What changed in this filing

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Item 1. Business

2021-03-29 compared with 2020-03-27 · 430 added, 234 removed, 12 unchanged (98% of the section changed)

GrowGeneration

(together with all of its wholly-owned subsidiaries, collectively “GrowGeneration”

the “Company”)

was incorporated in Colorado in 2014, and is the largest chain of hydroponic garden centers in North America and is a leading

marketer and distributor of nutrients, growing media, advanced indoor and greenhouse lighting, ventilation systems and accessories

for hydroponic gardening.

As of March 27, 2020, the Company owns and operates a chain of twenty seven (27) retail and commercial

hydroponic/gardening centers, with five (5) located in the state of Colorado, four (4) in the state of California, four (4) in

the state of Michigan, two (2) in the state of Nevada, one (1) in the state of Washington, one (1) in the state of Oregon, four

(4) in the State of Oklahoma, one (1) in the state of Rhode Island, three (3) in Maine, (1) in Florida, one (1) distribution center

in California and an online e-commerce store, GrowGen.Pro.

Our plan is to acquire, open and operate hydroponic/gardening centers

and related businesses throughout the United States and Canada.

our 27 centers operate in 10 states, each state considered an operating region.

GrowGeneration

is the largest retailers of hydroponic products in the United States and is engaged in the business of marketing and distributing

horticultural, organics, lighting and hydroponics products, including lighting fixtures, nutrients, seeds and growing media systems,

trays, fans, filters, humidifiers and dehumidifiers, timers, instruments, water pumps, irrigation supplies and hand tools.

GrowGeneration

is also actively developing a line of private labeled products, which would be sold through GrowGeneration garden centers under

brands owned or controlled by the Company.

In this regard, the Company acquired a variety of trademarks in March 2019 to bolsters

its ability to supply branded ‘house’

products to our customers.

From trellis netting, to plastic pots, to organic nutrients,

GrowGeneration introduced its first private-labeled products in the first quarter of 2020, expects to roll out a complete line

of private labeled products to offer our customers at great prices, which is expected to have a positive impact on margins and

profitability in the near term.

list of the product trademarks the Company acquired are listed as follows:

Blueprint,Carbide, DuraBreeze, Elemental Solutions,

GrowXcess, GaurdenWare, Harvester’s Edge, Hydro Thrive, Ion, MixSure +, OptiLUME, Pioneer, Predator Lighting, Smart Support,

Sunleaves Garden, Sunspot, Super Starter, Utopian Systems, VitaLUME, and VitaPlant.

stores sell thousands of products, that include nutrients, growing media, advanced indoor and greenhouse lighting, ventilation

systems and accessories for hydroponic gardening and other products needed to grow indoors and outdoors.

Our strategy is to target

two distinct groups of customers, namely commercial growers and smaller growers that require a local store to fulfill their daily

and weekly growing needs.

Our supply chain includes over 10,000 sku’s across 12 product departments.

We can deliver directly

to the grower’s facility, and they can pick up the products at one of our stores or order online.

GrowGeneration Corp.

(together with all

of its wholly owned subsidiaries, collectively “GrowGeneration”

or the “Company”) was incorporated in Colorado

in 2014 and is the largest chain of hydroponic garden centers in North America and is a leading marketer and distributor of nutrients,

growing media, advanced indoor and greenhouse lighting, environmental control systems and accessories for hydroponic gardening.

Currently, the Company owns and operates a chain of fifty two (52) retail hydroponic/gardening stores across 12 states, with eighteen

(18) in the state of California, six (6) in the state of Michigan, eight (8) located in the state of Colorado, five (5) in the

State of Oklahoma, five (5) in Maine, two (2) in the state of Nevada, two (2) in the state of Washington, two (2) in the state

of Oregon, one (1) in the state of Rhode Island, one (1) in the state of Florida, one (1) in the state of Arizona, one (1) in the

state of Massachusetts, one (1) in the state of Arizona, an online e-commerce store, GrowGeneration.com and a commercial e-commerce

platform, Agron.io.

We recently announced the signing of two leases in Los Angeles and Rancho Dominguez, CA, which are our 53 rd

and 54 th locations.

Proprietary brands owned by the Company include Canopy Crop Management Corp, CharCoir Inc, and the

Company introduced several private-label brands across multiple product categories from LED lighting to nutrients and additives

and other products for indoor cultivation.

Our plan is to continue to acquire, open

and operate hydroponic/gardening stores and related businesses throughout North America.

GrowGeneration sell thousands of products,

including nutrients, growing media, advanced indoor and greenhouse lighting, environmental control systems, vertical benching and

accessories for hydroponic gardening, as well as other indoor and outdoor growing products, that are designed and intended for

growing a wide range of plants.

Hydroponics is a specialized method of growing plants using mineral nutrient solutions in a water

solvent, as opposed to soil.

This method is typically used for indoor cultivation to give growers the ability to better regulate

and control nutrient delivery, light, air, water, humidity, pests, and temperature.

Hydroponic growers benefit from these techniques

by producing crops faster and with higher crop yields per acre as compared to traditional soil-based growers.

