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Item 9A. Controls and Procedures

2026-01-16 compared with 2024-03-28 · 2304 added, 638 removed, 278 unchanged (91% of the section changed)

CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Report.

These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our CEO and CFO to allow timely decisions regarding required disclosure.

Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of December 31, 2023, at reasonable assurance levels.

We believe that our financial statements presented in this Report fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.

Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures will prevent all error and all fraud.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Further, 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 costs.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake.

In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our fiscal year ended December 31, 2023, which were identified in conjunction with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management, with the

participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined

in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Report.

These controls are designed

to ensure that information required to be disclosed in the reports we file or submit pursuant to the Exchange Act is recorded, processed,

summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated

and communicated to our management, including our CEO and CFO to allow timely decisions regarding required disclosure.

Based on this evaluation,

our CEO and CFO have concluded that our disclosure controls and procedures were not effective as of December 31, 2024 because of

the material weaknesses in our internal control over financial reporting described below.

Notwithstanding the ineffective

disclosure controls and procedures as a result of the identified material weaknesses, our CEO and CFO have concluded that the consolidated

financial statements, included in this Annual Report on Form 10-K present fairly, in all material respects, the Company’s financial

position, results of operations and cash flows in accordance with generally accepted accounting principles in the United States of America

Our management, including our CEO and CFO, do not expect that our disclosure

controls and procedures will prevent all errors and all fraud.

A control system, no matter how well conceived and operated, can provide

only reasonable, not absolute, assurance that the objectives of the control system are met.

The design of any system of controls is based

in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in

achieving its stated goals under all potential future conditions.

Further, 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 costs.

Because of the inherent limitations

in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any,

within our company have been detected.

These inherent limitations include the reality that judgments in decision-making can be faulty,

and that breakdown can occur because of simple error or mistake.

In particular, many of our current processes rely upon manual reviews

and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.

Changes in Internal Control over Financial

There were no changes in

our internal control over financial reporting during our fiscal year ended December 31, 2024, which were identified in conjunction

with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially

affected, or are reasonably likely to materially affect, our internal control over financial reporting.

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act.

Those rules define internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and the receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company;

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements.

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.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023 and concluded that the Company’s internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

In making this assessment, our management used the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

This Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Report.

Our management is responsible for establishing and maintaining adequate

internal control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act.

Those rules define

internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial

reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles

and include those policies and procedures that:

● Pertain to the maintenance of records

that in reasonable detail accurately and fairly reflect the transactions and dispositions

of the assets of the Company;

● Provide reasonable assurance that

transactions are recorded as necessary to permit preparation of financial statements in accordance

with generally accepted accounting principles, and the receipts and expenditures of the Company

are being made only in accordance with authorizations of management and directors of the

● Provide reasonable assurance regarding

prevention or timely detection of unauthorized acquisitions, use or disposition of the Company’s

assets that could have a material effect on the financial statements.

Because of its inherent limitations,

internal controls over financial reporting may not prevent or detect misstatements.

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 material weakness is a

deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility

that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We identified deficiencies

that resulted in material weaknesses in our internal control over financial reporting.

The material weaknesses identified include:

of sufficient technical accounting expertise within the accounting function to appropriately

address complex technical accounting issues;

to maintain a sufficient complement of personnel in our accounting and reporting department

to ensure adequate segregation of duties such that appropriate review and monitoring of its

financial records are executed.

The material weaknesses described

above could result in material misstatements to financial statements or disclosures that would not be prevented or detected.

This Report does not include

an attestation report of our registered public accounting firm regarding internal control over financial reporting.

report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us

to provide only management’s report in this Report.

Management’s Plan to Remediate the Material Weaknesses

As it relates to the material

weaknesses that existed as of December 31, 2024, we are currently in the process of designing and implementing remediation plans

and taking steps to address the root cause of the material weaknesses described above.

Such plans include, but may not be limited to,

the following:

personnel resources within the accounting function have technical accounting expertise and

experience commensurate with our operations;

external consultants to provide support and to assist us in our evaluation of more complex

applications of GAAP where technical accounting expertise within the accounting function

is considered insufficient;

control processes to ensure adequate review by individuals with sufficient technical accounting

expertise to prevent disclosure and financial reporting misstatements.

While we believe these efforts

will improve our internal controls and address the root cause of the material weaknesses, such material weaknesses will not be remediated

until our remediation plan has been fully implemented and we have concluded, through testing, that our controls are operating effectively

for a sufficient period of time.

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information concerning our directors and officers is incorporated by reference to our Definitive Proxy Statement on Schedule 14A to be filed with the SEC within 120 days after the end of our fiscal year.

DIRECTORS, EXECUTIVE OFFICERS AND

CORPORTE GOVERNANCE

The following table and text set forth the name, age, position with

the Company, and terms of service of each director as of January 13, 2026:

of the Board and Chief Executive Officer

Member of the Corporate Governance

and Nominating Committee.

Member of the Audit Committee.

Member of the Compensation

Information with respect

to the securities beneficially owned by each of the directors can be found under the heading “Security Ownership of Certain Beneficial

Owners and Management and Related Stockholder Matters”.

The following sets forth the biographical background information for each

In addition, the biographies of the directors include a brief description of the specific experience, qualifications, attributes,

or skills that led to the conclusion that each person should serve as a director.

In addition to the specific experience, qualifications,

attributes, and skills described below, all of the directors have the professional experience and personal character that make them highly

qualified directors for the Company and collectively comprise an experienced board that works well together as a whole.

is one of our founders and has been our Chief Executive Officer and Chairperson of our Board since March 2017.

our Managing Member from March 2014 until March 2017 when we converted to a corporation.

From October 2015 to August 2016, he was the

Managing Member of enviro-glo, LLC, a Colorado limited liability company engaged in the manufacturing and branding of commercial lighting

Previously, from January 2012 through August 2016, he was the Managing Member of Bravo Lighting, LLC, a Colorado limited liability

company engaged in the distribution of commercial lighting products.

Nattrass received a Bachelor of Commerce degree from the University

of Calgary in marketing in 1995 and a Master of Business Administration from the University of Phoenix in 2001.

Nattrass brings executive

leadership experience, organizational experience, and extensive experience in the industry to the Board.

Nattrass is familiar with

the Company’s day-to-day operations and performance and the controlled environment agriculture industry in general.

insight into the Company’s operations and performance is critical to Board discussions.

was appointed as a director of our Company in August 2018.

Lowe cofounded MJardin Group in 2014 where he served as President of Cultivation,

overseeing all cultivation operations through 2017.

Lowe left MJardin Group to become EVP of Operations of GrowForce, a spinout from

MJardin Group based in Canada focusing on international cannabis opportunities.

Lowe is no longer an officer of GrowForce.

has served as a director of MJardin Group (CSE:

MJAR) (OTCQX:

MJARF) from March 2014 to September 2018, and again from January 2020 to

Since December 2015, he has also been an owner of Potco LLC, one of the highest grossing single site medical cannabis dispensary

and grow facilities in Colorado.

He has also been a cultivation advisor for Lightshade Labs, LLC, where he has provided guidance on cultivation

operations since 2012.

Lowe is also the owner of Next1 Labs, a vertically integrated extraction and concentrate business with a multi-acre

outdoor farm complex and the one of the largest producers of live resin products in the state of Colorado.

Lowe entered the

legal cannabis market in 2009 as the owner of Cloud9 Support LLC, a retail horticulture supplies and design company that was responsible

for over 50 design projects and construction assists.

Lowe brings to the Board significant experience in the CEA sector and prior

public company director experience within the sector.

Lowe’s extensive knowledge of the industry brings valuable insights to

the Board regarding customer demand and product offerings.

These views add important insights within discussions of the Board.

was appointed as a director of our Company in June 2021.

Britt served as the Chief Financial Officer for Perry Ellis International,

from 2009 to 2017 and held senior financial leadership positions at Jones Apparel Group and Urban Brands.

She currently serves on

the board of directors for VSE Corporation, and Smith & Wesson Brands, Inc.

Britt is a Certified Public Accountant;

Leadership Fellow as designated by the National Association of Corporate Directors;

and holds a Carnegie Mellon Cybersecurity Oversight

Certification and a Harvard Kennedy School Executive Education Certificate in Cybersecurity:

The Intersection of Policy and Technology.

As part of her key qualifications and skills, Mrs.

Britt has extensive corporate finance, wall street and capital markets experience

in both public and private sectors.

She brings board and business leadership experience.

Britt is a member of the American Institute

of Certified Public Accountants.

David Hsu was

appointed as a director of our Company in June 2021.

Hsu previously served as the Chief Operating Officer of The Cronos Group, a

leading global cannabinoid company (“Cronos”), from 2016 to 2019.

While at Cronos, Mr.

Hsu’s primary duties included

overseeing all of Cronos’s operations including construction, cultivation, and manufacturing.

Prior to joining Cronos, from 2006

Hsu served in various roles with CRG Partners (“CRG”), and later Deloitte & Touche LLP (“Deloitte”)

upon Deloitte’s acquisition of CRG in 2012, including as Vice President, where he operated and managed distressed companies with

revenues of more than $500 million.

Hsu received his Bachelor of Science in Business Management from Babson College in 2003 and holds

a Certification in Artificial Intelligence:

Business Strategies and Applications from the University of California Berkeley, which he

received in 2020.

Hsu also received a Certification in Financing and Deploying Clean Energy from Yale University, which he received

Hsu brings valuable experience to the Board through his prior business and management experience.

His business understanding,

education, and management background provide the Board with important insights regarding the Company’s operations, strategy and

business development.

appointed as a director of our Company in October 2021.

Lo brings over two decades of combined agriculture, technology, and business

experience to urban-gro.

From July 2022 to Present, Ms.

Lo has been the CEO of Unfold Bio, Inc.

a joint venture between Bayer Group and

Temasek Holdings Limited, focused on developing the next generation of seeds for vertical farmers.

From May 2020 to May 2021, Ms.

was CEO of Sensei Ag Holdings, Inc.

During her tenure, she led the building of four farms across North America, ranging from low-tech

aquaponics and high dome poly to high-tech glasshouse facilities.

From April 2013 to April 2020, Ms.

Lo was CEO of Crop One Holdings,

Inc., a vertical farming company that owns FreshBoxFarms in Millis, MA.

She is the first woman to serve as CEO of a major vertical farming

Lo has a Bachelor’s degree in Political Science & Mathematics from Stanford University and an MBA from Harvard

Business School.

Lo brings valuable experience to the Board through her management and controlled environment agriculture experience.

Her business understanding, education, and controlled environment agriculture background provide the Board with important insights regarding

the Company’s operations, product offering and business development.

To the best of the Company’s

knowledge, there are no arrangements or understandings between any director or executive officer and any other person pursuant to which

any person was selected as a director or executive officer.

There are no family relationships between any of the Company’s directors

or executive officers.

To the Company’s knowledge, there have been no material legal proceedings as described in Item 401(f) of

Regulation S-K during the last ten years that are material to an evaluation of the ability or integrity of any of the Company’s

directors or executive officers.

Members of the Board and executive officers of the Company do not have any substantial interest, direct

or indirect, in any of the matters currently anticipated to be acted upon at the Annual Meeting.

Board Committees and Meetings

The Board had established

four standing committees, the Audit Committee, the Compensation Committee, the Corporate Governance and Nominating Committee, and the

ESG Committee, to assist it with the performance of its responsibilities.

Effective November 21, 2025, the Board dissolved the ESG Committee.

The Board designates the members of these committees and the committee chairs based on the recommendation of the Corporate Governance

and Nominating Committee.

The Board has adopted written charters for each of these committees, which can be found at the investor relations

section of the Company’s website at https://ir.urban-gro.com/.

Copies are also available in print to any stockholder upon written

request to urban-gro, Inc., 1751 Panorama Point, Unit G, Lafayette, Colorado 80026, Attention:

Corporate Secretary.

The chair of each

committee develops the agenda for that committee and determines the frequency and length of committee meetings.

The Board held five meetings

Directors are expected to attend Board meetings, the Annual Meeting of Stockholders and meetings of the committees on which

they serve, with the understanding that on occasion a director may be unable to attend a meeting.

During 2024, each director attended

75% or more of the aggregate of the total number of meetings of the Board and the total number of meetings held by all committees of

the Board on which such director then served.

Every director then serving attended the 2024 Annual Meeting of Stockholders.

Audit Committee

Our Board has established

an Audit Committee, which consists of three independent directors, Mrs.

Britt (Chairperson), Ms.

The Audit Committee

held six meetings during 2024.

The committee’s primary duties are to:

● Review and discuss with management

and our independent auditor our annual and quarterly financial statements and related disclosures,

including disclosure under “Management’s Discussion and Analysis of Financial

Condition and Results of Operations,” and the results of the independent auditor’s

audit or review, as the case may be;

● Review our financial reporting processes

and internal control over financial reporting systems and the performance, generally, of

our internal audit function, if applicable;

● Oversee the audit and other services

of our independent registered public accounting firm and be directly responsible for the

appointment, independence, qualifications, compensation and oversight of the independent

registered public accounting firm, which reports directly to the Audit Committee;

● Oversee the Company’s cybersecurity

plan, business continuity program, information protection management strategy and related

risks to all of these areas;

● Provide an open means of communication

among our independent registered public accounting firm, management, our internal auditing

function and our Board;

● Review any disagreements between

our management and the independent registered public accounting firm regarding our financial

● Prepare the Audit Committee report

for inclusion in our proxy statement for our annual stockholder meetings;

● Establish procedures for complaints

received regarding our accounting, internal accounting control and auditing matters;

● Approve all audit and permissible

non-audit services conducted by our independent registered public accounting firm.

The Board has determined

that each of our Audit Committee members is independent of management and free of any relationships that, in the opinion of the Board,

would interfere with the exercise of independent judgment and are independent, as that term is defined under the enhanced independence

standards for audit committee members in the Exchange Act and the rules promulgated thereunder.

The Board has determined

Britt is an “audit committee financial expert,” as that term is defined in the rules promulgated by the Securities

and Exchange Commission (the “SEC”) pursuant to the Sarbanes-Oxley Act of 2012.

The Board has further determined that each

of the members of the Audit Committee shall be financially literate and that at least one member of the committee has accounting or related

financial management expertise, as such terms are interpreted by the Board in its business judgment.

Compensation Committee

Our Board has established

a Compensation Committee, which, in 2024, consisted of three independent directors (as defined under the general independence standards

of the Nasdaq listing standards and our Corporate Governance Guidelines):

Wilks (Chairperson), Mrs.

Britt, and Mr.

and Hsu and Mrs.

Britt are each a “non-employee director” (within the meaning of Rule 16b-3 of the Exchange Act).

The Compensation

Committee held two meetings during 2024.

The committee’s primary duties are to:

● Approve corporate goals and objectives

relevant to executive officer compensation and evaluate executive officer performance in

light of those goals and objectives;

● Determine and approve executive officer

compensation, including base salary and incentive awards;

● Make recommendations to the Board

regarding compensation plans;

● Administer our stock plan.

Our Compensation Committee

determines and approves all elements of executive officer compensation.

It also provides recommendations to the Board with respect to

non-employee director compensation.

The Compensation Committee may not delegate its authority to any other person, other than to a subcommittee.

Nattrass, as the Chairperson of the Board, is the only executive officer that participates in recommending the amount or form of

executive and director compensation.

Corporate Governance and Nominating Committee

Our Board has established

a Corporate Governance and Nominating Committee, which, in 2024, consisted of three independent directors, Mr.

Lowe (Chairperson), Mr.

Wilks and Mrs.

The Corporate Governance and Nominating Committee held two meetings during 2024.

The committee’s primary

duties are to:

● Recruit new directors, consider director

nominees recommended by stockholders and others and recommend nominees for election as directors;

● Review the size and composition of

our Board and committees;

● Oversee the evaluation of the Board;

● Recommend actions to increase the

Board’s effectiveness;

● Develop, recommend and oversee our

corporate governance principles, including our Code of Business Conduct and Ethics and our

Corporate Governance Guidelines.

Environment, Social and Governance Committee

Our Board had established

an ESG Committee, which consisted of three independent directors, Mr.

Hsu (Chairperson), Mr.

The ESG Committee held

four meetings during 2024.

The Board decided to dissolve the ESG Committee on November 21, 2025.

The committee’s primary duties

● Identify, review and determine the

effectiveness of the Company’s ESG metrics and goals;

● Review emerging risks and opportunities

regarding ESG issues and matters relative to the Company;

● Recommend to the Board ESG plans

and strategies;

● Review stockholder proposals relating

to ESG issues and recommend responses to the Board.

Director Independence

The Nasdaq marketplace rules

require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominations committees

be independent, or, if a listed company has no nominations committee, that director nominees be selected or recommended for the board’s

selection by independent directors constituting a majority of the board’s independent directors.

The Nasdaq marketplace rules further

require that audit committee members satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act and that compensation

committee members satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act.

Our Board has reviewed the

independence of our directors and considered whether any director has a material relationship with us that could compromise that director’s

ability to exercise independent judgment in carrying out that director’s responsibilities.

Our Board has affirmatively determined

that each of Messrs.

Lowe, Wilks and Hsu and Mses.

Britt and Lo qualify as an independent director, as defined under the applicable corporate

governance standards of Nasdaq.

Please see “Certain Relationships and Related Transaction s” in this proxy statement

for a transaction that the Board considered for determining Mr.

Lowe’s and Ms.

Lo’s independence.

Anti-Hedging Policy

Under our insider trading

policy, our directors, officers and employees may not at any time buy or sell options, puts or calls on company securities, security

futures, or other derivative securities that reference company securities and may not enter into hedging, monetization transactions or

similar transactions with respect to Company securities.

In addition, our directors and executive officers are prohibited from engaging

in short sales of our stock.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange

Act requires the Company’s directors, executive officers, and any persons who own more than 10% of a registered class of the Company’s

equity securities, to file reports of ownership and changes in ownership with the SEC.

SEC regulations require executive officers, directors,

and greater than 10% stockholders to furnish us with copies of all Section 16(a) forms they file.

Based solely on the Company’s

review of the copies of such forms furnished or available to the Company, the Company believes that its directors, executive officers,

and 10% stockholders complied with all Section 16(a) filing requirements for the year ended December 31, 2024, except for certain Form

4s relating to annual vesting of stock grants and tax withholdings related to those vested stock grants.

The Company intends to file

these delinquent reports on or before the annual shareholder meeting.

EXECUTIVE COMPENSATION

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

PRINCIPAL ACCOUNTING FEES AND SERVICES

EXHIBITS, FINANCIAL STATEMENTS SCHEDULES.

A list of financial statements filed herewith is contained is set forth on page F-1 of the financial statements that immediately follow the signature page of this Report and is incorporated by reference herein.

The financial statement schedules have been omitted because they are not required, not applicable or the information has been included in our financial statements.

