1

2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
11

We are extremely pleased with the 2013 financial results, especially
the fourth quarter, which reflects the first period of fully amalgamated
sales revenue from our store acquisitions earlier in the year, stated
GrowLife CEO and Chairman Sterling Scott. We also made key
investments in 2013, to position the company for future expansion and
maximize our ability to scale with the market.

Highlights from the period include:

Acquisition of Rocky Mountain Hydroponics, LLC and
Evergreen Garden Center, LLC, commencing GrowLife
Hydroponics retail presence in Colorado, Massachusetts, New
Hampshire, and Maine. The Companies were acquired in the
2rd quarter of fiscal 2013. Revenue from these acquisitions is
only fully expressed in the Q3 and Q4 totals.
Opening of our Northern California, Santa Rosa based
GrowLife Hydroponics Store in Q4.
CANX joint venture in Q4 to provide GrowLife with the
financial capital to accelerate acquisitions and take advantage
of market opportunities.

For a company that is so tremendously focused forward, the 10K
filing is an important opportunity for us to pause and look back on
2013 with complete transparency, added Scott. In addition to strong
financial results, 2013 represents a year of investing in our people
from the tremendous customer-service approach of our front-line store
personnel, to the depth and breadth of our leadership team and
independent Board, Im very proud of the team weve assembled.

With the exception of one-time, non-cash charges in 2013, the
important metrics of the Company are sound and improving.
Importantly, as the legislative environment continues to shift
favorably for legal cannabis, GrowLife is very well positioned to
increase our market leading presence in a revenue diversified manner
that is profitable to the Company and its shareholders.

23. On March 31, 2014, GrowLife filed its Annual Report with the SEC
on Form 10-K for the 2013 fiscal year. The Companys Form 10-K was signed by
Case 2:14-cv-03183 Document 1 Filed 04/25/14 Page 12 of 34 Page ID #:12
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
12
Defendants Scott and Genesi, and reaffirmed the Companys financial results
previously announced that day. The Companys Form 10-K also contained
Sarbanes-Oxley required certifications, signed by Defendants Scott and Genesi,
substantially similar to the certifications contained in 18, supra.
24. With respect to the issuance of common stock for services rendered,
the Companys Form 10-K, in relevant part, stated:
During the twelve month period ended December 31, 2013, the
Company issued 44,150,110 shares of its common stock for services
rendered and wages to its employees. These shares were valued at
$1,428,636 and are detailed as follows:

25. Also, the Companys Form 10-K stated that GrowLife had issued 10.5
million shares of common stock to various officers as compensation, and expensed
the issuance at $0.01 per share. With respect to each issuance, the Companys
Form 10-K, in relevant part, stated:
In March 2013, the Company issued 2,500,000 shares of its common
stock to Sterling Scott, the Companys Chief Executive Officer, as
consideration for services provided to the Company. These shares
represent an installment due to Mr. Scott in relation to a Board grant
Case 2:14-cv-03183 Document 1 Filed 04/25/14 Page 13 of 34 Page ID #:13
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
13
from August 2012. The shares were valued at $25,000 in the
aggregate.

In March 2013, the Company issued 2,000,000 shares of its common
stock to J ustin Manns, the Companys former Chief Financial Officer,
a former member of the Companys Board of Directors, and the
current Controller of GrowLife Hydroponics, Inc. The shares were
issued as consideration for services provided to the Company. These
shares represent an installment due to Mr. Manns in relation to a
Board grant from August 2012. The shares were valued at $20,000 in
the aggregate.

In November 2013, the Company issued 3,333,333 shares of its
common stock to Sterling Scott, the Companys Chief Executive
Officer, as consideration for services provided to the Company. These
shares represent the final installment due to Mr. Scott in relation to a
Board grant from August 2012. The shares were valued at $33,333 in
the aggregate.