Indoor growing techniques

and hydroponic products are being utilized in new and emerging industries or segments, including the growing of cannabis and hemp.

In addition, vertical farms producing organic fruits and vegetables also utilize hydroponics due to a rising shortage of farmland

as well as environmental vulnerabilities including drought, other severe weather conditions and insect pests.

GrowGeneration serves a new, yet sophisticated

community of commercial and urban cultivators growing specialty crops including organics, greens and plant-based medicines.

the traditional agricultural industry, these cultivators use innovative indoor and outdoor growing techniques to produce specialty

crops in highly controlled environments.

This enables them to produce crops at higher yields without having to compromise quality,

regardless of the season or weather and drought conditions.

Controlled-environment

agriculture (CEA) is a technology-based approach to maintain optimal growing conditions throughout the development of the

Production takes place within an enclosed growing structure such as a greenhouse or building.

Plants are often

grown using hydroponic methods in order to supply the proper amounts of water and nutrients to the root zone.

CEA optimizes the use of resources such as water, energy, space, capital and labor.

Different techniques are available for growing

in controlled environment agriculture.

The more viable option is vertical farming.

Vertical farming has the ability to produce

crops all year round in a controlled environment, with the possibility of increased yield by adjusting the amount of carbon and

nutrients the plants receive.

Our target customer segments include the

commercial growers in the plant-based medicine market, the craft grower and vertical farms who grow organically grown herbs and

leafy green vegetables.

The landscape for hydroponic retail stores is very fragmented, with numerous single stores which we consider

“targets”

for our acquisition strategy.

Further, the products we sell are in demand due to the ever-increasing legalization

of plant-based medicines, primarily cannabis and hemp, and the increasing number of licensed cultivation facilities in North America.

Total sales for the hydroponic equipment industry are projected to surpass $16 billion by 2025.

The Company believes there are

over 15,000 active cannabis cultivation licenses in North America.

The average cultivation facility is approximately 36,000 sq.

and over 34,000,000 pounds of cannabis is projected to be cultivated by 2025.

Our retail operations are driven by a wide

selection of all hydroponic products, service and solutions driven staff and pick, pack and ship distribution and fulfillment capabilities.

We employ approximately 590 employees, a majority of them we have branded as “Grow Pros”.

Currently, our operations

span over 800,000 square feet of retail and warehouse space.

We operate our business through the following

business units:

52 hydroponic/gardening centers focused on serving growers and cultivators.

Sales to commercial customers, including large multi-state operators and cultivators.

E-Commerce/Omni-channel :

Our e-commerce operation, includes GrowGeneration.com and Agron.io, a business-to-business (B2B) online portal for commercial

GrowGeneration.com is currently adding “Buy online/Pick up in store”

same day pick up service.

Distribution/Supply Chain :

Some of our garden centers have multi-functions, with added capabilities that include warehousing, distribution and fulfillment for direct shipments of products to garden center locations, pick, pack and ship for our online platforms and direct fulfillment to our commercial customers.

● Proprietary Brands and Private Label:

GrowGeneration

serves a new, yet sophisticated community of commercial and urban cultivators growing specialty crops including organics, greens

and plant-based medicines.

Unlike the traditional agricultural industry, these cultivators use innovative indoor and outdoor growing

techniques to produce specialty crops in highly controlled environments.

This enables them to produce crops at higher yields without

having to compromise quality, regardless of the season or weather and drought conditions.

target market segments include the commercial growers in the plant-based medicine market, the home grower and businesses and

individuals who grow organically grown herbs and leafy green vegetables.

The landscape for hydroponic retail stores is very

fragmented, with numerous single stores which we consider very ripe for our roll up strategy.

Further, the products we sell

are in demand due to the ever-increasing legalization of pant-based medicines, primarily cannabis and hemp, and the number of

licensed cultivation facilities in both the US and Canada.

Total sales for the hydroponic equipment industry were well over

$8 billion in 2019.

growing techniques have primarily been used to cultivate plant-based medicines.

Plant-based medicines often require high-degree

of regulation and controls including government compliance, security, and crop consistency, making indoor growing techniques a

preferred method.

Cultivators of plant-based medicines often make a significant investment to design and build-out their facilities.

They look to work with companies such as GrowGeneration that understand their specific needs and can help mitigate risks that

could jeopardize their crops.

Plant-based medicines are believed to be among the fastest-growing market in the U.S.

industry pundits believe that plant-based medicines may even displace prescription pain medication by providing patients with

a safer, more affordable alternative.

growing techniques, however, are not limited to plant-based medicines.

Vertical farms producing organic fruits and vegetables

are beginning to emerge in the market due to a rising shortage of farmland, and environmental vulnerabilities including drought,

other severe weather conditions and insect pests.

Indoor growing techniques enable cultivators to grow crops all-year-round in

urban areas and take up less ground while minimizing environmental risks.

Indoor growing techniques typically require a more significant

upfront investment to design and build-out these facilities than traditional farmlands.

If new innovations lower the costs for

indoor growing, and the costs to operate traditional farmlands continue to rise, then indoor growing techniques may be a compelling

alternative for the broader agricultural industry.

and Development

Company has not incurred any research and development expenses during the period covered by this report.

and Suppliers

key customers vary by state and are expected to be more defined as the Company moves from its retail walk-in purchasing sales

strategy to serving cultivation facilities directly and under predictable purchasing activity.