The exhibits required by this Item are contained in the Exhibit Index beginning on the following page of this Annual Report on Form 10-K and are incorporated herein by reference.

Elements of Director Compensation

Beginning in January 2020,

non-employee directors were granted restricted shares of common stock as an annual retainer and for serving as a member of a standing

Beginning in May 2021, non-employee directors were granted restricted shares of common stock and cash compensation as an annual

retainer and for serving as a member of a standing committee.

The following table below summarizes the 2024 Director Compensation:

Board of Director

Independent Lead Director

Audit Committee

Compensation Committee

Nominating & Governance Committee

ESG Committee

Special Committee

The price per share and corresponding

number of shares of common stock that equate to the RSU Value of $80,000 is determined each year by the Compensation Committee.

2024 grants, a price of $5.00 per share was used to determine the number of shares to be issued for the RSU Value of $80,000.

per share resulted in each director receiving a grant of 16,000 shares of common stock.

The closing market price of the Company’s

common stock on the day of the grant was $1.34, indicating that the actual value received by each director for their 16,000 share grant

Each director will be required

to attend a minimum of 75% of all Board meetings per year in person or telephonically.

Directors are reimbursed for travel and other

expenses directly associated with Company business.

Directors that are also employees of the Company do not receive any additional compensation

for their role as a director at this time.

Director Compensation Table

The following table provides

information regarding director compensation during 2024.

The compensation of Mr.

Nattrass is reported in the Summary Compensation Table.

Non-equity incentive plan

Change in pension value and nonqualified

deferred compensation earnings

All other compensation ($)

are scheduled to be paid quarterly to the directors.

Total fourth quarter 2024 fees of $80,000 have not yet been paid.

Wilks resigned as a director on August 26, 2025.

represent the aggregate fair value of stock grants based on the closing stock price on the date of the grant.

chart below shows the aggregate number of outstanding stock options and restricted stock units held by each non-employee director as

of December 31, 2024.

Stock Options

Restricted Stock Units

We are a “smaller reporting

company” under applicable SEC rules and are providing disclosure regarding our executive compensation arrangements pursuant to

the rules applicable to smaller reporting companies, which means that we are not required to provide a compensation discussion and analysis

and certain other disclosures regarding our executive compensation.

The following discussion relates to the compensation of our named

executive officers for 2024, consisting of Bradley J.

Nattrass, our Chairperson and Chief Executive Officer, and our two other most highly

compensated executive officers as of December 31, 2024, Richard A.

Akright, Chief Financial Officer, and Jason T.

Archer, Chief Operating

We have a Compensation Committee that, in 2024,

was comprised of Messrs.

Wilks and Hsu and Ms.

Under our Compensation Committee charter, our Compensation Committee determines

and approves all elements of executive officer compensation.

The Compensation Committee’s primary objectives in determining executive

officer compensation are (i) developing an overall compensation package that is at market levels and thus fosters executive officer retention

and (ii) aligning the interests of our executive officers with our stockholders by linking a significant portion of the compensation

package to performance.

Summary Compensation Table

The following Summary Compensation

Table contains information regarding compensation that the Company paid to Mr.

Nattrass and its two other most highly compensated executive

officers for each of the periods indicated.

Name and Principal Position

Incentive/ Bonus

Other Compensation ($) (4)

Chairperson of the Board and Chief Executive Officer

Chief Operating Officer

Chief Financial Officer

represent cash salaries paid in each year plus the following stock compensation taken in lieu of salaries in 2023:

Nattrass - $68,197;

Archer - $16,597;

Akright - $15,806.

reflect actual cash payments made during the fiscal year and represent payments under a Retention Incentive Plan that was put in place

in 2023 with payments made in 2023 and 2024.

There were no bonus payments related to 2024 or 2023 performance.

represent the aggregate fair value of stock grants based on the closing stock price on the date of the grant.

(4) Represents

amounts paid to Mr.

Nattrass, Mr.

Archer, and Mr.

Akright for health insurance premiums paid on their behalf.

Nattrass received a stock grant of 135,000 shares in June of 2024.

Nattrass received a stock grant of 106,804 shares in January of

Archer received a stock grant of 78,750 shares in June of 2024.

Archer was promoted to Chief Operating Officer on January 11, 2023.

Archer received stock grants of 62,302 shares and 20,000 shares in January 2023.

Archer resigned on February 14, 2025.

Archer entered into a severance agreement that was to pay Mr.

Archer for six months of severance.

Akright received a stock grant of 47,468 shares on January 1, 2023.

Akright resigned on February 18, 2025.

The Company and Mr.

entered into a consulting and transition agreement that was to pay Mr.

Akright for five months of severance and $185 per hour for ongoing

consulting services.

Employee Agreements

The following discussion

relates to compensation arrangement on behalf of, and compensation paid by us to, Messrs.

Nattrass, Archer, and Akright and that were

in place during 2024.

are a party to an employment agreement with Mr.

Nattrass (the “Nattrass Agreement”), whereby he serves as our Chief Executive

Pursuant to the Nattrass Agreement, he receives compensation pursuant to our standard programs in effect from time to time,

and is eligible to receive stock options, restricted stock, stock units or other equity awards from time to time at the sole discretion

of the Board in accordance with our 2021 Incentive Stock Option Plan or other equity plans that we may adopt.

He is also entitled to

participate in our group benefit plans.

Under certain circumstances, the Nattrass Agreement

also provides for severance benefits following a termination without “cause” or related to a “change of control”

(as such terms are defined in the Nattrass Agreement).

In the event of a termination without “cause,” Mr.

Nattrass is entitled

to severance payments equal to 12 months of regular base salary and target annual incentive pay and a lump sum payment for 12 months

of COBRA premiums.

In the event of termination in connection with a “change in control,” Mr.

Nattrass is entitled to a lump

sum payment equal to twice the sum of his annual salary and his target annual incentive pay, and a lump sum payment for 12 months of

COBRA premiums.

All other additional benefits and stock incentive rights (if any) would cease and expire upon termination of employment,

unless otherwise provided in the Nattrass Agreement or by the separate written terms of such benefits or incentives.

The Nattrass Agreement

includes indemnification, confidentiality and non-compete provisions.

were a party to an employment agreement with Mr.

Archer (the “Archer Agreement”), whereby he served as our Chief Operating

Pursuant to the Archer Agreement, he received compensation pursuant to our standard programs in effect from time to time, and

is eligible to receive stock options, restricted stock, stock units or other equity awards from time to time at the sole discretion of

the Board in accordance with our 2021 Incentive Stock Option Plan or other equity plans that we may adopt.

He was also entitled to participate

in our group benefit plans.

Under certain circumstances,

the Archer Agreement also provided for severance benefits following a termination without “cause” or related to a “change

of control” (as such terms are defined in the Archer Agreement).

In the event of a termination without “cause,” Mr.

Archer was entitled to severance payments equal to six months of regular base salary and a lump sum payment for six months of COBRA premiums.

In the event of termination in connection with a “change in control,” Mr.

Archer was entitled to a lump sum payment equal

to his annual salary and his target annual incentive pay, and a lump sum payment for 12 months of COBRA premiums.

All other additional

benefits and stock incentive rights (if any) would cease and expire upon termination of employment, unless otherwise provided in the

Archer Agreement or by the separate written terms of such benefits or incentives.

The Archer Agreement included confidentiality and non-compete

Archer resigned on February

In connection with his resignation, the Company entered into a severance agreement with Mr.

Archer that was to pay him six

months of severance.

We were a party to an employment agreement with Mr.

Akright (the “Akright Agreement”), whereby he served as our Chief Financial

Pursuant to the Akright Agreement, he received compensation pursuant to our standard programs in effect from time to time, and

was eligible to receive stock options, restricted stock, stock units or other equity awards from time to time at the sole discretion

of the Board in accordance with our 2021 Incentive Stock Option Plan or other equity plans that we may adopt.

He was also entitled to

participate in our group benefit plans.

Under certain circumstances,

the Akright Agreement also provided for severance benefits following a termination without “cause” or related to a “change

of control” (as such terms are defined in the Akright Agreement).

In the event of a termination without “cause,” Mr.

Akright was entitled to severance payments equal to six months of regular base salary and a lump sum payment for six months of COBRA

In the event of termination in connection with a “change in control,” Mr.

Akright was entitled to a lump sum payment

equal to his annual salary and his target annual incentive pay, and a lump sum payment for 12 months of COBRA premiums.

All other additional

benefits and stock incentive rights (if any) would cease and expire upon termination of employment, unless otherwise provided in the

Akright Agreement or by the separate written terms of such benefits or incentives.

The Akright Agreement included confidentiality and

non-compete provisions.

Akright resigned on February

In connection with his resignation, the Company entered into a consulting and transition agreement that was to pay him five

months of severance and $185 per hour for ongoing consulting services where he would continue to serve as the Company’s principal

financial and accounting officer.

The agreement has an initial term of three months and will subsequently extend on a month-to-month

basis unless either party gives notice to terminate.

Equity Incentive Awards

In June 2024, Mr.

Nattrass received a restricted common stock grant

of 135,000 shares.

Of this grant, 27,000 shares vest on each of January 1, 2025 and January 1, 2026 and 81,000 shares vest on January

In January 2023, Mr.

Nattrass received a restricted common stock grant of 106,805 shares.

Of this grant, 21,361 shares vest on

each of January 1, 2024 and January 1, 2025, and 64,083 shares vest on January 1, 2026.

In June 2024, Mr.

Archer received a restricted common stock grant of

78,750 shares.

Of this grant, 15,750 shares vest on each of January 1, 2025 and January 1, 2026 and 47,250 shares vest on January 1, 2027.

In January 2023, Mr.

Archer received a restricted common stock grant of 62,302 shares.

Of this grant, 12,460 shares vest on each of January

1, 2024 and January 1, 2025 and 37,382 shares vest on January 1, 2026.

In January 2023, Mr.

Archer received a restricted common stock

grant of 20,000 shares that vested on January 1, 2024.

In January 2023, Mr.

received a restricted common stock grant of 47,468 shares.

Of this grant, 9,494 shares vest on each of January 1, 2024 and January 1,

2025 and 28,480 shares vest on January 1, 2026.

Retirement Benefits

We provide all qualifying

employees with the opportunity to participate in our tax-qualified 401(k) plan.

The plan allows employees to defer receipt of earned

salary, up to tax law limits, on a pre-tax basis.

Accounts may be invested in a wide range of mutual funds.

The Company matches 100%

Outstanding Equity Awards at Fiscal Year-End

The following table lists

all of the outstanding stock awards held on December 31, 2024 by each of the Company’s named executive officers:

Number of shares or

stock that have

Market value of shares

of stock that

have not vested

Equity incentive plan

unearned shares, units

or other rights that

have not vested

Equity incentive plan

unearned shares, units

or other rights that

have not vested

The following table lists all of the outstanding

option awards held on December 31, 2024 by each of the Company’s named executive officers:

Option Awards

unexercised options

unexercisable

Equity incentive

unearned options

exercise price

expiration date

SECURITY OWNERSHIP

OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The Company’s only outstanding class of voting securities is

its common stock.

The following table sets forth information known to the Company about the beneficial ownership of its common stock on

January 13, 2026 by (i) each current director;

(ii) each current named executive officer;

and (iii) all of the Company’s current

executive officers and directors as a group.

Other than as set forth below, no person known to us beneficially owns 5% or more of the

outstanding common stock as of January 13, 2026.

Unless otherwise indicated in the footnotes, each person listed in the following table

has sole voting power and investment power over the common stock listed as beneficially owned by that person.

Percentages of beneficial

ownership are based on 16,300,807 shares of common stock outstanding on January 13, 2026.

Unless otherwise indicated, the address for

each stockholder listed below is urban-gro, Inc., 1751 Panorama Point, Unit G, Lafayette, Colorado 80026.

Shares Beneficially Owned (1)

Name and Address of Beneficial Owner

5% Stockholder:

Named Executive Officers and Directors:

All current executive officers and directors as a group (6 persons)

(1) Beneficial ownership as reported in the table has been determined in

accordance with Rule 13d-3 under the Exchange Act and is not necessarily indicative of beneficial ownership for any other purpose.

number of shares of common stock shown as beneficially owned includes shares of common stock which may not be beneficially owned but over

which a person would be deemed to exercise control or direction.

The number of shares of common stock shown as beneficially owned includes

shares of common stock subject to stock options exercisable and restricted stock units that were outstanding on January 13, 2026 and that

will vest within 60 days of January 13, 2026.

Shares of common stock subject to stock options exercisable and restricted stock units that

will vest within 60 days after January 13, 2026 are deemed outstanding for computing the percentage of the person holding such securities

but are not deemed outstanding for computing the percentage of any other person.

Nattrass has his vested common stock pledged as security

for a personal line of credit facility.

beneficial ownership of less than 1%

Equity Incentive Plans

As of December 31, 2024,

our equity compensation plans consisted of the Company’s 2021 Equity Incentive Plan, which was adopted by the Board and approved

by the stockholders in May 2021, the 2019 Equity Incentive Plan, which was adopted by the Board in March 2019 and approved by our stockholders

in May 2019, and the Company’s 2018 Equity Incentive Plan, which was adopted by the Board in January 2018 and was not approved

by our stockholders.

The following table summarizes information about our equity compensation plans.

All outstanding awards relate to

our common stock.

Plan Category

Number of securities to be issued

upon vesting of grants and exercise of outstanding options, warrants and rights

Weighted- average exercise

of outstanding options, warrants

Number of securities remaining available

for future issuance under equity compensation plans

Equity compensation plan approved by stockholders

Equity compensation plan not approved by stockholders

CERTAIN RELATIONSHIPS

AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Certain Relationships and Related Transactions

Following is a description

of transactions since January 1, 2023, including currently proposed transactions to which we have been or are to be a party in which

the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or beneficial holders of

more than 5.0% of our capital stock, or their immediate family members or entities affiliated with them, had or will have a direct or

indirect material interest.

We believe the terms and conditions set forth in such agreements are reasonable and customary for transactions

of this type.

A director of the Company,

James Lowe, is an owner of Cloud 9 Support, LLC (“Cloud 9”) and Potco LLC (“Potco”).

Cloud 9 purchases materials

from the Company for use with its customers and Potco purchases equipment from the Company for use in its cultivation facility.

director of the Company, Sonia Lo, is working on a vertical farming innovation model with a group of CEA experts (“the CEA Consortium”).

The CEA Consortium contracts services from the Company related to their business model.

The table below presents the revenues for these

related party entities for the twelve months ended December 31, 2024 and 2023:

Twelve Months Ended

Revenues - Cloud 9

Revenues - Potco

Revenues - CEA Consortium

Total revenues from related party transactions

The table below presents

the accounts receivable from these related party entities as of December 31, 2024 and December 31, 2023:

Accounts receivable - Cloud 9

Accounts receivable - Potco

Accounts receivable - CEA Consortium

Total accounts receivable due from related party transactions

ACCOUNTING FEES AND SERVICES

Fees Paid to Sadler, Gibb and Associates,

LLC and BF Borgers CPA PC

The Company records professional

service fees for principal accounting fees and services in the period that the services are performed.

The following table shows

the aggregate fees for professional services provided to the Company by Sadler, Gibb and Associates, LLC for 2024 and 2023:

Audit-Related Fees

All Other Fees

Fees paid to Sadler, Gibb

and Associates, LLC for 2024 include fees related to the re-audit of the 2023 and re-reviews of the three quarters in 2023 and first

quarter of 2024 financial statements.

The following table shows

the aggregate fees for professional services provided to the Company by BF Borgers CPA PC for 2024 and 2023:

Audit-Related Fees

All Other Fees

This category

includes the audit of the Company’s annual consolidated financial statements, reviews of the Company’s financial statements

included in the Company’s Quarterly Reports on Form 10-Q, and services that are normally provided by its independent registered

public accounting firm in connection with its engagements for those years.

This category also includes advice on audit and accounting

matters that arose during, or as a result of, the audit or the review of the Company’s interim financial statements.

Audit-Related Fees.

This category consists of assurance and related services by its independent registered public accounting firm that are reasonably related

to the performance of the audit or review of the Company’s financial statements and are not reported above under “Audit Fees.”

The services for the fees disclosed under this category include audit-related work regarding acquisitions, divestitures, the incurrence

of additional indebtedness, and debt covenant compliance.

This category

consists of professional services rendered by the Company’s independent registered public accounting firm for tax compliance and

The services for the fees disclosed under this category include tax return preparation and statutory tax audit services and

tax compliance services.

All Other Fees.

category consists of fees for other miscellaneous items.

Our Audit Committee is responsible

for approving all audit, audit-related, tax and other fees.

The Audit Committee pre-approves all auditing services and permitted non-audit

services, including all fees and terms to be performed for us by our independent auditor at the beginning of the fiscal year.

services are reviewed and pre-approved by project at the beginning of the fiscal year.

Any additional non-audit services contemplated

by us after the beginning of the fiscal year are submitted to the Audit Committee Chairperson for pre-approval prior to engaging the

independent auditor for such services.

Such interim pre-approvals are reviewed with the full Audit Committee at its next meeting for

ratification.

All of the audit, audit-related fees, tax fees, and other fees paid to Sadler, Gibb and Associates, LLC and BF Borgers

CPA PC with respect to 2024 and 2023 were pre-approved by the Audit Committee.

EXHIBITS, FINANCIAL

STATEMENTS SCHEDULES.

A list of financial statements

filed herewith is contained is set forth on page F-1 of the financial statements that immediately follow the signature page of this Report

and is incorporated by reference herein.

The financial statement schedules have been omitted because they are not required, not applicable

or the information has been included in our financial statements.

The exhibits required by this Item are contained in the Exhibit Index

beginning on the following page of this Annual Report on Form 10-K and are incorporated herein by reference.

EXHIBIT INDEX

Exhibit Description

2.1 Stock Purchase Agreement (incorporated by reference to Exhibit 2.1 to Form 8-K filed June 28, 2021), by and between 2WR Entities, urban-gro, Inc.

Purchase Agreement (incorporated by reference to Exhibit 2.1 to Form 8-K filed June 28, 2021), by and between 2WR Entities, urban-gro,

and urban-gro Architect Holdings, LLC.

3.4 Amendment No.

1 to Bylaws of urban-gro, Inc.

(incorporated by reference to Exhibit 3.1 to Form 8-K filed January 12, 2021).

4.1 Description of urban-gro, Inc.’s Common Stock.

10.1 Employment Agreement by and between urban-gro, Inc.

Archer, dated January 12, 2023.

