and~~ the Chairman isand anChief ~~interim Named~~ Executive Officer. InOn ~~early~~December ~~January~~31, ~~2021~~2022 anthe ~~additional~~ only independent director resigned from the board and audit committee. Thus, only one non-independent director currently sits on the committee. We expect to expand this committee during ~~2022~~2023 once a qualified candidate is identified.

Personnel: We do not employ a full time Chief Financial Officer. ~~Marco~~David ~~Hegyi~~Dohrmann serves as both Chief Executive Officer and Interim Chief Financial Officer. We utilize a consultant to assist with our financial reporting. There are limited personnel to assist with the accounting and financial reporting function, which results in: (i) a lack of segregation of duties and (ii) controls that may not be adequately designed or operating effectively and have not been formally documented. Despite the existence of material weaknesses, the Company believes the financial information presented herein is materially correct and fairly presents the financial position and operating results of the year ended December 31, ~~2021~~2022, in accordance with GAAP. During ~~2022~~2023, the Company intends to seek qualified accounting staff to expand its internal accounting and reporting functions.

Contractual Terms and Obligations

The Company entered into various financing agreements involving stock purchase agreements, notes and warrants. The terms of these legal instruments contain complex legal terms, conditions and calculations. Managements understanding of certain terms and conditions of the warrant agreements was not adequate to insure proper accounting and disclosure of the warrant terms.

(b) Management's Report on Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed by, or under the supervision of, our CEO and CFO, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (GAAP). Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2021~~2022. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 Internal Control-Integrated Framework. Based on its evaluation, management has concluded that the Company’s internal control over financial reporting was not effective as of December 31, ~~2021~~2022.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. A control system, no matter how well designed and operated can provide only reasonable, but not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their cost.

c) Changes in Internal Control over Financial Reporting

During the quarter ended December 31, 2021, Michael Fasci resigned as our CFO. The Company has a small accounting and finance team. Consulting services provided by independent consultants will be an important element of internal control during this transition. There were no other changes which were identified in connection with our management’s evaluation required by paragraph (d) of rules 13a-15 and 15d-15 under the Exchange Act, that materially affected, or is reasonably likely to have a materially affect, on our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

There were no disclosures of any information required to be filed on Form 8-K during the year ended December 31, ~~2021~~2022 that were not filed.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

The following table sets forth certain information about our current directors and executive officers as of March 31, ~~2022~~2023:

Name	~~Age~~	~~Position and Office Held~~Age	~~Since~~	Position and Office Held	Since
Management Directors
David Dohrmann		56		Director, Chief Executive Officer	July 1, 2022
Marco Hegyi	64	Director	December 9, 2013
				Chief Financial Officer	July 1, 2022
		Chairman of the Board	April 1, 2016-October 23, 2017 and December 6, 2018
				President	December 2, 2020
		Chief Executive Officer	April 1, 2016
				Secretary, Treasurer	December 31, 2022
		Interim Chief Financial Officer	December 1, 2021
		Interim Audit Committee Chairman	December 6, 2018
David Dohrmann	55	President	December 1, 2021
Independent Directors
Thom Kozik	61	Director	October 5, 2017
		Audit and Compensation Committee	December 6, 2018
		Interim Secretary	December 1, 2021

All directors hold office until their successors are duly appointed or until their earlier resignation or removal.

Business Experience Descriptions

Set forth below is certain biographical information regarding each of our executive officers and directors.

Marco Hegyi – Mr. Hegyi joined GrowLife as its President and a Member of its Board of Directors on December 9, 2013 and was appointed as Chairman of the Nominations and Governance Committee and a member of the Compensation Committee on June 3, 2014. Mr. Hegyi was appointed as CEO and Chairman of GrowLife effective on April 1, 2016. On October 23, 2017, Mr. Hegyi was appointed as Chairman of GrowLife, Chairman of the Nominations and Governance Committee or a member of the Compensation Committee. Effective December 6, 2018, Mr. Hegyi serves as Chairman of the Board, a Member of the Board of Directors, Chief Executive Officer, President, Interim Audit Committee Chairman and as a Member of the Compensation and Nominations and Governance Committees.

Mr. Hegyi served as an independent director of Know Labs, Inc., fka Visualant, Inc. from February 14, 2008 and as Chairman of the Board from May 2011 and served at the Chairman of the Audit and Compensation committees until his departure on February 2015. Mr. Hegyi was a principal with the Chasm Group from 2006 to January 2014, where he provided business consulting services. As a management consultant, Mr. Hegyi applied his extensive technology industry experience to help early-stage companies and has been issued 10 US patents.

Prior to working as a consultant in 2006, Mr. Hegyi served as Senior Director of Global Product Management at Yahoo! Prior to Yahoo!, Mr. Hegyi was at Microsoft from 2001 to 2006 leading program management for Microsoft Windows and Office beta releases aimed at software developers. While at Microsoft, he formed new software-as-a-service concepts and created operating programs to extend the depth and breadth of the company’s unparalleled developer eco-system, including managing offshore, outsource teams in China and India, and being the named inventor of a filed Microsoft patent for a business process in service delivery.

During Mr. Hegyi’s career, he has served as President and CEO of private and public companies, Chairman and director of boards, finance, compensation and audit committee chair, chief operating officer, vice-president of sales and marketing, senior director of product management, and he began his career as a systems software engineer.

Mr. Hegyi earned a Bachelor of Science degree in Information and Computer Sciences from the University of California, Irvine, and has completed advanced studies in innovation marketing, advanced management, and strategy at Harvard Business School, Stanford University, UCLA Anderson Graduate School of Management, and MIT Sloan School of Management.

Mr. Hegyi’s prior experience as Chairman and Chief Executive Officer of public companies, combined with his advanced studies in business management and strategy, were the primary factors in the decision to add Mr. Hegyi to the Company’s Board of Directors.

Mr. Dohrmann – Mr. Dohrmann has served as a General Partner of Penché Partners, a San Francisco based venture capital firm since January 2020. Prior to Penché, he served as the Chief Executive Officer of Gazillion Entertainment from August 2015 until December of 2018. From February 2013 to October 2016, Dohrmann was also a Managing Director at Roth Capital Partners, an Investment Bank, where he focused on Venture Capital investments. From September 2010 to January 2012, Dohrmann was the founder & CEO of Playchemy Inc., a San Francisco based developer of online and mobile games.

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From 2005 to 2010, Mr. Dohrmann served as a partner and headed the digital media and entertainment practice at Security Research Associates, a San Francisco based investment banking Firm focused on the emerging growth small & microcap Companies. From 2002 until 2005 he served as a partner and investment banker at Halpern Capital, an Investment Banking firm also focused on serving emerging growth Companies in the small and micro cap arena. From 2000 to 2002 Mr. Dohrmann was VP of Corporate Development for Sagent Inc., a Nasdaq traded company acquired by Group 1 Software in 2003. From 1992 to 1997 Mr. Dohrmann was VP of Institutional Sales at the Investment Banking firm Donaldson Lufkin & Jenrette.

Mr. Dohrmann received a Bachelor of Arts Degree from the University of Southern California in 1989. Mr. Dohrmann’s public company experience and knowledge of investment banking, corporate development, institutional sales, venture capital, his focus and work with public small and microcap Companies and as an operating executive will provide GrowLife with valuable perspective and guidance for corporate development initiatives as President of the Company.

Thom Kozik- Thom Kozik joined GrowLife as a Member of its Board of Directors on October 5, 2017 and was appointed a member of the Audit Committee on October 23, 2017. Mr. Kozik was appointed to the Nominations & Governance and Compensation Committees and serves on the Audit Committee as of December 6, 2018. From 2013 through 2014, Mr. Kozik served as Chief Operating Office of Omnia Media in Los Angeles, a leading YouTube Multichannel Network delivering over 1 billion monthly video views, and almost 70 million global Millennial subscribers. Thom assisted the company’s CEO/founder in building the team, refining product strategy, and securing additional funding. In December 2014, Mr. Kozik took on the role of VP, Global Marketing/Loyalty for Marriott International, having been recruited to fundamentally transform the hospitality industry’s longest-running loyalty program. Thom also led the merging of two of the industry’s most powerful programs with Marriott’s acquisition of Starwood Hotels & Resorts in 2016. From March 1, 2018 to January 2020, Mr. Kozik served as Chief Commercial Officer of Loyyal Corporation, a technology firm providing services to enterprise clients in the Travel & Hospitality sector. In his decades of experience with corporations such as Marriott International, Microsoft, Yahoo, and Atari, along with several startups, he has held executive roles in marketing, business development, and product development. Over the past decade Kozik’s core focus has been the behavioral economics of online consumers and communities, and methods to maximize their lifetime value, and leveraging technology to reduce acquisition costs while increasing retention.

Mr. Kozik was appointed to the Board of Directors based on his marketing and product brand skills.

Certain Significant Employees

There are no significant employees required to be disclosed under Item 401(c) of Regulation S-K.

Family Relationships

There are no family relationships among our directors and executive officers.

Involvement in Certain Legal Proceedings

None of our current directors or executive officers has, to the best of our knowledge, during the past ten years:

	·	Had any petition under the federal bankruptcy laws or any state insolvency law filed by or against, or had a receiver, fiscal agent, or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time hereof, or any corporation or business association of which he was an executive officer at or within two years before the time hereof;

	·	Been convicted in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

	·	Been the subject of any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

	·	Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

	·	Engaging in any type of business practice; or

	·	Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;

	·	Been the subject of any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any federal or state authority barring, suspending, or otherwise limiting for more than 60 days the right of such person to engage in any activity described in (i) above, or to be associated with persons engaged in any such activity;

	·	Been found by a court of competent jurisdiction in a civil action or by the SEC to have violated any federal or state securities law, where the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated; or

	·	Been found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, where the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended, or vacated.

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Committees of the Board of Directors

The Board has three standing committees to facilitate and assist the Board in the execution of its responsibilities. The committees are currently the Audit Committee, the Nominations and Governance Committee, and the Compensation Committee. The Committees were formed on June 3, 2014 by the current board of directors. The Audit Committee, Compensation and Nominations and Governance Committees each have one management directors and two independent directors. The table below shows current membership for each of the standing Board committees.

Compensation Committee Interlocks and Insider Participation

~~None~~We ofonly ~~our~~have ~~executive~~one ~~officers~~director, ~~serves~~thus aswe ahave ~~member~~no independent members of the board of directors orto serve on our compensation committee, or other committee serving an equivalent function, of any other entity that has one or more of its executive officers serving as a member of our board of directors or our compensation committee.

Code of Conduct and Ethics

We have adopted conduct and ethics standards titled the code of ethics, which is available at www.growlifeinc.com. These standards were adopted by our board of directors to promote transparency and integrity. The standards apply to our board of directors, executives and employees. Waivers of the requirements of our code of ethics or associated polices with respect to members of our board of directors or executive officers are subject to approval of the full board.

Section 16(a) Beneficial Ownership Reporting Compliance

Our executive officers, directors and 10% stockholders are required under Section 16(a) of the Exchange Act to file reports of ownership and changes in ownership with the SEC. Copies of these reports must also be furnished to us.

Based solely on a review of copies of reports furnished to us, as of December 31, ~~2021~~2022 our executive officers, directors and 10% holders complied with all filing.

ITEM 11. EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview of Compensation Program

This Compensation Discussion and Analysis describes the material elements of compensation awarded to, earned by or paid to each of our executive officers named in the Compensation Table on page 22 under “Remuneration of Executive Officers” (the “Named Executive Officers”) who served during the year ended December 31, ~~2021~~2022. This compensation discussion primarily focuses on the information contained in the following tables and related footnotes and narrative for the last completed fiscal year. We also describe compensation actions taken after the last completed fiscal year to the extent that it enhances the understanding of our executive compensation disclosure. The principles and guidelines discussed herein would also apply to any additional executive officers that the Company may hire in the future.

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The Compensation Committee of the Board has responsibility for overseeing, reviewing and approving executive compensation and benefit programs in accordance with the Compensation Committee’s charter. The members of the Compensation Committee are ~~Marco~~David ~~Hegyi and Thom Kozik~~Dohrmann. We expect to appoint at least one independent Director to serve on the Compensation Committee during ~~2022~~2023.

Compensation Philosophy and Objectives

The major compensation objectives for the Company’s executive officers are as follows:

•· to attract and retain highly qualified individuals capable of making significant contributions to our long-term success; •· to motivate and reward named executive officers whose knowledge, skills, and performance are critical to our success; •· to closely align the interests of our named executive officers and other key employees with those of its shareholders; and •· to utilize incentive-based compensation to reinforce performance objectives and reward superior performance.

Role of Chief Executive Officer in Compensation Decisions

The Board approves all compensation for the chief executive officer. The Compensation Committee makes recommendations on the compensation for the chief executive officer and approves all compensation decisions, including equity awards, for our executive officers. Our chief executive officer makes recommendations regarding the base salary and non-equity compensation of other executive officers that are approved by the Compensation Committee in its discretion.

Setting Executive Compensation

The Compensation Committee believes that compensation for the Company’s executive officers must be managed to what we can afford and in a way that allows for us to meet our goals for overall performance. During 2020 and 2019, the Compensation Committee and the Board compensated its Chief Executive Officers, President and Chief Financial Officer at the salaries indicated in the compensation table. This compensation reflected our financial condition. The Compensation Committee does not use a peer group of publicly traded and privately held companies in structuring the compensation packages.

Executive Compensation Components for the Year Ended December 31, ~~2021~~2022

The Compensation Committee did not use a formula for allocating compensation among the elements of total compensation during the year that ended December 31, ~~2021~~2022. The Compensation Committee believes that in order to attract and retain highly effective people it must maintain a flexible compensation structure. For the year that ended December 31, ~~2021~~2022, the principal components of compensation for named executive officers were base salary.

Base Salary

Base salary is intended to ensure that our employees are fairly and equitably compensated. Generally, base salary is used to appropriately recognize and reward the experience and skills that employees bring to the Company and provides motivation for career development and enhancement. Base salary ensures that all employees continue to receive a basic level of compensation that reflects any acquired skills which are competently demonstrated and are consistently used at work.

Base salaries for the Company’s named executive officers are initially established based on their prior experience, the scope of their responsibilities and the applicable competitive market compensation paid by other companies for similar positions. Our officers were compensated as described above based on the financial condition of the Company.

Performance-Based Incentive Compensation

The Compensation Committee believes incentive compensation reinforces performance objectives, rewards superior performance and is consistent with the enhancement of stockholder value. All of the Company’s Named Executive Officers are eligible to receive performance-based incentive compensation. The Compensation Committee did not recommend or approve payment of any performance-based incentive compensation to the Named Executive Officers during the year ended December 31, ~~2021~~2022 based on our financial condition.

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Ownership Guidelines

The Compensation Committee does not require our executive officers to hold a minimum number of our shares. However, to directly align the interests of executive officers with the interests of the stockholders, the Compensation Committee encourages each executive officer to maintain an ownership interest in the Company.

Stock Option Program

Stock options are an integral part of our executive compensation program. They are intended to encourage ownership and retention of the Company’s common stock by named executive officers and employees, as well as non-employee members of the Board. Through stock options, the objective of aligning employees’ long-term interest with those of stockholders may be met by providing employees with the opportunity to build a meaningful stake in the Company.

The Stock Option Program assists us by:

	-	enhancing the link between the creation of stockholder value and long-term executive incentive compensation;

	-	providing an opportunity for increased equity ownership by executive officers; and

	-	maintaining competitive levels of total compensation.

Stock option award levels are determined by the Compensation Committee and vary among participants’ positions within the Company. Newly hired executive officers or promoted executive officers are generally awarded stock options, at the discretion of the Compensation Committee, at the next regularly scheduled Compensation Committee meeting on or following their hire or promotion date. In addition, such executives are eligible to receive additional stock options on a discretionary basis after performance criteria are achieved.

Options are awarded at the closing price of our common stock on the date of the grant or last trading day prior to the date of the grant. The Compensation Committee’s policy is not to grant options with an exercise price that is less than the closing price of our common stock on the grant date.

Generally, the majority of the options granted by the Compensation Committee vest quarterly over two to three years of the 5-10-year option term. Vesting and exercise rights cease upon termination of employment and/or service, except in the case of death (subject to a one-year limitation), disability or retirement. Stock options vest immediately upon termination of employment without cause or an involuntary termination following a change of control. Prior to the exercise of an option, the holder has no rights as a stockholder with respect to the shares subject to such option, including voting rights and the right to receive dividends or dividend equivalents.

The Named Executive Officers received stock option grants and warrants during the year ended December 31, 2021 as outlined below.

Retirement and Other Benefits

We have no other retirement, savings, long-term stock award or other type of plans for the Named Executive Officers.

Perquisites and Other Personal Benefits

During the year ended December 31, ~~2021~~2022, we provided the Named Executive Officers with medical insurance and nominal health club benefits. The Company paid $14,225 in life insurance for Mr. Hegyi. No other perquisites or other personal benefits were provided to Named Executive Officers. The committee expects to review the levels of perquisites and other personal benefits provided to Named Executive Officers annually.

Employment and consulting agreements are discussed below.

Tax and Accounting Implications

Deductibility of Executive Compensation

Subject to certain exceptions, Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") generally denies a deduction to any publicly held corporation for compensation paid to its chief executive officer and its three other highest paid executive officers (other than the principal financial officer) to the extent that any such individual's compensation exceeds $1 million. “Performance-based compensation” (as defined for purposes of Section 162(m)) is not taken into account for purposes of calculating the $1 million compensation limit, provided certain disclosure, shareholder approval and other requirements are met. We periodically review the potential consequences of Section 162(m) and may structure the performance-based portion of our executive compensation to comply with certain exceptions to Section 162(m). However, we may authorize compensation payments that do not comply with the exceptions to Section 162(m) when we believe that such payments are appropriate and in the best interests of the stockholders, after taking into consideration changing business conditions or the officer's performance.

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Accounting for Stock-Based Compensation

We account for stock-based payments including its Stock Option Program in accordance with the requirements of ASC 718, “Compensation-Stock Compensation.”

COMPENSATION COMMITTEE REPORT

The Compensation Committee, sets and administers policies that govern the Company's executive compensation programs, and incentive and stock programs. The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K for year ended December 31, ~~2021~~2022.

THE COMPENSATION COMMITTEE

~~Thom~~David ~~Kozik~~Dohrmann (Chairman)

Marco Hegyi

EXECUTIVE COMPENSATION

REMUNERATION OF EXECUTIVE OFFICERS

The following table provides information concerning remuneration of the chief executive officer, the chief financial officer and another named executive officer for the years ended December 31, ~~2021~~2022 and ~~2020~~2021:

Summary Compensation Table

		Salary		Bonus		StockAwards		Non-Equity Incentive Compensation		Option Awards		Other Compensation		Total
Principal Position		$		$		$(1)		$		$		$		$
Marco Hegyi, Chief Executive Officer, Chairman of the Board and Director (2)	31.12.21	$	275,000	$	-	$	-	$	-	$	-	$	88,273	$	363,273
	31.12.20	$	275,000	$	-	$	-	$	-	$	-	$	88,273	$	363,273
Michael E. Fasci, Chief Financial Officer (3)	31.12.21	$	151,250	$	-	$	-	$	-	$	62,185	$	25,380	$	238,815
Mark E Scott, Chief Financial Officer and Director (4)	31.12.21
	31.12.20	$	165,000	$	-	$	-	$	-	$	-	$	27,688	$	192,688
Joseph Barnes, President of Grow Life Hydroponics, Inc (5)	31.12.21
	31.12.20	$	165,000	$	-	$	-	$	-	$	-	$	-	$	165,000

____________

(1) These amounts reflect the grant date market value as required by Regulation S-K Item 402(n)(2), computed in accordance with FASB ASC Topic 718.

(2) Mr. ~~Hegyi~~Dohrmann ~~was~~became ~~paid~~Chief aExecutive ~~salary~~Officer ofand ~~$275,000~~member ~~during~~of the ~~years~~board ~~ended~~on ~~December~~July 311, ~~2021~~2022 ~~and~~with ~~2020,~~a ~~respectively.~~base Wesalary ~~paid life insurance~~ of $14250,~~225 and $10,273 for Mr~~000. ~~Hegyi~~We ~~during~~paid ~~the~~insurance ~~years ended December 31, 2021 and 2020, respectively. On October 15, 2018, Mr. Hegyi received Warrants to purchase up to 320,000 shares~~ of ~~our common stock at an exercise price of~~ $~~1.80 per share and which vest on October 15~~16,940 ~~2018, 2019 and 2020. The Warrants are exercisable~~ for ~~5 years~~Mr. ~~The~~Dohrmann ~~warrants~~during ~~were valued at $192,000. The Company recorded compensation expense of $78,000 for~~ the year ended December 31, ~~2020~~2022.