Currently, none of our customers

accounted for more than 5% of our sales in 2019 or 2018.

key suppliers include several manufacturers and distributors such as FoxFarm Fertilizer, Canna, USA Mills Nutrients, Hawthorne

Garden Supply, Hydrofarm, and others.

sells a variety of products, including nutrients, growing media, advanced indoor and greenhouse lighting, ventilation systems,

vertical benching, environmental control systems and accessories for hydroponic gardening.

Our supply chain includes thousand’s

stock keeping units (“SKUs”) across 16 product departments.

Over 60% of our products are consumables, that feed the

plants, generating recurring orders by our customers.

Our strategy is to supply products to two groups of customers:

growers and craft growers that require a local center to fulfill their daily and weekly growing needs.

We have developed a line

of private label products that we are selling through our garden centers under proprietary brands we own and trademarked.

strategy is to deliver a one-stop shopping experience, through selection, service and solutions for our customers.

Store Acquisitions and New Store Openings

Core to our growth strategy is to expand

the number of our retail garden centers throughout North America.

The hydroponic retail landscape is fragmented, which allows us

to acquire the “best of breed”

hydroponic operations.

In addition to the 12 states we are currently operating in, we

have identified new market opportunities in states that include Ohio, Illinois, Pennsylvania, New York, New Jersey, Mississippi

and Missouri.

In 2020, we opened a second hydroponic/gardening center in Tulsa, Oklahoma, a 40,000 square feet store operation

and fulfillment center, and completed eight (8) acquisitions, adding 14 new locations in 2020.

The Company acquired 14 new locations

in the first quarter of 2021 and has an active target pipeline of acquisitions which are planned to close in 2021.

Commercial Sales Division

Our commercial division is focused on selling

end to end solutions for large commercial cultivators.

When a commercial customer gains a new cultivation license, they will need

to purchase lighting, benching, environmental control systems, irrigation, fertigation and other products to outfit their cultivation

Commercial customers typically purchase in larger dollar amounts and sizes of products.

We offer commercial customers

volume pricing, terms and financing.

Our commercial team manages thousands of commercial accounts across North America.

Our commercial

division collectively contributed approximately $49 million in revenue for 2020 compared to approximately $17 million for 2019,

a 189% year over year increase.

We have identified over 15,000 active licensed growers in North America and believe there is significant

room for us to expand our base of commercial customers.

E-Commerce/Omni-Channel Division

Our digital strategy is focused on capturing

the home, craft and commercial grower online.

GrowGeneration.com offers over 10,000 hydroponic products, all curated by our product

GrowGeneration.com offer customers the option to have their orders shipped directly to their locations, anywhere in North

America or alternatively customers can buy online and pick up in store.

Revenue for 2020 was approximately $10.6 million compared to

approximately $4.8 million for 2019, an increase of 123%.

New visitors to our website were 1.2 million in 2020 versus 477,000 in

2019, an increase of 152% year over year.

Our online garden center closed 17,000 transactions in 2020 versus 6,300 in 2019, an

increase of 170%.

On March 19, 2021, the Company purchased, Agron.io.

a leading wholesale agriculture portal that allows commercial

growers to manage their purchasing and logistics in one platform.

pricing, real-time inventory and one of the largest product catalog in the industry, with over 10,000 products in over 60

categories, including greenhouses, extraction, hemp, and commercial equipment.

The platform manages real-time product updates,

tier-pricing changes, case quantities, pallet quantities, profit margin projections, hazmat fees, ETL/UL listings and state chemical

regulations, as well as guarantees the latest shipping rates using API Pallet.

Our supply chain currently spans 800,000

of retail and warehouse space, across 52 locations and 12 states.

Today, we operate distribution and fulfillment out of

our 60,000 sq.

ft location in Sacramento, CA and 40,000 sq.

in Tulsa, OK.

The Company announced on March,9, 2021 the addition

of a total of 122,000 sq.

ft., including 52,000 sq.

in downtown Los Angeles, CA and 70,000 sq.

in Rancho Dominguez, CA,

that will serve as warehousing for our private-label products, distribution and fulfillment for the Company.

We are in the process

of building several additional locations that will serve as fulfillment service centers, that include a 25,000 sq.

in Phoenix, AZ.

and a 58,000 sq.

location in Medley, FL.

The Company expects these locations to be open by the summer of 2021.

Proprietary Brands and Private Label

GrowGeneration purchased Canopy Crop Management

Corp., in December 2020, the developer of the popular Power Si line of monosilicic acid products, a widely used nutrient additive

On March 12, 2021, the Company purchased Char Coir, a line of premium coco pots, cubes and medium.

Both Power Si and

Char Coir are brands that generate over $10,000,000 in annual sales.

We believe that expanding our private label offerings will

have a positive impact on our margins and profitability in the near term.