10.2 Form of Secured Promissory Note (incorporated by reference to Exhibit 10.2 to Form 8-K filed on December 18, 2023).

10.3 Form of Security Agreement (incorporated by reference to Exhibit 10.3 to Form 8-K filed on December 18, 2023).

10.4 Form of Continuing Guaranty (incorporated by reference to Exhibit 10.4 to Form 8-K filed on December 18, 2023).

Description of urban-gro, Inc.’s Common Stock (incorporated by reference to Exhibit 4.1 to Form 10-K filed March 28, 2024).

of Secured Promissory Note (incorporated by reference to Exhibit 10.2 to Form 8-K filed on December 18, 2023).

of Security Agreement (incorporated by reference to Exhibit 10.3 to Form 8-K filed on December 18, 2023).

of Continuing Guaranty (incorporated by reference to Exhibit 10.4 to Form 8-K filed on December 18, 2023).

Subsidiaries of the Registrant.

23.1 Consent of BF Borgers CPA PC.

24.1 Power of Attorney (included on signature page).

Consent of Sadler, Gibb & Associates, LLC

Power of Attorney (included

on signature page).

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

3 unchanged sentences

Clawback Policy

101.INS Inline XBRL Instance Document.

101.SCH Inline XBRL Schema Document.

101.CAL Inline XBRL Calculation Linkbase Document.

101.DEF Inline XBRL Definition Linkbase Document.

101.LAB Inline XBRL Label Linkbase Document.

101.PRE Inline XBRL Presentation Linkbase Document.

104 Cover Page Interactive Data File (embedded within the Inline XBRL document).

Inline XBRL Instance Document.

Inline XBRL Schema Document.

Inline XBRL Calculation Linkbase Document.

Inline XBRL Definition Linkbase Document.

Inline XBRL Label Linkbase Document.

Inline XBRL Presentation Linkbase Document.

Cover Page Interactive Data File (embedded within

the Inline XBRL document).

* Denotes a management contract or compensatory plan or arrangement.

FORM 10-K SUMMARY

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunder duly authorized.

Pursuant to the requirements

of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its

behalf by the undersigned thereunder duly authorized.

URBAN-GRO, INC.

March 27, 2024

January 16, 2026

/s/ Bradley Nattrass

Bradley Nattrass

Chairperson of the Board of Directors and Chief Executive Officer

Chairperson of the Board of Directors and

Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Bradley Nattrass, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that such attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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.

Signature Title Date

/s/ Bradley Nattrass Chairperson of the Board of Directors and Chief Executive Officer March 27, 2024

Bradley Nattrass (Principal Executive Officer)

KNOW ALL PERSONS BY THESE

PRESENTS, that each person whose signature appears below constitutes and appoints Bradley Nattrass, his or her true and lawful attorney-in-fact

and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all

capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other

documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorney-in-fact and agent full power

and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to

all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that such attorney-in-fact and

agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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.

/s/ Bradley Nattrass

Chairperson of the Board of Directors and

Chief Executive Officer

January 16, 2026

Bradley Nattrass

(Principal Executive Officer)

/s/ Richard A.

Akright Chief Financial Officer March 27, 2024

Akright (Principal Financial Officer)

Fractional Chief Financial Officer

January 16, 2026

Financial Officer)

(Principal Accounting Officer)

Wilks Director March 27, 2024

/s/ David Hsu Director March 27, 2024

/s/ Sonia Lo Director March 27, 2024

/s/ Anita Britt Director March 27, 2024

/s/ James Lowe Director March 27, 2024

/s/ David Hsu

January 16, 2026

/s/ Anita Britt

January 16, 2026

/s/ James Lowe

January 16, 2026

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Accounting Firm (PCAOB ID NO:

Consolidated Balance Sheets as of December 31, 202 3 and 202 2

Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 202 3 and 202 2

Consolidated Statement of Changes in Shareholders’ Equity for the Years ended December 31, 202 3 and 202 2

Consolidated Statements of Cash Flows for the Years ended December 31, 202 3 and 202 2

Notes to the Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the shareholders and the Board of Directors of urban-gro, Inc.

and subsidiaries

Consolidated Balance Sheets as of December 31, 2024 and 2023 F-5

Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 2024 and 2023 F-6

Consolidated Statement of Changes in Shareholders’ Equity for the Years ended December 31, 2024 and 2023 F-7

Consolidated Statements of Cash Flows for the Years ended December 31, 2024 and 2023 F-8

Notes to the Consolidated Financial Statements F-10

of Independent Registered Accounting Firm

To the Board of Directors and Shareholders of urban-gro, Inc.:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of urban-gro, Inc.

and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, shareholders’ equity and cash flows for the 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, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

We have audited the accompanying consolidated

balance sheets of urban-gro, Inc.

(“the Company”) as of December 31, 2024 and 2023, the related consolidated statements of

operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended

December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial

statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and

2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity

with accounting principles generally accepted in the United States of America.

Explanatory Paragraph Regarding Going Concern

The accompanying financial statements have been

prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has

suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue

as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

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 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 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 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 Company’s internal control over financial reporting.

These 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

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 audits 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 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 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 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 financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our 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 provides a reasonable basis for our opinion.

/s/ BF Borgers CPA PC

BF Borgers CPA PC (PCAOB ID 5041)

Our audits 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 audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters

communicated below are matters arising from the current period audits 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 financial statements,

and (2) involved especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter

in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,

providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

Goodwill Impairment

Critical Audit Matter

The Company designated

its annual goodwill impairment assessment date as October 1.

The Company has two reporting units for impairment testing purposes, and

as a result of such assessments, the Company recognized a goodwill impairment charge of approximately $8.6 million, leaving a goodwill

balance of approximately $1.1 million.

As described in Note 2 to the financial statements, the Company tests goodwill for impairment annually

at the reporting unit level, or more frequently if events or circumstances indicate it is more likely than not that the fair value of

a reporting unit is less than it’s carrying amount.

The Company’s evaluation of goodwill for impairment involves the comparison

of the fair value of each reporting unit to its carrying value.

The Company’s estimate of fair value for each reporting unit is

based on the present value of estimated future cash flows attributable to the respective reporting unit.

The Company utilized a third-party

valuation specialist to assist in the preparation of the impairment assessments.

The determination of the fair value requires management

to make significant estimates and assumptions.

We identified the evaluation

of the impairment analysis for goodwill as a critical audit matter because of the significant estimates and assumptions management made

in determining the fair value of its reporting units.

This required a high degree of auditor judgment and an increased extent of effort

when performing audit procedures to evaluate the reasonableness of such estimates and assumptions.

In addition, the audit effort involved

the use of professionals with specialized skills and knowledge.

How the Critical Audit

Matter Was Addressed in the Audit

Our audit procedures

related to the following:

management’s processes for estimating the fair value of its reporting units.

the Company’s discounted cash flow models and evaluating the valuation analysis for mathematical accuracy.

whether the valuation techniques applied were appropriate.

the significant assumptions provided by management or developed by the third-party valuation specialist related to revenues, earnings

before interest, taxes, depreciation, and amortization (“EBITDA”), income taxes, long term growth rates, and discount rates

to discern whether they are reasonable considering (i) the current and past performance of the entity;

(ii) the consistency with external

market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

In addition, professionals

with specialized skills and knowledge were utilized by the Firm to assist in the performance of these procedures.

Long-Lived Asset Impairment

Critical Audit Matter

As described in Note

2 to the consolidated financial statements, the Company reviews its long-lived asset group, including finite-lived intangible assets,

for impairment when events or changes in circumstances indicate that the carrying amount of such long-lived asset group may not be recoverable.

The Company tested its long-lived asset group for impairment on October 1, 2023, which resulted in the recognition of impairment charges

of approximately $2.7 million related to the Company’s intangible assets.

The Company utilized a third-party valuation specialist

to assist in the preparation of the impairment assessment.

The determination of the fair value requires management to make significant

estimates and assumptions.

We identified the evaluation

of the impairment analysis for long-lived assets as a critical audit matter because of the significant estimates and assumptions management

used in the fair value models.

Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required

a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit

Matter Was Addressed in the Audit

Our audit procedures

related to the following:

management’s process for developing the recoverability value and fair value estimates.

the appropriateness of the valuation models used.

the completeness and accuracy of underlying data used in the fair value estimates.

for reasonableness the significant assumptions used by management and the valuation specialist in the recoverability test including revenues,

EBITDA, and discount rates.

◾ Evaluating the significant assumptions provided by management or developed

by the third-party valuation specialist in the fair value models related to revenues, earnings before interest, taxes, depreciation, and

amortization (“EBITDA”), income taxes, long term growth rates, and discount rates to discern whether they are reasonable considering

(i) the current and past performance of the entity;

(ii) the consistency with external market and industry data;

and (iii) whether these

assumptions were consistent with evidence obtained in other areas of the audit.

In addition, the Firm

utilized professionals with specialized skills and knowledge to assist in the performance of these procedures.

Revenue Recognition

Critical Audit Matter

As described further

in Note 3 to the financial statements, revenues derived from certain contracts in the Services and Construction design-build segments

are recognized as performance obligations are satisfied over time.

The Company uses a ratio of project costs incurred to estimated total

costs for each contract to recognize revenue.

Under the cost-to-cost measure, the determination of progress towards completion requires

management to prepare estimates of the costs to complete.

In addition, the Company’s contracts may include variable consideration

related to contract modifications, and management must also estimate the variable consideration the Company expects to receive in order

to estimate the total contract revenue.

We identified revenue recognized over time to be a critical audit matter.

The principal consideration

for our determination that revenue recognized over time is a critical audit matter is that auditing management’s estimate of the

progress toward completion of its projects was complex and subjective.

Considerable auditor judgment was required to evaluate management’s

determination of the forecasted costs to complete its contracts as future results may vary significantly from past estimates due to changes

in facts and circumstances.

In addition, auditing the Company’s measurement of variable consideration is complex and highly judgmental

and can have a material effect on the amount of revenue recognized.

How the Critical Audit

Matter Was Addressed in the Audit

Our audit procedures

related to revenue recognized over time included the following, among others.

◾ We obtained an understanding

of the Company’s process related to the initial and ongoing monitoring of changes in the contract cost-to-cost estimates.

◾ We agreed a sample of costs allocated to contracts to supporting documentation

and recalculated revenues recognized based on the percentage of completion.

◾ For a selection of contracts,

we tested the Company’s cost-to-cost estimates by evaluating the appropriate application of the cost-to-cost method, testing the

significant assumptions used to develop the estimated cost to complete and testing the completeness and accuracy of the underlying data.

/s/ Sadler, Gibb & Associates, LLC

We have served as the Company’s auditor since 2024.

March 27, 2024

January 16, 2026

urban-gro, Inc.

2 unchanged sentences

Current Assets

Cash $ 1,112,504 $ 12,008,003

Accounts receivable, net

4 unchanged sentences

Property and equipment, net

Operating lease right of use assets, net 2,041,217 2,618,825

Investments — 2,559,307

Goodwill 15,572,050 15,572,050

Operating lease right-of-use assets

Intangible assets, net

Total non-current assets

Total assets $ 64,379,043 $ 62,065,552

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

4 unchanged sentences

Contingent consideration

Notes payable 3,204,840 3,832,682

Operating lease liabilities 707,141 600,816

Notes payable, current

Operating lease liabilities, current

Total current liabilities

Non-current liabilities

Operating lease liabilities 1,380,362 2,044,782

Notes payable, long-term

Deferred tax liability

Operating lease liabilities, long-term

Total non-current liabilities

1 unchanged sentence

Commitments and contingencies (Note 12)

Shareholders’ equity:

SHAREHOLDERS’ EQUITY (DEFICIT)

Preferred stock, $ 0.10 par value;

3,000,000 shares authorized;

0 shares issued and outstanding as of December 31, 2023, and 10,000,000 shares authorized;

0 shares issued and outstanding as of December 31, 2022

0 shares issued and outstanding as of December 31, 2024, and 2023

Common stock, $ 0.001 par value:

1 unchanged sentence

15,521,223 issued and 14,071,390 outstanding as of December 31, 2024, and 30,000,000 shares authorized;

12,220,593 shares issued and 10,770,760 outstanding as of December 31, 2022

13,523 12,221

13,522,669 issued and 12,072,836 outstanding as of December 31, 2023

Additional paid in capital

Treasury shares, cost basis:

1,449,833 shares as of December 31, 2023 and 1,449,833 as of December 31, 2022

1,449,833 shares as of December 31, 2024 and 2023

( 12,045,542 )

Accumulated deficit

Total shareholders’ equity 20,070,606 34,731,764

Total liabilities and shareholders’ equity $ 64,379,043 $ 62,065,552

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

( 102,768,208 )

( 66,272,382 )

Total shareholders’ equity (deficit)

( 24,642,542 )

Total liabilities and shareholders’ equity (deficit)

The accompanying notes are an integral part of

these consolidated financial statements

urban-gro, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Years Ended

Equipment systems $ 12,675,645 $ 33,333,574

Services 11,923,920 12,862,308

Construction design-build 46,254,967 19,822,901

Other 688,241 1,011,151

Total revenues and other income 71,542,773 67,029,934

Cost of revenues:

Equipment systems 11,085,306 27,963,258

Services 7,222,968 6,225,634

Construction design-build 42,442,858 17,905,172

Other 500,079 730,151

Total cost of revenues 61,251,211 52,824,215

Gross profit 10,291,562 14,205,719

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

the Years Ended

and administrative

and amortization

of goodwill and intangibles

operating expenses

General and administrative 23,713,773 19,911,276

Stock-based compensation 2,199,046 2,571,785

Intangible asset amortization 1,056,180 1,059,779

Business development — 3,299,864

Total operating expenses 26,968,999 26,842,704

Loss from operations ( 16,677,437 ) ( 12,636,985 )

from operations

( 35,530,119 )

( 23,285,474 )

Non-operating

income (expense)

( 1,024,749 )

in fair value of contingent consideration

of investment

on litigation settlement

( 1,500,000 )

income (expense)

non-operating income (expenses)

Interest expense ( 271,686 ) ( 54,579 )

Interest income 173,895 329,012

Contingent consideration ( 160,232 ) ( 436,905 )

Write-down of investment ( 258,492 ) ( 2,660,933 )

Loss on settlement ( 1,500,000 ) —

Other income (expense) ( 202,973 ) ( 139,611 )

Total non-operating income (expenses) ( 2,219,488 ) ( 2,963,016 )

Loss before income taxes ( 18,896,925 ) ( 15,600,001 )

Income tax benefit 215,864 322,092

Net loss $ ( 18,681,061 ) $ ( 15,277,909 )

Comprehensive loss $ ( 18,681,061 ) $ ( 15,277,909 )

( 2,057,978 )

before income tax

( 36,525,531 )

( 25,343,452 )

tax benefit (expense)

$ ( 36,495,826 )

$ ( 25,437,661 )

Comprehensive

$ ( 36,495,826 )

$ ( 25,437,661 )

loss per share – basic and diluted

Weighted average shares – basic and diluted 11,264,414 10,610,841

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

average shares - basic and diluted

The accompanying notes are an integral part of

these consolidated financial statements

urban-gro, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common Stock Additional

Capital Accumulated Deficit Treasury

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’

Shareholders’

Shares Amount

Balance, December 31, 2022

$ ( 40,834,721 )

$ ( 12,045,542 )

Stock-based compensation

Common stock repurchased — — — — ( 4,362,052 ) ( 4,362,052 )

Stock issuance related to acquisition 555,390 555 3,603,258 — — 3,603,813

Stock issued in conversion of warrants 34,863 35 ( 35 ) — — –

Stock issued for contingent consideration

Stock grant program vesting

Stock options exercised 4,555 5 28,792 — — 28,797

Net loss — — — ( 15,277,909 ) — ( 15,277,909 )

Issuance of warrants

( 25,437,661 )

Balance, December 31, 2023

$ ( 66,272,382 )

( 12,045,542 )

Stock-based compensation

1 unchanged sentence

Stock grant program vesting

Net loss — — — ( 18,681,061 ) — ( 18,681,061 )

Issuance of warrants

( 36,495,826 )

Balance, December 31, 2024

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

$ ( 102,768,208 )

( 12,045,542 )

$ ( 24,642,542 )

The accompanying notes are an integral part of

these consolidated financial statements

urban-gro, Inc.

2 unchanged sentences

Cash flows from operating activities:

Net loss $ ( 18,681,061 ) $ ( 15,277,909 )

$ ( 36,495,826 )

$ ( 25,437,661 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

Deferred income tax benefit ( 215,864 ) ( 322,092 )

Amortization of the right-of-use

Amortization of debt discount

Stock-based compensation expense

Loss on litigation settlement

Loss on legal settlement

Impairment of investment

Impairment of goodwill and intangibles

Change in fair value of contingent consideration

Other, net 735,760 54,858

Change in contingent consideration from indemnification

Interest income on investments

Loss on disposal of assets

Changes in operating assets and liabilities (net of acquired amounts):

Accounts receivable and contract receivables

Prepaid expenses and other assets and property and equipment 2,161,898 8,397,707

Accounts payable, contract liabilities, and accrued expenses 23,374,027 1,087,807

Change in contingent consideration from indemnification ( 917,699 ) —

( 11,948,620 )

Prepaid expenses and other assets

Accounts payable, contract liabilities, customer deposits and accrued expenses

Operating lease liability

Customer deposits ( 1,968,115 ) ( 10,774,290 )

Deferred tax liability

Net cash used in operating activities

( 2,821,187 )

( 10,516,068 )

Cash flows from investing activities:

Sale of investments 2,326,472 –

Proceeds from sale of property and equipment

Purchases of property and equipment

Business combinations, net of cash acquired — ( 3,871,452 )

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock, net of offering costs — 28,796

Repurchase of common stock — ( 4,362,052 )

Additions to notes payable

2 unchanged sentences

Repayments of notes payable

Net cash used in financing activities ( 1,414,095 ) ( 5,519,642 )

( 5,270,343 )

( 3,909,511 )

Net cash provided by (used in) financing activities

( 2,045,627 )

Net change in cash

( 10,679,507 )

Cash at beginning of period

Cash at end of period

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

The accompanying notes are an integral part of

these consolidated financial statements

urban-gro, Inc.

5 unchanged sentences

Supplemental disclosure of non-cash investing and financing activities:

Stock issued for acquisitions $ — $ 3,603,813

Operating lease right of use assets and liabilities extension $ — $ 1,929,121

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

Stock issued for contingent consideration

Stock grant program vesting

Warrants issued in connection with line of credit

Warrants issued in connection with notes payable

Prepaid expenses financed by notes payable

Recording of Operating lease assets and liabilities

Recording of Financing lease assets and liabilities

Debt discount on notes payable

The accompanying notes are an integral part of

these consolidated financial statements

urban-gro, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND ACQUISITIONS, BUSINESS PLAN, AND LIQUIDITY

NOTE 1 – ORGANIZATION AND ACQUISITIONS,

BUSINESS PLAN, AND LIQUIDITY

urban-gro, Inc.

("we," "us," "our," the "Company," or "urban-gro") is an integrated professional services and design-build firm.