(3) Mr. ~~Fasci~~Hegyi was ~~hired~~paid ona ~~January~~salary 1,of ~~2021~~$275,000 asduring the ~~Company’s~~year ~~Chief~~ended ~~Financial~~December ~~Officer~~31, at2021. anWe ~~annual~~paid ~~salary~~insurance of $~~165~~14,~~000.~~225 for Mr. ~~Fasci~~Hegyi ~~was~~during ~~also~~the ~~granted~~year anended ~~option~~December ~~to purchase 500~~31,~~000~~ ~~shares~~2021. ofOn ~~the~~June ~~Company’s~~30, ~~Common~~2022 ~~Stock under the Company’s 2018 Stock Incentive Plan at an exercise price of $0.12 per share.~~ Mr. ~~Fasci~~Hegyi resigned asfrom ~~Chief~~all ~~Financial~~positions ~~Officer~~with onthe ~~November 4, 2021 effective December 1, 2021.~~Company

(4) Mr. ~~Scott~~Fasci ~~resigned~~was ~~from~~hired ~~the~~on ~~Board~~January of1, ~~Directors effective December 15~~2021, ~~2020~~as ~~and~~the asCompany’s Chief Financial Officer asat ofan ~~December~~annual ~~31,~~salary ~~2020~~of $165,000. Mr. ~~Scott~~Fasci was ~~paid~~also agranted ~~salary~~an ofoption ~~$165~~to purchase 500,000 ~~during~~shares of the ~~year~~Company’s ~~ended~~Common ~~December~~Stock ~~31,~~under ~~2020.~~the ~~Mr.~~Company’s ~~Scott~~2018 ~~was~~Stock ~~reimbursed~~Incentive ~~$27,668~~Plan ~~for~~at ~~insurance~~an ~~expenses~~exercise ~~during~~price ~~the~~of ~~year~~$0.12 ~~ended~~per ~~December 31, 2020~~share. Mr. ~~Scott~~Fasci resigned as Chief Financial Officer on November 4, 2021 effective December 311, ~~2020~~2021.

(5) Mr. Barnes was paid a salary of $165,000 during the year ended December 31, 2020. Barnes resigned effective November 30, 2020.

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Grants of Stock Based Awards during the year ended December 31, ~~2021~~2022

The Compensation Committee did not grant any stock-based awards or performance-based incentive compensation to the Named Executive Officers for the year ended December 31, ~~2021~~2022 or ~~2020~~2021.

Pension Benefits

We do not provide any pension benefits.

Nonqualified Deferred Compensation

We do not have a nonqualified deferral program.

Employment Agreements

Employment Agreement with ~~Marco~~Dave ~~Hegyi~~Dohrmann

On ~~October~~June 1530, ~~2018,~~2022 the Board of Directors approved an Employment Agreement with ~~Marco~~Dave ~~Hegyi~~ Dohrmann pursuant to which we engaged Mr. ~~Hegyi~~Dohrmann as its Chief Executive Officer ~~through~~for ~~October~~a ~~2021.~~period of five years and a member of the Board of Directors.

Mr. ~~Hegyi~~Dohrmann’s annual compensation is $~~275~~250,000. Mr. ~~Hegyi~~Dohrmann is also entitled to receive an annual bonus equal to ~~four~~five percent (45%) of the Company’s EBITDA for that year commencing in 2023. The annual bonus shall be paid no later than 31 days following the ~~end~~completion of the annual audit of each calendar year.

Mr. ~~Hegyi~~Dohrmann ~~received~~is ~~320,000~~entitled ~~warrants~~to participate in ~~October~~all ~~2018~~group asemployment ~~follows:~~benefits ~~(i)~~that ~~Warrant~~are tooffered ~~purchase~~by upus to ~~106,667~~its ~~shares~~senior ofexecutives ~~our common stock at an exercise price of $1.80 per share which vested immediately:~~ and ~~(ii)~~management ~~two~~employees ~~Warrants~~from totime ~~purchase up~~ to ~~106~~time,~~667~~ ~~shares~~subject ofto ~~our~~the ~~common~~terms ~~stock~~and atconditions ~~an exercise price~~ of ~~$1.80~~such ~~per~~benefit ~~share. One warrant for 106~~plans,~~667~~ ~~shares~~including ofany ~~our~~eligibility ~~common stock vested on October 15, 2019~~requirements. ~~Additional warrants for 106,667 shares of our common stock vest on October 15, 2020 and 2021, respectively. The Warrants are exercisable for 5 years.~~

~~Mr.~~If ~~Hegyi~~we isterminate ~~entitled~~Mr. toDohrmann’s ~~participate~~employment inat ~~all~~any ~~group~~time ~~employment~~prior ~~benefits~~to ~~that~~the ~~are~~expiration ~~offered~~of bythe usTerm towithout ~~its~~Cause, ~~senior~~as ~~executives~~defined ~~and~~in ~~management~~the ~~employees~~Employment ~~from~~Agreement, ~~time~~or toif ~~time,~~Mr. ~~subject~~Dohrmann toterminates ~~the~~his ~~terms~~employment ~~and~~at ~~conditions~~any oftime ~~such~~for ~~benefit~~“Good ~~plans,~~Reason” ~~including~~or ~~any~~due ~~eligibility~~to ~~requirements.~~a ~~In addition~~“Disability”, weMr. Dohrmann will ~~purchase~~be ~~and~~entitled ~~maintain~~to ~~during~~receive ~~the~~(i) ~~Term~~his anBase ~~insurance~~Salary ~~policy~~amount onthrough ~~Mr.~~the ~~Hegyi’s~~end ~~life~~of in the ~~amount~~Term; ofand ~~$2,000,000~~(ii) ~~payable~~his toAnnual ~~Mr.~~Bonus ~~Hegyi’s~~amount ~~named~~for ~~heirs~~each oryear ~~estate~~during asthe remainder of the ~~beneficiary~~Term.

If we terminate Mr. Hegyi’s employment at any time prior to the expiration of the Term without Cause, as defined in the Employment Agreement, or if Mr. Hegyi terminates his employment at any time for “Good Reason” or due to a “Disability”, Mr. Hegyi will be entitled to receive (i) his Base Salary amount through the end of the Term; and (ii) his Annual Bonus amount for each year during the remainder of the Term.

Employment Agreement with Mark E. Scott

Mr. Scott resigned from the Board of Directors effective December 15, 2020 and as Chief Financial Officer as of December 31, 2020.

Employment Agreement with Joseph Barnes

Mr. Barnes resigned effective November 30, 2020 as President of GrowLife Hydroponics, Inc.

Potential Payments upon Termination or Change in Control

The Company’s Employment Agreement with ~~Marco~~Dave ~~Hegyi~~Dohrmann has provisions providing for severance payments amounting to $~~455~~300,~~208~~000 in addition to his then current salary should he be terminated without cause or as a result of a change in control, ~~less~~plus ~~any~~the ~~months~~bonus ~~worked.~~that ~~All~~would ~~outstanding~~have ~~warrants~~been ~~fully~~earned ~~vest~~during ~~under~~the ~~certain~~remainder ~~conditions~~of the Term.

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DIRECTOR COMPENSATION

We primarily use stock grants to incentive compensation to attract and retain qualified candidates to serve on the Board. This compensation reflected the financial condition of the Company. In setting director compensation, we consider the significant amount of time that Directors expend in fulfilling their duties to the Company as well as the skill-level required by our members of the Board. On February 1, 2018, a director compensation program was implemented. The directors are compensated at up to $60,000 annually and the annual share award is based on the close price on January 31 of that year.

During year ended December 31, ~~2021~~2022, ~~Marco~~neither ~~Hegyi~~Dave ~~did~~Dohrmann ~~not~~nor Marco Hegyi receive any compensation for his service as a director. The compensation disclosed in the Summary Compensation Table on page 22 represents the total compensation.

Director Summary Compensation

On December 31, 2021 and January 1, 2023, we issued 18,~~200~~000 and 500,000 shares of our common stock, respectively, to Thom Kozik that was valued at $~~0.202~~24,000 ~~per~~and ~~share or~~ $2425,000, respectively.

Compensation Paid to Board Members

Our independent non-employee directors are not compensated in cash. The only compensation has been in the form of stock awards. There is a stock compensation plan for independent non-employee directors.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding the ownership of our common stock as of March 31, ~~2022~~2023 by:

•· each director and nominee for director; •· each person known by us to own beneficially 5% or more of our common stock; •· each officer named in the summary compensation table elsewhere in this report; and •· all directors and executive officers as a group.

The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has the right to acquire beneficial ownership within 60 days. Under these rules more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.

Each beneficial owner named has sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. The address of each beneficial owner is 11335 NE 122nd Way, Suite 105, Kirkland, WA 98034 and the address of more than 5% of common stock is detailed below.

	Shares Beneficially Owned
Name of Beneficial Owner	Number			Percentage (1)
Directors and Named Executive Officers-
Marco Hegyi (2)		686,666				%
David Dohrmann (2)		-		*
David Dohrman (3)		-		*
Thom Kozik (3)		508,000		*
Thom Kozik (4)		1,220,000		*
Total Directors and Officers (2in total)		-				%
Total Directors and Officers (3 in total)		-				%
Greater Than 5% Ownership
Bucktown Capital LLC		(54	)		9.99	%
Silverback Capital Corporation		(65	)		9.99	%

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* Less than 1%.

(1) Based on ~~145~~27,~~517~~886,~~397~~190 shares of common stock outstanding as of March 31, ~~2022~~2023.

(2) Reflects the shares beneficially owned by ~~Marco~~David ~~Hegyi, the Chairman and CEO of the Company and includes warrants to purchase 686,666 shares of our common stock as of December 31, 2021~~ Dohrmann.

(3) Reflects the shares beneficially owned by ~~David~~Thom ~~Dohrmann~~Kozik, a Director of the Company, beneficial ownership includes 1,220,000 common shares issued to him as compensation for his services to the Board represents 1% of the outstanding shares on December 31, 2022. Mr. Kozik reigned effective December 31, 2022

(4) ~~Reflects~~ According to the ~~shares~~Schedule ~~beneficially~~13G ~~owned~~filed with the SEC on March 7, 2022, by ~~Thom~~ ~~Kozik~~Bucktown Capital LLC (“Bucktown”), aon ~~Director~~behalf of ~~the~~Bucktown, ~~Company~~and Fife Trading Inc. (“Fife Trading”) , sole manager of reporting person Bucktown, and John Fife (“Fife”) as sole member of reporting person Bucktown and the president and sole shareholder of Fife Trading. Mr. Fife has beneficial ownership ~~includes~~by 1virtue of his role as a control person of Fife Trading and Bucktown. The principal business address of each of Bucktown,~~220~~ Fife Trading and Fife is 303 East Wacker Drive,~~000~~ ~~common~~Suite ~~shares~~1040, ~~issued~~Chicago, IL 60601. Bucktown has rights to ~~him~~convert asa ~~compensation~~Promissory Note into shares of the Issuer’s common stock which, except for ~~his~~a ~~services~~contractual to9.99% cap on the ~~Board~~amount ~~represents~~of 1outstanding shares that Bucktown may own, would exceed the cap. Thus, the number of shares of the Issuer’s common stock beneficially owned by Bucktown as of the date of its 13G filing was 11,052,305 shares, which is 9.99% of the ~~outstanding~~Issuer's 110,633,688 shares outstanding on ~~December~~November 3122, 2021 (as reporting in the company's 10-Q filed November 23, 2021).

(5) According to the Schedule 13G filed with the SEC on March 73, 2022, by ~~Bucktown~~Silverback Capital ~~LLC~~Corporation (“~~Bucktown~~Silverback”), onSilverback behalf of Bucktown, and Fife Trading Inc. (“Fife Trading”) , sole manager of reporting person Bucktown, and John Fife (“Fife”) as sole member of reporting person Bucktown and the president and sole shareholder of Fife Trading. Mr. Fife has beneficial ownership by virtue of his role as a control person of Fife Trading and Bucktown. The principal business address of each of Bucktown, Fife Trading and Fife is 303 East Wacker Drive, Suite 1040, Chicago, IL 60601. Bucktown has rights to convert a Promissory Note into shares of the Issuer’s common stock which, except for a contractual 9.99% cap on the amount of outstanding shares that ~~Bucktown~~Silverback may own~~, would exceed the cap~~. Thus, the number of shares of the Issuer’s common stock beneficially owned by ~~Bucktown~~Silverback as of the date of its 13G filing was 1114,~~052~~479,~~305~~650 shares, which is 9.99% of the Issuer's ~~110~~134,~~633~~517,~~688~~394 shares outstanding on ~~November~~February 2215, ~~2021~~2022 (as ~~reporting~~reported inby the ~~company's~~OTC ~~10-Q~~Market ~~filed~~Group ~~November~~Inc. 23on February 28, ~~2021~~2022). Gillian Gold acts as Manager and control person of Silverback. The principal business address of Silverback is 614 North Dupont Highway, Suite 210, Dover, Delaware, 19901.

~~(6)~~There ~~According~~are tono ~~the~~other ~~Schedule~~persons ~~13G~~known ~~filed with the SEC on March 3, 2022,~~ by ~~Silverback~~us ~~Capital~~who ~~Corporation~~owns ~~(“Silverback”),~~beneficially ~~Silverback has rights to convert a Promissory Note into shares of the Issuer’s common stock which, except for a contractual 9.99~~5% ~~cap~~or onmore ~~the amount~~ of ~~outstanding~~our ~~shares that Silverback may own. Thus, the number of shares of the Issuer’s~~ common stock ~~beneficially owned by Silverback~~ as of ~~the~~March ~~date of its 13G filing was 14~~31,~~479,650~~ ~~shares, which is 9~~2023.99% of the Issuer's 134,517,394 shares outstanding on February 15, 2022 (as reported by the OTC Market Group Inc. on February 28, 2022). Gillian Gold acts as Manager and control person of Silverback. The principal business address of Silverback is 614 North Dupont Highway, Suite 210, Dover, Delaware, 19901.

There are no other persons known by us who owns beneficially 5% or more of our common stock as of March 31, 2022.

Review and Approval of Related Person Transactions

We have operated under a Code of Conduct for many years. Our Code of Conduct requires all employees, officers and directors, without exception, to avoid the engagement in activities or relationships that conflict, or would be perceived to conflict, with the Company’s interests or adversely affect its reputation. It is understood, however, that certain relationships or transactions may arise that would be deemed acceptable and appropriate upon full disclosure of the transaction, following review and approval to ensure there is a legitimate business reason for the transaction and that the terms of the transaction are no less favorable to the Company than could be obtained from an unrelated person.

The Audit Committee is responsible for reviewing and approving all transactions with related persons. The Company reviews all relationships and transactions in which the Company and our directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. As required under SEC rules, transactions that are determined to be directly or indirectly material to the Company or a related person are disclosed.

Since January 1, 2019, the Company engaged in the following reportable transactions with our directors, executive officers, holders of more than 5% of our voting securities, and affiliates or immediately family members of our directors, executive officers and holders of more than 5% of our voting securities.

Certain Relationships

Please see the transactions with Chicago Venture Partner, Iliad, Odyssey, St. George, and Bucktown discussed in Notes 11, 13 and 14.

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Related Party Transactions

Transactions with Marco Hegyi

On October 21, 2018, a 5-year Warrant for Mr. Hegyi to purchase up to 66,666 shares of our common stock at an exercise price of $1.50 per share vested. The warrant was valued at $390,000 and we recorded $178,750 as compensation expense for the year ended December 31, 2018. On October 15, 2018, Mr. Hegyi received Warrants to purchase up to 320,000 shares of our common stock at an exercise price of $1.80 per share and which vest on October 15, 2018, 2019 and 2020. The Warrants are exercisable for 5 years. The ~~warrants~~Warrants ~~that vested on October 15, 2019 and 2018~~ were ~~valued~~forfeited atin ~~$192,000~~conjunction ~~and~~with weMr. ~~recorded~~Hegyi’s ~~compensation~~resignation ~~expense~~effective ofJune ~~$78~~30,~~000~~ ~~and $96,000 for the years ended December 31, 2020 and 2019~~2022.

On October 15, 2018, the Board of Directors approved an Employment Agreement with Marco Hegyi pursuant to which we engaged Mr. Hegyi as its Chief Executive Officer through October 15, 2021. ~~See~~Mr. ~~Note~~Hegyi 16resigned ~~for~~effective ~~additional~~June ~~details.~~30, 2022.

Transaction with Thom Kozik

Mr. Kozik was appointed as a director on October 5, 2017, and resigned effective December 31, 2022. On February 22, 2019, we issued 54,054 shares of our common stock to Mr. Kozik valued at $1.11 per share or $60,000. On April 16, 2020, we issued 20,000 shares of our common stock to Mr. Kozik valued at $0.295 per share or $5,900. On December 31, ~~2021~~2022 we issued 1,200,000 shares of our common stock to Mr. Kozik valued at $0.02 per share or $24,000. On January 1, 2023 we issued 500,000 shares of our common stock to Mr. Kozik valued at $0.05 per share or $25,000. These issuances were an award for independent director services.

Notes Payable to Related Parties

EZ-CLONE had $49,144 due to relatives of the EZ-CLONE founders and shareholders as of December 31, 2020. The notes were paid off on May 19, 2021.

Director Independence

The Board has affirmatively determined that Thom Kozik iswas independent prior to his resignation as of December 31, ~~2021~~2022. For purposes of making that determination, the Board used NASDAQ’s Listing Rules even though the Company is not currently listed on NASDAQ.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Committee Pre-Approval Policy

The Audit Committee has established a pre-approval policy and procedures for audit, audit-related and tax services that can be performed by the independent auditors without specific authorization from the Audit Committee subject to certain restrictions. The policy sets out the specific services pre-approved by the Audit Committee and the applicable limitations, while ensuring the independence of the independent auditors to audit the Company's financial statements is not impaired. The pre-approval policy does not include a delegation to management of the Audit Committee’s responsibilities under the Exchange Act. During the year ended December 31, ~~2021~~2022, the Audit Committee pre-approved all audit and permissible non-audit services provided by our independent auditors.

Service Fees Paid to the Independent Registered Public Accounting Firm

The Audit Committee engaged the CPA firm Macias Gini & O’Connell LLP (“MGO”) on October 14, ~~2021to~~2021 to perform an annual audit of the Company’s financial statements for the fiscal ~~years~~year ended December 31, 2022 and 2021. MGO also performed a review of the Company’s financial statements for the three months ended September 30, 2021. BPM, LLP performed the annual audit for 2020 and 2019. BPM also performed a review of the Company’s financial statements for each of the first three quarters of 2021.The following is the breakdown of aggregate fees billed for and during the last two fiscal years. The following is the breakdown of aggregate fees paid for the last two fiscal years:

	Year Ended
	December 31, 2021		December 31, 2020
	December 31, 2022		December 31, 2021
Audit Fees	$	140,000	$	87,626
Audit related fees				49,220
	$	140,000	$	136,846

	-	“Audit Fees” are fees paid for professional services for the audit of our financial statements.