We use various trademarks, trade names in our private-

label business, including Ion Lighting, Sunleaves, powder nutrients and additive line, Optilime Bulbs, Blueprint controllers and

timers, Growxcess pots and containers, Harvest Edge, pruners, trellis and other gardening accessories, and Durabreeze fans and

dehumidifiers.

Both “GrowGeneration”

and “Where the Pros Go to Grow”

are trademarks used to brand and market our garden centers across

North America.

Competitive Advantages

As the largest chain of hydroponic garden

centers by revenue and number of stores in the United States based on management’s estimates, we believe that we have the

following core competitive advantages over our competitors:

We offer a one-stop shopping experience to all types of growers by providing “selection, service, and solutions”;

We provide end-to-end solutions for our commercial customers from capex built-out to consumables to nourish their plants;

We have a knowledge-based sales team, all with horticultural experience;

We offer the options to transact online, in store, or buy online and pick up;

We consider ourselves to be a leader of the products we offer, from launching new technologies to the development of our private label products;

We have a professional team for mergers and acquisitions to acquire and open new locations and successfully add them to our company portfolio;

We offer a program of issuing credit to licensed commercial customers based on a credit evaluation process.

Community Service and Charity

The Company has recently announced its

partnership with Whole Cities Foundation.

Founded by Whole Foods Market in 2014, the independent, nonprofit organization is based

in Austin, Texas, and has partnered with more than 190 community organizations in 100 cities across the U.S.

to build thriving

local food systems and improve health.

The first project, with Whole Cities, through its Fresh, Healthy Food Access Grant program,

has been with Newark Science & Sustainability and Greater Newark Conservancy over the past 4 years.

Both organizations

had identified hydroponic growing as a goal for their community plans.

Each group will benefit from an equipment grant.

first two opportunities are part of a pilot that we expect will yield learnings over the course of the year.

GrowGeneration will

provide equipment and expertise and partner with Whole Cities to evaluate community impact.

As we have built a national chain of hydroponic

garden centers, it has always been our mission to give back to the local communities.

In our day-to-day operations, we see the

results growing hydroponically.

We could not be prouder to partner with Whole Cities to donate hydroponic equipment and supplies

to their local communities to help them with their gardens and increase the quality of their food production.

Our staff of approximately

590 dedicated team members, the majority of whom are experienced in how to grow hydroponically, are energized to lend a hand and

their personal time to support Whole Cities.

It is rewarding to watch a community, come together, parents and children, and produce

the largest tomatoes and produce in their community!

Further, in December 2020, the Company

donated $10,000 to the Make- A- Wish Foundation to grant “a wish”

The Company is an active contributor

and supporter of the Make-A-Wish Foundation.

How We Evaluate Our Operations

The Company generates sales primarily from

the sale of hydroponic garden products, including nutrients, growing media, advanced indoor and greenhouse lighting, environmental

control systems, vertical benching, and accessories for hydroponic gardening, as well as other indoor and outdoor growing products.

The Company recognizes revenue, net of estimated returns and sales tax, at the time the customer takes possession of merchandise

or receives services at which point, the performance obligation is satisfied.

Sales and other taxes collected concurrent with revenue

producing activities are excluded from revenue.

Customer deposits and lay away sales are not reported as revenue until final payment

is received and the merchandise has been delivered.

Our sales depend on the type of products

we sell and the mix between consumables and non-consumables.

Due to their nature, purchases of consumables result in repeat orders

as customers seek to replenish their supplies.

In 2020, approximately 60% of our sales were consumables.

Generally, in new markets

where legalization of plant-based medicines is recent and licensors are ramping up their grow operations, there are more purchases

of non-consumables for buildouts compared to purchases of consumables.

In more mature markets, there are generally more purchases

of consumables than non-consumables.

Our sales are also impacted by our customer mix of commercial and non-commercial customers,

as larger commercial customers may receive volume discounts.

More than a majority of our sales are derived from our commercial

We calculate gross profit as sales less

cost of goods sold.

Cost of goods sold consists of cost of product sold and freight.

Gross profit excludes depreciation and amortization,

which are presented separately in our consolidated statement of operations.

Our overall gross profit margin varies

with our product mix, in particular the percentage of sales of consumable products versus non-consumables, such as in connection

with buildouts, during a particular quarter.

In addition, our customer mix impacts gross profit margin due to larger commercial

customers receiving discounts.

Operating Expenses

Operating expenses are comprised of store

operations, primarily payroll, rent and utilities, and corporate overhead.

Corporate overhead is comprised of share-based compensation,

depreciation and amortization, general and administrative costs and corporate salaries and related expenses.

General and administrative

expenses (“G&A”) consist mainly of advertising and promotions, travel & entertainment, professional fees and

G&A as a percentage of sales does not increase commensurate with an increase in sales.

Our largest expenses are

payroll and rent and these are largely fixed and not variable.

Our advertising and marketing expenses are controllable and variable

depending on the particular market.

Same-Store Sales

We assess the organic growth of our sales

on a same-store basis.

We believe that our assessment on a same-store basis represents an important indicator of comparative financial

results and provides relevant information to assess our performance.

New and acquired stores become eligible for inclusion in the

comparable store base if the store has been under our ownership for the entire period in the same-store base periods for which

we are including the store.