We offer value-added architectural, engineering, and construction management solutions to the Controlled Environment Agriculture ("CEA"), industrial, healthcare, and other commercial sectors.

Innovation, collaboration, and a commitment to sustainability drive our team to provide exceptional customer experiences.

To serve our horticulture clients, we engineer, design and manage the construction of indoor CEA facilities and then integrate complex environmental equipment systems into those facilities.

Through this work, we create high-performance indoor cultivation facilities for our clients to grow specialty crops, including leafy greens, vegetables, herbs, and plant-based medicines.

Our custom-tailored approach to design, construction, procurement, and equipment integration provides a single point of accountability across all aspects of indoor growing operations.

We also help our clients achieve operational efficiency and economic advantages through a full spectrum of professional services and programs focused on facility optimization and environmental health which establish facilities that allow clients to manage, operate and perform at the highest level throughout their entire cultivation lifecycle once they are up and running.

Further, we serve a broad range of commercial and governmental entities, providing them with planning, consulting, architectural, engineering and construction design-build services for their facilities.

We aim to work with our clients from the inception of their project in a way that provides value throughout the life of their facility.

We are a trusted partner and advisor to our clients and offer a complete set of engineering and managed services complemented by a vetted suite of select cultivation equipment systems.

Effective October 31, 2022, the Company entered into an agreement with Dawson Van Orden, Inc.

("Seller" or "DVO") and DVO's shareholders (the "DVO Shareholders") to acquire substantially all of the operating assets and liabilities of DVO, a Texas-based engineering firm with significant experience in indoor CEA.

The purchase price of $ 6.1 million, after working capital adjustments, was comprised of (i) $ 1.2 million in cash, (ii) a $ 3.8 million Seller's promissory note, and (iii) $ 1.1 million of the Company's common stock.

The Seller's promissory note was initially to be paid out over four quarters beginning in January 2023.

In the third quarter of 2023, a portion of that quarter’s note payment was extended to the first quarter of 2024.

The Seller’s promissory note balances as of December 31, 2023, and December 31, 2022, were $ 575,240 and $ 3,832,682 , respectively.

The purchase price excludes up to $ 1.1 million of contingent consideration earnout that may become payable to the sellers dependent on the continued employment of the DVO Shareholders.

The contingent consideration earnout is payable, at the Company’s discretion, in cash or shares of the Company’s common stock with the value of such shares being determined based upon the volume-weighted average price ("VWAP") of the Company’s common stock in the ten trading days prior to the end of the applicable quarter for which the quarterly gross profit is calculated.

The Company accounted for the acquisition as follows:

Purchase price $ 6,072,366

Allocation of purchase price:

Accounts receivable, net $ 1,134,909

Right of use asset $ 1,197,310

Property and equipment $ 229,058

Goodwill $ 3,444,926

Intangible assets $ 1,276,000

Accrued expenses $ ( 12,527 )

Right of use liability $ ( 1,197,310 )

Pro-forma disclosure of the DVO acquisition is not required as the historical results of DVO were not material to the Company's consolidated financial statements.

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

Emerald/UG Construction, Inc.

Effective April 29, 2022, the Company acquired all of the issued and outstanding capital stock of Emerald Construction Management, Inc.

("Emerald") from its shareholders (the "Emerald Sellers").

The purchase price of $ 7.7 million, after working capital adjustments, was comprised of (i) $ 3.4 million in cash, (ii) $ 2.5 million of the Company’s common stock, and (iii) $ 1.8 million of estimated contingent consideration earnout payable to the Emerald Sellers over the term of the earnout.

The total contingent earnout payable to the Emerald Sellers is $ 2.0 million.

Effective January 1, 2023, the terms of the contingent consideration earnout provisions were amended providing for the entire contingent consideration of up to $ 2.0 million to be earned based solely on the continued employment of the Emerald Sellers for a two year period following the closing of the Emerald acquisition.

This resulted in the Company recording additional contingent consideration expense of $ 160,232 in the first quarter of 2023.

Per the amendment, the remaining contingent consideration earnout is payable quarterly, at the Company’s discretion, in cash or in shares of the Company’s common stock with the value of such shares being determined based upon the VWAP of the Company’s common stock in the ten trading days prior to the end of the applicable quarter.Effective November 21, 2023, Emerald changed its name to UG Construction, Inc.

The Company accounted for the acquisition as follows:

Purchase price $ 7,671,557

Allocation of purchase price:

Cash $ 622,641

Accounts receivable, net $ 2,666,811

Contract receivable $ 494,456

Prepayments and other assets $ 38,086

Property and equipment $ 403,008

Right of use asset $ 82,408

Goodwill $ 4,135,006

Intangible assets $ 3,659,000

Accrued expenses $ ( 2,361,302 )

Contract liabilities $ ( 1,071,399 )

Right of use liability $ ( 82,408 )

Deferred tax liability $ ( 914,750 )

The following pro-forma amounts reflect the Company’s results as if the acquisition of Emerald had occurred on January 1, 2022.

These pro-forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of the acquisition to reflect the additional amortization of intangibles.

For the Years Ended

Equipment systems 12,675,645 33,333,574

Services 11,923,920 12,862,308

Construction design-build 46,254,967 31,504,349

Other 688,241 1,011,151

Total revenues and other income 71,542,773 78,711,382

Net loss $ ( 18,681,061 ) $ ( 13,268,226 )

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

Per the Emerald Acquisition Agreement and Plan of Merger (the “Emerald Acquisition Agreement”), when the Company acquired all of the issued and outstanding capital stock of Emerald, the Emerald Sellers indemnified the Company for any material liabilities, losses, and actions or inaction which took place prior to the acquisition and that were not disclosed as part of the transaction.

To that end, a pre-acquisition Emerald project incurred a substantial loss that was not disclosed in the Emerald Acquisition Agreement.

The majority shareholder of Emerald has agreed to indemnify the Company for the loss, which is currently estimated to be $ 2.4 million (the “Indemnified Loss”).

In the second quarter of 2023, the Company offset $ 1.0 million of the Indemnified Loss against the total remaining contingent consideration and certain other liabilities owed to the majority shareholder of Emerald thereby resulting in a net amount due from the majority shareholder of Emerald to $ 1.4 million.

Further, the Company has agreed to satisfy up to $ 1.2 million of the Indemnified Loss in the event a certain Emerald project is above a 7 % profit margin, on a dollar for dollar basis.

with its wholly owned subsidiaries, collectively “urban-gro,” “we,” “us,” or “the Company”)

was originally formed on March 20, 2014, as a Colorado limited liability company.

On March 10, 2017, we converted to a Colorado corporation

and exchanged shares of our common stock for every member’s interest issued and outstanding on the date of conversion.

29, 2020 , we reincorporated as a Delaware corporation.

On February 12, 2021, we completed an uplisting to the Nasdaq Capital Market (“Nasdaq”)

under the ticker symbol “UGRO”.

In 2024, urban-gro, Inc.

was an integrated professional services and design-build firm.

We offered value-added architectural, engineering, and construction management

solutions to the Controlled Environment Agriculture (“CEA”), industrial, healthcare, and other commercial sectors.

collaboration, and a commitment to sustainability drove our team to provide exceptional customer experiences.

To serve our horticulture

clients, we engineered, designed and managed the construction of indoor CEA facilities and then integrate complex environmental equipment

systems into those facilities.

Through this work, we created high-performance indoor cultivation facilities for our clients to grow specialty

crops, including leafy greens, vegetables, herbs, and plant-based medicines.

Our custom-tailored approach to design, construction, procurement,

and equipment integration provided a single point of accountability across all aspects of indoor growing operations.

We also helped our

clients achieve operational efficiency and economic advantages through a full spectrum of professional services and programs focused

on facility optimization and environmental health which established facilities that allowed clients to manage, operate and perform at

the highest level throughout their entire cultivation lifecycle once they are up and running.

Further, we served a broad range of commercial

and governmental entities, providing them with planning, consulting, architectural, engineering and construction design-build services

for their facilities.

We aimed to work with our clients from the inception of their project in a way that provided value throughout the

life of their facility.

We are a trusted partner and advisor to our clients and offer a complete set of engineering and managed services

complemented by a vetted suite of select cultivation equipment systems.

Liquidity and Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business within one year after the date the consolidated financial statements are available to be issued.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation, Principles of Consolidation and Business Combinations

These consolidated financial statements include the accounts of urban-gro, Inc.

The Company has produced

multiple consecutive years of net losses and negative cash flows.

The financial results described in these financial statements and our

financial position as of December 31, 2024 raise substantial doubt about our ability to continue as a going concern.

Company has recently taken actions to strengthen its liquidity, including decreasing headcount and operating expenses to expedite the

Company’s path to cash flow positive results.

If necessary, the Company will seek to raise capital by issuing additional equity

shares either through a private placement or on the open market.

The Company may also seek to obtain additional debt financing for which

there can be no guarantee.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING

Basis of Presentation, Principles of Consolidation

and Business Combinations

These consolidated financial statements include the accounts of urban-gro,

and its wholly owned subsidiaries.

They are presented in United States dollars and have been prepared in accordance with U.S.

GAAP and pursuant to the rules and regulations of the SEC for condensed financial reporting.The condensed consolidated financial statements are audited and, in the Company’s opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of the Company’s condensed consolidated balance sheets, condensed consolidated statements of operations and comprehensive loss, condensed consolidated statements of stockholders’ equity and condensed consolidated statements of cash flows for the periods presented.

Acquisitions of businesses are accounted for using the acquisition method of accounting (Accounting Standards Codification 805-10-225).

The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred, liabilities incurred to the former owners of the acquired entities and the equity interests issued in exchange for control of the acquired entities.

and pursuant to the rules and regulations of the SEC for financial reporting.

All intercompany transactions and balances have been eliminated

in the preparation of the consolidated financial statements.

The consolidated financial statements are audited and, in the Company’s

opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of the Company’s

consolidated balance sheets, consolidated statements of operations and comprehensive loss, consolidated statements of shareholders’

equity and consolidated statements of cash flows for the periods presented.

Acquisitions of businesses are accounted for using the acquisition

method of accounting (Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the

acquisition date fair values of the assets transferred, liabilities incurred to the former owners of the acquired entities and the equity

interests issued in exchange for control of the acquired entities.

Acquisition-related costs are recognized in net income (loss) as incurred.

Use of Estimates

In preparing consolidated financial statements in conformity with U.S.

GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the reported periods.

In preparing consolidated

financial statements in conformity with U.S.

GAAP, management is required to make estimates and assumptions that affect the reported

amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the consolidated financial statements and

revenues and expenses during the reported periods.

Actual results could differ from those estimates.

Significant estimates include estimated revenues earned under percentage of completion construction contracts, professional service contracts, estimated useful lives and potential impairment of long-lived assets and goodwill, inventory write-offs, allowance for deferred tax assets and deferred tax liabilities, and allowance for bad-debt.

Reclassification

Certain prior year amounts have been reclassified for consistency with the current year presentation.

These reclassifications had no effect on the reported results of operations.

Significant estimates include estimated

revenues earned under percentage of completion construction contracts, professional service contracts, estimated useful lives and potential

impairment of long-lived assets and goodwill, inventory write-offs, allowance for deferred tax assets and deferred tax liabilities, and

allowance for bad debt.

Balance Sheet Classifications

The Company includes in current assets and liabilities the following amounts that are in connection with construction contracts that may extend beyond one year:

contract assets and contract liabilities (including retainage invoiced to customers contingent upon anything other than the passage of time), capitalized costs to fulfill contracts, retainage payable to sub-contractors and accrued losses on uncompleted contracts.

A one-year time period is used to classify all other current assets and liabilities when not otherwise prescribed by the applicable accounting principles.

The Company includes in current

assets and liabilities the following amounts that are in connection with construction contracts that may extend beyond one year:

assets and contract liabilities (including retainage invoiced to customers contingent upon anything other than the passage of time),

capitalized costs to fulfill contracts, retainage payable to sub-contractors and accrued losses on uncompleted contracts.

period is used to classify all other current assets and liabilities when not otherwise prescribed by the applicable accounting principles.

Contract Assets and Liabilities

The timing between when Company collects cash from its construction design-build customers can create a contract asset or contract liability.

Please refer to Note 3 - Revenue from Contracts with Customers for further discussion of the Company's contract assets and liabilities.

The timing when the Company

collects cash from its construction design-build customers can create a contract asset or contract liability.

Please refer to Note

3 - Revenue from Contracts with Customers for further discussion of the Company’s contract assets and liabilities.

Functional and Reporting Currency and Foreign Currency Translation

The functional and reporting currency of the Company and its subsidiaries is US dollars.

All transactions in currencies other than US dollars are translated into US dollars on the date of the transaction.

Any exchange gains and losses related to these transactions are recognized in the current period earnings as other income (expense).

The functional and reporting

currency of the Company and its subsidiaries is US dollars.

All transactions in currencies other than US dollars are translated into

US dollars on the date of the transaction.

Any exchange gains and losses related to these transactions are recognized in the current

period earnings as other income (expense).

Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash, accounts receivable, accounts payable, promissory note and other current assets and liabilities.

The Company’s financial

instruments consist principally of cash, accounts receivable, accounts payable, promissory note and other current assets and liabilities.

We value our financial assets and liabilities using fair value measurements.

Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable.

The categorization of financial instruments within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:

Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated with observable market data.

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.

This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

The carrying amount of our cash, accounts receivable, accounts payable, promissory note, and other current assets and liabilities in our consolidated financial statements approximates fair value because of the short-term nature of the instruments as of December 31, 2023 and 2022.

Investments in non-marketable equity securities are carried at cost less other-than-temporary impairments as of December 31, 2023 and 2022.

There have been no changes in Level 1, Level 2, and Level 3 categorizations and no changes in valuation techniques for these assets or liabilities for the years ended December 31, 2023 and 2022.

The Company considers all highly liquid short-term cash investments with an original maturity of three months or less to be cash equivalents.

As of December 31, 2023 and 2022, the Company did not maintain any cash equivalents.

Fair value is based on the price that would be received

to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the

inputs are observable.

The categorization of financial instruments within the valuation hierarchy is based on the lowest level of input

that is significant to the fair value measurement.

The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined

Quoted prices in active

markets for identical assets or liabilities that the entity has the ability to access.

Observable inputs other

than prices included in Level 1, such as quoted prices for similar assets and liabilities

in active markets, quoted prices for identical or similar assets and liabilities in markets

that are not active, or other inputs that are observable or can be corroborated with observable

Unobservable inputs that

are supported by little or no market activity and that are significant to the fair value

of the assets and liabilities.

This includes certain pricing models, discounted cash flow

methodologies, and similar techniques that use significant unobservable inputs.

The carrying amount of

our cash, accounts receivable, accounts payable, promissory note, and other current assets and liabilities in our consolidated financial

statements approximates fair value because of the short-term nature of the instruments as of December 31, 2024 and 2023.

in non-marketable equity securities are carried at cost less other-than-temporary impairments as of December 31, 2024 and 2023.

There have been no changes

in Level 1, Level 2, and Level 3 categorizations and no changes in valuation techniques for these assets or liabilities for the years

ended December 31, 2024 and 2023.

The Company considers all highly liquid short-term cash investments

with an original maturity of three months or less to be cash equivalents.

As of December 31, 2024 and 2023, the Company did not maintain

any cash equivalents.

The Company maintains cash with financial institutions that may from time to time exceed federally-insured limits.

The Company has Insured Cash Sweep programs in place with its financial institutions to ensure that these excess funds are also federally-insured.

The Company has Insured Cash Sweep programs in place with its financial institutions to ensure that these excess funds are also federally

There are no restricted or compensating cash balances as of December 31, 2024.

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Trade Accounts Receivable

Trade accounts receivables are carried at the original invoiced amounts less an allowance for doubtful accounts.

As of December 31, 2023 and 2022, the balance of allowance for doubtful accounts was $ 306,496 and $ 103,653 , respectively.

The allowance for doubtful accounts is calculated based on a detailed review of certain individual customer accounts and an estimation of the overall economic conditions affecting the Company’s customer base.

Trade accounts receivable are carried at the original invoiced amounts

less an estimate of expected credit losses.

The Company estimates its allowance for credit losses and the related expected credit loss

based upon the Company’s historical credit loss experience and the age of the account adjusted for asset-specific risk characteristics,

current economic conditions, relationship with the customer, and reasonable forecasts.

Credit is generally extended on a short-term basis;

thus current receivables do not bear interest.

The Company reviews a customer’s credit history before extending credit to the customer.

If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, additions to the allowance would be required.

A provision is made against accounts receivable to the extent they are considered unlikely to be collected.

Occasionally, the Company will write off bad-debt directly to the bad-debt expense account when the balance is determined to be uncollectible.

Bad-debt expense for the years ended December 31, 2023 and 2022 was $ 566,569 and $ 110,000 , respectively.

If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, an increase

in the expected credit losses balance would be required.

A provision is made against accounts receivable to the extent they are considered

unlikely to be collected.

Occasionally, the Company will write off bad debt directly to the bad-debt expense account when the balance

is determined to be uncollectible.

The Company’s allowance for expected credit losses for the years ended December 31, 2024

and 2023 was $ 3,277,083 and $ 284,745 , respectively.

Non-trade Accounts Receivable

Non-trade accounts receivable consist of amounts due to the Company outside of our normal operating business.

As of December 31, 2023 and 2022, the Company had a total of $ 3,134,452 and $ 2,914,112 of non-trade accounts receivable, respectively.

Non trade accounts receivable as of December 31, 2023 were comprised of the remaining Indemnified Loss receivable from the majority shareholder of Emerald further detailed in Note 1 – Organization, Acquisitions, and Liquidity and miscellaneous non-trade accounts receivable of $ 498,043 .

As of December 31, 2022, non-trade accounts receivables was comprised of miscellaneous non-trade accounts receivables totaling $ 514,112 , and non-trade accounts receivable related to litigation involving fraudulent wire transactions of $ 2,400,000 .

On March 27, 2023, the Company entered into an agreement to settle this litigation and received a cash payment of $ 2,400,000 on March 27, 2023.

In connection with the settlement the Company recorded an impairment in the fourth quarter of 2022 of $ 950,576 .

Inventories, consisting entirely of finished goods, are stated at the lower of cost or net realizable value, with cost determined using the weighted average cost method.

The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions.

Write-downs and write-offs are charged to cost of goods sold at the realization of change in value.

Once written down, inventories are carried at this lower basis until sold or scrapped.

Property, Plant, and Equipment, net

Property and equipment is stated at cost less accumulated depreciation and impairment.

Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred.

When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period.

Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes.

Non-trade accounts receivable represents amounts owed to the Company

that arise outside of its regular operating activities.

Non-trade accounts receivable as of December 31, 2024 and 2023 were comprised

of the remaining Indemnified Loss receivable from the majority shareholder of Emerald further detailed in Note 1 – Organization,

Acquisitions, Business Plan, and Liquidity .