	-	“Audit-Related fees” are fees paid for professional services not included in the first category, specifically, PCAOB interim reviews for quarterly filings, and accounting consultations on matters addressed during the audit.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) FINANCIAL STATEMENTS:

The Company’s financial statements, as indicated by the Index to Consolidated Financial Statements set forth below, begin on page F-1 of this Form 10-K, and are hereby incorporated by reference. Financial statement schedules have been omitted because they are not applicable or the required information is included in the financial statements or notes thereto.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Title of Document		Page
Report of Independent Registered Public Accounting Firm For the year ended December 31, 2021 (PCAOB ID 324)		F-1
Report of Independent Registered Public Accounting Firm For the year ended December 31, 2022 and 2021 (PCAOB ID 324)		F-1
Report of Independent Registered Public Accounting Firm For the year ended December 31, 2020		F-2
Consolidated Balance Sheets As of December 31, 2022 and 2021		F-2
Consolidated Balance Sheets As of December 31, 2021 and 2020		F-3
Consolidated Statements of Operations For the years ended December 31, 2022 and 2021		F-3
Consolidated Statements of Operations For the years ended December 31, 2021 and 2020		F-4
Consolidated Statements of Changes in Stockholders’ Deficit For the years ended December 31, 2022 and 2021		F-4
Consolidated Statements of Changes in Stockholders’ Deficit For the years ended December 31, 2021 and 2020		F-5
Consolidated Statements of Cash Flows For the years ended December 31, 2022 and 2021		F-5
Consolidated Statements of Cash Flows For the years ended December 31, 2021 and 2020		F-6
Notes to the Financial Statements		F-6
Notes to the Financial Statements		F-7

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(b) Exhibits

Exhibit No.		Description
3.1		Certificate of Incorporation. Filed as an exhibit to the Company’s Form 10-SB General Form for Registration of Securities of Small Business Issuers filed with the SEC on December 7, 2007, and hereby incorporated by reference.
3.2		First Amendment to Second Amended and Restated Bylaws ~~of GrowLife~~Amendment, ~~Inc.~~ dated ~~October~~August 166, ~~2015. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on October 26~~2022, ~~2015, and hereby~~ incorporated herein by reference.
3.3		Certificate of Amendment of Certificate of Incorporation of GrowLife, Inc. dated October 23, 2017 to increase the authorized shares of Common Stock from 3,000,000,000 to 6,000,000,000 shares. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on October 24, 2017, and hereby incorporated by reference.
3.4		Amendment to Articles of Incorporation dated November 20, 2019. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on November 26, 2019, and hereby incorporated by reference.
3.5		Certificate of Amendment of Certificate of Incorporation of GrowLife, Inc. dated November 8, 2021, to increase the authorized shares of Common Stock from 120,000,000 to 740,000,000 shares. Filed herewith.
3.6		Amendment to Articles of Incorporation citing Reverse Stock Split, dated September 29, 2022
3.7		Certificate of Designation of Series A Convertible Preferred Stock of GrowLife, Inc., Filed as an exhibit to the Company’s Form 8-K filed with the SEC on November 28, 2022.
4.1		GrowLife, Inc. Second Amended and Restated 2017 Stock Incentive Plan filed as an Annex 1 to the Company’s Definitive Revised Schedule 14A filed with the SEC on September 24, 2021, and hereby incorporated by reference.
4.2		Form of Warrants. Filed as exhibits to the Company’s Form 8-K and filed with the SEC on February 28, 2020, and hereby incorporated by reference.
10.1		Compilation of Securities Purchase Agreement and Warrant to Purchase Common Stock dated February 9, 2018 entered into by and between GrowLife, Inc. and St. George Investments LLC. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on February 15, 2018, and hereby incorporated by reference.
10.2		Compilation of Securities Purchase Agreement, Secured Promissory Notes, and Security Agreement by and between GrowLife, Inc. and Iliad Research and Trading, L.P. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on August 16, 2018, and hereby incorporated by reference.
10.3		Rights Offering to Shareholders filed in Amendment No.1 of Form S-1. Filed with the SEC on September 18, 2018, and hereby incorporated by reference. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on September 21, 2018, and hereby incorporated by reference.
10.4		Rights Offering to Shareholders filed in Amendment No.1 of Form S-1. Filed with the SEC on September 18, 2018, and hereby incorporated by reference. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on September 21, 2018, and hereby incorporated by reference.
10.5		Purchase and Sale agreement dated October 10, 2018, by and between GrowLife, Inc. and EZ-CLONE Enterprises LLC. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on October 18, 2018, and hereby incorporated by reference.
10.6		Compilation of Securities Purchase Agreement, Warrant, Secured Promissory Notes, and Security Agreement by and between GrowLife, Inc. and Iliad Research and Trading, L.P. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on October 17, 2018, and hereby incorporated by reference.
10.7		~~Marco~~Compilation ~~Hegyi~~of ~~Employment~~Securities Purchase Agreement, ~~dated~~Secured ~~October~~Promissory 15Notes, ~~2018~~and Security Agreement by and between GrowLife, Inc. and Odyssey Research and Trading, LLC. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on ~~October~~July 1730, ~~2018~~2019, and hereby incorporated by reference.
10.8		~~Joseph~~Amendment ~~Barnes~~No. ~~Employment~~1 to Purchase and Sale Agreement dated October 1523, ~~2018~~2019, entered into by between GrowLife, Inc. and William Blackburn. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on ~~October~~November 1712, ~~2018~~2019, and hereby incorporated by reference.
10.9		~~Termination~~Compilation of ~~Existing~~Securities ~~Agreements~~Purchase ~~and Release~~ Agreement ~~accepted February 15~~, ~~2019,~~Secured ~~entered~~Promissory ~~into by and between GrowLife~~Notes, ~~Inc.~~ and ~~CANX~~Security ~~USA LLC~~Agreement. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on February 205, ~~2019~~2020, and hereby incorporated by reference.
10.10		Compilation of Labrys Securities Purchase Agreement, ~~Secured~~Self-Amortization Promissory ~~Notes,~~Note and ~~Security~~Other ~~Agreement by and between GrowLife, Inc~~Agreements. ~~and Odyssey Research and Trading, LLC.~~ Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on ~~July~~October 3015, ~~2019~~2020, and hereby incorporated by reference.
10.11		~~Amendment~~Compilation ~~No.~~of 1EMA toSecurities Purchase ~~and Sale~~ Agreement ~~dated October 23~~, ~~2019,~~Self-Amortization ~~entered~~Promissory ~~into~~Note ~~by between GrowLife, Inc.~~ and ~~William~~Other ~~Blackburn~~Agreements. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on ~~November~~October 1215, ~~2019~~2020, and hereby incorporated by reference.
10.12		Compilation of Securities Purchase Agreement, Secured Promissory Notes, and Security Agreement. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on February 5, 2020, and hereby incorporated by reference.
10.13		Compilation of Labrys Securities Purchase Agreement, Self-Amortization Promissory Note and Other Agreements. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on October 15, 2020, and hereby incorporated by reference.
10.14		Compilation of EMA Securities Purchase Agreement, Self-Amortization Promissory Note and Other Agreements. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on October 15, 2020, and hereby incorporated by reference.

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10.15		Compilation of FF Securities Purchase Agreement, Self-Amortization Promissory Note and Other Agreements. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on October 15, 2020, and hereby incorporated by reference.
10.12		Compilation of FF Securities Purchase Agreement, Self-Amortization Promissory Note and Other Agreements. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on October 15, 2020, and hereby incorporated by reference.
10.16		Amendment 2 to Compilation of Labrys Securities Purchase Agreement, Self-Amortization Promissory Note and Other Agreements. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on December 7, 2020, and hereby incorporated by reference.
10.13		Amendment 2 to Compilation of Labrys Securities Purchase Agreement, Self-Amortization Promissory Note and Other Agreements. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on December 7, 2020, and hereby incorporated by reference.
10.17		Michael E. Fasci Executive Employment Agreement dated January 1, 2021. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on January 8, 2021, and hereby incorporated by reference.
10.14		Amendment 3 to Compilation of Labrys Securities Purchase Agreement, Self-Amortization Promissory Note and Other Agreements. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on January 5, 2021, and hereby incorporated by reference.
10.18		Amendment 3 to Compilation of Labrys Securities Purchase Agreement, Self-Amortization Promissory Note and Other Agreements. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on January 5, 2021, and hereby incorporated by reference.
10.15		Compilation of Bucktown Capital, LLC Securities Purchase Agreement, and Other Agreements. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on March 5, 2021, and hereby incorporated by reference.
10.19		Compilation of Bucktown Capital, LLC Securities Purchase Agreement, and Other Agreements. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on March 5, 2021, and hereby incorporated by reference.
10.16		St. George and Iliad joint Warrant Settlement Agreement. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on April 9, 2021, and hereby incorporated by reference.
10.20		St. George and Iliad joint Warrant Settlement Agreement. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on April 9, 2021, and hereby incorporated by reference.
10.17		Compilation of Bucktown Capital, LLC Securities Purchase Agreement, and Other Agreements. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on March 5, 2021, and hereby incorporated by reference.
10.21		Compilation of Bucktown Capital, LLC Securities Purchase Agreement, and Other Agreements. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on March 5, 2021, and hereby incorporated by reference.
10.18		Compilation of Bucktown Capital, LLC Securities Purchase Agreement, and Other Agreements. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on November 12, 2021, and hereby incorporated by reference.
10.22		Compilation of Bucktown Capital, LLC Securities Purchase Agreement, and Other Agreements. Filed as an exhibit to the Company’s Form 8-K and filed with the SEC on November 12, 2021, and hereby incorporated by reference.
10.19		Securities Purchase Agreement and Convertible Promissory Note with Sixth Street Lending LLC dated January 4, 2022.
10.23		Securities Purchase Agreement and Convertible Promissory Note with Sixth Street Lending LLC dated January 4, 2022. Filed herewith.
10.20		Securities Purchase Agreement and Convertible Promissory Note with Sixth Street Lending LLC dated March 8, 2022.
10.24		Securities Purchase Agreement and Convertible Promissory Note with Sixth Street Lending LLC dated March 8, 2022. Filed herewith.
10.21		Compilation of AJB Capital Investments LLC, Securities Purchase Agreement, and Other Agreements dated May 17, 2022.
10.22		Asset Purchase Agreement, dated September 1, 2022, with Bridgetown Mushrooms, LLC
10.23		Dohrmann Employment Agreement, dated September 30, 2022
10.24		Securities Purchase Agreement, Promissory Note, Security Agreement and Registration Rights Agreement, dated September 28, 2022, between Growlife, Inc. and AJB Capital Investments, LLC
10.25		Securities Purchase Agreement and Convertible Note dated October 17, 2022, between GrowLife Inc. and 1800 Diagonal Lending LLC
10.26		Note Purchase Agreement, Warrant and Convertible Promissory Note dated November 2, 2022 between GrowLife Inc. and Quick Capital LLC
10.27		Compilation of Securities Purchase Agreement, Promissory Note, Common Stock Purchase Agreement, dated November 9, 2022, between GrowLife, Inc. and Coventry Enterprises, LLC, filed as exhibits to Form 8-K filed November 28, 2022
10.28		Securities Purchase Agreement and Convertible Promissory Note dated November 11, 2022, between GrowLife Inc, and 1800 Diagonal Lending LLC, filed as exhibits to Form 8-K filed December 2, 2022
14.1		Code of Conduct and Ethics dated May 15, 2014. Attached as an exhibit to the Company’s Form 8-K filed and with the SEC on June 9, 2014, and hereby incorporated by reference.
21.1		Subsidiaries of the Registrant, Filed herewith.
23.1		Consent of Macias Gini & O’Connell LLP Independent Registered Account Firm Relating to the Consolidated Financial Statements of the Company for the year ended December 31, ~~2021~~2022
23.2		Consent of BPM LLP Independent Registered Account Firm Relating to the Consolidated Financial Statements of the Company for the year ended December 31, 2020
31.01		Certification of Principal Executive Officer Pursuant to Rule 13a-14 *
31.02		Certification of Principal Financial Officer Pursuant to Rule 13a-14 *
32.01		CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act *
32.02		CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act *
99.1		Amended and Restated Audit Committee Charter, dated October 16, 2015. Attached as an exhibit to the Company’s Form 8-K and filed with the SEC on October 26, 2015, and hereby incorporated by reference.
99.2		Compensation Committee Charter dated May 15, 2014. Attached as an exhibit to the Company’s Form 8-K dated June 3, 2014 and filed with the SEC on June 9, 2014, and hereby incorporated by reference.
99.3		Amended and Restated Nominations and Governance Charter, dated October 16, 2015.Attached as an exhibit to the Company’s Form 8-K and filed with the SEC on October 26, 2015, and hereby incorporated by reference.
99.4		Amended and Restated Insider Trading Policy, dated October 16, 2015. Attached as an exhibit to the Company’s Form 8-K and filed with the SEC on October 26, 2015, and hereby incorporated by reference.
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Filed Herewith.

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Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

GrowLife, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance ~~sheet~~sheets of GrowLife, Inc. (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the ~~year~~years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the accompanying financial statements, the Company has suffered recurring losses from operations, incurred negative cash flows from operating activities, and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on the entity’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our ~~audit~~audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the ~~audit~~audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our ~~audit~~audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.

Our ~~audit~~audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our ~~audit~~audits ~~provides~~provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Derivative Liabilities

Description of the Matter

As disclosed in Note 127 to the financial statements, The Company has issued several convertible notes which were outstanding as of December 31, ~~2021~~2022. Under the terms of the note agreements, ~~she~~the note holders have the right to convert principal and accrued interest outstanding into shares of common stock at a discounted price compared to the market price of the common stock at the date of conversion. The embedded conversion features of the notes are recognized as derivative liabilities and management measures the fair value of the derivative liabilities using a Binomial Option Pricing Model. Auditing the Company’s valuation of its derivatives is challenging as the valuation methodologies used by the Company are complex by their nature and the methodologies incorporate significant assumptions that impact the fair value measurement, including the discount rate and forecasted volatility of the Company’s common stock price.

How We Addressed the Matter in Our Audit

To test the valuation of the derivative liabilities, our audit procedures included, among others, evaluating the methodologies used in the valuation model and testing the significant assumptions. For example, we compared the forecasted volatility of the Company’s common stock price to its historical volatility. We also assessed the completeness and accuracy of the underlying data and engaged an external valuation specialist to assist in our evaluation of the significant assumptions and methodologies used by the Company. As part of our procedures, we also evaluated the Company’s financial statement disclosures related to derivative liabilities which are included in Note 12 to the financial statements.

Macias Gini & O’Connell LLP

We have served as Growlife, Inc.’s auditor since 2021

Irvine, CA

~~May~~June 1613, ~~2022~~2023

F-1

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Report of Independent Registered Public Accounting Firm

GROWLIFE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	December 31, 2022			December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	94,208		$	6,275
Advances		160,000			-
Current assets of discontinued operations		-			2,203,932
Total current assets		254,208			2,210,207

Long term assets of discontinued operations		-			1,897,823
TOTAL ASSETS	$	254,208		$	4,108,030

LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable		850,619			829,909
Accrued expenses		209,768			171,464
Notes payable- PPP/EIDL loans		716,252			874,570
Notes payable		1,877,896			13,117
Convertible notes payable, net		2,323,516			2,570,570
Derivative liabilities		2,686,892			1,698,272
Current liabilities of discontinued operations		-			3,548,517
Total current liabilities		8,664,942			9,706,419

LONG TERM LIABILITIES:
Long term liabilities of discontinued operations		-			335,222
Total long term liabilities		-			335,222

STOCKHOLDERS' DEFICIT
Series A Preferred stock - $0.0001 par value, 10,000,000 shares authorized, 1,800 shares and no shares issued and outstanding at 12/31/2022 and 12/31/201, respectively		-			-
Common stock - $0.0001 par value, 740,000,000 shares authorized, 7,083,254 and 786,331 shares issued and outstanding at 12/31/2022 and 12/31/2021 , respectively		708			79
Additional paid in capital		156,385,473			154,380,348
Accumulated deficit		(164,796,915	)		(160,314,038	)
Total stockholders' deficit		(8,410,734	)		(5,933,611	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	254,208		$	4,108,030

ToThe ~~the~~accompanying ~~Board~~notes ofare ~~Directors~~an ~~and~~integral ~~Stockholders~~part of these consolidated financial statements.

GrowLife, Inc. and Subsidiaries

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of GrowLife, Inc. and Subsidiaries (the Company) as of December 31, 2020, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has sustained a net loss from operations and has an accumulated deficit since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Emphasis of a Matter-Uncertainty of Litigation

As described in notes 1 and 17 to the consolidated financial statements, the Company is in litigation with the Founders of its EZ Clone Enterprises subsidiary for the Company’s failure to pay the remaining 49% of the balance owed under the Purchase and Sale agreement with EZ Clone Enterprises. The Founders are seeking rescission of the Purchase and Sale Agreement, unspecified damages in excess of ten thousand dollars, and other equitable relief. Our audit opinion is not modified for this matter.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ BPM LLP

BPM LLP

Walnut Creek, California

April 15, 2021

We served as the Company’s auditor from October 2019 to October 2021

F-2

Table of Contents

GROWLIFE, INC. AND SUBSIDIARIES

GROWLIFE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

	For Year Ended
	December 31, 2022			December 31, 2021

	$	-		$	-
Cost of goods sold		-			-
Gross Profit		-			-
Operating expenses		1,341,468			1,382,519
Loss from operations		(1,341,468	)		(1,382,519	)

OTHER INCOME (EXPENSE):
Change in fair value of derivative		(1,347,845	)		(973,101	)
Interest expense, net		(1,963,736	)		(3,243,162	)
Gain (Loss) on debt conversions, net		204,868			(931,494	)
Gain on forgiveness/settlement of debt		183,449			1,025,400
Total other expense, net		(2,923,264	)		(4,122,357	)

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(4,264,732	)		(5,504,876	)
Income taxes		-			-

NET LOSS FROM CONTINUING OPERATIONS		(4,264,732	)		(5,504,876	)

INCOME (LOSS) ON DISCONTINUED OPERATIONS
Income (Loss) from discontinued operations, net of income tax		(1,931,250	)		32,208
Gain on deconsolidation of discontinued operations		1,713,105
NET INCOME (LOSS) ON DISCONTINUED OPERATIONS		(218,145	)		32,208

NET LOSS	$	(4,482,877	)	$	(5,472,668	)

BASIC AND DILUTED INCOME (LOSS) PER SHARE
Net Loss on continuing operations	$	(1.86	)	$	(9.86	)
Net Income (Loss) on discontinued operation	$	(0.09	)	$	0.06
Net Loss	$	(1.95	)	$	(9.80	)

Weighted average shares of common stock outstanding- basic and diluted		2,297,827			558,371

CONSOLIDATED BALANCE SHEETS

	December 31, 2021			December 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	363,863		$	383,144
Accounts receivable - trade, net of allowance for doubtful accounts of $10,000 and $5,690 as of 12/31/2021 and 12/31/2020, respectively		366,789			960,522
Other receivables		161,000			-
Inventory		1,299,560			570,524
Deposits		18,995			18,995
Total current assets		2,210,207			1,933,185
Property and equipment, net		249,906			129,330
Intangible assets, net		459,002			1,130,718
Goodwill		781,749			781,749
Operating lease right of use asset		407,166			380,247
TOTAL ASSETS	$	4,108,030		$	4,355,229
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable - trade		1,146,344			1,146,195
Accrued expenses		219,398			2,592,251
Accrued expenses - related parties		-			37,394
Notes payable- PPP/EIDL loans, current		1,034,994			390,035
Note payable to bank		137,728
Derivative liability		1,698,272			1,101,436
Convertible notes payable, net		2,583,816			2,495,153
Notes payable- related party		-			49,144
Acquisition of EZ-CLONE Enterprises, Inc. payable in cash		1,026,000			1,026,000
Acquisition of EZ-CLONE Enterprises, Inc. payable in common stock		1,105,000			1,105,000
Current portion of operating lease right of use liability		197,915			140,772
Federal and state income taxes payable		556,952			343,125
Total current liabilities		9,706,419			10,426,505
LONG TERM LIABILITIES:
Deferred tax liability		106,000			352,649
Notes payable- PPP/EIDL, less current portion		-			485,679
Non-current portion of operating lease right of use liability		229,222			264,868
Total long term liabilities		335,222			1,103,196
COMMITMENTS AND CONTINGENCIES		-			-
STOCKHOLDERS' DEFICIT
Preferred stock - $0.0001 par value, 10,000,000 shares authorized, no shares		-			-
issued and outstanding at 12/31/2021 and 12/31/2020, respectively
Common stock - $0.0001 par value, 740,000,000 shares authorized, 117,952,697 and 51,843,221
shares issued and outstanding at 12/31/2021 and 12/31/2020 , respectively		395,198			388,587
Additional paid in capital		153,985,229			147,278,311
Accumulated deficit		(160,314,038	)		(154,841,370	)
Total stockholders' deficit		(5,933,611	)		(7,174,472	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	4,108,030		$	4,355,229

The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

GROWLIFE, INC. AND SUBSIDIARIES

GROWLIFE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT)

	Series A										Additional						Total
	Preferred Stock				Common Stock						Paid			Accumulated			Stockholders'
	Shares		Amount		Shares			Amount			in Capital			Deficit			(Deficit)

Balance as of December 31, 2020		-	$	-		345,621		$	35		$	147,666,863		$	(154,841,370	)	$	(7,174,472	)

Stock based compensation for stock options						-			-			15,476			-			15,476
Shares issued for services						8,000			1			23,999						24,000
Shares issued for convertible note conversions						332,305			33			5,239,460			-			5,239,493
Shares issued for liability settlement						95,000			9			1,397,091						1,397,100
Shares issued for warrant exercise						5,425			1			37,459						37,460
Net loss for the year ended December 31, 2021						-			-			-			(5,472,668	)		(5,472,668	)
Balance as of December 31, 2021		-	$	-		786,351		$	79		$	154,380,348		$	(160,314,038	)	$	(5,933,611	)

Shares issued for convertible note conversions						5,560,082			555			1,682,143						1,682,698
Shares issued for note commitments, net		1,800		-		1,000,000			100			327,692						327,792
Repurchase of shares in connection with reverse stock split						(263,159	)		(26	)		(10,142	)					(10,168	)
Fair value of warrants issued												5,433						5,433
Net loss for the year ended December 31, 2022															(4,482,877	)		(4,482,877	)
Balance as of December 31, 2022		1,800	$	-		7,083,274		$	708		$	156,385,473		$	(164,796,915	)	$	(8,410,734	)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For Year Ended
	December 31, 2021			December 31, 2020
NET REVENUE	$	6,199,089		$	7,000,812
Cost of goods sold		3,405,655			4,020,570
Gross Profit		2,793,434			2,980,242
Operating expenses		4,318,416			4,870,204
Loss from operations		(1,524,982	)		(1,889,962	)
OTHER INCOME (EXPENSE):
Change in fair value of derivative		(973,101	)		199,479
Interest expense, net		(3,252,191	)		(1,089,734	)
Loss on debt conversions, net		(931,494	)		(945,169	)
Loss on debt settlement, net		-			(2,422,500	)
Gain on extinguishment of warrants		1,025,400			-
Gain on forgiveness of debt		206,287
Total other expense, net		(3,925,099	)		(4,257,924	)
LOSS BEFORE INCOME TAXES		(5,450,081	)		(6,147,886	)
Income taxes - current benefit (expense)		(22,587	)		(231,952	)
NET LOSS	$	(5,472,668	)	$	(6,379,838	)
Basic and diluted loss per share	$	(0.07	)	$	(0.18	)
Weighted average shares of common stock outstanding- basic and diluted		83,755,630			35,286,804