For example, our same store sales for the full year 2020 and 2019 includes 21 stores that operated

for the entire year.

We do not include any stores that were closed or consolidated during a particular period.

Research and Development

The Company has not incurred any research

and development expenses during the period covered by this report.

Customers and Suppliers

Our key customers vary by state and are

expected to be more defined as the Company moves from its retail walk-in purchasing sales strategy to serving cultivation facilities

directly and under predictable purchasing activity.

Currently, none of our customers accounted for more than 5% of our sales in

2020 or 2019.

Our key suppliers include several manufacturers

and distributors such as Hawthorne Garden Supply, Hydrofarm, Fluence Engineering, Advanced Nutrients, House and Gardens, FoxFarm

Fertilizer, Canna, USA, and others.

All the products purchased and sold are applicable to indoor and outdoor growing for organics,

greens, and plant-based medicines.

As of December 31, 2019, and 2018, two suppliers represent 51% and 56%, respectively of our

As of December 31, 2020, two suppliers represented 41% of all our purchases, a decrease of 18%

The Company is of the opinion that the loss of either supplier would not have a material adverse impact on our business.

because both suppliers provide the same products and the Company maintains direct manufacturing agreements with vendors.

for indoor and outdoor growing equipment is currently high due to legalization of plant-based medicines, primarily cannabis

and hemp, which requires equipment purchases for build-out and repeat purchases of consumable nutrients needed during the growing

This demand is projected to continue to increase as a result of the approval of a comprehensive, publicly available

medical marijuana/cannabis programs laws in 33 states and 11 states for adult-use plus the District of Columbia as of the

date thereof.

Continued innovation and more efficient build-out technologies along with larger and consolidated cultivation

facilities are expected to further expand market demand for GrowGeneration products and services.

We expect the market to

continue to segment into urban farmers serving groups of individuals, community cultivators, and large-scale cultivation

facilities across the states.

Each segment will be optimized to different distribution channels that GrowGeneration currently

We are of the opinion that as our volume increases, we will obtain volume discounts on purchasing that should allow

us to maximize our revenues and expand gross profit margins.

Company has developed its e-commerce website and portal, www.GrowGen.Pro which offers for sale hydroponic, specialty and

organic gardening products.

Online shoppers are able to shop from product departments, from nutrients to lighting to hydroponic

and greenhouse equipment, delivering an easy and quick method to find the products that they want to purchase.

Our e-commerce

site is designed to appeal to the professional growers.

Each product listed on the site contains product descriptions, product

reviews and a picture so the customers can make an informed and educated purchase.

Our product filters allow the customers to

search by brand, manufacturer, or by function such as wattage.

Designed as an information portal as well as an e-commerce store,

the customers will find videos, articles, blogs and other relevant content, all generated by GrowGeneration’s internal staff,

which we call our “Grow Pros”.

The GrowGeneration customers are able to shop and order online 24/7 and, choose to

receive products delivered directly to their grow operations, or for pick up at one of the GrowGeneration retail stores.

customers may simply use our site as a resource and shop with our Grow Pros at one of our retail locations.

Google advertising,

social media and in store advertising are the primary advertising tools we use to drive traffic to www.GrowGen.Pro .

to year end, on February 26, 2020, the Company entered into an asset purchase agreement through its wholly-owned subsidiary,

GrowGeneration Florida Corp, to purchase the assets of Healthy & Harvest, LLC, with one location in Pembroke Pines, FL.

connection with the purchase of the assets, the Company also entered a three-year commercial lease for warehouse space, effective

February 26, 2020 and subleased the store space whose current lease expires July 31, 2020.

December 18, 2019, the Company entered into an asset purchase agreement through its wholly-owned subsidiary, GrowGeneration Washington

Corp, to purchase the assets of GrowWorld with one location in Portland, OR.

In connection with the purchase of the assets, the

Company also entered into an assignment of lease, effective December 18, 2019, to rent the premises in Portland, OR.

lease terminates on December 31, 2026.

September 3, 2019, the Company entered into an asset purchase agreement through its wholly-owned subsidiary, GrowGeneration Michigan

Corp, to purchase the assets of Grand Rapids Hydroponics with one location in Grand Rapids, MI.

The Company maintains direct manufacturing agreements with many vendors.

The Company purchased a total of 14 stores

in 2020 and 14 stores through March 12, 2021.

The Company also completed the acquisitions of two leading product companies, Canopy

Crop Management in December 2020 and Char Coir, on March 14, 2021.

Acquisition completed in 2021, Subsequent

to year-end December 31, 2020

On March 19, 2021 the Company purchased

the assets of Agron, LLC, an online seller of growing equipment.

The total consideration for the purchase of Agron was approximately

$11.3 million, including $6 million in cash and common stock valued at approximately $5.3 million.

On March 15, 2021 the Company purchased

the assets of 55 Hydroponics, a hydroponic and organic superstore located in Santa Ana, CA.

The total consideration for the purchase of 55 Hydroponics was approximately $6.1 million, including $5 million in cash and common

stock valued at approximately $1.1 million.

On March 15, 2021 the Company purchased

the assets of Aquarius, a hydroponic and organic garden store in Springfield, MA.