On March 27, 2023, the Company entered into an agreement to settle litigation and received

a cash payment of $ 2,400,000 related to the non-trade accounts receivable involving fraudulent wire transactions of $ 2,400,000 included

in the December 31, 2022 balance.

Property and Equipment, net

Property and equipment

is stated at cost less accumulated depreciation and impairment.

Expenditures for major additions and improvements are capitalized and

minor replacements, maintenance, and repairs are charged to expense as incurred.

When property and equipment is retired or otherwise

disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results

of operations for the respective period.

Depreciation is provided over the estimated useful lives of the related assets using the straight-line

method for financial statement purposes.

The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate.

No impairment charges were recorded for the years ended December 31, 2024 and 2023.

The estimated useful lives for significant property and equipment categories are as follows:

The estimated useful lives

for significant property and equipment categories are as follows:

Computer and technology equipment 3 years

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Operating Lease Right of Use Assets

Operating lease right of use assets are stated at cost less accumulated depreciation, amortization and impairment.

The Company has various operating and finance equipment and office leases with an imputed annual interest rate of 8 %.

The Company accounts for

leases in accordance with ASC 842.

The Company determines whether a contract is a lease at contract inception or for a modified contract

at the modification date.

At inception or modification, the Company recognizes right-of-use (“ROU” assets and related lease

liabilities on the Consolidated Balance Sheets for all leases greater than one-year in duration.

Lease liabilities and their corresponding

ROU assets are initially measured at the present value of the unpaid lease payments as of the lease commencement date.

If the lease contains

a renewal and/or termination option, the exercise of the option is included in the term of the lease if the Company is reasonably certain

that a renewal or termination option will be exercised.

As the Company’s leases do not provide an implicit rate, the Company uses

an estimated incremental borrowing rate (“IBR”) based on the information available at the commencement date of the respective

lease to determine the present value of the future payments.

The IBR is determined by estimating what it would cost the Company to borrow

a collateralized amount equal to the total lease payments over the lease term based on the contractual terms of the lease and the location

of the leased asset.

Operating lease payments

are recognized as an expense on a straight-line basis over the lease term in equal amounts of rent expense attributed to each period

during the term of the lease, regardless of when actual payments are made.

This generally results in rent expense in excess of cash payments

during the early years of a lease and rent expense less than cash payments in later years.

The difference between rent expense recognized

and actual rental payments is typically represented as the spread between the ROU asset and lease liability.

The Company does not recognize

ROU assets and lease liabilities for short-term leases that have an initial term of 12 months or less.

The Company recognizes the lease

payments associated with short-term leases as an expense on a straight-line basis over the lease term.

Operating lease right-of-use

assets are recorded at cost, net of accumulated depreciation, amortization, and impairment.

The Company has various operating and finance

equipment and office leases with an imputed annual interest rate of 11 %.

Intangible Assets

The Company’s intangible assets, consist of legal fees for application of patents and trademarks, as well as customer relationships, trademarks and trade names and backlog from the acquisitions of DVO, 2WR and Emerald.

Our patents and trademarks are recorded at cost, while the intangibles from our acquisitions are recorded at fair value and are amortized using the straight-line method over an estimated life, generally 5 years for patents, 5 years for trademarks and trade names, 7 years for customer relationships, and 1 year for backlog.

The Company’s intangible assets consist of legal fees for application

of patents and trademarks, as well as customer relationships, trademarks and trade names and backlog from the acquisitions of DVO, 2WR

Our patents and trademarks are recorded at cost, while the intangibles from our acquisitions are recorded at fair value and

are amortized using the straight-line method over an estimated life, generally 5 years for patents, 5 years for trademarks and trade names,

and 7 years for customer relationships.

Intangible assets are reported in the “Intangible Asset” line on the balance sheet.

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination.

Goodwill is not amortized but is tested for impairment annually and at any time when events or circumstances suggest impairment may have occurred.

The testing for impairment consists of a comparison of the fair value of the reporting unit with its carrying amount.

If the carrying amount of the reporting unit, including goodwill, exceeds the fair value, an impairment will be recognized equal to the difference between the carrying value of the reporting unit’s goodwill and the implied fair value of the goodwill.

In testing goodwill for impairment, we determine the estimated fair value of our reporting units based upon a discounted future cash flow analysis.

Goodwill, trade names and patents are our only indefinite-lived intangible assets.

Definite-lived intangible assets are amortized using the straight-line method over the shorter of their contractual term or estimated useful lives.

Goodwill represents the

excess of the purchase price over the fair value of net assets acquired in a business combination.

Goodwill is not amortized but is tested

for impairment annually and at any time when events or circumstances suggest impairment may have occurred.

The testing for impairment

consists of a comparison of the fair value of the reporting unit with its carrying amount.

If the carrying amount of the reporting unit,

including goodwill, exceeds the fair value, an impairment will be recognized equal to the difference between the carrying value of the

reporting unit’s goodwill and the implied fair value of the goodwill.

In testing goodwill for impairment, we determine the estimated

fair value of our reporting units based upon a discounted future cash flow analysis.

Goodwill, trade names and patents are our only indefinite-lived

intangible assets.

Definite-lived intangible assets are amortized using the straight-line method over the shorter of their contractual

term or estimated useful lives.

Impairment of Long-lived Assets

The Company evaluates potential impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.

An impairment will be recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

Investments without readily determinable fair values and for which the Company does not have the ability to exercise significant influence are accounted for at cost with adjustments for observable changes in prices or impairments.

The Company evaluates potential

impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be

The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected

to result from the use and eventual disposition of the asset.

An impairment will be recognized as the amount by which the carrying amount

of a long-lived asset exceeds its fair value.

Investments without readily

determinable fair values and for which the Company does not have the ability to exercise significant influence are accounted for at cost

with adjustments for observable changes in prices or impairments.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, which requires that five basic steps be followed to recognize revenue:

The Company recognizes

revenue in accordance with ASC 606, Revenue from Contracts with Customers, which requires that five basic steps be followed to

recognize revenue:

(1) a legally enforceable contract that meets criteria standards as to composition and substance is identified;

performance obligations relating to provision of goods or services to the customer are identified;

(3) the transaction price, with consideration given to any variable, noncash, or other relevant consideration, is determined;

(4) the transaction price is allocated to the performance obligations;

and (5) revenue is recognized when control of goods or services is transferred to the customer with consideration given to whether that control happens over time or not.

Determination of criteria (3) and (4) are based on judgments regarding the fixed nature of the selling prices of the services and products delivered and the collectability of those amounts.

The Company derives revenue predominately from the sale of equipment systems, services, construction design-build, and from other various immaterial contracts with customers.

(3) the transaction price, with consideration

given to any variable, noncash, or other relevant consideration, is determined;

(4) the transaction price is allocated to the performance

and (5) revenue is recognized when control of goods or services is transferred to the customer with consideration given

to whether that control happens over time or not.

Determination of criteria (3) and (4) are based on judgments regarding the fixed nature

of the selling prices of the services and products delivered and the collectability of those amounts.

The Company derives revenue

predominately from the sale of equipment systems, services, construction design-build, and from other various immaterial contracts with

Please refer to Note 3 - Revenue from Contracts with Customers for additional discussion.

Customer Deposits

For equipment systems contracts, the Company’s policy is to collect deposits from customers at the beginning of the contract.

Please refer to Note 3 - Revenue from Contracts with Customers for further discussion of the Company's customer deposits.

For equipment systems contracts,

the Company’s policy is to collect deposits from customers at the beginning of the contract.

Please refer to Note 3 - Revenue

from Contracts with Customers for further discussion of the Company’s customer deposits.

Cost of Revenues

The Company’s policy is to recognize cost of revenues in the same manner as, and in conjunction with, revenue recognition.

The Company’s cost of revenues includes the costs directly attributable to revenue recognized and includes expenses related to the purchasing of products and providing services, costs related to construction design-build contracts, fees for third-party commissions, and shipping costs.

Total shipping costs included in the cost of revenues for the years ended December 31, 2023 and 2022 were $ 256,345 and $ 893,517 , respectively.

The Company’s policy

is to recognize cost of revenues in the same manner as, and in conjunction with, revenue recognition.

The Company’s cost of revenues

includes the costs directly attributable to revenue recognized and includes expenses related to the purchasing of products and providing

services, costs related to construction design-build contracts, fees for third-party commissions, and shipping costs.

Advertising Costs

The Company expenses advertising costs in the periods the costs are incurred.

The Company recognizes advertising costs in the periods the costs are

Prepayments made under contracts are included in prepaid expenses and expensed when the advertisement is run.

Total advertising expense incurred for the years ended December 31, 2023 and 2022 was $ 516,522 and $ 504,738 , respectively.

Total advertising

expenses incurred for the years ended December 31, 2024 and 2023 were $ 53,050 and $ 516,522 , respectively.

Stock-Based Compensation

The Company periodically issues shares of its common stock and stock options to employees, directors, and consultants in non-capital raising transactions for fees and services.

The Company accounts for stock grants and stock options issued to employees and directors with the award being measured at its fair value at the date of grant and amortized ratably over the vesting period.

The Company accounts for stock issued to consultants with the value of the stock compensation based upon the measurement date as determined at the grant date of the award.

The Company estimates the fair value of warrants at the respective balance sheet dates using the Black-Scholes option-pricing model based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term, risk-free interest rate, and expected volatility of the price of the underlying common stock.

There is a moderate degree of subjectivity involved when using option pricing models to estimate the warrants and the assumptions used in the Black-Scholes option-pricing model are moderately judgmental.

The Company files income tax returns in the United States, Canada, and the Netherlands, and state and local tax returns in applicable jurisdictions.

Provisions for current income tax liabilities, if any, would be calculated and accrued on income and expense amounts expected to be included in the income tax returns for the current year.

The Company periodically

issues restricted stock units (“RSUs”) and stock options to employees, directors, and consultants in non-capital raising

transactions for fees and services.

The Company accounts for stock grants and stock options issued to employees and directors with the

award being measured at its fair value at the date of grant and amortized ratably over the estimated service period.

The Company accounts

for stock issued to consultants with the value of the stock compensation based upon the measurement date as determined at the grant date

of the award.

The Company estimates the

fair value of warrants at the respective balance sheet dates using the Black-Scholes option-pricing model based on the estimated market

value of the underlying common stock at the valuation measurement date, the remaining contractual term, risk-free interest rate, and

expected volatility of the price of the underlying common stock.

There is a moderate degree of subjectivity involved when using option

pricing models to estimate the warrants and the assumptions used in the Black-Scholes option-pricing model are moderately judgmental.

The Company files income

tax returns in the United States, Canada, and the Netherlands, and state and local tax returns in applicable jurisdictions.

for current income tax liabilities, if any, would be calculated and accrued on income and expense amounts expected to be included in

the income tax returns for the current year.

Income taxes reported in earnings, if any, would also include deferred income tax provisions.

Deferred income tax assets and liabilities, if any, would be computed on differences between the financial statement bases of assets and liabilities at the enacted tax rates.

Deferred income tax assets

and liabilities, if any, would be computed on differences between the financial statement bases of assets and liabilities at the enacted

Changes in deferred income tax assets and liabilities would be included as a component of income tax expense.

The effect on deferred income tax assets and liabilities attributable to changes in enacted tax rates would be charged or credited to income tax expense in the period of enactment.

Valuation allowances would be established for certain deferred tax assets when realization is not likely.

Assets and liabilities would be established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions, in the judgment of the Company, do not meet a more-likely-than-not threshold based on the technical merits of the positions.

The effect on

deferred income tax assets and liabilities attributable to changes in enacted tax rates would be charged or credited to income tax expense

in the period of enactment.

Valuation allowances would be established for certain deferred tax assets when realization is not likely.

Assets and liabilities

would be established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions, in

the judgment of the Company, do not meet a more-likely-than-not threshold based on the technical merits of the positions.

Valuation allowances

would be established for certain deferred tax assets when realization is not likely.

Loss per Share

The Company computes net loss per share by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for the period.

Diluted earnings per share would be computed by dividing net loss by the weighted-average of all potentially dilutive shares of common stock that were outstanding during the periods presented.

The diluted earnings per share calculation is not presented as it results in an anti-dilutive calculation of net loss per share.

The treasury stock method would be used to calculate diluted earnings per share for potentially dilutive stock options and share purchase warrants.

This method assumes that any proceeds received from the exercise of in-the-money stock options and share purchase warrants would be used to purchase common shares at the average market price for the period.

The Company computes net

loss per share by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for

Diluted earnings per share would be computed by dividing net loss by the weighted-average of all potentially dilutive shares

of common stock that were outstanding during the periods presented.

The diluted earnings per share calculation is not presented as it

results in an anti-dilutive calculation of net loss per share.

The treasury stock method

would be used to calculate diluted earnings per share for potentially dilutive stock options and share purchase warrants.

assumes that any proceeds received from the exercise of in-the-money stock options and share purchase warrants would be used to purchase

common shares at the average market price for the period.

Recently Issued Accounting Pronouncements

From time to time, the Financial Accounting Standards Board (the "FASB") or other standards setting bodies issue new accounting pronouncements.

From time to time, the

Financial Accounting Standards Board (the “FASB”) or other standards setting bodies issue new accounting pronouncements.

The FASB issues updates to new accounting pronouncements through the issuance of an Accounting Standards Update (“ASU”).

Unless otherwise discussed, the Company believes that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on the Company’s financial statements upon adoption.

In November 2023, the FASB issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires an enhanced disclosure of significant segment expenses on an annual and interim basis.

This ASU will be effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company does not expect this ASU to have an impact on its consolidated financial statements.

In December 2023, the FASB issued ASU No.

Unless otherwise discussed, the Company believes that the impact of recently issued guidance, whether adopted or to be adopted in the

future, is not expected to have a material impact on the Company’s financial statements upon adoption.

In December 2023, the FASB

issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (ASU 2023-09), which requires greater disaggregation of information in the effective tax rate reconciliation, income taxes paid disaggregated by jurisdiction, and certain other amendments related to income tax disclosures.

Improvements to Income Tax Disclosures (ASU 2023-09), which requires greater disaggregation

of information in the effective tax rate reconciliation, income taxes paid disaggregated by jurisdiction, and certain other amendments

related to income tax disclosures.

This guidance will be effective for fiscal years beginning after December 15, 2024.

The Company will be evaluating the impact of this ASU on its consolidated financial statements.

There are other various updates recently issued by the FASB, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Management has reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on the Company's financial condition or the results of our operations.

NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company recognizes revenue predominantly from the sale of equipment systems, services, construction design-build, and from other various immaterial contracts with customers from its CEA and Commercial sectors.

The table below presents the revenue by source for the years ended December 31, 2023 and 2022:

For the year ended December 31, 2023

CEA Commercial Total Relative Percentage

Equipment systems $ 12,675,645 $ — $ 12,675,645 18 %

Services 3,820,338 8,103,582 11,923,920 17 %

Construction design-build 4,391,087 41,863,880 46,254,967 65 %

Other 688,241 — 688,241 1 %

Total revenues and other income $ 21,575,311 $ 49,967,462 $ 71,542,773 100 %

Relative percentage 30 % 70 % 100 %

Percentages may not calculate due to rounding.

For the year ended December 31, 2022

CEA Commercial Total Relative Percentage

The Company is

evaluating the impact of this ASU on its consolidated financial statements.

There are other various

updates recently issued by the FASB, most of which represented technical corrections to the accounting literature or application to specific

industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Management has reviewed

all other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements

may be expected to cause a material impact on the Company’s financial condition or the results of our operations.

NOTE 3 – REVENUE FROM CONTRACTS WITH

The Company recognizes

revenue predominantly from the sale of equipment systems, services, construction design-build, and from other various immaterial contracts

with customers from its CEA and Commercial sectors.

The table below presents the revenue by source for the years ended December 31,

2024 and 2023:

For the twelve months ended December 31, 2024

Equipment systems

Services 8,016,433 4,845,875 12,862,308 19 %

Construction design-build

Other 1,011,151 — 1,011,151 2 %

Total revenues and other income

Relative percentage

Percentages may not calculate due to rounding.

Under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers , a performance obligation is a promise in a contract with a customer, to transfer a distinct good or service to the customer.

Equipment systems contracts are lump sum contracts, which require the performance of some, or all, of the obligations under the contract for a specified amount.

Service revenue contracts, which include both architectural and engineering designs, generally contain multiple performance obligations which can span across multiple phases of a project and are generally set forth in the contract as distinct milestones.

The majority of construction design-build contracts have a single performance obligation, as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct.

Some contracts have multiple performance obligations, most commonly due to the contract covering multiple phases of the project life cycle (design and construction).

The transaction price for service contracts and construction design-build contracts is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied.

When there are multiple performance obligations under the same service contract, the Company allocates the transaction price to each performance obligation based on the standalone selling price.

In general, payment is fixed at the time of the contract and are not subject to discounts, incentives, payment bonuses, credits, and penalties, unless negotiated in an amendment.

When establishing the selling price to the customer, the Company uses various observable inputs.

For equipment systems, the stand-alone selling price is determined by forecasting the expected costs of the products, and then adding in the appropriate margins established by management.

For service revenues and construction design-build revenues, the Company estimates the selling price by reference to certain physical characteristics of the project, which include the facility size, the complexity of the design, and the mechanical systems involved, which are indicative of the scope and complexity for those services.

Significant judgments are typically not required with respect to the determination of the transaction price based on the nature of the selling prices of the products and services delivered and the collectability of those amounts.

Under ASC Topic 606, Revenue

from Contracts with Customers , a performance obligation is a promise in a contract with a customer, to transfer a distinct good or

service to the customer.

Equipment systems contracts are lump sum contracts, which require the performance of some, or all, of the obligations

under the contract for a specified amount.

Service revenue contracts, which include both architectural and engineering designs, generally

contain multiple performance obligations which can span across multiple phases of a project and are generally set forth in the contract

as distinct milestones.

The majority of construction design-build contracts have a single performance obligation, as the promise to transfer

the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct.

contracts have multiple performance obligations, most commonly due to the contract covering multiple phases of the project life cycle

(design and construction).

The transaction price for

service contracts and construction design-build contracts is allocated to each distinct performance obligation and recognized as revenue

when, or as, each performance obligation is satisfied.

When there are multiple performance obligations under the same service contract,

the Company allocates the transaction price to each performance obligation based on the standalone selling price.

In general, payment

is fixed at the time of the contract and are not subject to discounts, incentives, payment bonuses, credits, and penalties, unless negotiated

in an amendment.

When establishing the selling

price to the customer, the Company uses various observable inputs.

For equipment systems, the stand-alone selling price is determined

by forecasting the expected costs of the products, and then adding in the appropriate margins established by the contract.

revenues and construction design-build revenues, the Company estimates the selling price by reference to certain physical characteristics

of the project, which include the facility size, the complexity of the design, and the mechanical systems involved, which are indicative

of the scope and complexity for those services.