The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

GROWLIFE, INC. AND SUBSIDIARIES

GROWLIFE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

	For Year Ended
	December 31, 2022			December 31, 2021

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(4,482,877	)	$	(5,472,668	)
(Income) Loss from discontinued operations		1,931,250			(32,208	)
Gain on discontinued operations		(1,713,105	)		-
Net loss from continuing operations		(4,264,732	)		(5,504,875	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense		-			15,476
Non-cash interest expense		1,882,488			1,415,936
Loss on cashless warrant conversion		-			37,460
(Gain) Loss on debt conversion		(204,868	)		931,494
Change in fair value of derivative		1,347,845			973,101
(Gain) on forgiveness of debt		(183,449	)		(206,287	)
Gain on settlement of accounts payable		-			(1,025,400	)
Fair value of derivatives expensed upon conversion		-			1,429,138
Changes in operating assets and liabilities:
Accounts payable		38,605			96,601
Accrued expenses		38,303			(25,650	)
Net cash used in operating activities from continuing operations		(1,345,808	)		(1,863,007	)
Net cash provided by operating activities by discontinued operations		30,310			299,884
CASH USED BY OPERATING ACTIVITIES		(1,315,498	)		(1,563,123	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Payment of advances		(160,000	)		-
Net cash used in investing activities by discontinued operations		(11,190	)		(20,000	)
CASH USED IN INVESTING ACTIVITIES		(171,190	)		(20,000	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible debt		1,254,305			1,728,873
Proceeds from notes payable		473,000			369,574
Repayment of convertible notes		(110,150	)		(553,550	)
Repayment of notes payable		(13,117	)		(49,144	)
Purchase of shares in reverse stock split		(10,168	)		-
Net cash provided by financing activities from continuing operations		1,593,870			1,495,753
Net cash used in financing activities by discontinued operations		(19,249	)		-
CASH PROVIDED BY FINANCING ACTIVITIES		1,574,621			1,495,753

NET CHANGE IN CASH AND CASH EQUIVALENTS		87,933			(87,370	)

CASH AND CASH EQUIVALENTS, beginning of period		6,275			93,645

CASH AND CASH EQUIVALENTS, end of period	$	94,208		$	6,275

Non-cash investing and financing activities:
Value of shares issued for convertible note conversion	$	1,682,698		$	2,502,596
Value of shares issued for liability settlement	$	1,046,425		$	1,397,100
Value of shares issued for loan commitment fees	$	327,792			-

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

										Total
	Common Stock				Additional Paid		Accumulated			Stockholders'
	Shares		Amount		in Capital		Deficit			(Deficit)
Balance as of December 31, 2019		28,677,147		386,269		143,441,047		(148,461,532	)		(4,634,216	)
Stock based compensation for stock options		-		-		47,169		-			47,169
Stock based compensation for warrants		-		-		78,000		-			78,000
Shares issued for services rendered		40,000		4		11,796		-			11,800
Shares issued for convertible note and interest conversion		19,573,920		1,960		3,113,249		-			3,115,208
Shares issued for convertible note commitment fee		3,552,000		355		586,565		-			586,920
Warrant exercise		154		-		485		-			485
Net loss for the year ended December 31, 2020		-		-		-		(6,379,838	)		(6,379,838	)
Balance as of December 31, 2020		51,843,221		388,587		147,278,311		(154,841,370	)		(7,174,472	)
Stock based compensation for stock options						15,476					15,476
Shares issued for services rendered		1,200,000		120		23,880					24,000
Shares issued for convertible note and interest conversion		49,845,718		4,985		5,234,508					5,239,493
Shares issued for warrant settlement		14,250,000		1,425		1,395,675					1,397,100
Warrant exercise		813,758		81		37,379					37,460
Net loss for the year ended December 31, 2021								(5,472,668	)		(5,472,668	)
Balance as of December 31, 2021		117,952,697	$	395,198	$	153,985,229	$	(160,314,038	)	$	(5,933,611	)

The accompanying notes are an integral part of these consolidated financial statements.

F-5

Table of Contents

GROWLIFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended
	December 31, 2021			December 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(5,472,668	)	$	(6,379,838	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation expense		37,152			37,152
Amortization of intangible assets		671,716			671,716
Amortization of debt discount		643,680
Share-based compensation expense		15,476			125,169
Shares issued for service		24,000			11,800
Non Cash Interest Expense		772,256			1,061,852
Loss on debt Conversion		931,494			945,169
Change in fair value of derivative		973,101			(199,479	)
Loss on cashless warrant conversion		37,460
Loss on debt settlement		-			2,422,500
Gain on forgiveness of debt		(206,287	)		-
Gain of settlement of accounts payable		(1,025,400	)		-
Fair value of derivatives expensed upon issuance		1,429,138
Changes in operating assets and liabilities:
Accounts receivable		593,733			(858,716	)
Inventory		(729,036	)		30,150
Other assets		(161,000	)		-
Deposits		-			-
Right of use, net		(5,422	)		11,409
Accounts payable		149			28,105
Accrued expenses		40,764			(83,433	)
Change in deferred taxes		(246,649	)		(117,551	)
Change in federal and state taxes payable		213,827			343,125
Cash Used in operating activities		(1,462,515	)		(1,950,870	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of PP&E		(20,000	)		-
Cash Used in investing activities		(20,000	)		-
CASH FLOWS FROM FINANCING ACTIVITIES:
Warrant exercise		-			(431,151	)
Proceeds from convertible notes		1,728,873
Proceeds from notes payable		337,055			-
Repayment of convertible notes		(553,550	)
Repayment of notes		(49,144	)		2,723,846
Proceeds from issuance of common stock		-			485
Net cash provided by financing activities		1,463,234			2,293,180
NET CHANGE IN CASH AND CASH EQUIVALENTS		(19,281	)		342,310
CASH AND CASH EQUIVALENTS, beginning of period		383,144			40,834
CASH AND CASH EQUIVALENTS, end of period	$	363,863		$	383,144
Non-cash investing and financing activities:
Shares issued for convertible note and interest conversion		2,502,596			1,947,819
Issuance of stock for debt issuance costs					586,565
Loss of debt conversions- issuance of stock		-			984,169
Gain on debt conversions- reduction of accounts payable		-			39,000
Shares issued for liability settlement		1,397,100			-
Purchase of fixed asset for notes payable		137,725
Derivative liability settled in shares		1,805,403

The accompanying notes are an integral part of these consolidated financial statements.

F-6 Table of Contents

GROWLIFE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – DESCRIPTION OF BUSINESS AND ORGANIZATION

GrowLife, Inc. (“GrowLife” or the “Company”) is incorporated under the laws of the State of Delaware and is headquartered in Kirkland, Washington. The Company was founded in 2012 with the Closing of the Agreement and Plan of Merger with SGT Merger Corporation.

On October 15, 2018, the Company closed the Purchase and Sale Agreement with EZ-CLONE Enterprises, Inc., a California corporation (the “Agreement”). On November 5, 2019, the Company amended the Agreement with one 24.5% shareholder of EZ-CLONE Enterprises, Inc. (“EZ-CLONE”), to extend the date to purchase the remaining 49% of stock of EZ-CLONE in exchange for a 20% extension fee (a total of $171,000 for the 49% or $85,500 for each 24.5% shareholder) of the $855,000 cash payable at the earlier of the closing of $2,000,000 in funding or nine months (July 2020). The Company did not close the purchase of the remaining 49% of stock of EZ-CLONE by the extended deadline.

On September 15, 2020, the Company received notice that William Blackburn and Brad Mickelsen (“Plaintiffs”), minority shareholders of EZ-CLONE Enterprises, Inc., a majority owned subsidiary of the Company, filed a complaint against the Company and its officers ~~Marco Hegyi and Mark Scott (“Officers”),~~ in the Superior Court of California, County of Sacramento (“Complaint”) for claims related to breach under the Purchase and Sale Agreement dated October 15, 2018 between the Company and Plaintiffs. The Complaint also alleges that the Company and its Officers made certain false representations and other claims to consummate the Transaction and as a result has failed to complete the second closing as required under Purchase and Sale Agreement. ~~The Plaintiffs are seeking rescission of the Purchase and Sale Agreement, unspecified damages in excess of ten thousand dollars, and other equitable relief.~~ As of December 4, 2020, the Company’s officers were dismissed from the case. The ~~Plaintiffs~~complaint ~~are~~sought ~~seeking~~ rescission of the Purchase and Sale Agreement, unspecified damages in excess of ten thousand dollars, and other equitable relief. See Note 17 for description of Legal Proceedings.

On September 15, 2020, the Company filed a notice of removal with the California Superior Court, County of Sacramento and the United States District Court for the Eastern District of California. The case was removed to Federal District Court for the Eastern District of California and Plaintiffs filed an Ex Parte Application for TRO and an Order for Preliminary Injunction with the Federal Court. The TRO was granted on September 16, 2020 and a preliminary injunction hearing was scheduled for September 29, 2020. After reviewing all pleadings and oral arguments at the hearing, the Court issued a ruling granting Plaintiffs’ request for a preliminary injunction.

~~The~~On ~~parties~~December ~~provided~~29,2022, ~~legal~~the ~~briefs~~Company toentered ~~the~~into ~~Federal~~a ~~court~~Settlement toAgreement ~~determine~~and ifMutual ~~rescission~~General ~~should~~Release be(“SAMGA”) ~~granted~~with Mr. ~~The~~ ~~Court~~Blackburn ~~did~~whereby: ~~not~~(i) ~~reach~~both aparties ~~decision~~agreed onto ~~this~~settle ~~issue,~~all disputes and ~~denied~~potential ~~without prejudice~~disputes, ~~the~~(ii) ~~Company’s~~EZ-CLONE ~~effort~~assumes toall ~~reverse~~obligations ~~the~~relating ~~preliminary~~to ~~injunction.~~the ~~The~~warehouse ~~Company~~lease, is(iii) ~~currently~~32.7% ~~reviewing~~of ~~whether~~the tostock ~~pursue~~held by the ~~matter~~Company ~~further~~was ~~and~~retired, ~~engaging~~(iv) ~~in settlement discussions~~3. If9% weof ~~are unsuccessful and~~ the ~~court~~stock ~~grants~~held ~~Plaintiffs’~~by ~~request for rescission~~ the ~~resulting~~Company ~~actions~~was ~~are~~transferred ~~speculative~~to atMr. ~~this~~Blackburn, ~~time~~and ~~but~~(v) ~~could include~~ the ~~return~~Company ofreceived ~~the~~anti-dilution ~~consideration~~rights ~~exchanged~~for asa ~~part~~period of ~~the~~five ~~acquisition~~years. ~~subject~~As toa ~~certain~~result, ~~adjustments as~~ the ~~result~~Company’s ofownership ~~several~~percentage ~~variables~~has ~~which~~decreased ~~the~~from ~~court~~51% ~~will~~to ~~consider~~19.6% Ifand ~~the~~Mr. ~~court~~Blackburn ~~denies~~ownership ~~Plaintiffs~~percentage ~~request~~has ~~for~~increased ~~rescission the~~from ~~litigation~~24.5% ~~will~~to ~~continue~~51%, ~~regarding~~and ~~the~~Mr. ~~breach~~Mickelsen ofownership ~~contract~~percentage ~~claims~~increased ~~and~~from ~~contractual~~24.%% ~~remedies~~to ~~for~~29.4%. ~~breach~~Mr. ~~and~~Mickelsen ~~the~~refused ~~Court~~to ~~may~~participate orin ~~may~~negotiating ~~not dissolve~~ the ~~preliminary injunction as a result~~SAMGA.

AOn ~~decision~~May to10, ~~grant~~2023, ~~rescission~~Mr. ~~could~~Mickelson ~~materially~~filed ~~harm~~a ~~our~~Motion ~~business~~for asSummary ~~EZ-CLONE~~Judgment ~~represents~~in athe ~~significant~~original ~~portion~~lawsuit against Growlife and the former CEO, seeking 100% of ~~our~~the ~~operations~~damages claimed for breach of contract, and is no longer pursuing recission. Growlife’s filed an Opposition on June 9, 2023. Growlife expects to prevail against the Motion and to ultimately defeat the claims in the complaint.

As of December 31, 2021 and 2020, the Company recorded a liability of $2,131,000 for acquisition payable of which a $1,105,000 is payable in stock and $1,026,000 is payable in cash.

As of March 4, 2019, the Company began to trade on the Pink Sheet stocks system. Our bid price had closed below $0.01 for more than 30 consecutive calendar days. As of March 17, 2020, the Company commenced trading on the OTCQB Market ("OTCQB") after successfully up-listing from the OTC Pink Market.

On November 5, 2021, the Company held its 2021 Annual Meeting of Stockholders, where stockholders approved an increase in the authorized shares of common stock (“Common Stock”) from 120,000,000 to 740,000,000 shares. As such, the Company filed a Certificate of Amendment of Certificate of Incorporation with the Secretary of State of the State of Delaware on November 8, 2021. As a result of the increase, 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.

F-On October 7, ~~Table~~2022, FINRA (the Financial Industry Regulatory Authority) announced the Reverse Stock Split of ~~Contents~~150-for-1 which was previously approved by the Company’s shareholders at the Company’s November 5, 2021 annual meeting of stockholders. All share and per share amounts have been adjusted in these condensed consolidated financial statements to reflect the effects of the reverse stock split.

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Table of Contents

NOTE 2 – GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred net losses from continuing operations of $54,~~472~~264,~~688~~732 and $65,~~379~~504,~~838~~876 for the years ended December 31, ~~2021~~2022 and ~~2020~~2021, respectively. Net cash used in operating activities from continuing operations was $1,~~462~~345,~~515~~808 and $1,~~950~~863,~~870~~007 for the years ended December 31, ~~2021~~2022 and ~~2020~~2021, respectively.

The Company anticipates that it will record losses from operations for the foreseeable future. As of December 31, ~~2021~~2022, the Company’s accumulated deficit was $~~160~~164,~~314~~796,~~038~~915. The Company has limited capital resources, and operations to date have been funded with the proceeds from private equity and debt financings. These conditions raise substantial doubt about our ability to continue as a going concern.

The Company believes that its cash on hand will be sufficient to fund our operations only until ~~May~~June 3115, ~~2022~~2023. The Company needs additional financing to implement our business plan and to service our ongoing operations and pay our current debts. There can be no assurance that we will be able to secure any needed funding, or that if such funding is available, the terms or conditions would be acceptable to us. If we are unable to obtain additional financing when it is needed, we will need to restructure our operations, and divest all or a portion of our business. We may seek additional capital through a combination of private and public equity offerings, debt financings and strategic collaborations. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, and could increase our expenses and require that our assets secure such debt. Equity financing, if obtained, could result in dilution to the Company’s then-existing stockholders and/or require such stockholders to waive certain rights and preferences. If such financing is not available on satisfactory terms, or is not available at all, the Company may be required to delay, scale back, eliminate the development of business opportunities and our operations and financial condition may be materially adversely affected.

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS

Basis of Presentation - The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”).

Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly owned and ~~majority-owned~~ subsidiaries. Inter-Company items and transactions have been eliminated in consolidation.

~~Sales~~Discontinue ~~Returns~~Operations - WeOn ~~allow~~December ~~customers~~29, to2022, ~~return~~the ~~defective~~Company ~~products~~completed ~~when~~the ~~they~~Settlement ~~meet~~and ~~certain~~Mutual ~~established~~Release ~~criteria~~of asa ~~outlined~~majority inof ~~our~~its ~~sales~~ownership ~~terms~~in ~~and conditions~~EZ-CLONE. ItThe isassets, ~~our~~liabilities ~~practice~~and toresults ~~regularly~~of ~~review~~the ~~and~~EZ-CLONE ~~revise,~~business ~~when~~and ~~deemed~~the ~~necessary,~~related ~~our~~cash ~~estimates~~flows ofhave ~~sales~~been ~~returns,~~reported ~~which~~as ~~are~~discontinued ~~based~~operations ~~primarily~~ on ~~actual~~the ~~historical~~accompanying ~~return~~Balance ~~rates.~~Sheet Weand ~~record~~in ~~estimated~~the ~~sales~~Consolidated ~~returns~~Statements asof ~~reductions~~Operations toand ~~sales,~~Consolidated ~~cost~~Statements of ~~goods~~Cash ~~sold~~Flows, ~~and~~respectively, ~~accounts~~through ~~receivable~~the ~~and~~date anof ~~increase~~sale. These changes have been applied to ~~inventory~~all periods presented. ~~Returned~~Unless ~~products~~otherwise ~~which~~noted, ~~are~~discussion ~~recorded~~within asthese ~~inventory~~notes ~~are~~to ~~valued~~the ~~based~~consolidated ~~upon~~financial ~~the~~statements ~~amount~~relates weto ~~expect~~continuing operations. Refer to ~~realize~~Note ~~upon~~4 ~~its~~for ~~subsequent~~additional ~~disposition.~~information on discontinued operations.

FCash and Cash Equivalents -8 ~~Table~~We classify highly liquid temporary investments with an original maturity of ~~Contents~~three months or less when purchased as cash equivalents. The Company maintains cash balances at various financial institutions. Balances at US banks are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk for cash on deposit. At December 31, 2022, the Company had no uninsured deposits.

~~Concentration~~F-7 Table of ~~Credit and Sales Risk -~~ Contents

The Company had the following concentrations of credit and sales risk-

Customers with over 10% of sales- the Company had two customers of EZ-CLONE that represented approximately 53% and 15% of consolidated revenue for the year ended December 31, 2021.

Customers with over 10% of outstanding accounts receivable- one customer totaling 84.9% and 88.8% as of December 31, 2021 and 2020, respectively.

Inventories - Inventories are recorded on a first in first out basis Inventory consists of raw materials, work in process and finished goods and components sold by EZ-CLONE to it distribution customers. The Company reviews its inventory on a periodic basis to identify products that are slow moving and/or obsolete, and if such products are identified, the Company records the appropriate inventory impairment charge at such time.

Long Lived Assets – The Company reviews its long-lived assets for impairment annually or when changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets under certain circumstances are reported at the lower of carrying amount or fair value. Assets to be disposed of and assets not expected to provide any future service potential to the Company are recorded at the lower of carrying amount or fair value (less the projected cost associated with selling the asset). To the extent carrying values exceed fair values, an impairment loss is recognized in operating results.

Intangible Assets – Intangible assets are capitalized and amortized on a straight-line basis over their estimated useful life, if the life is determinable. If the life is not determinable, amortization is not recorded. We regularly perform reviews to determine if facts and circumstances exist which indicate that the useful lives of our intangible assets are shorter than originally estimated or the carrying amount of these assets may not be recoverable. When an indication exists that the carrying amount of intangible assets may not be recoverable, we assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Such impairment test is based on the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Impairment, if any, is based on the excess of the carrying amount over the estimated fair value of those assets.

Goodwill - The Company reviews its acquired goodwill for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. In reviewing its goodwill, the Company performs a qualitative analysis to determine if it is more-likely-than-not that the goodwill is impaired. If the qualitative analysis indicates that goodwill is likely impaired, the Company calculates the fair value of its goodwill by allocating the fair value of the business unit containing the goodwill to all its tangible and intangible assets and liabilities, with the residual fair value allocated to goodwill. The excess, if any, of the goodwill carrying value in excess of its fair value would be recognized as an impairment loss. Management has concluded that, based on a qualitative analysis, it is more-likely-than-not that goodwill has not been impaired as of December 31, 2021 and 2020.

Level 1 – Quoted prices in active markets for identical assets and liabilities;

Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

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Derivative Financial Instruments –Pursuant to ASC 815 “Derivatives and Hedging”, the Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company then determines if embedded derivative must bifurcated and separately accounted for. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The variable conversion features of the Convertible Notes Payable and certain warrants are considered derivatives, see Note 12. For derivative financial instruments, the Company uses the Binomial pricing model to value the derivative instruments at inception and on subsequent valuation dates. The Company uses the following assumptions when using the model: (i) risk-free interest rate of 1%; (ii) expected life of one year; (iii) expected dividend of 0%; and (iv) expected volatility ranging from 140% – 184%. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.

In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). The amendment is meant to simplify the accounting for convertible instruments by removing certain separation models in subtopic 470-20 for convertible instruments. The amendment also changed the method used to calculate dilutes EPS for convertible instruments and for instruments that may be settled in cash. The amendment is effective for years beginning after December 15, 2023, with early adoption for years beginning after December 15, 2020 including interim periods for those fiscal years. The Company adopted ASU No. 2020-06 in the first quarter of 2022. The adoption did not have an impact on the Company’s financial statements.

Convertible Securities – Based upon ASC 815-15, we have adopted a sequencing approach regarding the application of ASC 815-40 to convertible securities issued subsequent to September 30, 2015. WeThe ~~will~~Company ~~evaluate~~evaluates ~~our~~its contracts based upon the earliest issuance date.

Net Loss Per Share - Under the provisions of ASC Topic 260, “Earnings per Share,” basic loss per common share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of the Company, subject to anti-dilution limitations. The common stock equivalents have not been included as they are anti-dilutive.