The total consideration for the purchase of Aquarius was approximately $3.6 million, including $2.4 million in cash and common

stock valued at approximately $1.2 million.

On March 12, 2021 the Company purchased

the assets of Charcoir Corporation, who sells an RHP-certified growing medium made from the

highest-grade coconut fiber.

The total consideration for the purchase of Charcoir was approximately $16.3 million, including

$9.8 million in cash and common stock valued at approximately $6.5 million.

On February 22, 2021 the Company purchased

the assets of San Diego Hydroponics & Organics, a four-store chain of hydroponic and

organic garden stores in San Diego, CA.

The total consideration for the purchase of San Diego Hydroponics was approximately

$9.3 million, including $4.8 million in cash and common stock valued at approximately $4.5 million.

On February 15, 2021 the Company purchased

the assets of Grow Warehouse LLC, a four-store chain of hydroponic and organic garden stores

in Colorado (3 stores) and Oklahoma (1 store).

The total consideration for the purchase of Grow Warehouse LLC was approximately

$17.8 million, including $8.1 million in cash and common stock valued at approximately $9.7 million.

On February 1, 2021 the Company purchased

the assets of J.A.R.B., Inc d/b/a Grow Depot Maine, a two-store chain in Auburn and Augusta,

The total consideration for the purchase of Grow Depot Maine was approximately $2.1 million, including $1.7 million

in cash and common stock valued at approximately $411,000.

On January 25, 2021 the Company purchased

the assets of Indoor Garden & Lighting, Inc, a two-store chain of hydroponic and equipment

and indoor gardening supply stores serving the Seattle and Tacoma, Washington area.

The total consideration for the purchase

of Garden & Lighting was approximately $1.63 million, including $1.1 million in cash and common stock valued at approximately

Acquisitions completed in 2020

On December 23, 2020, the Company acquired

the assets of Canopy Crop Management and its complete portfolio of products including the Power SI brand of momo-silicic acid-enriched

The total consideration for the purchase of Canopy Crop was approximately $9.2 million, including $5.4 million in

cash and common stock valued at approximately $3.8 million.

On December 14, 2020, the Company acquired

the assets of Grassroots, a three-store chain in California.

The total consideration for the purchase of Grassroots was approximately

$10 million, including $7.5 million in cash and common stock valued at approximately $2.5 million.

On November 17, 2020, the Company acquired

the assets of The GrowBiz, a five-store chain with four stores in California and one store in Oregon.

The total consideration for

the purchase of The GrowBiz was approximately $44.7 million, including $17.4 million in cash and common stock valued at approximately

$27.3 million.

On October 20, 2020 the Company acquired

the assets of Big Green Tomato (“BGT”), a two-store chain in Battle Creek and Taylor,

The total consideration for the purchase of BGT was approximately $9.1 million, including $6.0

in cash and common stock valued at approximately $3.1 million.

On October 12, 2020, the Company acquired

the assets of Hydroponics Depot, LLC, a single store located in Phoenix Arizona.

consideration for the purchase of Hydroponics Depot, LLC was approximately $1.54 million,

including $987,500 in cash and common stock valued at approximately $548,000.

On August 10, 2020 the Company acquired

certain assets of Benzakry Family Corp, d/b/a Emerald City Garden, in a transaction valued at $1 million.

Acquired goodwill of

approximately $618,000 represents the value expected to rise from organic growth and an opportunity to expand into a well-established

market for the Company.

Cash consideration was funded from the Company’s existing working capital.

On June 16, 2020 the Company acquired certain

assets of H2O Hydroponics, LLC in a transaction valued at approximately $1.99 million.

Acquired goodwill of approximately $1 million

represents the value expected to rise from organic growth and an opportunity to expand into a well-established market for the Company.

Cash consideration was funded from the Company’s existing working capital.

On February 26, 2020, the Company entered

into an asset purchase agreement through its wholly-owned subsidiary, GrowGeneration Florida Corp, to purchase the assets of Healthy

& Harvest, LLC, with one location in Pembroke Pines, FL.

The total consideration for the purchase of Healthy Harvest was approximately

$2.9 million, including $1.8 million in cash and common stock valued at approximately $1.1 million.

In connection with the purchase

of the assets, the Company also entered into a ten-year commercial lease agreement, effective from September 9, 2019, to rent

the premises in Grand Rapids, MI.

April 23, 2019, the Company entered into an asset purchase agreement through its wholly-owned subsidiary, GrowGeneration Rhode

Island Corp., to purchase the assets of GreenLife Garden Supply Corp., with two store locations in Maine and one in New Hampshire.

In connection with the purchase of the assets, the Company also entered into five-year commercial lease agreements, effective

from May 9, 2019 and July 1, 2019, respectively, to rent the premises in York and Biddeford, Maine where store assets are located.

January 26, 2019, the Company entered into an asset purchase agreement through its wholly-owned subsidiary, GrowGeneration California

Corp., to purchase the assets from Palm Springs Hydroponics, Inc.

located in Palm Springs, California.

The acquisition was completed

on February 7, 2019.