Significant judgments are typically not required with respect to the determination of

the transaction price based on the nature of the selling prices of the products and services delivered and the collectability of those

Accordingly, the Company does not consider estimates of variable consideration to be constrained.

The Company recognizes equipment systems, services, and construction design-build revenues when the performance obligation with the customer is satisfied.

For satisfaction of equipment system revenues, the Company recognizes revenue when control of the promised good transfers to the customer, which predominately occurs at the time of shipment.

For service revenues, satisfaction occurs as the services related to the distinct performance obligations are rendered or completed in exchange for consideration in an amount for which the Company is entitled.

The time period between recognition and satisfaction of performance obligations is generally within the same reporting period;

thus, there are no material unsatisfied or partially unsatisfied performance obligations for product or service revenues at the end of the reporting period.

Construction design-build revenues are recognized as the Company's obligations are satisfied over time, using the ratio of project costs incurred to estimated total costs for each contract because of the continuous transfer of control to the customer as all of the work is performed at the customer’s site and, therefore, the customer controls the asset as it is being constructed.

This continuous transfer of control to the customer is further supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay the Company for costs incurred plus a reasonable profit and take control of any work in process.

This cost-to-cost measure is used for our construction design-build contracts because management considers it to be the best available measure of progress on these contracts.

Contract modifications through change orders, claims and incentives are routine in the performance of the Company’s construction design-build contracts to account for changes in the contract specifications or requirements.

In most instances, contract modifications are not distinct from the existing contract due to the significant integration of services provided in the contract and are accounted for as a modification of the existing contract and performance obligation.

Either the Company or its customers may initiate change orders, which may include changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the work.

The Company recognizes

equipment systems, services, and construction design-build revenues when the performance obligation with the customer is satisfied.

satisfaction of equipment system revenues, the Company recognizes revenue when control of the promised good transfers to the customer,

which predominately occurs at the time of shipment.

For service revenues, satisfaction occurs as the services related to the distinct

performance obligations are rendered or completed in exchange for consideration in an amount for which the Company is entitled.

period between recognition and satisfaction of performance obligations is generally within the same reporting period;

thus, there are

no material unsatisfied or partially unsatisfied performance obligations for product or service revenues at the end of the reporting

Construction design-build

revenues are recognized as the Company’s obligations are satisfied over time, using the ratio of project costs incurred to estimated

total costs for each contract because of the continuous transfer of control to the customer as all of the work is performed at the customer’s

site and, therefore, the customer controls the asset as it is being constructed.

This continuous transfer of control to the customer

is further supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay the

Company for costs incurred plus a reasonable profit and take control of any work in process.

This cost-to-cost measure is used for our

construction design-build contracts because management considers it to be the best available measure of progress on these contracts.

Contract modifications

through change orders, claims and incentives are routine in the performance of the Company’s construction design-build contracts

to account for changes in the contract specifications or requirements.

In most instances, contract modifications are not distinct from

the existing contract due to the significant integration of services provided in the contract and are accounted for as a modification

of the existing contract and performance obligation.

Either the Company or its customers may initiate change orders, which may include

changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the

Change orders that are unapproved as to both price and scope are evaluated as claims.

The Company considers claims to be amounts in excess of approved contract prices that the Company seeks to collect from its customers or others for customer-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs.

The timing of when the Company bills customers on long-term construction design-build contracts is generally dependent upon agreed-upon contractual terms, which may include milestone billings based on the completion of certain phases of the work, or when services are provided.

When as a result of contingencies, billings cannot occur until after the related revenue has been recognized;

the result is unbilled revenue, which is included in contract assets.

The Company considers claims to be amounts

in excess of approved contract prices that the Company seeks to collect from its customers or others for customer-caused delays, errors

in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and

price, or other causes of unanticipated additional contract costs.

The timing of when the

Company bills customers on long-term construction design-build contracts is generally dependent upon agreed-upon contractual terms, which

may include milestone billings based on the completion of certain phases of the work, or when services are provided.

When as a result

of contingencies, billings cannot occur until after the related revenue has been recognized;

the result is unbilled revenue, which is

included in contract assets.

Additionally, the Company may receive advances or deposits from customers before revenue is recognized;

the result is deferred revenue, which is included in contract liabilities.

Retainage subject to conditions other than the passage of time are included in contract assets and contract liabilities.

Contract assets represent revenues recognized in excess of amounts paid or payable (contract receivables) to the Company on uncompleted contracts.

Contract liabilities represent the Company’s obligation to perform on uncompleted contracts with customers for which the Company has received payment or for which contract receivables are outstanding.

The following table provides information about contract assets and contract liabilities from contracts with customers:

Retainage subject to conditions other than the passage of

time are included in contract assets and contract liabilities.

Contract assets represent

revenues recognized in excess of amounts paid or payable (contract receivables) to the Company on uncompleted contracts.

Contract liabilities

represent the Company’s obligation to perform on uncompleted contracts with customers for which the Company has received payment

or for which contract receivables are outstanding.

The following table provides

information about contract assets and contract liabilities from contracts with customers:

As of December 31,

Contract assets:

Revenue recognized in excess of amounts paid or payable (contract receivables) to the Company on uncompleted contracts (contract asset), excluding retainage $ 9,364,915 $ 2,874,141

Retainage included in contract assets due to being conditional on something other than solely passage of time 707,036 130,141

Revenue recognized in excess of amounts paid

or payable (contract receivables) to the Company on uncompleted contracts (contract asset), excluding retainage

Retainage included in contract assets

due to being conditional on something other than solely passage of time

Total contract assets

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Contract liabilities:

Payments received or receivable (contract receivables) in excess of revenue recognized on uncompleted contracts (contract liability) $ 8,009,018 $ 1,294,452

Retainage included in contract liabilities due to being conditional on something other than solely passage of time 54,307 —

Payments received or receivable (contract receivables)

in excess of revenue recognized on uncompleted contracts (contract liability)

Retainage included in contract liabilities

due to being conditional on something other than solely passage of time

Total contract liabilities

Trade accounts receivable, net of allowance for doubtful accounts, balances from contracts with customers within the accompanying balance sheets as of December 31, 2023, and 2022, were $ 23,857,287 and $ 12,466,180 , respectively.

For equipment systems contracts, the Company’s predominant policy is to collect deposits from customers at the beginning of the contract and the balance of the contract payment prior to shipping.

For equipment systems contracts,

the Company’s predominant policy is to collect deposits from customers at the beginning of the contract and the balance of the

contract payment prior to shipping.

The Company does, in some cases, collect deposits or retainers as down payments on service contracts.

Consumable products orders may be paid for in advance of shipment or for recurring customers with credit, payment terms of 30 days or less may be extended by the Company.

Customer payments that have been collected prior to the performance obligation being recognized are recorded as customer deposit liabilities on the balance sheet.

When the performance obligation is satisfied and all the criteria for revenue recognition are met, revenue is recognized.

In certain situations when the customer has paid the deposit and services have been performed but the customer chooses not to proceed with the contract, the Company is entitled to keep the deposit and recognize revenue.

Of the outstanding customer deposit balance of $ 2,571,161 at December 31, 2022, $ 2,569,321 was recognized as revenue in the year ended December 31, 2023.

Of the customer deposit balance of $ 13,345,451 at December 31, 2021, $ 13,186,579 was recognized as revenue in the year ended December 31, 2022.

Consumable products orders may be paid for in advance of shipment or for recurring customers with credit, payment terms of 30 days or

less may be extended by the Company.

Customer payments that have been collected prior to the performance obligation being recognized

are recorded as customer deposit liabilities on the balance sheet.

When the performance obligation is satisfied and all the criteria

for revenue recognition are met, revenue is recognized.

In certain situations when the customer has paid the deposit and services have

been performed but the customer chooses not to proceed with the contract, the Company is entitled to keep the deposit and recognize revenue.

NOTE 4 – RELATED PARTY TRANSACTIONS

A director of the Company is an owner of Cloud 9 Support, LLC (“Cloud 9”) and Potco LLC (“Potco”).

Cloud 9 purchases materials from the Company for use with its customers and Potco purchases equipment from the Company for use in its cultivation facility.

Another director of the Company is working on a vertical farming innovation model with a group of CEA experts (“the CEA Consortium”).

The CEA Consortium contracts services from the Company related to their business model.

The table below presents the revenues for these related party entities for the twelve months ended December 31, 2023, and 2022:

Twelve Months Ended

Revenues - Cloud 9 $ 462 $ 13,383

Revenues - Potco 987,268 12,480

Revenues - CEA Consortium

$ 245,000 $ —

A director of the Company

is an owner of Cloud 9 Support, LLC (“Cloud 9”) and Potco LLC (“Potco”).

Cloud 9 purchases materials from the

Company for use with its customers and Potco purchases equipment from the Company for use in its cultivation facility.

Another director

of the Company is working on a vertical farming innovation model with a group of CEA experts (“the CEA Consortium”).

CEA Consortium contracts services from the Company related to their business model.

The table below presents

the revenues from related parties:

For the years ended

CEA Consortium

Total revenues from related party transactions

The table below presents the accounts receivable from these related party entities as of December 31, 2023, and December 31, 2022:

December 31, 2023 December 31, 2022

Accounts receivable - Cloud 9 $ — $ 3,920

Accounts receivable - Potco 163,088 20,174

Accounts receivable - CEA Consortium

$ 245,000 $ —

The table below presents

the accounts receivable from related parties as of December 31, 2024, and December 31, 2023:

CEA Consortium

Total accounts receivable due from related party transactions

NOTE 5 – PREPAYMENTS & OTHER ASSETS

Prepayments and other assets are comprised of prepayments paid to vendors to initiate orders and prepaid services and fees.

The prepaid balances are summarized as follows:

NOTE 5 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepayments and other assets

are comprised of prepayments paid to vendors to initiate orders and prepaid services and fees.

The prepaid balances are summarized as

As of December 31,

1 unchanged sentence

Prepaid services and fees

Inventories 228,858 320,372

Other assets 42,757 38,769

Total prepaid expenses and other assets $ 2,775,682 $ 4,164,960

NOTE 6 - PROPERTY PLANT & EQUIPMENT, NET

Property Plant and Equipment balances are summarized as follows:

Deferred financing cost (See Note 10 - Debt)

Total prepaid expenses and other current assets

Inventories, consisting

primarily of finished goods, are stated at the lower of cost or net realizable value, with cost determined using the weighted-average

The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based

on its assessment of market conditions.

Write-downs and write-offs are charged to cost of goods sold at the realization of change in

Once written down, inventories are carried at this lower basis until sold or scrapped.

NOTE 6 – PROPERTY AND EQUIPMENT, NET

Property and Equipment, net balances are summarized as follows:

As of December 31,

Computers and technology equipment $ 294,322 $ 232,405

Computer and Technology Equipment

Furniture and fixtures

Leasehold Improvements

Vehicles 432,823 456,797

Software 1,087,569 685,580

Other Equipment

Accumulated depreciation

Total property plant and equipment, net $ 1,419,393 $ 1,307,146

Depreciation expense for the years ended December 31, 2023 and 2022 totaled $ 580,487 and $ 423,286 , respectively.

( 1,707,372 )

( 1,095,516 )

Total Property and equipment, net

The total depreciation expense for the years ended December 31,

2024 and 2023 was $ 744,722 and $ 580,487 , respectively.

NOTE 7 – INVESTMENTS

The components of investments are summarized as follows:

XS Financial Edyza Total

Balances, as of December 31, 2022 $ 2,559,307 $ — $ 2,559,307

Impairment ( 258,492 ) — ( 258,492 )

Paid in kind interest 25,657 – 25,657

Sale of investment ( 2,326,472 ) $ — ( 2,326,472 )

Balances, as of December 31, 2023 $ — $ — $ —

On October 30, 2021, the Company participated in a convertible note offering of Xtraction Services, Inc., a/k/a XS Financial Inc.

XSHLF) ("XSF"), a specialty finance company providing CAPEX financing solutions, including equipment leasing, to CEA companies in the United States.

On October 30, 2021,

the Company participated in a convertible note offering of Xtraction Services, Inc., a/k/a XS Financial Inc.

(“XSF”), a specialty finance company providing capital expenditure financing solutions, including equipment leasing, to CEA

companies in the United States.

The Company invested $ 2,500,000 of a total $ 43,500,000 raised by XSF.

Prior to any Nasdaq listing, the investment incurs 9.5 % interest payable, of which, 7.5 % is cash interest and 2.0 %.

Prior to any Nasdaq listing, the

investment incurs 9.5 % interest payable, of which, 7.5 % is cash interest and 2.0 %.

is interest paid in kind.

Subsequent to any Nasdaq listing, the investment incurs 8.0 % interest.

The debt matures on October 28, 2023, with a one-year option at the sole discretion of XSF to extend the maturity date.

In addition, the Company received 1.25 million warrants denominated in Canadian dollars ("C$") with a C$ 0.45 share price as subject to the warrant instrument.

Subsequent to any Nasdaq

listing, the investment incurs 8.0 % interest.

The debt matured on October 28, 2023, with a one-year option at the sole discretion

of XSF to extend the maturity date.

In addition, the Company received 1.25 million warrants denominated in Canadian dollars (“C$”)

with a C$ 0.45 share price as subject to the warrant instrument.

No value was attributed to the warrants at the time of the investment.

1 unchanged sentence

The Company received the $ 2.3 million in proceeds on August 30, 2023.

In connection with the agreement to sell the investment, the Company recorded an impairment loss of $ 0.3 million.

The Company has a strategic investment in Edyza, Inc.

("Edyza"), a hardware and software technology company that enables dense sensor networks in agriculture, healthcare, and other environments that require precise micro-climate monitoring.

The Company measures this investment at cost, less any impairment changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

During the third quarter of 2022, the Company fully impaired this investment.

The Company notes that the intent and ability to retain its investment for a period of time sufficient to allow for any anticipated recovery has passed, causing an "other than temporary loss." The Company will continue to monitor any future changes to this impairment and seek to recover any remaining value of its 19.5 % ownership.

The impairment recorded was $ 1.7 million.

In connection with the agreement to sell the investment, the

Company recorded an impairment loss of $ 0.3 million for the year ended December 31, 2023.

NOTE 8 – GOODWILL & INTANGIBLE ASSETS

The Company has recorded goodwill in conjunction with acquisitions it has completed.

The Company has recorded goodwill in conjunction with acquisitions

it has completed.

The goodwill balances as of December 31, 2024 and 2023 were $ 1,080,638 and $ 9,688,975 .

Goodwill is not amortized,

The Company did no t record any impairment charges related to goodwill for the years ended December 31, 2023 and 2022.

Intangible Assets Other Than Goodwill

Intangible assets as of December 31, 2023 and 2022 consisted of the following:

but tested for impairment annually.

The Company recorded a goodwill impairment charge of $ 8,608,337 for the year ended December 31,

Intangible Assets

Intangible assets as of

December 31, 2024 and 2023 consisted of the following:

As of December 31, 2024

Cost Accumulated Amortization Net Book Value

Finite-lived intangible assets:

Customer relationships $ 4,212,100 $ ( 1,004,749 ) $ 3,207,351

Trademarks and trade names

1 unchanged sentence

Total finite-lived intangible assets:

6,758,213 ( 2,391,997 ) 4,366,216

Indefinite-lived intangible assets:

Trade name 28,291 — 28,291

Total indefinite-lived intangible assets 28,291 — 28,291

Total intangible assets, net $ 6,786,504 $ ( 2,391,997 ) $ 4,394,507

As of December 31, 2023

Cost Accumulated Amortization Net Book Value

Finite-lived intangible assets:

Customer relationships

$ ( 1,004,743 )

Trademarks and trade names

3 unchanged sentences

Indefinite-lived intangible assets:

Trade name 28,291 — 28,291

Total indefinite-lived intangible assets

Total intangible assets, net $ 6,786,504 $ ( 1,335,817 ) $ 5,450,687

Amortization expense for intangible assets subject to amortization for the years ended December 31, 2023 and 2022 was $ 1,056,180 and $ 1,059,779 , respectively.

The estimated future amortization expense for intangible assets subject to amortization at December 31, 2023, is summarized below:

For the years ending December 31, Estimated Future

Amortization Expense

intangible assets, net

$ ( 2,391,997 )

Thereafter 270,495

The Company recorded an impairment charge of $ 2,673,742 related to

intangible assets for the year ended December 31, 2024.

Amortization expense for intangible assets subject to amortization

for the years ended December 31, 2024 and 2023 was $ 629,086 and $ 1,056,180 , respectively.

The estimated future amortization

expense for intangible assets subject to amortization at December 31, 2024, is summarized below:

Estimated Future

Year ending December 31,

Amortization Expense

Total estimated future amortization expense

NOTE 9 – ACCRUED EXPENSES

Accrued expenses are summarized as follows:

Accrued expenses are summarized

As of December 31,

1 unchanged sentence

Accrued wages and related expenses

Accrued 401(k) 66,642 262,599

Business development accrual

Accrued interest expense

Accrued 401(k)

Accrued sales tax payable

Total accrued expenses

Accrued sales tax payable is comprised of amounts due to various states and Canadian provinces for 2017 through 2023.

NOTE 10 – PROMISSORY NOTE AND DEBT

The table below shows outstanding promissory note and debt amounts as of December 31, 2023 and 2022.

As of December 31,

Accrued sales tax payable

is comprised of amounts due to various states and Canadian provinces for 2017 through 2023.

NOTE 10 – NOTES PAYABLE

The table below presents amounts due for notes payable as of December 31,

2024 and 2023.

Line of credit

DVO note 575,240 3,832,682

Grow Hill Note, net

Other financing agreements

Total $ 3,204,840 $ 3,832,682

Less current maturities ( 3,204,840 ) ( 3,832,682 )

Long Term — –

On December 13, 2023, UG Construction, Inc.

Less current portion

( 5,968,145 )

( 3,204,840 )

Notes payable, long-term

On December 13, 2023, UG

Construction, Inc.

d/b/a Emerald Construction Management, Inc.

(“UG Construction”), a wholly owned subsidiary of the Company, entered into an interest only asset based revolving Loan Agreement (the “Line of Credit”) with Gemini Finance Corp.

(“Lender”) pursuant to which Lender extended to UG Construction a secured line of credit in an amount not to exceed $ 10,000,000 , to be used to assist UG Construction and the Company with cash management.

Lender will consider requests for advances under the Line of Credit, which Lender may accept or reject in its discretion, until September 12, 2024 (the “Initial Term”), subject to an automatic extension for an additional nine-month term until May 12, 2025, provided that UG Construction is in compliance with all the terms of the applicable loan documents and Lender has not sent a written notice of non-renewal at least 60 days prior to expiration of the Initial Term.