In November 2013, the Company issued 2,666,667 shares of its
common stock to J ustin Manns, the Companys former Chief
Financial Officer, a former member of the Companys Board of
Directors, and the current Controller of GrowLife Hydroponics, Inc.
The shares were issued as consideration for services provided to the
Company. These shares represent the final installment due to Mr.
Manns in relation to a Board grant from August 2012. The shares
were valued at $26,667 in the aggregate.

26. Also, the Companys Form 10-K stated that GrowLife had issued over
3.9 million shares of common stock to its Board Members as compensation, and
expensed the issuance at $0.02 per share. With respect to each issuance, the
Companys Form 10-K , in relevant part, also stated:
During the twelve months ended December 31, 2013, the Company
issued 1,500,000 shares of its common stock to Eric Shevin, an
independent member of the Companys Board of Directors, as
consideration for his service as a Board member from April 1, 2013
Case 2:14-cv-03183 Document 1 Filed 04/25/14 Page 14 of 34 Page ID #:14
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
14
through December 31, 2013. The shares were valued at $30,000 in the
aggregate.

During the twelve months ended December 31, 2013, the Company
issued 1,683,333 shares of its common stock to Bob Kurilko, a former
independent member of the Companys Board of Directors, as
consideration for his service as a Board member from J anuary 1, 2013
through November 2, 2013. The shares were valued at $33,667 in the
aggregate.

During the twelve months ended December 31, 2013, the Company
issued 500,000 shares of its common stock to Craig Ellins, a former
independent member of the Companys Board of Directors, as
consideration for his service as a Board member from J anuary 1, 2013
through March 31, 2013. The shares were valued at $10,000 in the
aggregate.

On December 31, 2013, the Company issued 83,333 shares of its
common stock to Alan Hammer, an independent member of the
Companys Board of Directors, as consideration for his service as a
Board member from December 17, 2013 through December 31, 2013.
The shares were valued at $1,667 in the aggregate.

On December 31, 2013, the Company issued 72,222 shares of its
common stock to Anthony Ciabattoni, an independent member of the
Companys Board of Directors, as consideration for his service as a
Board member from December 19, 2013 through December 31, 2013.
The shares were valued at $1,444 in the aggregate. Mr. Ciabattonis
shares have been issued to the Ciabattoni Living Trust, of which Mr.
Ciabattoni is the Trustee.

On December 31, 2013, the Company issued 72,222 shares of its
common stock to J eff Giarraputo, an independent member of the
Companys Board of Directors, as consideration for his service as a
Board member from December 19, 2013 through December 31, 2013.
The shares were valued at $1,444 in the aggregate.

27. Also, the Companys Form 10-K stated that GrowLife had issued 2.0
million shares of common stock to its Board Members for Board service for the
Case 2:14-cv-03183 Document 1 Filed 04/25/14 Page 15 of 34 Page ID #:15
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
15
first quarter of 2014 and expensed the issuance at $0.02 per share. The Companys
Form 10-K, in relevant part, stated:
On March 31, 2014, the Company issued 500,000 shares, 2,000,000
shares in the aggregate, to each of its four (4) independent Board
members as compensation for their Board service for the J anuary 1,
2014 through March 31, 2014 period. The shares were valued at $0.02
per share and $40,000 in the aggregate and were issued in accordance
with an August 2012 Board grant. The four independent Board
members are Eric Shevin, Alan Hammer, Tony Ciabatonni, and J eff
Giarraputo.

28. The statements contained in 17-27 were materially false and/or
misleading when made because defendants failed to disclose or indicate the
following: (1) that the Company had provided inaccurate and/or inadequate
information about its stock and engaged in potentially manipulative transactions;
(2) that the Company lacked adequate internal and financial controls; and (3) that,
as a result of the foregoing, the Companys statements about GrowLifes business,
operations, and prospects were materially false and misleading at all relevant
times.
Disclosures at the End of the Class Period
29. On April 10, 2014, the SEC issued a press release entitled Release No.
71924. Therein, the SEC, in relevant part, stated:
The U.S. Securities and Exchange Commission announced the
temporary suspension, pursuant to Section 12(k) of the Securities
Exchange Act of 1934 (the Exchange Act), of trading of the
securities of GrowLife, Inc. (PHOT), of Woodland Hills, California
Case 2:14-cv-03183 Document 1 Filed 04/25/14 Page 16 of 34 Page ID #:16
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
16
at 9:30 a.m. EDT on April 10, 2014, and terminating at 11:59 p.m.
EDT on April 24, 2014.