In connection with the purchase of the assets, the Company also entered into a commercial lease agreement

with a term of five years and three months, effective from February 7, 2019 to April 30, 2024, to rent the premises where the

assets were located to open a new store.

January 26, 2019, the Company entered into an asset purchase agreement through its wholly-owned subsidiary, GrowGeneration Nevada

Corp., to purchase the assets from Reno Hydroponics, Inc.

located in Reno, Nevada.

The acquisition was completed on February 11,

In connection with the purchase of the assets, the Company also entered into a one-year commercial lease agreement, effective

from February 1, 2019 to January 31, 2020, to rent the premises where the assets were located to open a new store.

has since entered into a new lease expiring March 31, 2021.

November 28, 2018, the Company entered into an asset purchase agreement through its wholly-owned subsidiary, GrowGeneration Pueblo

Corp., to purchase the assets of Chlorophyll, Inc., located in Denver, Colorado.

The acquisition was completed on January 21,

In connection with the purchase of the assets, the Company also entered into a five-year commercial lease agreement, effective

from January 21, 2019, to rent the premises where the assets are located to open a new store

August 30, 2018, the Company entered into an asset purchase agreement, amended on September 14, 2018, with Virgus, Inc.

Heavy Gardens, an online store of hydroponic and garden supplies (“Heavy Gardens”), to purchase the assets of Heavy

Gardens through its wholly-owned subsidiary, GrowGeneration HG Corp.

The closing of the asset purchase took place on September

June 28, 2018, the Company entered into a restated and amended asset purchase agreement to purchase the assets of a retail hydroponic

store, Santa Rosa Hydroponics & Grower Supply Inc., located in Santa Rosa, California.

On July 13, 2018, the parties entered

into an amendment to the purchase agreement and conducted the closing of the asset purchase.

In connection with the purchase of

the assets, the Company also entered into a commercial lease agreement, effective from July 14, 2018 to July 13, 2023, to rent

the premises where the assets were located to open the new store.

April 12, 2018, the Company entered into an asset purchase agreement through its wholly-owned subsidiary, GrowGeneration Michigan

Corp., to purchase substantially all of the assets of Superior Growers Supply, Inc.’s business located in Michigan.

In connection

with the purchase of the assets, the Company also entered into a commercial lease, effective from April 12, 2018 to April 11,

2023, to rent the premises where a part of the assets are located.

The Company entered into two additional leases.

Following this

acquisition, the Company opened three stores in the state of Michigan.

business is subject to some seasonal influences.

Generally, our highest volume of sales occurs in our second and third fiscal

quarter, and the lower volume occurs during our first or fourth fiscal quarter.

markets in which we sell our products are highly competitive.

Our key competitors include many local and national vendors of gardening

supplies, local product resellers of hydroponic and other specialty growing equipment, as well as online product resellers and

large online marketplaces such as Amazon.com and eBay.

Our industry is a highly fragmented industry with over 1,000 retail outlets

throughout the U.S.

We compete with companies that have greater capital resources, facilities and diversity of product lines.

Our competitors may also introduce new hydroponic growing equipment, manufacturers may sell equipment direct to consumers, and

our distributers could cease sales of product to us.

Notwithstanding

the foregoing, we do believe that our pricing, inventory and product availability and overall customer service provide us with

the ability to compete in this marketplace.

In addition, as we increase our number of stores and inventory per store, we expect

to be able to purchase larger amounts of inventory at lower volume sale prices, which we expect will enable us to price competitively

and deliver the products that our customers are seeking.

We compete on supply chain competency, field sales support, in-store

sales support, the strength of our relationships with major manufacturers, distributors and advertising.

on our knowledge and communication with our suppliers, we do not believe our suppliers sell directly to the retail market or our

Property and Proprietary Rights

intellectual property consists of our brands and their related trademarks, domain names and websites, customer lists and affiliations,

product know-how and technology, and marketing intangibles.

We also hold rights to website addresses related to our business including

websites that are actively used in our day-to-day business such as www.GrowGeneration.com.

We own the federally registered trademark

for “GrowGeneration®”

of the assets, the Company also entered a three-year commercial lease for warehouse space, effective February 26, 2020 and subleased

the store space whose current lease expires July 31, 2021.

Our business is subject to some seasonal

Historically, our highest volume of sales occurs in our second and third fiscal quarters, and the lower volume occurs

during our first or fourth fiscal quarter.

The markets in which we sell our products

are highly competitive.

Our key competitors include many local and national vendors of gardening supplies, local product resellers

of hydroponic and other specialty growing equipment, as well as online product resellers and large online marketplaces such as

Amazon.com and eBay.

Our industry is a highly fragmented industry with over 1,000 retail hydroponic retailers throughout the U.S.

Notwithstanding the foregoing, we are the

largest chain of hydroponic garden centers in North America and our pricing, inventory and product availability and overall customer

service, provide us with the ability to compete in our industry.

In addition, as we continue to increase the number of garden centers

and inventory per store, we expect to be able to continue to purchase inventory at lower volume prices, which we expect will enable

us to price competitively and deliver the products that our customers are seeking.

The Company competes by delivering the widest

selection of hydroponics products, end to end solutions for all types of cultivation environments, in-store sales and product support,

direct manufacturer pricing and world-class customer service.