As of December 31, ~~2021~~2022, there are warrants for the purchase of ~~686~~7,~~666~~917,222 shares of common shares at a $10.64053 average exercise price. In addition, we have an unknown number of common shares to be issued under the convertible notes ~~with Bucktown and Silverback Capital~~ financing agreements and warrants because the number of shares ultimately issued depends on the price at which the holder converts its debt to shares and exercises its warrants. The lower the conversion or exercise prices, the more shares that will be issued to the holder upon the conversion of debt to shares. The Company will not know the exact number of shares of stock issued to the holder until the debt is actually converted to equity.

As of December 31, ~~2020~~2022, there were (i) no stock option grants outstanding ~~for the purchase of 506,667 common shares at an $1.496 average exercise price~~; and (ii) warrants for the purchase of 3 7,~~451~~917,~~737~~222 shares of common shares at a $20.~~428~~053 average exercise price. In addition, the Company ~~have~~has an unknown number of common shares to be issued under the ~~Crossover~~various ~~financing~~convertible ~~agreements~~debt infinancing ~~the case of default~~agreements. ~~In addition~~Also, ~~the~~certain ~~Company had an unknown number of common shares to be issued under the Chicago Venture, Iliad and St. George financing~~ agreements ~~because~~will ~~the~~allow ~~number~~for ~~of shares ultimately issued to Chicago Venture depends on the price at which Chicago Venture converts its debt to shares and exercises its warrants. The lower the~~ conversion orshould ~~exercise prices,~~ the ~~more~~Company ~~shares~~default ~~that~~on ~~will~~terms bein ~~issued to Chicago Venture upon~~ the ~~conversion of debt to shares~~agreements.

Dividend Policy - The Company has never paid any cash dividends and intends, for the foreseeable future, to retain any future earnings for the development of our business. Our future dividend policy will be determined by the board of directors on the basis of various factors, including our results of operations, financial condition, capital requirements and investment opportunities.

Use of Estimates - In preparing these consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates and assumptions included in our consolidated financial statements relate to the valuation of long-lived assets, estimates of sales returns, inventory reserves and accruals for potential liabilities, and valuation assumptions related to derivative liability, equity instruments and share based compensation.

~~Comprehensive~~F-9 ~~loss~~Table ~~– Comprehensive loss is defined as the change in equity~~ of ~~a business during a period from non-owner sources. There were no differences between net loss for the years ended December 31, 2021 and 2020 and comprehensive loss for those periods.~~Contents

Research and Development Expenses – There are no research and development expenses for the years ended December 31, 2021 and 2020, respectively.

F-10 Table of Contents

Recent Accounting Pronouncements

Right of Use Assets and Liabilities- ASU 2016-02, Leases (Topic 842), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are now classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations.

In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). The amendment is meant to simplify the accounting for convertible instruments by removing certain separation models in subtopic 470-20 for convertible instruments. The amendment also changed the method used to calculate dilutes EPS for convertible instruments and for instruments that may be settled in cash. The amendment is effective for years beginning after December 15, 2021, with early adoption for years beginning after December 15, 2020 including interim periods for those fiscal years. We are currently evaluating the impact of adoption this standard on the Company’s consolidated financial statements and related disclosures.

Based on the Company’s review of accounting standard updates issued , there have been no other newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a significant impact on the Company’s consolidated financial statements.

NOTE 4 –BUSINESS COMBINATIONS, ACQUISITION PAYABLE AND ~~OTHER~~DISCONTINUED ~~TRANSACTION~~ OPERATIONS

Acquisition and Disposition of EZ-CLONE Enterprises, Inc.

On October 15, 2018, the Company closed the Purchase and Sale Agreement with EZ-CLONE Enterprises, Inc. (“EZ-CLONE”), a California corporation (the “Agreement”). The total purchase price was $4 million of which $1,500,000 is payable in cash and $2.5 million payable in stock. At closing, we paid 51% of this amount totaling $2,040,000 via a (i) a cash payment of $645,000; and (ii) the issuance of 715,385 restricted shares of our common stock valued $1,395,000. The Agreement called for the Company, upon delivery of the remaining 49% of EZ-Clone stock, to acquire such stock within one year for $1,960,000, payable as follows: (i) a cash payment of $855,000; and (ii) the issuance of Company’s common stock at a value of $1,105,000.

On November 5, 2019, the Company amended the Agreement with one 24.5% shareholder of EZ-CLONE to extend the date to purchase the remaining 49% of stock of EZ-CLONE in exchange for a 20% extension fee (a total of $171,000 for the 49% or $85,500 for each 24.5% shareholder) of the $855,000 cash payable at the earlier of the closing of $2,000,000 in funding or nine months (July 2020). The Company did not close the purchase of the remaining 49% of stock of EZ-CLONE by the extended deadline.

As of December 31, 2021 and 2020, the Company has recorded a liability of $2,131,000 for acquisition payable of which a $1,105,000 is payable in stock and $1,026,000 is payable in cash.

This acquisition accelerated the Company’s revenue growth, increased the Company gross margins and added additional personnel.

The Company accounted for the acquisition in accordance with ASC 805, “Business Combinations”. ASC 805 defines the acquirer in a business combination as the entity that obtains control of one or more businesses in a business combination and establishes the acquisition date as the date that the acquirer achieves control. ASC 805 requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date.

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Table of Contents

For accounting purposes, from October 15, 2018 the Company consolidated EZ-Clone given their control and recorded its obligation to acquire the remaining interest in EZ-Clone. The Company considerd EZ-Clone to be 100% owned. At December 31, 2021 the Company has recorded $2,131,000 as a liability, $1,026,000 of which is due in cash and $1,105,000 is due in stock. Such amounts are included in the Current Liabilities of Discontinue Operations on the Balance Sheet at December 31, 2021.

Settlement Agreement with EZ-CLONE Enterprises, Inc.

On December 29, 2022, to avoid the costs, risks, and uncertainties inherent in litigation, the Company, EZ-CLONE and William Blackburn (collectively, the “EZ Parties”) entered into that certain Settlement Agreement and General Mutual Release (the “Settlement Agreement) whereby the Company and the EZ Parties agreed to settle, compromise, fully, and finally resolve all the disputes and potential disputes between them pursuant to the terms and conditions of the EZ Agreement. Among other things, the Company relinquished such number of shares such that the Company owns an aggregate number of EZ-CLONE shares less than 20% and in exchange EZ-CLONE assumed the obligations of the Company under the lease for the real property on which EZ-CLONE conducts its business. Both Parties agree that the terms of the Settlement Agreement are fair and equitable and that all such disputes, known or unknown, between them are forever discharged and extinguished. By agreement of the parties the Settlement Agreement is deemed performed and complete as of December 31, 2022. As a result of the Settlement agreement, the Company deconsolidated its investment in EZ-Clone, and recognized a gain on deconsolidation of $1.7 million. The gain on the deconsolidation was primarily the result of the derecognition of the $2.1 million owed in connection with the acquisition of EZ-CLONE. The Company now records its investment in EZ-CLONE using the cost method of accounting and has valued its minority interest at zero based on the projected operations in the foreseeable future and unlikely ability to liquidate the Company’s remaining investment interest.

Summarized Discontinue Operations Financial Information

The following table summarizes the major line items for the EZ-CLONE business that are included in the Consolidated Statements of Operations:

	For the Year Ended
	December 31, 2022			December 31, 2021
Net Revenue	$	1,638,540		$	6,199,089
Cost of goods sold		797,683			3,405,655
Gross Profit		840,857			2,793,434
Operating expenses		2,872,472			2,876,566
(Loss) from operations		(2,031,615	)		(83,132	)
Non-operating (income) expense		5,635			(137,927	)
Profit (loss) before income taxes		(2,037,250	)		54,795
Income taxes		(106,000	)		22,587
Net income (loss)	$	(1,931,250	)	$	32,208

The following table summarizes the major line items for the EZ-CLONE business that are included in the Consolidated Balance Sheet:

	Balance Sheet
	December 31, 2021
Current assets of discontinued operations:
Cash	$	357,588
Accounts Receivable, net		366,789
Inventory, net		1,299,560
Deposits and advances		179,995
		2,203,932
Non-current assets of discontinued operations
Fixed assets, net		249,906
Right of use asset		407,166
Intangible assets and goodwill		1,240,751
		1,897,823
Total Assets	$	4,101,755

Current liabilities of discontinued operations
Accounts payable	$	316,436
Accrued liabilities		802,930
Notes payable		298,151
Liability for acquisition of EZ-Clone		2,131,000
		3,548,517
Non-current liabilities of discontinued operations
Deferred income taxes		106,000
Right of use liability		229,222
		335,222
Total Liabilities	$	3,883,739
Net Assets	$	218,016

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Table of Contents

~~For~~NOTE ~~accounting purposes, from the October 15, 2018 the Company consolidated EZ~~5-~~Clone~~ ~~given~~ACCOUNTS their control and treated its obligation to acquire the remaining interest in EZ-Clone. The Company considers EZ-Clone considers EZ-Clone to be 100% owned. At December 31, 2020 and 2021 the Company has recorded $213,100 as a liability, $1,026,000 of which is due in cash and $1,105,000 is due in stock..PAYABLE

~~The~~Accounts ~~fair~~payable ~~value~~were ~~of the intangible assets associated with the assets acquired was~~ $2850,~~351~~619,~~000~~ ~~estimated~~and by$829,909 ~~using~~as aof December ~~discounted~~31, ~~cash~~2022 ~~flow~~and ~~approach~~2021, ~~based on future economic benefits~~respectively. InSuch ~~summary,~~liabilities ~~the~~consisted ~~estimate~~of ~~was~~amounts ~~based~~due onto avendors ~~projected~~for ~~income~~audit, ~~approach~~legal and ~~related~~other ~~discounted~~expenses ~~cash~~incurred ~~flows~~by ~~over five years, with applicable risk factors assigned to assumptions in~~ the ~~forecasted results~~Company.

NOTE 56- –ACCRUED ~~INVENTORY~~EXPENSES

~~Inventory~~Accrued expenses were $202,765 and $171,465 as of December 31, ~~2021~~2022 and ~~2020~~2021, respectively. Such liabilities consisted of ~~the~~amounts ~~following:~~due to sales tax, payroll and restructuring expense liabilities.

	December 31, 2021		December 31, 2020
Raw materials	$	723,834	$	456,723
Work in proess		375,083		83,792
Finished goods		183,318		26,557
Inventory deposits		17,325		3,452
	$	1,299,560	$	570,524

Inventory consist of supplies for product lines at EZ-CLONE.

NOTE 6 – PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2021 and 2020 consists of the following:

	December 31, 2021			December 31, 2020
Machinery, equipment and tooling	$	356,867		$	356,867
Computer equipment		16,675			16,675
Leasehold equipment		14,702			14,702
Automobile		157,728
Total	$	545,972		$	388,244
Less accumulated depreciation and amortization		(296,066	)		(258,914	)
Net property and equipment	$	249,906		$	129,330

Total depreciation expense was $37,152 and $37,152 for the years ended December 31, 2021 and 2020, respectively. All equipment is used for manufacturing, selling, general and administrative purposes and accordingly all depreciation is classified in cost of goods sold, selling, general and administrative expenses.

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Table of Contents

NOTE 7 –NOTES ~~INTANGIBLE ASSETS~~PAYABLE

~~Intangible~~Notes ~~assets~~Payable as of December 31,. ~~2021~~2022 ~~and 2020~~ consisted of the following:

	Estimated life		December 31, 2021				December 31, 2020
	Interest Rate				Principal				Accrued Interest		Discount			Balance
Customer lists	3.5 Years		$	1,297,000			$	1,297,000
Government Assistance Notes
Intellectual property	3.5 Years			1,054,000				1,054,000
Paycheck Protection Program		1%				362,500				10,117					372,617
Less accumulated amortization				(1,891,998	)			(1,220,282	)
Paycheck Protection Program		1%				337,050				6,585					343,635
			$	~~459,002~~	$	699,550	$	~~1,130,718~~	$	16,702				$	716,252
Goodwill	Indefinite		$	781,749			$	781,749
Promissory Notes
Total Intangibles and Goodwill			$	1,240,751			$	1,912,467
Promissory notes		5%				127,500				4,847					132,347
Coventry Enterprises 11-9-22		10%				250,000				3,144		(140,795	)		112,349
AJB Capital 12-29-22		10%				1,870,000				-		(236,800	)		1,633,200
					$	2,247,500			$	7,991	$	(377,595	)	$	1,877,896

Total amortization expense was $671,716 and $671,716 for the years ended December 31, 2021 and 2020, respectively.

	Interest Rate		Principal		Accrued Interest		Discount			Balance
Convertible Promissory Notes
Silverback 2-12-21		10%	$	995,130	$	117,520	$	-		$	1,112,650
Dublin Holdings 2-6-21		8%		491,643		1,080		-			492,723
Dublin Holdings 8-25-21		8%		335,000		38,616		-			373,616
Dublin Holdings 11-5-21		8%		225,000		21,899		-			246,899
1800 Diagonal 10-17-22		8%		88,000		622		(36,338	)		52,284
1800 Diagonal 11-14-22		8%		60,500		1,458		(27,791	)		34,167
Quick Capital 11-2-22		12%		95,556		1,898		(86,277	)		11,177
			$	2,290,829	$	183,093	$	(150,406	)	$	2,323,516

NOTE 8- LEASES

The Company previously entered into operating leases for warehouse and corporate facilities. These leases have terms which range from less than one to two years, and often include options to renew. These operating leases are listed as a separate line item on the Company's December 31, 2021 Consolidated Balance Sheet and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are also listed as separate line items on the Company's December 31, 2021 Consolidated Balance Sheet. As of December 31, 2021, total right-of-use assets and operating lease liabilities for remaining long-term lease was $407,166 and $427,137, respectively. During the years ended December 31, 2021 and 2020, the Company recognized approximately $232,524 and $222,984, respectively, in total lease costs for the lease.

Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments.

Cash paid for ROU operating lease liability amounted to $230,385 and $211,575 for the years ended December 31, 2021 and December 31, 2020, respectively.

Minimum future lease payments as of December 31, 2021

Year ended	Amount
December 31, 2022	$	232,741
December 31, 2023		236,352
	$	469,093
Imputed interest using 10%		(41,956	)
Right of Use Liability	$	427,137

NOTE 9- ACCOUNTS PAYABLE

Accounts payable were $1,146,344 and $1,146,195 as of December 31, 2021 and 2020, respectively. Such liabilities consisted of amounts due to vendors for inventory purchases, audit, legal and other expenses incurred by the Company.

NOTE 10- ACCRUED EXPENSES

Accrued expenses were $219,398 and $2,592,251 as of December 31, 2021 and 2020, respectively. Such liabilities consisted of amounts due to sales tax, payroll and restructuring expense liabilities. On April 5, 2021, the Company entered into a Warrant Settlement Agreement dated March 31, 2021 with St. George and Iliad to resolve a dispute regarding prior financings. The Company entered into a joint warrant settlement agreement with St. George and Iliad to resolve a dispute regarding prior financings wherein St. George and Iliad agreed once they have exercised the warrants for an aggregate 14,250,000 shares of stock valued at approximately $2,423,000, the balance of the warrant would be cancelled so long as the Company has increased its authorized common stock. This amount was adjusted in 2021 due to the fair value of the stock resulted in a gain (reversal of original amount recorded as a loss/liability) of $1,025,000.

F-13 Table of Contents

NOTE 11 –NOTES PAYABLE

Notes Payable as of December 31, 2021 consisted of the following:

	Inteerest Rate			Principal		Accrued Interest		Balance
	Interest Rate			Principal		Accrued Interest		Balance
Government Assistance Notes
Economic Injury Disaster Loan (EZC)		3.75	%	$	149,900	$	10,524	$	160,424
Economic Injury Disaster Loan (GLI)		3.75%			149,900		15,652		165,552
Economic Injury Disaster Loan (GLI)		3.75	%		149,900		15,652		165,552
Paycheck Protection Program		1%			362,500		6,350		368,850
Paycheck Protection Program		1%	%		~~362~~337,~~500~~050		63,~~350~~118		~~368~~340,~~850~~168
Paycheck Protection Program		1	%		337,050		3,118		340,168
				$	849,450	$	25,120	$	874,570
				$	999,350	$	35,644	$	1,034,994
Amortizing Promissory Note
Secured Promisory Note
First Fire		12%			12,141		976		13,117
Coomercial Bank		3.44	%	$	137,728	$	-	$	137,728
				$	12,141	$	976	$	13,117

	Inteerest Rate			Principal		Accrued Interest		Discount		Balance
Convertible Promissory Notes
Convertible Promisory Notes
Silverback 2-12-21		10%		$	995,130	$	212,169	$	1,207,299
Bucktown 2-6-21		8	%	$	780,791	$	10,303	$	-	$	791,094
Dublin Holdings 2-6-21		8%			780,791		10,303		791,094
Silverback 2-12-21		10	%		1,125,118		82,308		-		1,207,426
Dublin Holdings 8-25-21		8%			335,000		9,511		344,511
Bucktown 8-25-21		8	%		335,000		9,511		-		344,511
Dublin Holdings 11-5-21		8%			225,000		2,666		227,666
Bucktown 11-5-21		8	%		225,000		2,665		-		227,665
				$	2,335,921	$	234,649	$	2,570,570
				$	2,465,909	$	104,788	$	-	$	2,570,697
Amortizing Promisory Note
First Fire		12	%		12,141		978		-		13,119
				$	2,478,050	$	105,766	$	-	$	2,583,816

~~Notes~~F-13 ~~payable~~Table as of ~~December 31, 2020 consisted of the following:~~Contents

	Inteerest Rate			Principal		Accrued Interest		Balance
Government Assistance Notes
Economic Injury Disaster Loan (EZC)		3.75	%	$	149,900	$	3,075	$	152,975
Economic Injury Disaster Loan		3.75	%		149,900		3,001		152,901
Paycheck Protection Program		1	%		362,500		2,638		365,138
Paycheck Protection Program (EZC)		1	%		203,329		1,371		204,700
				$	865,629	$	10,085	$	875,714
Less long-term portion									485,679
Current portion of Government Assistance Notes								$	390,035
Parties related to EZC founders				$	49,144	$	-	$	49,144

F-14 Table of Contents

	Inteerest Rate			Principal		Accrued Interest		Discount			Balance
Convertible Promisory Notes
Iliad 8-17-18		10	%	$	250,637	$	319,982				$	570,619
Odyssey 7-22-19		10	%	$	390,000	$	59,595				$	449,595
CVP 1-29-20		10	%	$	555,000	$	50,088				$	605,088
Silverback 9-1-20 (from Iliad)		10	%		140,146		585					140,731
Silverback 11-18-20 (from Iliad)		10	%		117,380		1,894					119,274
PowerUp Lending Group		12	%		253,000		5,888		(13,912	)		244,976
				$	1,706,163	$	438,032	$	(13,912	)	$	2,130,283
Amortizing Promisory Note
Labrys		12	%		592,144		986		(454,430	)		138,700
EMA		12	%		221,000		6,030		(87,535	)		139,495
First Fire		12	%		156,602		3,964		(73,891	)		86,675
				$	2,675,909	$	449,012	$	(629,768	)	$	2,495,153

Government Assistance Notes Payable

On April 17, 2020, the Company received $362,500 under the Paycheck Protection Program of the U.S. Small Business Administration’s (SBA) 7(a) Loan Program pursuant to the Coronavirus, Aid, Relief and Economic Security Act (CARES Act), Pub. Law 116-136, 134 Stat. 281 (2020). The interest rate is one percent (1%). At December 31, ~~2021~~2022 and December 31, ~~2020~~2021, the Company recorded interest expense of $3,712 and $2,638, respectively. The loan iswas due April 2022. The Company is utilizing the funds in accordance with the legal requirements and expects this loan to be forgiven ~~during 2022~~.

On ~~May~~June 719, 2020, ~~EZ-CLONE~~the Company received two loans totaling $~~203~~149,~~329~~900 under the ~~Paycheck~~Economic ~~Protection~~Injury Disaster Loan Program of the U.S. Small Business Administration’s 7(a) Loan Program pursuant to the Coronavirus, Aid, Relief and Economic Security Act (CARES Act), Pub. Law 116-136, 134 Stat. 281 (2020). ~~The~~Repayment ~~interest~~terms ~~rate~~on isthe ~~one~~loans ~~percent~~are ~~(1%).~~monthly Atprincipal ~~December~~and ~~31,~~interest ~~2021~~totaling ~~and~~approximately ~~December 31~~$1,392 ~~2020,~~over ~~the~~a ~~Company~~30-year ~~recorded~~term ~~interest~~at ~~expense~~3.75%. ofIn $1addition,~~587~~ ~~and~~the ~~$1,371,~~loan ~~respectively.~~contains ~~The~~a ~~loan~~12-month ispayment ~~due~~deferral ~~April~~beginning ~~2022.~~on ~~The~~the ~~Company~~loan isdate. ~~utilizing~~There ~~the~~is ~~funds~~no inprepayment ~~accordance~~penalty ~~with~~on the ~~legal~~EIDL ~~requirements~~loans. This loan plus accrued interest was forgiven inon ~~October~~February ~~2021~~1, 2022.