The Commission temporarily suspended trading in the securities of
PHOT because of questions that have been raised about the accuracy
and adequacy of information in the marketplace and potentially
manipulative transactions in PHOTs common stock.

30. On April 11, 2014, the Company issued a press release entitled,
GrowLife Response to SEC Notification. Therein, the Company, in relevant
part, stated:
GrowLife, Inc. (PHOT), a diversified company operating in the legal
cannabis industry which develops, markets and deploys products and
services of legal cannabis, learned this morning that the SEC
temporarily halted trading of GrowLifes stock. We were not notified
in advance, but have contacted the SEC to better understand the basis
of the complaint. We will fully comply with the SECs requests for
information, and continue business as normal during this temporary
suspension.

31. On this news, when trading of the Companys stock resumed on April
25, 2014, shares of GrowLife declined as much as $0.27 per share, or 54%, to
$0.23 per share during intraday trading.
CLASS ACTION ALLEGATIONS
32. Plaintiff brings this action as a class action pursuant to Federal Rule of
Civil Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who
purchased GrowLife securities between November 14, 2013 and April 9, 2014,
inclusive (the Class Period) and who were damaged thereby. Excluded from the
Class are Defendants, the officers and directors of the Company, at all relevant
Case 2:14-cv-03183 Document 1 Filed 04/25/14 Page 17 of 34 Page ID #:17
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
17
times, members of their immediate families and their legal representatives, heirs,
successors or assigns and any entity in which Defendants have or had a controlling
interest.
33. The members of the Class are so numerous that joinder of all
members is impracticable. Throughout the Class Period, GrowLife securities were
actively quoted and/or traded on the OTCQB, a highly efficient marketplace.
While the exact number of Class members is unknown to Plaintiff at this time and
can only be ascertained through appropriate discovery, Plaintiff believes that there
are hundreds or thousands of members in the proposed Class. Hundreds of
thousands of GrowLife shares were traded publicly during the Class Period,
demonstrating an active and broad market for GrowLife stock and permitting a
strong presumption of an efficient market. Record owners and other members of
the Class may be identified from records maintained by GrowLife or, its transfer
agent and may be notified of the pendency of this action by mail, using the form of
notice similar to that customarily used in securities class actions.
34. Plaintiffs claims are typical of the claims of the members of the Class
as all members of the Class are similarly affected by Defendants wrongful
conduct in violation of federal law that is complained of herein.
35. Plaintiff will fairly and adequately protect the interests of the
members of the Class and has retained counsel competent and experienced in class
Case 2:14-cv-03183 Document 1 Filed 04/25/14 Page 18 of 34 Page ID #:18
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
18
and securities litigation.
36. Common questions of law and fact exist as to all members of the
Class and predominate over any questions solely affecting individual members of
the Class. Among the questions of law and fact common to the Class are:
(a) whether the federal securities laws were violated by Defendants acts
as alleged herein;
(b) whether statements made by Defendants to the investing public during
the Class Period omitted and/or misrepresented material facts about the business,
operations, management, and prospects of GrowLife; and
(c) to what extent the members of the Class have sustained damages and
the proper measure of damages.
37. A class action is superior to all other available methods for the fair
and efficient adjudication of this controversy since joinder of all members is
impracticable. Furthermore, as the damages suffered by individual Class members
may be relatively small, the expense and burden of individual litigation make it
impossible for members of the Class to individually redress the wrongs done to
them. There will be no difficulty in the management of this action as a class
action.
UNDISCLOSED ADVERSE FACTS
38. The market for GrowLife securities was open, well-developed and
Case 2:14-cv-03183 Document 1 Filed 04/25/14 Page 19 of 34 Page ID #:19
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
19
efficient at all relevant times. As a result of these materially false and misleading
