On July 23, 2019, (the “Closing Date”), Grow Capital, Inc. (the “Company”), a Nevada corporation, acquired Bombshell Technologies, Inc. (“Bombshell”), a Nevada corporation, , pursuant to a stock exchange agreement (the “Exchange Agreement”), dated June 26, 2019, by and between Bombshell, the shareholders of Bombshell (the “Bombshell Holders”). At the Closing, Bombshell became a wholly-owned subsidiary of the Company.  Joel Bonnette, the current President and Chief Executive Officer of Bombshell, now serves as the Chief Executive Officer of Bombshell.

Immediately prior to the Closing, the Company, Bombshell and the Bombshell Holders entered into an amendment to the Exchange Agreement (the “Amendment”).  Pursuant to the Amendment, at the Closing, the Company acquired 100% of the outstanding shares of Bombshell (the “Bombshell Shares”) in exchange for the Bombshell Holders receiving the right to receive 110,675,328 shares (the “Consideration Shares”) of unregistered shares of the Company’s Common Stock on a pro rata basis (the “Exchange”), 33,000,000 of which were issued to the Bombshell Holders (the “Closing Shares”) at the Closing on a pro rata basis.  The remaining 77,675,328 Consideration Shares (the “Secondary Shares”) were issued on September 3, 2019, to the Bombshell Holders upon the Company filing an effective amended and restated article of incorporation (the “Charter Amendment”) that increased the number of authorized shares of Common Stock.  The Bombshell Holders are also eligible to receive earn-out consideration of up to an additional 36,769,215 shares of Common Stock (the “Earn-out Shares”) earnable in tranches of 12,256,405 shares of Common Stock in each of the second, third and fourth years after the Closing, based on whether Bombshell is able to meet certain Earnings Before Interest and Taxes thresholds in each year.  The Bombshell Holders include certain limited liability companies owned by (i) Jonathan Bonnette, (ii) Joel Bonnette, and (iii) Terry Kennedy.

Note 1 — Basis of presentation

The historical consolidated financial statements have been adjusted in the pro forma consolidated financial statements to give effect to pro forma events that are (1) directly attributable to the acquisition of Bombshell, (2) factually supportable and (3) with respect to the pro forma consolidated statements of operations, expected to have a continuing impact on the consolidated results of operations following the acquisition.

The acquisition of Bombshell was not accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Due to the related party and common control relationships held between Bombshell and Grow Capital, Inc., the assets and liabilities of Bombshell will transfer over to the Company at their carrying values.

The pro forma consolidated financial statements do not necessarily reflect what the consolidated company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the consolidated company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

Note 2 — Pro Forma Adjustments

Adjustment 1:  Records the issuance of shares by the Company to acquire Bombshell as noted above under Unaudited Pro Forma Consolidated Financial Information.  For further details on this transaction, please see the Form 8-K filed at www.sec.gov on July 24, 2019.

Adjustment 2:  Records the expected purchase price received for the sale of the Smoke on the Water property and disposition of the assets and liabilities of WCS Enterprises, LLC in the sale to the former CEO and Chairman Wayne Zallen. On September 4, 2019, the board of directors of the Company authorized the listing for sale of the Smoke on the Water Property and engaged real estate professionals to assist with the sale.  The purchase price of the property approved by the board of directors was for $850,000 with expected costs of sale to include 6% sales commission.  On September 30, 2019, the Company entered into a membership interest purchase agreement with the Zallen Trust pursuant to which the Company sold all of the Company’s membership interests in WCS for an aggregate purchase price of $782,450. The Zallen Trust paid the purchase price by transferring to the Company 8,693,888 shares of the Company’s Common Stock, valued at $0.09 per share. The Purchase Agreement also provided that Mr. Zallen transfer to the Company an additional 400,000 shares of Common Stock to settle $36,000 in back rent owed at the time of the sale. The Company retired all of the shares received as a result of the transaction. In connection with the sale of WCS, the Company and Mr. Zallen entered into a separation and release of claims agreement pursuant to which the Company and Mr. Zallen provided a mutual release of claims against the other party and such party’s affiliates, including all claims related to Mr. Zallen’s service as an officer, employee, and director of the Company. Such release resulted in the Company writing down approximately $367,000 of previously accrued wages relative to Mr. Zallen’s prior employment with the Company.

Adjustment 3:  Records the expected repayment of the labilities associated with the proceeds from the sale of the Smoke on the Water property, including the mortgage held on the property.

Adjustment 4:  Records adjustment to show the effect of the pro forma of having completed the sale of WCS Enterprises, LLC and the Smoke on the Water property prior to commencement of operations in this reporting period.