On ~~June~~February 193, ~~2020~~2021, the Company, ~~including its EZ-CLONE subsidiary,~~ received ~~two loans totaling~~ $~~299~~337,~~800~~050 under the ~~Economic~~Paycheck ~~Injury~~Protection ~~Disaster Loan~~ Program of the U.S. Small Business Administration’s (SBA) 7(a) Loan Program pursuant to the Coronavirus, Aid, Relief and Economic Security Act (CARES Act), Pub. Law 116-136, 134 Stat. 281 (2020). ~~Repayment~~The ~~terms on the loans are monthly principal and~~ interest ~~totaling~~rate ~~approximately~~is ~~$1,392~~one ~~over~~percent ~~a 30-year term at 3.75~~(1%). InAt ~~addition~~December 31, 2022, the ~~loan~~Company ~~contains~~recorded ainterest ~~12-month~~expense ~~payment~~of ~~deferral~~$3,113 ~~beginning~~at on1%. ~~the~~The loan ~~date. There~~ is nodue ~~prepayment~~February ~~penalty on the EIDL loans~~2023. AtThe ~~December~~Company ~~31,~~is ~~2021~~utilizing ~~and~~the ~~December~~funds ~~31,~~in ~~2020,~~accordance with the ~~Company~~legal ~~recorded~~requirements ~~interest~~and ~~expense~~expects ofthis ~~$11,856~~loan ~~and~~to ~~$7,152,~~be ~~respectively~~forgiven.

OnPromissory February 3, 2021, the Company received $337,050 under the Paycheck Protection Program of the U.S. Small Business Administration’s (SBA) 7(a) Loan Program pursuant to the Coronavirus, Aid, Relief and Economic Security Act (CARES Act), Pub. Law 116-136, 134 Stat. 281 (2020). The interest rate is one percent (1%). At December 31, 2021, the Company recorded interest expense of $3,113 at 1%. The loan is due February 2023. The Company is utilizing the funds in accordance with the legal requirements and expects this loan to be forgiven during 2023. Notes

Promissory Notes

At December 31, 2022 the Company had outstanding unsecured borrowings from three individuals which total $127,500. The Notes carry an interest rate of five percent (5%) per annum.

Coventry Enterprises LLC

On November 9, 2022, the Company entered into the following agreements with Coventry Enterprises LLC: (i) Securities Purchase Agreement; and (ii) Promissory Note. The total amount of the Note is $250,000; the Note carries an aggregate original issue discount of $50,000. Additionally under the Securities Purchase Agreement the Company agreed to issue 200,000 shares of Common Stock and 1,800 shares of Preferred Stock which is convertible into 1,800,000 shares of Common Stock (the “Commitment Shares”) to the Investor as additional consideration for the Note. The Note carries an interest rate of ten percent (10%) per annum and matures on November 9, 2023. Upon default by the Company the interest rate increases to eighteen percent (18%). Upon default by the Company, the Note is convertible by Coventry into the Company’s common stock at ninety percent (90%) of the lowest trading price during the previous twenty trading days. The Note requires monthly payments of $39,286 commencing April 9, 2023 and ending November 9, 2023

AJB Capital Investments LLC

On May 17, 2022, the Company entered into the following agreements with AJB Capital Investments LLC: (i) Securities Purchase Agreement; and (ii) Promissory Note; (iii) Common Stock Purchase Warrant; and (iv) Security Agreement. The total amount of the Note is $750,000; the Note carries an aggregate original issue discount of $75,000 and transaction expenses of $56,000. The Note carries an interest rate of ten percent (10%) per annum and matures on November 17, 2022. Should the Note be extended at that time the interest rate increases to fifteen percent (15%). Upon default by the Company, the Note is convertible by AJB Capital into the Company’s common stock at the lesser of the lowest trading price during the previous twenty trading days either (i) ending on the date of conversion of the Note or (ii) the date of the Note. In connection with executing the Note the Company issued 50,000 shares of its common stock as an initial commitment fee. Should the Note be extended, the Company was obligated to issue an additional 33,333 shares as an extension commitment fee. The Warrant agreement allows for AJB to purchase 6,000,000 shares at $0.05 per share and has a five-year term. The Company recorded an original issue discount of approximately $519,250 related to the original issue discount, shares issued and warrants. This Note was refinanced with AJB on December 29, 2022.

On September 28, 2022, the Company entered into the following agreements with AJB Capital Investments LLC: (i) Securities Purchase Agreement; and (ii) Promissory Note; and (iii) Security Agreement. The total amount of the Note is $220,000; the Note carries an aggregate original issue discount of $20,000 and transaction expenses of $5,000. The Note carries an interest rate of ten percent (10%) per annum and was to mature on May 28, 2023. Should the Note be extended at that time the interest rate increases to fifteen percent (15%). Upon default by the Company, the Note is convertible by AJB Capital into the Company’s common stock at the lesser of the lowest trading price during the previous twenty trading days either (i) ending on the date of conversion of the Note or (ii) the date of the Note. In connection with executing the Note the Company issued 53,333 shares of its common stock as an initial commitment fee. Proceeds from the Note in the amount of $151,048 were used to pay off the outstanding balance due 1800 Diagonal. This Note was refinanced with AJB on December 29,2022.

On December 29, 2022, the Company entered into the following agreements with AJB Capital Investments LLC: (i) Securities Purchase Agreement; and (ii) Promissory Note; and (iii) Security Agreement. The total amount of the Note is $1,870,000; the Note carries an aggregate original issue discount of $168,300 and transaction expenses of $30,000. The Note carries an interest rate of ten percent (10%) per annum and matures on June 29, 2024. Should the Note be extended at that time the interest rate increases to fifteen percent (15%). Upon default by the Company, the Note is convertible by AJB Capital into the Company’s common stock at the lesser of the lowest trading price during the previous twenty trading days either (i) ending on the date of conversion of the Note or on (ii) the date of the Note. In connection with executing the Note the Company issued 700,000 shares of its common stock as an initial commitment fee. $970,000 of this Note was used to replace the Notes dated May 17 and September 28, 2022. $580,000 of this Note was used to repurchase the 50,000 and 53,333 commitment shares issued in obtaining the May 17 and September 28, 2022 Notes per those Securities Purchase Agreements. Such repurchased shares were cancelled. The Company expensed the $580,000 as additional interest expense in recording this Note as debt issuance costs related the May and September AJB Note Agreements. The Note requires monthly payments as follows: (i) $15,583 from February through June 2023, (ii) $115,759 from July 2023 through January 2024, and (iii) $230,750 from February through June 2024.

F-14

Table of Contents

Convertible Promissory Notes

Chicago Venture Partners, L.P.

Funding from Chicago Venture Partners, L.P. (“Chicago Venture” or “CVP”), Iliad Research and Trading, L.P. (“Iliad”) and Odyssey Research and Trading, LLC, (“Odyssey”). The Company typically issues original issuance discount notes with these parties that has a stated interest rate of typically 10%. Accrued interest represents the interest to be accreted over the remaining term of the notes. These notes contain terms and conditions that are deemed beneficial conversion features and the Company recognizes a derivative liability related to these terms until the notes are converted. Upon the conversion of these notes, the Company records a loss on debt conversion and reduces their derivative liability. The notes may be converted to common stock after six months until they are converted.

F-15 Table of Contents

On April 5, 2021, the Company finalized a a joint Warrant Settlement Agreement with St. George Investments LLC (“St. George”) and Iliad Research and Trading, L.P. (“Iliad”) to resolve a dispute related the calculation of shares issuable under warrants issued in prior financings. In the Warrant Settlement Agreement, in exchange for certain covenants by the Company, St. George and Iliad agreed that upon the exercise of its warrant of up to 14,250,000 shares of the Company’s common stock they would cancel the balance of the warrant related to a February 9, 2018, subscription agreement. The Company recorded a loss on debt settlement of $2,423,000 for the year ended December 31, 2020 and accrued a liability for the future issuance of shares. During 2021, the Company issued the 14,250,000 shares of common stock in connection with the warrant settlement. The Company recognized a gain on settlement of $1,025,400 in 2021 when the fair value of the common shares issued were based on the stock price on the date of settlement.

As of December 31, 2020, the outstanding principal balance due to Chicago Venture, Iliad and Odyssey was $1,195,637 and accrued interest was $429,665 which results in a total amount of $1,625,302.

During the year ended December 31, 2020, Chicago Venture and Iliad converted principal and accrued interest of $600,000 into 4,882,919 shares of our common stock at a per share conversion price of $0.123 with a fair value of $1,006,518. The Company recognized $287,466 loss on debt conversions during the year ended December 31, 2020.

Odyssey Research and Trading, LLC, (“Odyssey”)

On July 23, 2019, the Company executed the following agreements with Odyssey: (i) Securities Purchase Agreement; (ii) Secured Promissory Notes; and (iii) Security Agreement (collectively the “Odyssey Agreements”). The Company entered into the Odyssey Agreements with the intent to acquire working capital to grow the Company’s businesses.

The total amount of funding under the Odyssey Agreements is $1,105,000. The Convertible Promissory Note carries an original issue discount of $100,000 and a transaction expense amount of $5,000, for total debt of $1,105,000. As of December 31, 2020 the principal balance owed Odyssey is $390,000. The Company agreed to reserve three times the number of shares based on the redemption value with a minimum of 3,333,334 shares of its common stock for issuance upon conversion of the Debt, if that occurs in the future. The Debt carries an interest rate of ten percent (10%). The Debt is convertible, at Odyssey’s option, into the Company’s common stock at $1.50 per share subject to adjustment as provided for in the Secured Promissory Notes.

Labrys Fund L.P.

On August 31, 2020, the Company executed the following agreements with Labrys: (i) Securities Purchase Agreement; and (ii) Self-Amortization Promissory Note for $750,000 (“Note”); (collectively the “Labrys Agreements”). The Company entered into the Labrys Agreements with the intent to acquire working capital to grow the Company’s businesses and complete the EZ-CLONE Enterprises, Inc. acquisition.

The total amount of funding received under the Labrys Agreements, after deducting the $75,000 original issue discount and $42,250 of fees was $632,750. The Note required a payment of $250,000 on November 30, 2020, and $51,042 at each month end from December 2020 through November 30, 2021. The Company issued commitment shares of 1,662,000 shares related to the Labrys Agreement and the value of such shares are being treated as a discount and being amortized over the term of the note. The Debt was due on or before November 30, 2021. The Debt carried an interest rate of twelve percent (12%). Upon an event of default as defined in the agreement, the Debt was convertible into the Company’s common stock at the closing price the day before the conversion, subject to adjustment as provided for in the Note. The Company agreed to reserve 5,043,859 shares of its common stock for issuance if any Debt is converted.

Labrys Fund Amendment #2

On November 30, 2020, the Company entered into Amendment No. 2 of the Self-Amortization Promissory Note (“Amendment No. 2”) amendment that certain Self-Amortization Promissory Note originally issued by the Company to Labrys on August 31, 2020 (the “Note”). Amendment No. 2 included the following amendments to the Note:

1. The Company issued 550,000 restricted shares of the Company’s common stock (the “Amendment Shares”) to the Holder on or before December 2, 2020, and the value of such shares are being amortized as a debt discount through the remaining term of the note.

2. The first Amortization Payment (as defined in the Note) of $250,000 originally due on November 30, 2020, shall instead be due as follows: $125,000 was paid by December 3, 2020, and $125,000 is due on or before December 31, 2020.

Labrys Fund Amendment #3

On December 31, 2020, the Company entered into Amendment No. 3. Pursuant to Amendment No. 3 the Company issued 340,000 restricted shares of the Company’s common stock (the “Amendment Shares”) and issued a common stock purchase warrant for the purchase of 1,033,057 shares of the Company’s common stock (the “Warrant”). The value of the Amendment shares, and the Warrant are being amortized as a debt discount through the remaining term of the note. In exchange for the Warrant and Amendment Shares, the outstanding payment of $125,000 owed on or before December 31, 2020 (as described in Amendment No. 2) (“Outstanding Payment”), was amended so that no payment was required and that the future monthly payments beginning in January 2021 through November 30, 2022, have been increased to $61,458 from $51,042. This Note was assumed by Silverback in 2021.

F-16 Table of Contents

EMA Financial LLC

On October 2, 2020, the Company executed the following agreements with EMA Financial LLC : (i) Securities Purchase Agreement; and (ii) Self-Amortization Promissory Note for $221,000 (“Note”). The Note has an interest rate of twelve percent (12%). The Company made monthly payments in the amount of $19,550. The final payment was made on December 30, 2021.

FirstFire Global Opportunities Fund, LLC

On October 2, 2020, the Company executed the following agreements with FirstFire Global Opportunities Fund, LLC: (i) Securities Purchase Agreement; and (ii) Self-Amortization Promissory Note for $156,600 (“Note”). The Note has an interest rate of twelve percent (12%). The Company made monthly payments in the amount of $13,851. The final payment was made on January 12, 2022.

Silverback Capital Corporation

During 2020 Silverback Capital Corporation (“Silverback”) purchased from Iliad $993,855 of Iliad’s outstanding note balance with the Company. During the year ended December 31, ~~2020~~2021, Silverback Capital Corporation converted principal and accrued interest of $746,632 into 9,510,000 shares of our common stock at an average per share conversion price of $0.0757. The Company recognized $447,324 loss on Silverback debt conversions during the year ended December 31, ~~2020~~2021.

During the three months ended March 31, 2021, Silverback purchased all of the remaining outstanding notes the Company had with Chicago Ventures, Iliad and Odyssey of $1,139,182. Silverback assumed the terms of the original notes. On March 16, 2021, the Company executed the following agreements with Silverback: (i) Securities Purchase Agreement; and (ii) Convertible Promissory Note for $165,000.

The 10% Notes are convertible at the holder’s option into the Company’s common stock at 65% of the lower of $1.35 or the current fair market value of the stock. During the year ended December 31, ~~2021~~2022, Silverback converted ~~principal~~principle and interest of $2524,~~217,916~~938 into 403,~~223~~277,000 shares of our common stock at an average per share conversion price of $0.~~055~~16. ~~The Company recognized $2,442,903 loss on Silverback debt conversions during the year ended December 31, 2021.~~

~~Power~~Bucktown UpCapital ~~Lending~~LLC/Dublin ~~Group Ltd.~~Holdings

AsOn ofFebruary ~~the beginning of 2020~~26, ~~the Company owed Power Up Lending Group Ltd (“Power Up”) $281~~2021,~~600.~~ ~~During 2020~~ the Company ~~entered~~executed an additional $199,100 of convertible notes which were settled by year end. These $480,700 of notes were settled when $395,700 of notes were converted to common stock and a cash payment of $85,000 was made. As of December 31, 2020 the following ~~Power~~agreements ~~Up convertible notes that the Company also entered into~~ with ~~Power~~Bucktown UpCapital onLLC ~~July~~(“Bucktown”): ~~13,~~(i) ~~2020,~~Securities ~~November~~Purchase ~~30,~~Agreement; ~~2020,~~(ii) ~~and~~Secured ~~December~~Convertible 8,Promissory ~~2020~~Note; ~~for $253,000 to fund short-term working capital were still outstanding The Notes accrue interest at a rate of 12% per annum~~ and ~~became~~(iii) ~~due~~Security inAgreement ~~one~~(collectively ~~year~~the ~~and~~“Bucktown ~~are convertible into common stock at 75% of market value after six months~~Agreements”). ~~The Company received cash of $220,000 under these three notes after deducting original issue discount and fees.~~

~~During~~F-15 ~~the~~Table ~~year ended December 31, 2021, Power Up converted principal~~ of $84,680 into 1,039,018 shares of our common stock at a per share conversion price of $0.082. The Company recognized a loss on the conversion of $87,698 which represents the difference between the closing price of the shares and the exercise price.Contents

Bucktown Capital LLC

On February 26, 2021, the Company executed the following agreements with Bucktown Capital LLC (“Bucktown”): (i) Securities Purchase Agreement; (ii) Secured Convertible Promissory Note; and (iii) Security Agreement (collectively the “Bucktown Agreements”). The Company entered the Bucktown Agreements with the intent to acquire working capital to grow the Company’s businesses and to repay all outstanding obligations owed to: (i) Labrys in the amount of $615,333; and (ii) Power Up in the amount of $128,858.

F-17 Table of Contents

The total amount of funding under the Bucktown Agreements is $3,088,000 as represented in the Secured Convertible Promissory Note (“Note”). The total purchase price for this Note is $2,850,000; the Note carries an aggregate original issue discount of $228,000 and a transaction expense amount of $10,000. The Note is comprised of two (2) tranches (each, a “Tranche”), consisting of (i) an initial Tranche in an amount equal to $928,000 and any interest, costs, fees or charges accrued thereon or added thereto under the terms of the Note and the Bucktown Agreements (the “Initial Tranche”), and (ii) an additional Tranche, which is exclusively dedicated for the purchase of the remaining equity interest in EZ-CLONE, in the amount of $2,160,000.00, plus any interest, costs, fees or charges accrued thereon or added thereto under the terms of the Note and the Bucktown Agreements (the “Subsequent Tranche”). The Initial Tranche shall correspond to $68,000 of the OID and the Transaction Expense Amount and may be converted into shares of Common Stock at any time after the Purchase Price Date. The Subsequent Tranche corresponds to the Investor Note and $160,000 of the aggregate OID. The Bucktown Agreement limits the shares to be held at any time not to exceed 9.9% of the Company’s outstanding shares.

The Company agreed to reserve three times the number of shares based on the redemption value with a minimum of 23,340,000 shares of its common stock for issuance upon conversion of the Note, if that occurs in the future. If not converted sooner, the Note is due on or before February 26, 2022. The Note has an interest rate of eight percent (8%). The Note is convertible, at Bucktown’s option, into the Company’s common stock at $0.30 per share (“Lender Conversion Price”), subject to adjustment as provided for in the Note. However, in the event the Market Capitalization (as defined in the Note) falls below the Minimum Market Capitalization the Lender Conversion Price shall equal the lower of the Lender Conversion Price and the Market Price as of any applicable date of Conversion.

On August 25, 2021, and on November 5, 2021, the Company entered into the following agreements with Bucktown: (i) Securities Purchase Agreements; (ii) Secured Convertible Promissory Notes; and (iii) Security Agreements. The total amount for these Notes is $560,000; the Note carries an aggregate original issue discount of $50,000 and a transaction expense amount of $10,000. The Notes have an interest rate of eight percent (8%). The Note is convertible, at Bucktown’s option, into the Company’s common stock at $0.10 per share (“Lender Conversion Price”), subject to adjustment as provided for in the Note. However, in the event the Market Capitalization (as defined in the Note) falls below the Minimum Market Capitalization the Lender Conversion Price shall equal the lower of the Lender Conversion Price and the Market Price as of any applicable date of Conversion.

~~During~~On ~~the~~June ~~year ended December 31~~30, ~~2021,~~2022 ~~Bucktown~~Dublin ~~converted~~Holdings ~~principal~~assumed ofthe ~~$200,000~~three ~~into~~notes ~~8,583,691~~from ~~shares of our common stock at a per share conversion price of $0~~Bucktown.~~023.~~ The ~~Company~~were ~~recognized~~no onchanges ~~loss~~to onany ~~the conversion~~ of ~~$117,597 which represents~~ the ~~difference~~debt ~~between the closing price of the shares and the exercise price~~agreements.

During the year ended December 31, 2022, Bucktown/Dublin converted principal of $347,500 into 1,609,466 shares of our common stock at a per share conversion price of $0.216.

The Company’s obligation to pay the Notes, or any portion thereof, are secured by all the Company’s assets.

~~NOTE~~1800 12Diagonal –Lending ~~DERIVATIVE~~LLC ~~LIABILITY~~

~~The~~On October 17, 2022, and on November 11, 2022, the Company entered into the following agreements with 1800 Diagonal Lending LLC: (i) Securities Purchase Agreements; and (ii) Convertible Promissory Notes. ~~payable~~The ~~include~~total ~~a conversion~~amount ~~feature~~for ~~that~~these ~~pursuant~~Notes ~~ASC~~is ~~815~~$148,500; ~~“Derivatives~~the Note carries an aggregate original issue discount of $13,500 and ~~Hedging”~~a transaction expense amount of $7,000. ~~has~~The ~~been~~Notes ~~identified~~are asdue one year from the issuance date. The Notes have an ~~embedded~~interest ~~derivative~~rate ~~financial~~of ~~instrument~~eight ~~and~~percent ~~which~~(8%). Upon default by the Company ~~accounts~~the ~~for~~interest ~~under~~rate increases to twenty-two percent (22%). After six months from the ~~fair~~issue ~~value~~date, ~~method~~the Notes are convertible, at 1800 Diagonal’s option, into the Company’s common stock at seventy-five percent (75%) of ~~accounting.~~the average of the lowest three days closing price over the prior fifteen trading days.