The Line of Credit contains standard events of default and representations and warranties

by UG Construction and the Lender and the Company have entered into a Continuing Guaranty pursuant to which the Company will guarantee repayment of the loans associated with the Line of Credit (the “Guaranty Agreement”).

Loans made under the Line of Credit shall be evidenced by a Secured Promissory Note - Revolving issued by UG Construction to the Lender (the “Promissory Note”), and each draw on the Promissory Note shall be due and payable on or before 180 days after such draw is funded to UG Construction;

provided that, such draw is also subject to a mandatory pre-payment upon UG Construction’s receipt of payment for any invoice previously submitted and approved for financing by Lender.

Lender will receive a security interest in UG Construction’s Collateral (as defined in the “Security Agreement” entered into as part of the Line of Credit).

The Promissory Note earns interest at a monthly rate of one and seventy-five hundredths percent ( 1.75 %).

In connection with entering in the Line of Credit, the Company has agreed to issue to Bancroft Capital, LLC (the “Placement Agent”) cash and warrant compensation in two separate tranches, the first being earned upon closing of the Line of Credit and the remainder of which will be due if and when UG Construction draws more than $ 4,500,000 from the Line of Credit.

(“UG Construction”), a wholly owned subsidiary of the Company,

entered into an interest only asset based revolving Loan Agreement (the “Line of Credit”) with Gemini Finance Corp.

pursuant to which Lender extended to UG Construction a secured line of credit in an amount not to exceed $ 10,000,000 , to be used to assist

UG Construction and the Company with cash management.

Lender will consider requests for advances under the Line of Credit, which Lender

may accept or reject in its discretion, until September 12, 2024 (the “Initial Term”), subject to an automatic extension

for an additional nine-month term until May 12, 2025, provided that UG Construction is in compliance with all the terms of the applicable

loan documents and Lender has not sent a written notice of non-renewal at least 60 days prior to expiration of the Initial Term.

Line of Credit contains standard events of default and representations and warranties by UG Construction and the Lender and the Company

have entered into a Continuing Guaranty pursuant to which the Company will guarantee repayment of the loans associated with the Line

of Credit (the “Guaranty Agreement”).

Loans made under the Line

of Credit shall be evidenced by a Secured Promissory Note - Revolving issued by UG Construction to the Lender (the “Promissory

Note”), and each draw on the Promissory Note shall be due and payable on or before 180 days after such draw is funded to UG Construction;

provided that, such draw is also subject to a mandatory prepayment upon UG Construction’s receipt of payment for any invoice previously

submitted and approved for financing by Lender.

Lender will receive a security interest in UG Construction’s Collateral (as defined

in the “Security Agreement” entered into as part of the Line of Credit).

The Promissory Note earns interest at a monthly

rate of one and seventy-five hundredths percent ( 1.75 %).

In connection with entering

in the Line of Credit, the Company has agreed to issue to Bancroft Capital, LLC (the “Placement Agent”) cash and warrant

compensation in two separate tranches, the first being earned upon closing of the Line of Credit and the remainder of which will be due

if and when UG Construction draws more than $ 4,500,000 from the Line of Credit.

Both instances are detailed as follows:

At closing of the Line of Credit, the Placement Agent earned a cash fee of $ 200,000 .

In addition to the cash fee, the Company will issue to the Placement Agent or its designees, $ 200,000 worth of warrants (the “Placement Agent’s Warrants”) to purchase the Company’s common stock at a price per share equal to 110 % of the daily volume weighted average closing price of the Company’s common stock on the Nasdaq exchange for a period consisting of ten ( 10 ) consecutive trading days ending on and inclusive of the trading day of the Closing.

The Placement Agent’s Warrants will be exercisable at any time and from time to time, in whole or in part, during the four and a half-year period commencing six ( 6 ) months from the date of issuance.

The Placement Agent’s Warrants will provide for registration rights (including a one-time demand registration right and unlimited piggyback rights), cashless exercise and customary anti-dilution provisions (for stock dividends and splits) and anti-dilution protection (adjustment in the number and price of such warrants and the shares underlying such warrants) resulting from corporate events (which would include dividends, reorganizations, mergers, etc.).

If and when Emerald draws more than $ 4,500,000 from the Line of Credit, the Placement Agent will earn an additional cash fee of $ 200,000 , and an additional $ 200,000 worth of Placement Agent’s Warrants to purchase the Company’s common stock at a price per share equal to 110 % of the daily volume weighted average closing price of the Company’s common stock on the Nasdaq exchange for a period consisting of ten ( 10 ) consecutive trading days ending on and inclusive of the trading day of the date that the draws exceeding $ 4,500,000 were to take place.

As part of the Asset Purchase Agreement of DVO, a non-negotiable promissory note in the aggregate principal amount of $ 3,806,250 , payable to DVO was issued effective November 1, 2022 (the "DVO Promissory Note").

The principal amount, together with the simple interest accrued on the unpaid principal amount outstanding was to be paid by the Company on a quarterly basis for the first four consecutive quarters, with the first payment paid in January 2023, and the remaining three payments due ten days following the end of each subsequent fiscal quarter thereafter until the earlier of the end of the fourth full fiscal quarter following the closing date December 31, 2023 or the payment in full of all amounts due.

At closing of the

Line of Credit, the Placement Agent earned a cash fee of $ 200,000 .

In addition to the cash fee, the Company will issue to the Placement

Agent or its designees, $ 200,000 worth of warrants (the “Placement Agent’s Warrants”) to purchase the Company’s

common stock at a price per share equal to 110 % of the daily volume weighted average closing price of the Company’s common stock

on the Nasdaq exchange for a period consisting of ten ( 10 ) consecutive trading days ending on and inclusive of the trading day of the

The Placement Agent’s Warrants will be exercisable at any time and from time to time, in whole or in part, during the

four and a half-year period commencing six ( 6 ) months from the date of issuance.

The Placement Agent’s Warrants will provide for

registration rights (including a one-time demand registration right and unlimited piggyback rights), cashless exercise and customary

anti-dilution provisions (for stock dividends and splits) and anti-dilution protection (adjustment in the number and price of such warrants

and the shares underlying such warrants) resulting from corporate events (which would include dividends, reorganizations, mergers, etc.).

If and when Emerald

draws more than $ 4,500,000 from the Line of Credit, the Placement Agent will earn an additional cash fee of $ 200,000 , and an additional

$ 200,000 worth of Placement Agent’s Warrants to purchase the Company’s common stock at a price per share equal to 110 % of

the daily volume weighted average closing price of the Company’s common stock on the Nasdaq exchange for a period consisting of

ten ( 10 ) consecutive trading days ending on and inclusive of the trading day of the date that the draws exceeding $ 4,500,000 were to

As part of the Asset Purchase

Agreement of DVO, a non-negotiable promissory note in the aggregate principal amount of $ 3,806,250 , payable to DVO was issued effective

November 1, 2022 (the “DVO Promissory Note”).

The principal amount, together with the simple interest accrued on the unpaid

principal amount outstanding was to be paid by the Company on a quarterly basis for the first four consecutive quarters, with the first

payment paid in January 2023, and the remaining three payments due ten days following the end of each subsequent fiscal quarter thereafter

until the earlier of the end of the fourth full fiscal quarter following the closing date December 31, 2023 or the payment in full of

all amounts due.

In the third quarter of 2023, a portion of that quarter’s note payment was extended to the first quarter of 2024.

The DVO Promissory Note may be prepaid in whole or in part at any time without premium or penalty;

provided, that each payment shall be accompanied by payment of all unpaid costs, fees and expenses, if any, which are due plus all accrued and unpaid interest due as of the date of such prepayment.

The outstanding principal balance under the DVO Promissory Note shall bear simple interest at a variable rate per annum equal to the rate of interest most recently published by JP Morgan Chase & Co.

provided, that each payment shall

be accompanied by payment of all unpaid costs, fees and expenses, if any, which are due plus all accrued and unpaid interest due as of

the date of such prepayment.

The outstanding principal

balance under the DVO Promissory Note shall bear simple interest at a variable rate per annum equal to the rate of interest most recently

published by JP Morgan Chase & Co.

as the “prime rate” (the “Prime Rate”).

Initially, interest will accrue at the Prime Rate as of the date of the DVO Promissory Note.

The interest rate will be adjusted on a quarterly basis as of the first day of each full fiscal quarter following the first full fiscal quarter after the closing date to the then current Prime Rate.

In connection with the extension of the DVO Promissory Note payment to the first quarter of 2024, the interest rate was revised to a fixed rate of 10 %, with principal and interest to be paid on a weekly basis.

The other financing agreements relate to short-term financing of the Company's insurance policies and are at an average interest rate of 13.6 %.

NOTE 11 – OPERATING LEASE LIABILITIES AND COMMITMENTS AND CONTINGENCIES

The Company has seven operating office lease liabilities and one finance office lease liability with an imputed annual interest rate of 8 %.

Five of the leases were assigned to the Company in connection with the acquisitions of 2WR, Emerald, and DVO.

The remaining lease terms range from less than a year to 5 years, as of December 31, 2023.

The following is a summary of operating lease liabilities:

Initially, interest will accrue

at the Prime Rate as of the date of the DVO Promissory Note.

The interest rate will be adjusted on a quarterly basis as of the first

day of each full fiscal quarter following the first full fiscal quarter after the closing date to the then current Prime Rate.

In connection

with the extension of the DVO Promissory Note payment to the first quarter of 2024, the interest rate was revised to a fixed rate of

10 %, with principal and interest to be paid on a weekly basis.

On October 1, 2024, the Company,

entered into a loan with Grow Hill, LLC, a Washington limited liability company (“Grow Hill”).

The terms are as follows:

● Principal Amount:

$ 2,000,000 .

● Interest Rate:

15 % per annum, applied to the outstanding principal amount.

● Origination Fee:

$ 100,000 ( 5 % of the loan amount), considered as debt issuance costs under GAAP and amortized over the loan term.

● Repayment Terms:

Monthly payments of interest and principal as per the Promissory Note.

Ther term of the loan is 2 years.

● Optional Prepayment:

Allowed if the Grow Hill has received $ 150,000 or more in interest payments.

If less, the Company must pay the difference to reach $ 150,000 .

Prepayment requires at least one Business Day’s notice.

Required if the Company fails to meet the Receivable Ratio negative covenants

or events of default.

Collateral and Security

● Collateral:

Defined in the Security Agreement.

The Company grants a perfected security interest in the Collateral to the Grow

The loan became effective on October 1, 2025, when the Company issued Warrants to the Grow Hill for 160,000 shares of Borrower’s common stock at $ 2.50 /share, exercisable immediately and valid for five years .

● Affirmative

regular financial reports, compliance certificates, and notices of defaults or legal actions.

with all applicable laws and regulations, including tax payments.

with audits of accounts receivable (the Company pays audit fees unless an Event of Default

◾ Restrictions

on creating liens, incurring additional debt, or guaranteeing third-party obligations without

Grow Hill’s consent.

◾ Maintain a Receivable Ratio of at least 2.00 :

1.00 , calculated monthly.

Events of Default

failure to pay principal or interest, breach of covenants, misrepresentation, insolvency,

or legal challenges to the validity of the Loan Documents.

● Consequences:

Grow Hill may accelerate repayment, enforce security interests, or exercise other remedies.

The other financing agreements

relate to short-term financing of the Company’s insurance policies and are at an average interest rate of 13.6 %.

NOTE 11 – RIGHT OF USE ASSETS AND LIABILITIES

As of December 31, 2024 and 2023, the Company has seven operating

type leases with an imputed annual interest rate of 11 %.

Each of the Company’s operating type leases are utilized as office space

with one lease also including a warehouse for inventory.

Five of the leases were acquired by the Company in connection with the acquisitions

of 2WR, Emerald, and DVO.

The remaining lease terms range from less than one year to 5 years, as of December 31, 2024.

As of December 31,

2024 and 2023, right of use assets were $ 1,534,560 and $ 2,041,217 , respectively, and for the years ended December 31, 2024 and 2023

lease expense was $ 730,339 and $ 460,347 , respectively.

The following is a summary

of finance and operating lease liabilities :

As of December 31,

Operating lease liabilities related to right of use assets

Finance lease liability

Less current portion

Long term $ 1,380,362 $ 2,044,782

The following is a schedule showing total future minimum lease payments:

For the years ending December 31, Minimum

The following is a schedule

showing total future minimum lease payments for the Company’s operating leases:

For the years ending December 31,

Lease Payments

2024 $ 754,076

Thereafter 82,488

Total minimum lease payments

1 unchanged sentence

Net lease obligations

From time to time, the Company is involved in routine litigation that arises in the ordinary course of business.

There are no legal proceedings for which management believes the ultimate outcome would have a material adverse effect on the Company’s results of operations and cash flows.

On August 11, 2023, the Company entered into a settlement agreement (the “Settlement Agreement”) with Crest Ventures, LLC (“Crest”) and Andrew Telsey to settle all claims in the litigation filed in the District Court for Arapahoe County, Colorado, Case No.

Pursuant to the Settlement Agreement, the Company paid $ 1,500,000 to Crest on September 7, 2023.

In connection with this settlement, the Company recorded a loss in the second quarter of 2023 of $ 1,500,000 in accordance with GAAP related to loss contingencies.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

From time to time, the Company is involved in routine litigation that

arises in the ordinary course of business.

Other than below, there are no other legal proceedings for which management believes the ultimate

outcome would have a material adverse effect on the Company’s results of operations and cash flows.

Gemini Loan Agreement Amendment and Default

On December 13, 2023, our

wholly-owned subsidiary UG Construction, Inc.

d/b/a Emerald Construction Management, Inc.

(“UG Construction”) entered into

(i) an interest only asset based revolving loan agreement (the “Loan Agreement”) with Gemini Finance Corp.

pursuant to which Gemini extended to UG Construction a secured line of credit in an amount not to exceed $ 10,000,000 , to be used to assist

UG Construction and us with cash management, and (ii) a Secured Promissory Note - Revolving issued by UG Construction to Gemini (the “Promissory

Pursuant to the Promissory Note, each draw was due and payable on or before 180 days after such draw is funded to UG Construction,

subject to a mandatory pre-payment upon UG Construction’s receipt of payment for any invoice previously submitted and approved for

financing by Gemini.

On March 18, 2025, UG Construction

entered into an amendment to the Loan Agreement and Promissory Note and waiver with Gemini (the “Amendment”).

the Amendment, Gemini waived any potential or perceived events of default arising under certain circumstances, which events did not constitute

specified events of default under the Promissory Note or the Loan Agreement.

Pursuant to the Amendment, the Promissory Note was amended to provide

that (i) the term during which Gemini may consider advances under the Loan Agreement has been extended to January 1, 2026, and (ii) the

interest applied on the outstanding principal amount of the Promissory Note will accrue interest at an annual rate of 12 %, and all accrued

and unpaid interest shall be paid to Gemini on the first business day of each month for the prior month.

The Amendment also amended the

Loan Agreement to require monthly reporting of certain accounts receivable and to include a covenant that such accounts receivable equal

or exceed 125 % of the sum of the total amount drawn down under the Promissory Note, plus outstanding interest, as of the applicable measurement

In connection with the execution of the Amendment, we issued to Gemini, as an amendment fee, 150,000 shares of our common stock

On July 31, 2025, Gemini issued

a notice of default to UG Construction claiming that UG Construction was in default under the line of credit due to a failure to

submit receivables calculations and failing to maintain sufficient eligible accounts and to forward accounts receivable.

The notice indicated

that the remaining outstanding amount due under the line of credit of approximately $ 1.76 million was immediately due and payable with

default of 1 % per week accruing from the June 16, 2025 date of default claimed by Gemini, and that Gemini intended to pursue legal

action if full payment was not received by August 8, 2025.

On August 21, 2025, we received

a notification from Gemini stating that Gemini would proceed with a foreclosure and private sale of substantially all of the assets of

UG Construction in an Article 9 sale process, pursuant to Section 9601 et seq.

of the California Commercial Code (the “Asset Sale”).

The Asset Sale occurred on September 4, 2025, at which Gemini acquired the assets constituting the collateral under the line of credit

for $ 450,000 .

On August 29, 2025, Gemini

commenced a lawsuit captioned Gemini Finance Corp.

UG Construction, Inc.

, case number 25CV2259 W SBC, in the U.S.

District Court for the Southern District of California, which lawsuit (the “Lawsuit”) included us and certain of our officers

as defendants and pursuant to which Gemini claimed it was owed $ 1,486,189 (the “Claim Amount”).

On September 26, 2025, we

entered into a Settlement and Mutual General Release (the “Gemini Settlement Agreement”) with Gemini.

Pursuant to the terms

of the Gemini Settlement Agreement, among other things, we agreed to file a joint motion requesting an expedited fairness hearing under

Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), which motion was filed on September 30,

Following such fairness hearing, and subject to the satisfaction of all applicable conditions and requirements of Section 3(a)(10)

of the Securities Act, we agreed to issue to Gemini shares of our common stock that, upon sale by Gemini, would result in net proceeds

to Gemini equal to the Claim Amount, provided that Gemini shall at no time be issued shares if it would beneficially own more than 4.99%

of our common stock, and the aggregate number of shares issued to Gemini may not exceed 19.99 % of our outstanding common stock as of immediately

prior to the signing of the Gemini Settlement Agreement to the extent required by Nasdaq Listing Rule 5635.

Additionally, Gemini agreed

to use its best efforts to not sell common stock exceeding 10 % of our daily volume on any given trading day.

Upon the issuance of the

last tranche of shares under the Gemini Settlement Agreement, Gemini will dismiss the Lawsuit with prejudice.

The Gemini Settlement Agreement

also included a customary mutual release of claims by the parties.

The fairness hearing occurred on October 14, 2025.

Grow Hill Default

On October 1, 2024, we entered

into an asset-based term Loan Agreement with Grow Hill, LLC (“Grow Hill”) pursuant to which Grow Hill extended to us a secured

loan of $ 2,100,000 with an origination fee of $ 100,000 , which was added to the amount of the loan.

The loan is evidenced by a Secured

Promissory Note issued by us to Grow Hill.

Grow Hill received a security interest in certain of our assets pursuant to a security agreement

between us and Grow Hill (the “Security Agreement”), which does not include any assets of our subsidiaries.

On October 14, 2025, we received

service of process for a lawsuit filed by Grow Hill against us in the District Court for the City and County of Denver, Colorado (Case

2025CV33546) alleging breach of contract and fraud.

Pursuant the complaint, Grow Hill stated that we were in default under the Secured

Promissory Note due to a failure to timely make payments, and elected to accelerate all amounts due under the Secured Promissory Note,

including a default fee equal to 1 % of the outstanding principal amount.

We are currently investigating available options to resolve the

complaint and intends to vigorously defend the allegation of fraud.