statements, and failures to disclose, GrowLife securities traded at artificially
inflated prices during the Class Period. Plaintiff and other members of the Class
purchased or otherwise acquired GrowLife securities relying upon the integrity of
the market price of the Companys securities and market information relating to
GrowLife, and have been damaged thereby.
39. During the Class Period, Defendants materially misled the investing
public, thereby inflating the price of GrowLife securities, by publicly issuing false
and/or misleading statements and/or omitting to disclose material facts necessary
to make Defendants statements, as set forth herein, not false and/or misleading.
Said statements and/or omissions were materially false and/or misleading in that
they failed to disclose material adverse information and/or misrepresented the truth
about the Company, its business, operations, management, and prospects, as
alleged herein.
40. At all relevant times, the material misrepresentations and/or omissions
particularized in this Complaint directly or proximately caused or were a
substantial contributing cause of the damages sustained by Plaintiff and other
members of the Class. As described herein, during the Class Period, Defendants
made or caused to be made a series of materially false and/or misleading
statements about GrowLifes business, operations, management, and prospects.
Case 2:14-cv-03183 Document 1 Filed 04/25/14 Page 20 of 34 Page ID #:20
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
20
These material misstatements and/or omissions had the cause and effect of creating
in the market an unrealistically positive assessment of the Company and its
business and operations, thus causing the Company's securities to be overvalued
and artificially inflated at all relevant times. Defendants materially false and/or
misleading statements during the Class Period resulted in Plaintiff and other
members of the Class purchasing the Company's securities at artificially inflated
prices, thus causing the damages complained of herein.
LOSS CAUSATION
41. Defendants wrongful conduct, as alleged herein, directly and
proximately caused the economic loss suffered by Plaintiff and the Class.
42. During the Class Period, Plaintiff and the Class purchased GrowLife
securities at artificially inflated prices and were damaged thereby. The price of the
Companys securities significantly declined when the misrepresentations made to
the market, and/or the information alleged herein to have been concealed from the
market, and/or the effects thereof, were revealed, causing investors losses.
SCIENTER ALLEGATIONS
43. As alleged herein, Defendants acted with scienter in that Defendants
knew that the public documents and statements issued or disseminated in the name
of the Company were materially false and/or misleading; knew that such
statements or documents would be issued or disseminated to the investing public;
Case 2:14-cv-03183 Document 1 Filed 04/25/14 Page 21 of 34 Page ID #:21
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
21
and knowingly and substantially participated or acquiesced in the issuance or
dissemination of such statements or documents as primary violations of the federal
securities laws. As set forth elsewhere herein in detail, Defendants, by virtue of
their receipt of information reflecting the true facts regarding GrowLife, his control
over, and/or receipt and/or modification of GrowLife allegedly materially
misleading misstatements and/or their associations with the Company which made
them privy to confidential proprietary information concerning GrowLife,
participated in the fraudulent scheme alleged herein.
APPLICABILITY OF PRESUMPTION OF RELIANCE
(FRAUD-ON-THE-MARKET DOCTRINE)

44. The market for GrowLife securities was open, well-developed and
efficient at all relevant times. As a result of the materially false and/or misleading
statements and/or failures to disclose, GrowLife securities traded at artificially
inflated prices during the Class Period. Plaintiff and other members of the Class
purchased or otherwise acquired the Companys securities relying upon the
integrity of the market price of GrowLife securities and market information
relating to GrowLife, and have been damaged thereby.
45. During the Class Period, the artificial inflation of GrowLifes stock
was caused by the material misrepresentations and/or omissions particularized in
this Complaint causing the damages sustained by Plaintiff and other members of
the Class. As described herein, during the Class Period, Defendants made or
Case 2:14-cv-03183 Document 1 Filed 04/25/14 Page 22 of 34 Page ID #:22