Intellectual Property and Proprietary

Our intellectual property consists of our

brands and their related trademarks, domain names and websites, customer lists and affiliations, product knowledge and technology,

and marketing intangibles.

We also hold rights to website addresses related to our business including websites that are actively

used in our day-to-day business such as www.GrowGeneration.com.

We own the federally registered trademark for “GrowGeneration®”

“Where the Pros Go to Grow®”.

and GrowGen.Pro.

In addition, we own several

registered trademarks acquired March 2019 as detailed previously under the caption Products.

sell products, including hydroponic gardening products, that end users may purchase for use in new and emerging industries or

segments, including the growing of cannabis and hemp, that may not grow or achieve market acceptance in a manner that we can

The demand for these products depends on the uncertain growth of these industries or segments.

addition, we sell products that end users may purchase for use in industries or segments, including the growing of cannabis

and hemp, that are subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices,

enforcement approaches, judicial interpretations, and consumer perceptions.

In addition, we own several registered trademarks acquired in March 2019.

Government Regulation

We sell products, including hydroponic

gardening products, that end users may purchase for use in new and emerging industries or segments, including the growing of cannabis

and hemp, that may not grow or achieve market acceptance in a manner that we can predict.

The demand for these products depends

on the uncertain growth of these industries or segments.

In addition, we sell products that end

users may purchase for use in industries or segments, including the growing of cannabis and hemp, that are subject to varying,

inconsistent, and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations,

and consumer perceptions.

For example, certain countries and 36 U.S.

states have adopted frameworks that authorize, regulate, and tax the cultivation, processing, sale, and use of cannabis for

medicinal and/or non-medicinal use, while the U.S.

Controlled Substances Act and the laws of other U.S.

states prohibit

growing cannabis.

states have adopted frameworks that authorize, regulate,

and tax the cultivation, processing, sale, and use of cannabis for medicinal and/or non-medicinal use, while the U.S.

Substances Act and the laws of other U.S.

states prohibit growing cannabis.

In addition, with the passage of the Farm Bill in December

2018, hemp cultivation is now broadly permitted.

The Farm Bill explicitly allows the transfer of hemp-derived products across state lines

for commercial or other purposes.

It also puts no restrictions on the sale, transport, or possession of hemp-derived products,

The Farm Bill explicitly allows the transfer of hemp-derived products across state

lines for commercial or other purposes.

It also removes restrictions on the sale, transport, or possession of hemp-derived products,

so long as those items are produced in a manner consistent with the law.

1 unchanged sentence

allow the Company to expand its marketplace opportunities.

gardening products, including our hydroponic gardening products, are multi-purpose products designed and intended for growing

a wide range of plants and are purchased by cultivators who may grow any variety of plants, including cannabis and hemp.

Although the demand for our products may be negatively impacted depending on how laws, regulations, administrative practices,

enforcement approaches, judicial interpretations, and consumer perceptions develop, we cannot reasonably predict the nature

of such developments or the effect, if any, that such developments could have on our business.

of December 31, 2019, we had 184 full time employees and 21 part-time employees.

No employees are subject to collective bargaining

principal offices are located at 1000 W Mississippi Ave., Denver, CO 80223.

As of December 31, 2019, we leased six (6)

facilities in the State of Colorado, eight (8) in the State of California, one (1) in the State of Nevada, one (1) in the

State of Washington, one (1) in the State of Oregon, one (1) in the State of Rhode Island, four (4) in the State of Oklahoma,

four (4) in the State of Michigan, three (3) in the State of Maine, two (2) in the State of Florida, all for our corporate

and retail operations.

In total the Company leases approximately 350,000 square feet of space, which consists primarily of

3,000 feet of corporate office space, 100,000 square feet of warehouse space and 247,000 square feet of store

Our gardening products, including our hydroponic

gardening products, are multi-purpose products designed and intended for growing a wide range of plants and are purchased by cultivators

who may grow any variety of plants, including cannabis and hemp.

Although the demand for our products may be negatively impacted

depending on how laws, regulations, administrative practices, enforcement approaches, judicial interpretations, and consumer perceptions

develop, we cannot reasonably predict the nature of such developments or the effect, if any, that such developments could have

on our business.

As of December 31, 2020, we had 360 full

time employees and 47 part-time employees.

No employees are subject to collective bargaining agreements.

As of March 19, 2021,

the Company has 590 employees.

Principal Offices

Our principal offices are located at 930

W 7 th Ave, Suite A., Denver, CO 80204.

Currently, we lease ten (10) facilities in the State of Colorado, twenty (20)

in the State of California, three (3) in the State of Nevada, two (2) in the State of Washington, two (2) in the State of Oregon,

two (2) in the state of Arizona, one (1) in the State of Rhode Island, six (6) in the State of Oklahoma, six (6) in the State of

Michigan, five (5) in the State of Maine, three (3) in the State of Florida, all for our corporate and retail operations.

the Company currently leases approximately 800,000 square feet of space, which consists primarily of 9,000 feet of corporate office

space, 100,000 square feet of warehouse space and approximately 700,000 square feet of store space.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business