IfQuick ~~the~~Capital conversion features of conventional convertible debt provide for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (BCF). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20. Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method. The debt is convertible at range of 75% to 65% of the fair value of the Company’s common stock requiring the conversion feature to be bifurcated from the host debt contract and accounting for separately as a derivative, resulting in periodic revaluations. The notes underlying the derivatives are short term in nature and generally converted to stock in less than one year. The derivative is valued at period end with the key inputs being current stock price and the conversion feature. LLC

~~There~~On ~~was~~November a2, ~~derivative~~2022, ~~liability~~the ofCompany $2entered into the following agreements with Quick Capital LLC: (i) Note Purchase Agreement,~~583~~ (ii) Convertible Promissory Note,~~816~~ and (iii) Common Stock Purchase Warrant. The total amount for this Note is $195,~~101,436~~555; asthe ofNote ~~December~~carries ~~31,~~an ~~2021~~aggregate original issue discount of $9,555. and ~~December~~a 31transaction expense amount of $11,000. ~~2020~~Additionally under the Note Purchase Agreement the Company agreed to issue 100,000 ~~respectively~~shares of Common Stock (the “Commitment Shares”) to the Investor as additional consideration for the Note. ~~For~~The Note is due eight months from the ~~year~~issuance ~~ended~~date. The ~~December~~Note ~~31,~~has ~~2021~~an ~~and~~interest ~~December~~rate ~~31,~~of ~~2020,~~twelve percent (12%). Upon default by the Company ~~recorded~~the ~~non~~interest rate increases to twenty-~~cash~~four ~~income~~percent of(24%). The ~~$973,101 and~~Note ~~$199~~is convertible,~~479,~~ ~~respectively~~at Quick Capital’s option, ~~related~~into tothe Company’s common stock at the ~~“change~~lower inof ~~fair~~$0.06 ~~value~~or seventy-five percent (75%) of ~~derivative”~~the ~~expense~~average ~~related~~of tothe lowest two days closing price over the ~~convertible~~prior ~~note~~fifteen ~~financing~~trading days. ~~These~~Upon ~~were~~default by the ~~only~~Company ~~changes~~the inconversion ~~level~~price 3is ~~fair~~adjusted ~~value~~to ~~instruments~~$0.03 ~~during~~per ~~such~~share. ~~periods~~The Warrant agreement allows for Quick Capital to purchase 1,911,111 shares at $0.05 per share and has a five-year term.

~~F-18~~NOTE ~~Table~~8 of– ~~Contents~~DERIVATIVE LIABILITIES

~~Derivative~~The ~~liability~~Convertible Notes payable include a conversion feature that pursuant ASC 815 “Derivatives and Hedging”, has been identified as an embedded derivative financial instrument and which the Company accounts for under the fair value method of ~~December~~accounting. 31In additions, ~~2021~~certain ~~was~~warrants issued by the Company also meet the criteria that requires them to be accounted for as ~~follows:~~derivative liabilities.

Balance, December 31, 2020	$	1,101,436
Additions		1,402,519
Conversions		(1,778,784	)
Change in fair value		973,101
Balance, December 31, 2021	$	1,698,272

Certain convertible notes payable convert at a discount to the market price of common stock. In addition, for many of these notes the exercise price of the embedded conversion feature are adjustable based upon issuances of other securities with lower purchase price. As a result, management has deemed that these embedded conversion features meet the requirements to be accounted as derivatives. The debt is convertible at range of 75% to 50% of the fair value of the Company’s common stock requiring the conversion feature to be bifurcated from the host debt contract and accounting for separately as a derivative, resulting in periodic revaluations. The notes underlying the derivatives are short term in nature and generally converted to stock in less than one year. The derivative is valued at period end with the key inputs being current stock price and the conversion feature.

~~NOTE~~There 13was –a ~~RELATED~~derivative ~~PARTY~~liability ~~TRANSACTIONS~~of ~~AND~~$2,336,892 ~~CERTAIN~~and ~~RELATIONSHIPS~~$1,698,272 as of December 31, 2022 and December 31, 2021, respectively. For the year ended December 31, 2022 and December 31, 2021, the Company recorded non-cash expense of $997,845 and $973,101, respectively, related to the “change in fair value of derivative” expense related to the convertible note financing.

F-16

Table of Contents

Derivative liabilities for the year ended was as follows:

	For the Year Ended
	December 31, 2022			December 31, 2021
Balance, Beginning of Year	$	1,698,272		$	1,101,436
Additions		687,020			1,402,519
Conversions		(1,046,245	)		(1,778,784	)
Change in fair value		1,347,845			973,101
Balance, End of Year	$	2,686,892		$	1,698,272

NOTE 9 – RELATED PARTY TRANSACTIONS AND CERTAIN RELATIONSHIPS

Certain Relationships

Please see the transactions with Chicago Venture Partners, L.P. discussed in Notes 11 and 14.

Transactions with Marco Hegyi

On October 21, 2018, a 5-year Warrant for Mr. Hegyi to purchase up to 66,666 shares of our common stock at an exercise price of $1.50 per share vested. The warrant was valued at $390,000 and we recorded $178,750 as compensation expense for the year ended December 31, 2018. On October 15, 2018, Mr. Hegyi received Warrants to purchase up to 320,000 shares of the Company’s common stock at an exercise price of $1.80 per share and which vest on October 15, 2018, 2019 and 2020. The Warrants are exercisable for 5 years. The warrants that vested on October 15, 2019 and 2018 were valued at $192,000 and the Company recorded compensation expense of $78,000 for the year ended December 31, 2020.

On October 15, 2018, the Board of Directors approved an Employment Agreement with Marco Hegyi pursuant to which the Company engaged Mr. Hegyi as its Chief Executive Officer through October 15, 2021. See Note 17 for additional details.

Transaction with Thom Kozik

Mr. Kozik was appointed as a director on October 5, 2017. On April 16, 2020, the Company issued 20,000 shares of the Company’s common stock to Mr. Kozik valued at $0.295 per share or $5,900. On December 31, 2021, and January 1, 2023 the Company issued 18,~~200~~000 and 500,000 shares, respectively, of the Company’s common stock to Mr. Kozik valued at $3.00 and $0.0205 per share or $24,000. ~~This~~and ~~issuance~~$25,000, ~~was~~respectively. These issues were an award for independent director services. Mr. Kozik resigned his position on the board effective December 31, 2022.

F-1917 Table of Contents

~~Notes~~NOTE 10 ~~Payable~~– ~~and Receivable Related Parties~~EQUITY

EZ-CLONE had $49,144 due to relatives of the shareholders as of December 31, 2020. The amounts were repaid on May 10, 2021. At December 31, 2021 EZ-CLONE has $161,000 due from the two founders. The notes bear interest at 3% and are due in July 2041.

NOTE 14 – EQUITY

Authorized Capital Stock

On October 9, 2019, the Company approved the reduction of authorized capital stock, whereby the total number of the Company’s authorized common stock decreased from 6,000,000,000 by a ratio of 1 for 50, to 120,000,000 shares. On November 20, 2019, the Company filed a Certificate of Amendment of Certificate of Incorporation with the Secretary of State of the State of Delaware. The reverse stock split of 1 for 150 was effective at the open of business on November 27, 2019 whereupon the shares of the Company’s common stock began trading on a split-adjusted basis. Our CUSIP number will change to 39985X203.

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.

Preferred Stock

The purpose of authorizing our board of directors to issue non-voting preferred stock and determine our rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of non-voting preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire or could discourage a third party from seeking to acquire, a majority of our outstanding voting stock. Other than the Series B and C Preferred Stock discussed below, there are no shares of preferred stock presently outstanding, and we have no present plans to issue any shares of preferred stock.

As of December 31, 2022, the Company had issued and outstanding 1,800 shares of Series A 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.

Capital Stock Issued and Outstanding

As of December 31, ~~2021~~2022, the Company had issued and outstanding securities of ~~117~~7,~~952~~083,~~697~~255 shares of common stock.

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.

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.

F-2018 Table of Contents

During the year ended December 31, 2022, the Company had the following issuances of unregistered equity securities to accredited investors unless otherwise indicated:

Debt of $1,072,488 was converted into 5,560,082, shares of our common stock at an average per share conversion price of $0.21.

The Company issued 1,000,000 shares, net, of the Company’s common stock as commitment fees associated with various debt agreements at an average per share price of $0.058.

During the year ended December 31, 2021, the Company had the following issuances of unregistered equity securities to accredited investors unless otherwise indicated:

Debt ~~and accrued interest~~ of $2,~~502~~927,596 was converted into 49340,~~845,718~~285 shares of our common stock at an average per share conversion price of $08.~~099~~60.

Liability settlements of $2,442,500 was converted into 1495,~~250,~~000 shares of our common stock at an average per share conversion price of $025.~~097~~711.

The Company issued ~~813~~5,~~758~~425 shares of the Company’s common stock in a cashless exercise of warrants.

The Company issued 18,~~200,~~000 shares of the Company’s common stock to Thom Kozik, valued at $03.0200 per share or $24,000. This issuance was an annual award for independent director services.

During the year ended December 31, 2020, the Company had the following issuances of unregistered equity securities to accredited investors unless otherwise indicated:

Debt and accrued interest of $1,947,819 was converted into 19,573,905 shares of our common stock at an average per share conversion price of $0.099.

The Company issued 15 shares related to a previous reverse stock split.

The Company issued 154 shares of common stock related to the exercise of warrants for $485, or $3.151 per share.

On April 16, 2020, the Company issued 20,000 shares of the Company’s common stock each to Katherine McLain and Thom Kozik, directors valued at $0.295 per share or $5,900. This issuance was an annual award for independent director services.

Warrants

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

In April, 2022 in connection with promissory notes the Company issued common stock purchase warrants for the purchase of 6,444 shares of the Company’s common stock. The exercise price is $4.50 per share and is exercisable for a term of five years. The number of warrants and exercise price is after adjustment for the reverse split on October 7, 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.

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.

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.

The Company had the following warrant activity during the year ended December 31, 2021:

On ~~April~~December 531, 2021, the Company ~~finalized~~entered ainto ~~joint~~Amendment ~~Warrant~~No. ~~Settlement~~3 ~~Agreement~~to ~~with~~the ~~St.~~Self-Amortization ~~George~~Promissory ~~Investments~~Note ~~LLC~~ (“~~St.~~Amendment ~~George”) and Iliad Research and Trading, L~~No.P. ~~(“Iliad~~3”) toas ~~resolve~~originally ~~a dispute related the calculation of shares issuable under warrants~~ issued ~~in prior financings. In the Warrant Settlement Agreement, in exchange for certain covenants~~ by the Company, ~~St. George and Iliad agreed that upon the issuance of 14,250,000 shares of the Company’s common stock it would cancel the balance of the warrants related~~ to ~~previous~~Labrys ~~subscription agreements. The Company recorded a loss~~ on ~~debt~~August ~~settlement of $2,423,000 for the year ended December~~ 31, 2020 ~~and accrued a liability for~~ (the ~~future issuance of shares. On April 5~~“Note”), ~~2021,~~Pursuant ~~the Company issued 2,500,000 shares upon the exercise of the warrant~~ to ~~reduce~~Amendment ~~by $425,000 its obligation~~No. On3 ~~May 7, 2021,~~ the Company issued ~~another~~a ~~3,500,000~~common ~~shares~~stock ~~upon~~purchase ~~the exercise of the~~ warrant tofor ~~further reduce by $595,000 its debt settlement obligation. On June 10, 2021,~~ the ~~Company~~purchase ~~issued~~of 31,~~750~~033,~~000~~057 shares ~~upon the exercise~~ of the ~~warrant to reduce its obligation by $637,500. On August 23, 2021, the~~ Company’s ~~issued~~common ~~another~~stock ~~2,300,000 shares upon~~ (the ~~exercise~~“Warrant”) ofto the ~~warrant~~Holder toon ~~reduce~~December ~~its obligation by $391~~31,~~000.~~ ~~On September 29,~~ 2021,. ~~the~~The ~~Company issued 2,200,000 shares upon the~~ exercise ofprice ~~the~~is ~~warrant~~$0.121 toor ~~reduce its obligation by~~ $~~374~~125,000 ~~and completely payoff the balance of its obligation~~. The ~~Company~~three ~~received~~year ~~no proceeds from these April, May, June, August, and September 2021 cashless~~ warrant ~~exercises.~~expires ~~During the quarter ended September 30, 2021, the Company recognized a gain~~ on ~~settlement~~December ~~of $571~~31,~~060~~ ~~when the fair value of the common shares issued were based on the stock price on the date of settlement~~2023. ~~In addition, as final settlement the Company issued 813,758 shares of common stock related to the cashless exercise of warrants~~

The Company had the following warrant activity during the year ended December 31, 2020:

On December 31, 2020, the Company entered into Amendment No. 3 to the Self-Amortization Promissory Note (“Amendment No. 3”) as originally issued by the Company to Labrys on August 31, 2020 (the “Note”), Pursuant to Amendment No. 3 the Company issued a common stock purchase warrant for the purchase of 1,033,057 shares of the Company’s common stock (the “Warrant”) to the Holder on December 31, 2020. The exercise price is $0.121 or $125,000. The three year warrant expires on December 31, 2023.

The Company issued 154 shares of common stock related to the exercise of warrants for $485, or $3.151 per share.

On April 5, 2021, the Company finalized a joint Warrant Settlement Agreement dated March 31, 2021 with St. George and Iliad to settle a dispute regarding prior financings. The Company agreed to issue St. George 11,750,000 shares of the Company’s common stock to cancel a warrant related to a February 9, 2018 subscription agreement. The Company agreed to issue Iliad 2,500,000 shares of the Company’s common stock to cancel a warrant related to a October 15, 2018 securities Purchase agreement. We recorded a loss on debt settlement of $2,423,000 for the year ended December 31, ~~2020~~2021 and accrued the liability as of December 31, ~~2020~~2021.

F-2119 Table of Contents

ANOTE ~~summary~~11– ofSTOCK ~~the warrants activity as of December 31, 2021 is as follows:~~OPTIONS

	December 31, 2021
	Shares			Weighted Average Exercise Price
Outstanding on January 1, 2021		3,451,736		$	2.464
Exercised		(1,138,344	)		2.225
Forefeited		(1,626,726	)		2.742
		686,666		$	1.640
Exerciseable on December 31, 2021		686,666

Warrants had no intrinsic value as of December 31, 2021.

NOTE 15– STOCK OPTIONS

Description of Stock Option Plan

On November 5, 2021, at our annual shareholder meeting the Second Amended and Restated 2017 Stock Incentive Plan was adopted to increase the shares issuable under the plan from 1,333,333 to 75,000,000 shares. All terms of the Plan shall remain the same with the exception of the amount of shares reserved for issuance under the Plan. We have 75,000,000 shares available for issuance under the Second Amended and Restated 2017 Stock Incentive Plan. The Company had no outstanding stock options as of December 31, ~~2021~~2022; and, had outstanding unexercised stock option grants totaling 506,667 shares at an average exercise price of $1.496 per share as of December 31, ~~2020~~2021, all of which were forfeited in 2021. The Company filed registration statements on Form S-8 to register 1,333,333 shares of our common stock related to the 2017 Stock Incentive Plan and First Amended and Restated 2017 Stock Incentive Plan.

Determining Fair Value under ASC 718

The Company records compensation expense associated with stock options and other equity-based compensation using the Black-Scholes-Merton option valuation model for estimating fair value of stock options granted under our plan. The Company amortizes the fair value of stock options on a ratable basis over the requisite service periods, which are generally the vesting periods. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company estimates the volatility of our common stock based on the historical volatility of its own common stock over the most recent period corresponding with the estimated expected life of the award. The Company bases the risk-free interest rate used in the Black Scholes-Merton option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. The Company has not paid any cash dividends on our common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes-Merton option valuation model and adjusts share-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate is recognized in the period the forfeiture estimate is changed.

Stock Option Activity

During the year ended December 31, ~~2020~~2021, the Company had the following stock option activity:

Stock option grants for 506,667 and 43,333 shares of common stock ~~expired~~were forfeited in the year ended December 31, ~~2021~~2022 and December 31, ~~2020~~2021, respectively. No options to purchase common shares were exercised during either year.

As of December 31, ~~2021~~2022, and December 31, ~~2020~~2021, there are zero and 506,667, respectively, options to purchase common stock at an average exercise price of $1219.~~496~~00 per share outstanding under the 2017 Amended and Restated Stock Incentive Plan. ~~The Company recorded $15,475 and $47,170 of compensation expense, net of related tax effects, relative to stock options for the year ended December 31, 2021and 2020 in accordance with ASC Topic 718.~~

~~NOTE 16~~ F-20 ~~SEGMENT~~Table ~~REPORTING~~of Contents

~~The~~NOTE ~~management~~12 of– ~~the Company consider the business to have one operating segment for the year ended December 31~~COMMITMENTS, ~~2021.~~CONTINGENCIES ~~The~~AND ~~management~~LEGAL of the Company considers the business to have two operating segments (i) the distribution of GrowLife products and GrowLife, Inc. and (ii) EZ-CLONE, a manufacturer of cloning products. EZ-CLONE has provided the majority of the Company’s gross margins during 2020. The financial results from GrowLife products has been diminishing with the Company’s focus on EZ-CLONE. PROCEEDINGS

F-22 Table of Contents

The reporting for the year ended December 31, 2020, was as follows (in thousands):

Segment	Revenue		Gross Margin		Operating Profit (Loss)			Assets
GrowLife	$	1,568	$	314	$	(2,465	)	$	108
EZ-CLONE Enterprises		5,433		2,666		575			4,247
Total	$	7,001	$	2,980	$	(1,890	)	$	4,355

NOTE 17 – COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

Legal Proceedings

From time to time, the Company may become subject to various legal proceedings that are incidental to the ordinary conduct of the Company’s business. Although we cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, it makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current information and may be adjusted from time to time according to developments.

As of September 30, 2019, the Company closed retail stores in Portland, Maine, Encino, California and Calgary, Canada. The Company has recorded restructuring reserves related to the store closures. The Company cannot determine the outcome of these proceedings.

On September 15, 2020, the Company received notice that William Blackburn and Brad Mickelsen, minority shareholders of EZ-CLONE Enterprises, Inc. (“Plaintiffs”), a majority owned subsidiary of the Company, filed a complaint against the Company and its officers Marco Hegyi and Mark Scott (“Officers”), in the Superior Court of California, County of Sacramento (“Complaint”) for claims related to breach under the Purchase and Sale Agreement dated October 15, 2018 between the Company and Plaintiffs. On September 15, 2020, the Company filed a notice of removal with the California Superior Court, County of Sacramento and the United States District Court for the Eastern District of California. The case was removed to Federal District Court for the Eastern District of California and Plaintiffs filed an Ex Parte Application for TRO and an Order for Preliminary Injunction with the Federal Court. The TRO was granted on September 16, 2020 and a preliminary injunction hearing was scheduled for September 29, 2020. After reviewing all pleadings and oral arguments at the hearing, the Court issued a ruling granting Plaintiffs’ request for a preliminary injunction. After reviewing all pleadings and oral arguments at the hearing, the Court issued a ruling granting Plaintiffs’ request for a preliminary injunction.

The Complaint also alleges that the Company and its Officers made certain false representations and other claims to consummate the Transaction and as a result has failed to complete the second closing as required under Purchase and Sale Agreement. As of December 4, 2020, the company’s officers were dismissed from the case. The Plaintiffs are seeking rescission of the Purchase and Sale Agreement, unspecified damages in excess of ten thousand dollars, and other equitable relief. The parties provided legal briefs to the Federal court to determine if rescission should be granted. The Court did not reach a decision on this issue, and denied without prejudice, the Company’s effort to reverse the preliminary injunction. The Company is currently reviewing whether to pursue the matter further and engaging in settlement discussions. We cannot determine the outcome of these proceedings.

As of December 31, 2021, the Company recorded a liability of $2,131,000 for acquisition payable of which a $1,105,000 is payable in stock and $1,026,000 is payable in cash.

On April 23, 2021, the Company was notified that it was in default on its notes held by Silverback Capital Corporation. The reason for the default was the Company’s inability to provide the reserve share requirement as specified in the notes. The penalty for the reserve share default was an increase in the outstanding note balances by 15%, an increase in the conversion discount by 5%, and a default interest rate on the outstanding note balances of 22%. The company recorded such amounts as debt extinguishment and as all amount were considered due on demand, such amount was expensed.

F-2321 Table of Contents

As a result of the reserve share default, on May 7, 2021, Silverback demanded immediate payment in full of all their notes. On May 10, 2021, when Silverback had not been paid in full, Silverback presented another default notice for lack of payment. The penalty for the non-payment default was an increase in the outstanding note balances by another 15%, an additional increase in the conversion discount by 5%, and a default interest rate on the outstanding note balances of 22%. The company recorded such amount as debt extinguishment and as all amounts were considered due in demand, such amount was immediately expensed.

Operating Leases

The Company is obligated under the following leases for its various facilities.

On May 31, 2021, the Company rented space at 11335 NE 122nd Way, Suite 105, Kirkland, Washington 98034 for $623 per month for the Company’s corporate office and use of space in the Regus network, including California. The Company’s agreement expires May 31, 2022.

Employment Agreements

Employment Agreement with ~~Marco~~Dave ~~Hegyi~~Dohrmann

On ~~October~~June 1530, ~~2018,~~2022 the Board of Directors approved an Employment Agreement with ~~Marco~~Dave ~~Hegyi~~ Dohrmann pursuant to which we engaged Mr. ~~Hegyi~~Dohrmann as its Chief Executive Officer ~~through~~for ~~October~~a ~~15,~~period ~~2021.~~of five years and a member of the Board of Directors.

Mr. ~~Hegyi~~Dohrmann ~~received~~is ~~320,000~~entitled ~~warrants~~to participate in ~~October~~all ~~2018~~group asemployment ~~follows:~~benefits ~~(i)~~that ~~Warrant~~are tooffered ~~purchase~~by upus to ~~106,667~~its ~~shares~~senior ofexecutives ~~our common stock at an exercise price of $1.80 per share which vested immediately;~~ and ~~(ii)~~management ~~two~~employees ~~Warrants~~from totime ~~purchase up~~ to ~~106~~time,~~667~~ ~~shares~~subject ofto ~~common stock of~~ the ~~Company~~terms atand anconditions ~~exercise price~~ of ~~$1.80~~such ~~per~~benefit ~~share. One warrant for 106~~plans,~~667~~ ~~shares~~including ofany ~~our~~eligibility ~~common stock vested on October 15, 2019~~requirements. ~~Additional warrants for 106,667 shares of the Company’s common stock vest on October 15, 2020 and 2021, respectively. The Warrants are exercisable for 5 years.~~

~~Mr.~~If ~~Hegyi~~we isterminate ~~entitled~~Mr. toDohrmann’s ~~participate in all group~~ employment ~~benefits~~at ~~that~~any ~~are~~time ~~offered~~prior byto the ~~Company~~expiration toof ~~its~~the ~~senior~~Term ~~executives~~without ~~and~~Cause, ~~management~~as ~~employees~~defined ~~from~~in ~~time~~the toEmployment ~~time~~Agreement, ~~subject~~or toif ~~the~~Mr. ~~terms~~Dohrmann ~~and~~terminates ~~conditions~~his ofemployment ~~such~~at ~~benefit~~any ~~plans,~~time ~~including~~for ~~any~~“Good ~~eligibility~~Reason” ~~requirements.~~or Indue ~~addition~~to a “Disability”, ~~the~~Mr. ~~Company~~Dohrmann will ~~purchase~~be ~~and~~entitled ~~maintain~~to ~~during~~receive ~~the~~(i) ~~Term~~his anBase ~~insurance~~Salary ~~policy~~amount onthrough ~~Mr.~~the ~~Hegyi’s~~end ~~life~~of in the ~~amount~~Term; ofand ~~$2,000,000~~(ii) ~~payable~~his toAnnual ~~Mr.~~Bonus ~~Hegyi’s~~amount ~~named~~for ~~heirs~~each oryear ~~estate~~during asthe remainder of the ~~beneficiary~~Term.

IfNOTE 13 ~~the~~– ~~Company~~INCOME ~~terminates~~TAXES Mr. Hegyi’s employment at any time prior to the expiration of the Term without Cause, as defined in the Employment Agreement, or if Mr. Hegyi terminates his employment at any time for “Good Reason” or due to a “Disability”, Mr. Hegyi will be entitled to receive (i) his Base Salary amount through the end of the Term; and (ii) his Annual Bonus amount for each year during the remainder of the Term.

The ~~Employment~~Company ~~Agreements~~has ~~for~~incurred Mrlosses since inception, which have generated net operating loss carryforwards. ~~Hegyi~~The ~~expired~~net ~~October~~operating ~~15,~~loss ~~2021~~carryforwards arise solely from United States sources.

~~NOTE 18~~The –Company ~~INCOME~~has ~~TAXES~~net operating loss carryforwards of approximately $25.8 million of which $14.1 million related to years prior to 2018 which expire in 2022 through 2038. Because it is more likely than not that sufficient tax earnings will be generated to utilize the net operating loss carryforwards, the deferred tax asset related to the net operating loss carryforwards has a corresponding 100% valuation allowance. Additionally, under the Tax Reform Act of 1986, the amounts of, and benefits from, net operating losses may be limited in certain circumstances, including a change in control.

~~The Company has incurred losses since inception, which have generated net operating loss carryforwards. The net operating loss carryforwards arise solely from United States sources. EZ~~F-~~CLONE~~22 ~~currently~~Table ~~files its own separate tax return as it does not meet the qualifications for being included in the Company’s consolidated tax returns. Taxable losses and the future benefit~~ of EZ-CLONE losses since our transaction with them in October 2018 have not been material through 2019. During 2021 and 2020 EZ-CLONE generated taxable income and our current tax expense below relates to estimated taxes owed by EZ-CLONE. Contents

The Company has net operating loss carryforwards of approximately $25.8 million of which $14.1 million related to years prior to 2018 which expire in 2022 through -2038. Because it is not more likely than not that sufficient tax earnings will be generated to utilize the net operating loss carryforwards, the deferred tax asset related to the net operating loss carryforwards has a corresponding 100% valuation allowance. Additionally, under the Tax Reform Act of 1986, the amounts of, and benefits from, net operating losses may be limited in certain circumstances, including a change in control.

F-24 Table of Contents

Section 382 of the Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss carryforwards that may be used to offset taxable income when a corporation has undergone significant changes in its stock ownership. There can be no assurance that the Company will be able to utilize any net operating loss carryforwards in the future. The Company is subject to possible tax examination for the years 2014 through 2021.

~~For~~NOTE ~~the~~14– ~~year~~SUBSEQUENT ended December 31, 2020 the Company’s effective tax rate was 4% which is higher than expected because the Company’s subsidiary EZ-CLONE files its own tax return and generated taxable income for the year. In accordance with the ASC 740, “Accounting for income taxes”, and in connection with the acquisition of EZ-CLONE the Company recorded a deferred tax liability of $587,750 related to the inside basis difference between book and tax basis of intangible assets acquired. Beginning in 2019, the deferred tax liability is reduced as the intangible assets are reduced. The reduction of the deferred tax liability resulted in a tax benefit of $117,550 in 2021 and 2020. As of December 31, 2021 and 2020 the deferred tax liability totals $235,097 and $352,649, respectively. EVENTS

For the years ended December 31, 2021 and 2020, income tax (expense) benefit consisted of the following:

	2021			2020
Current income tax (expense)
Federal		(189,333	)	$	(263,982	)
State		(79,905	)		(85,520	)
Total current tax (expense)		(269,238	)		(349,502	)
Deferred tax benefit
Federal		210,925			117,550
State		80,900			-
Total deferred benefit		291,825			117,550
Total income tax (expense)	$	(22,587	)	$	(231,952	)

The principal components of the Company’s deferred tax assets and liabilities at December 31, 2021 and 2020 are as follows:

	2021			2020
Net operating loss carryforwards	$	7,018,000		$	5,232,524
Less valuation allowance		(7,018,000	)		(5,232,524	)
Net deferred tax asset		-			-
Deferred tax liability - intangible basis		(106,000	)		(352,649	)
Net deferred tax liability	$	(106,000	)	$	(352,649	)

A reconciliation of the United States Federal Statutory rate to the Company’s effective tax rate for the years ended December 31, 2021 and 2020 is as follows:

	2021			2020
Federal statutory rate		21	%		21	%
State statutory rate		6	%		6	%
Non-deductible interest and loss on extinguishment		-24	%		-27	%
Change in valuation allowance		-6	%		-6	%
Change in fair value of derivatives		3	%		2	%
Effective tax (expense) rate		0	%		-4	%

NOTE 19– SUBSEQUENT EVENTS

The Company evaluates subsequent events, for the purpose of adjustment or disclosure, up through the date the financial statements are available.

~~F-25~~These ~~Table~~were ofthe ~~Contents~~material events after December 31, 2022:

~~These~~Asset ~~were~~Purchase ~~the material events after December 31, 2021:~~Agreement

~~Securities~~On June 2, 2022, GrowLife, Inc., a Delaware corporation (“Company” or “Purchaser”) entered into an Asset Purchase ~~Agreements~~Agreement (the “Asset Purchase Agreement”) with Bridgetown Mushrooms, LLC, an Oregon limited liability company (“Seller”) and ~~Convertible~~Trevor Huebert (“Executive”), pursuant to which the Company would purchase and assume, certain assets, properties, rights and interests relating to the Seller’s business (“Assets”) which is the processing, marketing, storing, selling and distributing fresh and dried mushroom products (“Business”). On November 14, 2022, the parties executed the First Amendment to Asset Purchase Agreement (“First Amendment”), pursuant to which the parties amended the purchase price structure among other things. On January 6, 2023, the Company, Seller, and Executive consummated and closed the acquisition and acquired the Assets related to the Business (the “Closing Date”) for cash consideration and additional consideration. On January 11, 2023, the Company and Seller entered into certain post-closing amendments including a Second Amendment to Asset Purchase Agreement (“Second Amendment”), further revising the purchase price structure and assumption of cert Seller debt obligations, a Pledge and Security Agreement (“Pledge Agreement”), and an Amended and Restated Promissory ~~Notes~~Note (“Note”). The cash consideration, paid prior to the Closing Date, was in the aggregate amount of $157,000, the additional consideration consists of: (i) $43,000 in the form of cancellation and forgiveness of the indebtedness owed to Purchaser by Seller under a secured promissory note dated May 19, 2022 (the “Prior Loan”); (ii) $138,546 in the form of promissory note, which shall be payable in installments of (1) $38,546 on January 31, 2023, (2) $50,000 on February 28, 2023, and (3) $50,000 on March 31, 2023; (iii) $340,000 in the form of shares of restricted shares of the common stock, which calculated as of the Closing Date was equal to an aggregate of 5,923,345 (the “Stock Consideration”), to be issued and distributed pursuant to the terms and conditions of the Asset Purchase Agreement, and (iv) the assumption of $161,546 of debt which is secured by the assets of the Seller.

OnThe ~~January~~assets 4acquired from Seller and Executive included tangible assets, ~~2022~~intellectual property, registrations and onapprovals, ~~March~~inventory, 8data, ~~2022~~records, and certain other assets. The Asset Purchase Agreement contains customary representations and warranties and covenants by each party. Both parties are obligated, subject to certain limitations, to indemnify the ~~Company~~other ~~executed~~under the ~~following~~Asset ~~agreements~~Purchase ~~with~~Agreement ~~Sixth~~for ~~Street~~certain ~~Lending~~customary and other specified matters, ~~LLC:~~ including breaches of representations and warranties, breaches of covenants and for certain liabilities and third-party claims.

~~(i)~~ Securities Purchase Agreement; and ~~(ii)~~ Convertible Promissory Note~~; an (collectively the “Sixth Street Agreements”).~~

~~The~~On ~~total~~January ~~amount~~11, of2023, ~~funding~~Growlife, ~~under~~Inc. ~~the~~a ~~Sixth~~Delaware ~~Street~~corporation ~~Agreements~~(the is“Company”) ~~$275,000~~entered asinto ~~represented~~a inSecurities ~~the~~Purchase ~~Convertible~~Agreement ~~Promissory Notes~~ (the “~~Note~~Purchase Agreement”). ~~The~~with ~~total~~1800 ~~purchase~~Diagonal ~~price~~Lending ~~for~~LLC, ~~these~~a ~~Notes~~Virginia ~~are~~limited ~~$310~~liability company (the “Investor”),~~200;~~ pursuant to which the ~~Notes~~Company ~~carry~~sold an1800 ~~aggregate~~Diagonal ~~original~~a ~~issue~~promissory ~~discount~~note in the principal amount of $2888,200 ~~and~~(the “Note”). The Note carries a ~~transaction~~one-time ~~expense~~interest ~~amount~~charge of ~~$7,000.~~twelve ~~The~~percent ~~Notes~~(12%) ~~have~~(the ~~maturity~~“Interest ~~dates~~Rate”) ~~one~~which ~~year~~was ~~from~~applied on the issuance date ofto ~~execution.~~the ~~The~~principal ~~Notes~~(22% ~~have~~upon the occurrence of an ~~interest~~event ~~rate~~of default) and has a maturity date of ~~eight~~January ~~percent~~11, ~~(8%)~~2024. The ~~Notes~~Note ~~are~~included ~~convertible,~~an atoriginal ~~Sixth~~issue ~~Street’s~~discount ~~option~~of $9,450 ~~into~~and ~~the~~transaction ~~Company’s~~expenses ~~common~~of ~~stock~~$3,750 atand awas ~~25%~~purchased ~~discount~~for toan ~~market~~aggregate ~~price~~of ~~(“Lender~~$75,000. ~~Conversion~~The ~~Price”),~~Note ~~subject~~was tofunded ~~adjustment~~by asthe ~~provided~~Investor ~~for~~on inJanuary ~~the~~13, ~~Note~~2023.

The Note requires that the Company make monthly payments for accrued interest and outstanding principal, which shall be paid in ten (10) payments each in the amount of $9,878.40 (a total payback to the Holder of $98,784.00). The first payment shall be due March 1, 2023, with nine (9) subsequent payments each month thereafter. The Company shall have a five (5) day grace period with respect to each payment. The Company has right to accelerate payments or prepay in full at any time with no prepayment penalty.

The Investor may in its option, at any time following an Event of Default, as defined in the Note, convert all or any part of the outstanding and unpaid amount of this Note into fully paid and non-assessable shares of Common Stock at a conversion price per share equal to 75% of the lowest daily volume weighted average price (“VWAP”) of our common stock during the 10 trading days prior to the date of conversion. Additionally, the Company agreed to reserve five times the number of shares of our common stock which may always be issuable upon conversion of the Note.

F-23

Table of Contents

Securities Purchase Agreement and Convertible Promissory Note

On February 1, 2023 (the “Issue Date”), Growlife, Inc. a Delaware corporation (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Fourth Man LLC, a Nevada limited liability company (the “Investor”), pursuant to which the Company sold Investor a convertible Promissory Note (the “Note”) in the principal aggregate amount of $125,000.00, which carries an original issue discount in the amount of $21,250.00, plus $10,762.50 in transaction fees accordingly the Company received proceeds of $92,987.50 of the purchase price. The Purchase Agreement and the Note require the Company to pay interest on the unpaid Principal Amount at the rate of ten percent (10%) (the “Interest Rate”) per annum (with the understanding that the first twelve months of interest (equal to $12,500.00) shall be guaranteed and earned in full as of the Issue Date). The Note is due and payable, in full, as of the maturity date, which is twelve (12) months from the Issue Date. The Note may not be prepaid or repaid in whole or in part and the Investor has the right, at any time on or following the Issue Date, to convert all or any portion of the outstanding and unpaid Principal Amount and interest into fully paid and non-assessable shares of the Company’s common stock. The per share conversion price into which Principal Amount and interest under the Note is $0.035 per share, subject to adjustment as provided in the Note. Additionally, the Note may not be converted into shares of our common stock if such conversion would result in the Investor, or its affiliates owning an aggregate of more than 4.99% of the then outstanding shares of our common stock.

Warrants

In addition to the Note, the Company issued the Investor Common Stock Purchase Warrants granting the Investor the right to purchase up to 625,000 shares of common stock of the Company at an exercise price of $0.08 per share for a period of Five (5) years. Additionally, the Investor has the right to exercise the Warrants on a cashless basis if the trade price of a share of common stock of the Company exceeds the exercise price. If the Company issues shares or any securities convertible into shares at an effective price per share lower than the exercise price of the Warrants, the exercise price of the Warrants shall be reduced to such lower price, subject to customary exceptions. The Investor may not exercise the Warrants if such exercise would result in the Investor, together with any affiliates, beneficially owning in excess of 4.9% of the Company’s outstanding common stock immediately after giving effect to such exercise.

Securities Purchase Agreement and Convertible Promissory Note

On March 21, 2023 (the “Issue Date”), Growlife, Inc. a Delaware corporation (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Fourth Man LLC, a Nevada limited liability company (the “Investor”), pursuant to which the Company sold Investor a Convertible Promissory Note (the “Note”) in the principal aggregate amount of $125,000.00, which carries an original issue discount in the amount of $21,250, and $10,762 of transactions costs accordingly the Company received $92,987 of the purchase price. Additionally under the Purchase Agreement the Company agreed to issue 3,125,000 shares of Common Stock (the “Commitment Shares”) to the Investor as additional consideration for the purchase of the Note, which shall be earned in full as of the Closing Date, March 23, 2023. The Purchase Agreement and Note require the Company to pay interest on the unpaid Principal Amount at the rate of ten percent (10%) (the “Interest Rate”) per annum (with the understanding that the first twelve months of interest (equal to $12,500.00) shall be guaranteed and earned in full as of the Issue Date). The Note is due and payable, in full, as of the maturity date, which is twelve (12) months from the Issue Date. Upon default, the Note provides the debt may be converted into shares of the Company. The Conversion Price is $0.01 per share, subject to adjustment as provided for in the Note. Conversions are subject to adjustment for any stock dividend, stock split, stock combination, rights offerings, reclassification, or similar transaction that proportionately decreases or increases the common stock.

Additionally and in connection with the issuance of the Note, the Company issued the Commitment Shares (as defined in the Purchase Agreement) to Investor as a commitment fee, provided, however, that 2,125,000 of the Commitment Shares (subject to equitable adjustments resulting any stock dividend, stock split, stock combination, rights offerings, reclassification, or similar transaction that proportionately decreases or increases the Common Stock) may be cancelled and extinguished if the Note is fully repaid and satisfied on or prior to June 21, 2023.

Securities Purchase Agreement and Convertible Promissory Note

On March 24, 2023, Growlife, Inc. a Delaware corporation (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with 1800 Diagonal Lending LLC, a Virginia limited liability company (the “Investor”), pursuant to which the Company sold 1800 Diagonal a promissory note in the principal amount of $54,725 (the “Note”). The Note carries an interest charge of eight percent (8%) (the “Interest Rate”) which was applied on the issuance date to the principal (22% upon the occurrence of an event of default) and has a maturity date of March 24, 2024. The Note included an original issue discount of $9,725 and transaction expenses of $4,250 and was purchased for an aggregate of $40,750. The Note was funded by the Investor on March 28, 2023.

The Investor may in its option, at any time following an Event of Default, as defined in the Note, convert all or any part of the outstanding and unpaid amount of this Note into fully paid and non-assessable shares of Common Stock at a conversion price per share equal to 75% of the average of the three lowest closing prices of our common stock during the 15 trading days prior to the date of conversion. Additionally, the Company agreed to reserve five times the number of shares of our common stock which may always be issuable upon conversion of the Note.

Securities Purchase Agreement and Convertible Promissory Note

On March 28, 2023, Growlife, Inc. a Delaware corporation (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with One44 Capital, LLC, a Nevada limited liability company (the “Investor”), pursuant to which the Company sold One44 Capital a promissory note in the principal amount of $150,000 (the “Note”). The Note carries an interest rate of ten percent (10%) (the “Interest Rate”) (24% upon the occurrence of an event of default) and has a maturity date of March 28, 2024. The Note included an original issue discount of $15,000 and transaction expenses of $6,750 and was purchased for an aggregate of $40,750. The Note was funded by the Investor on March 28, 2023.

The Investor may in its option, at any time following six months from the issuance date convert all or any part of the outstanding and unpaid amount of this Note into fully paid and non-assessable shares of Common Stock at a conversion price per share equal to 60% of the lowest closing prices of our common stock during the 20 trading days prior to the date of conversion. Additionally, the Company agreed to reserve 19,230,700 shares of our common stock which may always be issuable upon conversion of the Note.

Debt Conversions

On January 412, ~~2022~~January 23, March 1, and April 24, 2023, Silverback Capital Corporation converted principal ~~and accrued interest~~ of $50129,~~400~~492 into 45,~~800~~695,000 shares of the Company’s common stock at aan average per share conversion price of $0.~~0105~~0227.

On ~~February~~March 1024, ~~2022~~2023, ~~Bucktown~~Dublin Holdings converted principal ~~and accrued interest~~ of $~~180~~55,000 into 111,~~764~~948,~~706~~627 shares of the Company’s common stock at a per share conversion price of $0.~~0153~~0282.

On ~~March~~January 221, ~~2022~~2023, ~~Silverback~~the Company converted $116,890 of principal and accrued interest of ~~$126,500~~Notes into 112,~~000~~922,~~000~~257 shares of the Company’s common stock at a per share conversion price of $0.~~0115~~04.

F-2624 Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, GrowLife, Inc. (the "Registrant") has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	GROWLIFE, INC.
Date: May 16, 2022	By:	/s/ Marco Hegyi
Date: June 13, 2023	By:	/s/ David Dohrmann
		Marco Hegyi
		David Dohrmann
		Chief Executive Officer and Director(Principal Executive Officer)
	By:	/s/ ~~Marco~~David ~~Hegyi~~Dohrmann
		Marco Hegyi
		David Dohrmann
		(Interim Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

SIGNATURES	TITLE	~~DATE~~	DATE
/s/ Marco Hegyi	Chief Executive Officer and Director	May 16, 2022
/s/ David Dohrmann	Chief Executive Officer and Director		June 13, 2023
Marco Hegyi	(Principal Executive Officer)
David Dohrmann	(Principal Executive Officer)
/s/ Marco Hegyi	Interim Principal Financial/Accounting Officer	May 16, 2022
/s/ David Dohrmann	Interim Principal Financial/Accounting Officer		June 13, 2023
Marco Hegyi
David Dohrmann

/s/ Thom Kozik		Director	May 16, 2022
Thom Kozik

Filing Compare · GROWLIFE, INC.