J Brrothers Settlement

On August 8, 2025, we entered

into a Settlement and Release Agreement (the “Settlement Agreement”) with J Brrothers LLC (“J Brrothers”) and

Herb-a-More LLC relating to a dispute arising from amounts due for certain heating, ventilation and air conditioning equipment.

to the terms of the Settlement Agreement, among other things, we issued a promissory note to J Brrothers with an original principal amount

of $ 395,556 and issued 150,000 unregistered shares of our common stock to J Brrothers.

The note accrues simple interest at an annual rate

of 12 % and has a maturity date of March 18, 2026.

The note must be repaid in monthly installments over a period of eight months, with

the first seven payments being $ 50,000 per month and the final monthly payment being $ 64,047 .

Any remaining principal and accrued but

unpaid interest will become due and payable on the maturity date, and the note may be prepaid without penalty.

The note includes customary

representations and warranties, customary events of default and a 17 % default interest rate.

2WR of Georgia Sale

On August 27, 2025, certain

of our subsidiaries entered into a Stock and Asset Purchase Agreement (the “2WR Purchase Agreement”) with 2WR Holdco, LLC

(the “Buyer”).

Pursuant to the 2WR Purchase Agreement, the Buyer acquired all of the outstanding shares of stock of 2WR of

Georgia, Inc.

and certain assets of our other subsidiaries relating to those entities’ business of providing commercial, industrial

and municipal architectural and construction administration services for projects not involving CEA.

The purchase price paid by the Buyer

consisted of $ 2.0 million in cash, offset by a previous deposit of $ 500,000 and by any assumed indebtedness.

MJ’s Market, Inc

MJ’s Market, Inc.

Urban-Gro, Inc.

et al, pending in the Suffolk

County Superior Court in Massachusetts as Civil Action No.

2384-cv-02794.

The original complaint, filed by MJ’s Market, Inc, alleged

that the Corporation prepared deign drawings for the plaintiff and subsequently sold those drawings to a competitor.

The original complaint

asserted claims for Breach of Contract;

violation of M.G.L.

Breach of the Covenant of Good Faith and Fair Dealing;

Trademark Infringement;

and Interference with Contractual Relations against the Corporation.

An amended complaint has been filed which names 2WR of Colorado,

Inc., which is characterized as a subsidiary or affiliate of the Corporation, in place of the Corporation.

The lawsuit is ongoing.

NOTE 13 – RISKS AND UNCERTAINTIES

Concentration Risk

The tables below show customers who account for 10% or more of the Company’s total revenues and 10% or more of the Company’s accounts receivable for the periods presented:

The tables below show customers

who account for 10% or more of the Company’s total revenues and 10% or more of the Company’s accounts receivable for the

periods presented:

Customers exceeding 10% of revenue

For the Years Ended

Company Customer Number

C000001462 * 10 %

For the Year Ended

Customers Exceeding 10% of Revenue/$:

C000001462 21 % *

1 unchanged sentence

C000002463 * 15 %

*Amounts less than 10%

Customers exceeding 10% of accounts receivable

As of December 31,

Company Customer Number

C000002151 * 10 %

C000002187 57 % 24 %

*Amounts less than 10%

The table below shows vendors who account for 10% or more of the Company’s total purchases and 10% or more of the Company’s accounts payable for the periods presented:

For the Year Ended

Customers exceeding 10 % of accounts receivable

The table below shows vendors

who account for 10% or more of the Company’s total purchases and 10% or more of the Company’s accounts payable for the periods

Vendors exceeding 10% of purchases

1 unchanged sentence

Company Vendor Number

V000001029 * 13 %

V000002275 11 % *

* Amounts less than 10%

2 unchanged sentences

Company Vendor Number

V000002275 13 % *

V000001910 * 11 %

* Amounts less than 10%

Foreign Exchange Risk

Although our revenues and expenses are expected to be predominantly denominated in United States dollars, we may be exposed to currency exchange fluctuations.

Although our revenues and

expenses are expected to be predominantly denominated in United States dollars, we may be exposed to currency exchange fluctuations.

Recent events in the global financial markets have been coupled with increased volatility in the currency markets.

Fluctuations in the exchange rate between the U.S.

dollar, the Canadian dollar, the Euro, and the currency of other regions in which we may operate may have a material adverse effect on our business, financial condition and operating results.

We may, in the future, establish a program to hedge a portion of our foreign currency exposure with the objective of minimizing the impact of adverse foreign currency exchange movements.

Fluctuations in the

exchange rate between the U.S.

dollar, the Canadian dollar, the Euro, and the currency of other regions in which we may operate may have

a material adverse effect on our business, financial condition and operating results.

We may, in the future, establish a program to hedge

a portion of our foreign currency exposure with the objective of minimizing the impact of adverse foreign currency exchange movements.

However, even if we develop a hedging program, it may not mitigate currency risks.

NOTE 14 – STOCK-BASED COMPENSATION

Stock-based compensation expense for the years ended December 31, 2023 and 2022 was $ 2,199,046 and $ 2,571,785 , respectively based on the vesting schedule of the stock grants and options.

During the year ended December 31, 2023, 510,720 shares vested and were issued to employees and directors.

During the year ended December 31, 2022, 62,172 shares vested and were issued to employees and directors.

Stock-based compensation expense for the years ended December 31,

2024 and 2023 was $ 1,426,877 and $ 2,199,046 , respectively based on the vesting schedule of the RSUs and Stock Options (“Options”).

During the year ended December 31, 2024, 477,574 RSUs vested and were issued to employees and directors.

During the year ended December 31,

2023, 397,210 RSUs vested and were issued to employees and directors.

No cash flow effects are anticipated for stock grants.

The Company has adopted the 2021 Omnibus Stock Incentive Plan, as amended (the “Omnibus Incentive Plan”), which provides for the issuance of incentive stock options, stock grants and stock-based awards to employees, directors, and consultants of the Company to reward and attract employees and compensate the Company’s Board of Directors (the “Board”) and vendors when applicable.

The Company’s shareholders

approved the 2021 Omnibus Stock Incentive Plan, as amended (the “Omnibus Incentive Plan”), which provides for the issuance

of incentive stock options, stock grants and stock-based awards to employees, directors, and consultants of the Company to reward and

attract employees and compensate the Company’s Board of Directors (the “Board”) and vendors when applicable, up to

an aggregate 1,100,000 authorized shares of common stock.

In 2023, an additional $ 1,200,000 shares were authorized by the shareholders.

The Omnibus Incentive Plan is administered by the Company’s Board.

Grants of RSUs under the Omnibus Incentive Plan are valued at no less than the market price of the stock on the date of grant.

The fair value of the options is calculated using the Black-Scholes pricing model based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the options, risk-free interest rate and expected volatility of the price of the underlying common stock of 100 %.

There is a moderate degree of subjectivity involved when estimating the value of stock options with the Black-Scholes option pricing model as the assumptions used are moderately judgmental.

Stock grants and stock options are sometimes offered as part of an

employment offer package, to ensure continuity of service or as a reward for performance.

Stock grants and stock options typically require a 1 to 3 year period of continued employment or service performance before the stock grant of RSUs or stock option vests.

The following schedule shows grants of RSU activity for the years ended December 31, 2023 and 2022:

Grants of RSUs under the Omnibus Incentive Plan are valued at

no less than the market price of the stock on the date of grant.

The fair value of the options is calculated using the Black-Scholes

pricing model based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual

term of the options, risk-free interest rate and expected volatility of the price of the underlying common stock of 100 %.

moderate degree of subjectivity involved when estimating the value of stock options with the Black-Scholes option pricing model as the

assumptions used are moderately judgmental.

Stock grants and stock options are sometimes offered as part of an employment offer package,

to ensure continuity of service or as a reward for performance.

Stock grants and stock options typically require a 1 to 3 year period

of continued employment or service performance before the stock grant of RSUs or stock option vests.

The following schedule shows

grants of RSU activity for the years ended December 31, 2024 and 2023:

Grants unissued as of December 31, 2022

1 unchanged sentence

Forfeiture/cancelled

Grants vested ( 62,172 )

Grants vested and issued

Grants vested unissued at year-end

Grants unissued as of December 31, 2023

1 unchanged sentence

Forfeiture/Cancelled

Grants vested ( 510,720 )

Grants vested and issued

Grants unissued as of December 31, 2024

The following table summarizes grants of RSU vesting periods:

Shares Unrecognized Stock

Compensation Expense As of December 31,

436,210 $ 890,461 2024

158,059 182,418 2025

594,269 $ 1,072,879

The following schedules show stock option activity for the years ended December 31, 2023 and 2022:

Weighted Average Remaining

Weighted Average

The following table summarizes

grants of RSU vesting periods:

Unrecognized Stock

Compensation Expense

As of December 31,

The following schedules show

stock option activity for the years ended December 31, 2024 and 2023:

Stock options outstanding as of December 31, 2022 601,427 5.49 $ 6.84

Issued 76,246 9.00 $ 10.48

Exercised ( 4,555 ) 0.00 $ 6.00

Forfeited ( 99,598 ) 0.00 $ 7.01

1 unchanged sentence

Stock options exercisable at December 31, 2023 471,288 0.00 $ 6.70

Weighted Average Remaining

Weighted Average

5 unchanged sentences

Stock options exercisable at December 31, 2024 454,452 7.85 $ 6.82

The following table summarizes stock option vesting periods under the Incentive Plans:

Shares Unrecognized Stock

Compensation Expense As of December 31,

6,745 $ 29,372 2024

6,745 $ 29,372

The aggregate intrinsic value of the stock options outstanding and exercisable at December 31, 2023 is $ 0 .

NOTE 14 – STOCKHOLDERS’ EQUITY

On February 17, 2021, we completed an offering of 6,210,000 shares of our common stock, inclusive of the underwriters full over allotment, at $ 10.00 per share for total gross offering proceeds of $ 62,100,000 .

In connection with this offering, we received approval to list our common stock on the Nasdaq Capital Market under the symbol "UGRO."

On May 24, 2021, we announced that the Board authorized a stock repurchase program to purchase up to $ 5.0 million of the currently outstanding shares of the Company’s common stock, over a period of 12 months through open market purchases, in compliance with Rule 10b-18 under the Securities Exchange Act of 1934.

On January 18, 2022, the Board authorized a $ 2.0 million increase to the stock repurchase program, to a total of $ 7.0 million.

On February 2, 2022, the Board authorized an additional $ 1.5 million increase to the stock repurchase, to a total of $ 8.5 million.

On September 12, 2022, the Board authorized an additional $ 2 million increase to the stock repurchase, for a total of $ 10.5 million.

During the twelve months ended December 31, 2023 the Company did no t repurchase shares of common stock.

During the twelve months ended December 31, 2022, the Company repurchased 594,918 shares of common stock at an average price per share of $ 7.33 , for a total price of $ 4.4 million.

In total, the Company has repurchased 1,099,833 shares of common stock at an average price per share of $ 8.25 for a total of $ 9.1 million, under this program.

As of December 31, 2023, we have $ 1.4 million remaining under the repurchase program.

In February 2021, the Company repurchased 350,000 shares of common stock with an average price per share of $ 8.50 , for a total of $ 3.0 million, outside of any stock repurchase or publicly announced program.

The following table summarizes stock option vesting

periods under the Incentive Plans:

Unrecognized Stock

Compensation Expense

As of December 31,

The aggregate intrinsic value

of the stock options outstanding and exercisable at December 31, 2024 is $ 0 .

NOTE 15 – SHAREHOLDERS’ EQUITY

The Company is authorized

to issue 30,000,000 shares of common stock at $ 0.001 par value.

The holders of the Company’s common stock are entitled

to one vote for each share held.

At December 31, 2024 and 2023, there were 14,071,390 and 12,072,836 shares of

common stock outstanding, respectively.

Preferred stock

The Company is authorized to issue 3,000,000 shares

of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s

Board of Directors.

The preferred stock has a par value of $ 0.10 .

As of December 31, 2024 and 2023, there were no shares of preferred

stock outstanding.

Treasury Stock

For the years ended December 31,

2024 and 2023, the Company did not purchase any treasury stock.

NOTE 16 – INCOME TAXES

The Company accounts for income taxes in accordance with the asset and liability method prescribed in ASC 740, "Accounting for Income Taxes." The Company has adopted the provisions of ASC 740-10-25, which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns.

ASC 740-10-25 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities.

Tax positions that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement.

The Company had no tax positions relating to open income tax returns that were considered to be uncertain.

The Company has experienced cumulative losses for both book and tax purposes since inception.

The potential future recovery of any tax assets that the Company may be entitled to due to these accumulated losses is uncertain and any tax assets that that the Company may be entitled to have been fully reserved based on management’s current estimates.

Management intends to continue maintaining a full valuation allowance on the Company’s deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

The deferred income tax benefit for the year ended December 31, 2023 relates to the reduction in the deferred tax liability associated with the amortization of the intangible assets from the acquisitions of the DVO, Emerald and 2WR Entities.

As of December 31, 2023, the Company had approximately $ 35,479,242 of operating loss carryforwards for United States tax purposes, expiring as follows:

• $ 2,182,354 expiring in 2037

• $ 33,296,888 with no expiration

As of December 31, 2022, the Company had approximately $ 19,346,059 of operating loss carryforwards for United States tax

purposes, expiring as follows:

• $ 2,182,354 expiring in 2037

• $ 17,163,705 with no expiration

Realization of operating loss carryforwards to offset future operating income for tax purposes are subject to various limitations including change of ownership and current year taxable income percentage limitations.

The Company accounts for

income taxes in accordance with the asset and liability method prescribed in ASC 740, “Accounting for Income Taxes.” The

Company has adopted the provisions of ASC 740-10-25, which provides recognition criteria and a related measurement model for uncertain

tax positions taken or expected to be taken in income tax returns.

ASC 740-10-25 requires that a position taken or expected to be taken

in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination

by tax authorities.

Tax positions that meet the more likely than not threshold are then measured using a probability weighted approach

recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement.

had no tax positions relating to open income tax returns that were considered to be uncertain.

The Company has experienced

cumulative losses for both book and tax purposes since inception.

The potential future recovery of any tax assets that the Company may

be entitled to due to these accumulated losses is uncertain and any tax assets that that the Company may be entitled to have been fully

reserved based on management’s current estimates.

Management intends to continue maintaining a full valuation allowance on the Company’s

deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

The income tax benefit for

the years ended December 31, 2024 and 2023 are as follows (in thousands):

Total income tax expense (benefit)

A reconciliation between the expected income tax

provision at the federal statutory tax rate and the reported income tax provision for the periods ended are approximately as follows:

Statutory Federal income tax rate

State income taxes, net of federal benefit

Research and development tax credits

Change in valuation allowance

Change in Tax Rate

Permanent differences

Goodwill Impairment

The tax effects of significant items comprising

the Company’s deferred taxes as of December 31, 2024 and 2023 are as follows (in thousands):

Deferred tax assets:

Federal, state and foreign NOL carryover

Lease Liabilities

Bad Debts and Other Reserves

Share-based Compensation

Interest Expense

Total deferred tax assets

Valuation Allowance

Net deferred tax assets

Deferred tax liabilities:

Intangible Assets

Net deferred tax asset (liability)

At December 31, 2024, the Company had $ 58.0 million

of Federal net operating loss which are set to expire beginning in 2037.

The Internal Revenue Code contains provisions that may limit

the net operating loss carryovers available to be used in any year if certain events occur, including significant changes in ownership

Below is a table showing the gross net operating

loss carryovers available at December 31, 2024 and their respective expiration:

Federal Net Operating Losses with expiration

Federal Net Operating Losses with indefinite life

Total Federal Net Operating Losses

Various State Net Operating Losses

Canada Net Operating Losses

Netherlands Net Operating Losses

In assessing the realizability

of its deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets

will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during

the periods in which those temporary differences become deductible.

The Company considers the scheduled reversal of deferred tax liabilities,

projected future taxable income, and tax planning strategies in making this assessment.

As the Company evaluate the reversal of deferred

tax liabilities, projections of future taxable income over the periods in which the deferred tax assets are deductible, and after consideration

of the history of operating losses, the Company does not believe it is more likely than not that it will realize the benefits of net

deferred tax assets and, accordingly, has established a valuation allowance on the net deferred tax assets.

The valuation allowance increased

by $ 8.0 million during 2024.

of December 31, 2024 and 2023, the company has not recorded any unrecognized tax benefits related to uncertain tax positions.

does not believe it is reasonably possible that its unrecognized tax benefits will significantly change in the next twelve months.

The Company monitors proposed

and issued tax law, regulations, and cases to determine the potential impact of uncertain income tax positions.

At December 31, 2024,

the Company had not identified any potential subsequent events that would have a material impact on unrecognized income tax benefits within

the next twelve months.

Federal and State tax returns

are open for examination for the tax years beginning December 31, 2017 for three years and four years from the date of utilization of

any net loss carryforwards.

Realization of operating

loss carryforwards to offset future operating income for tax purposes are subject to various limitations including change of ownership

and current year taxable income percentage limitations.

The Company has no credit carryforwards for tax purposes.

The Company’s primary filing jurisdictions are the United States, Canada, and the Netherlands.

Due to the Company’s net operating loss carryforwards, the Company’s income tax returns remain subject to examination by federal, foreign and most state taxing authorities for all tax years.

NOTE 16 – BUSINESS DEVELOPMENT

During 2021, the Company purchased lights from one of its international vendors to fulfill an order for a major customer.

Subsequent to the sale, delivery and installation of the lights, the customer noted the lights were not performing as the manufacturer had stipulated.

The Company performed tests of the lights and confirmed the performance metrics did not meet the manufacturer’s specifications.

The Company worked with the customer to determine a lighting solution of replacement lights, sourced from the vendor, that would meet their needs.

The customer has been a key customer to the Company and the Company expects to continue to do significant business with the customer in the future.

In order to immediately satisfy the customer in this matter, the Company agreed to supply the replacement lighting solution to the customer at the Company’s expense while the Company continues to work with the vendor to resolve the original defective lighting issue, including, claims for reimbursement of the expense.

In total, the Company delivered $ 3.3 million of replacement lighting equipment to the customer and recorded the full amount as a business development expense during the year ended December 31, 2022.

The Company’s primary

filing jurisdictions are the United States, Canada, and the Netherlands.

Due to the Company’s net operating loss carryforwards,

the Company’s income tax returns remain subject to examination by federal, foreign and most state taxing authorities for all tax

NOTE 17 – WARRANTS

The following table shows warrant activity for the years ended December 31, 2023 and 2022:

Number of shares Weighted Average Exercise Price

The following table shows

warrant activity for the years ended December 31, 2024 and 2023:

Warrants outstanding as of December 31, 2022

Exercised ( 18,196 ) $ 6.00

Terminated – cashless exercise ( 44,393 ) $ 6.00

Expired 0 $ —

Issued for line of credit

Expired loan extension

Warrants outstanding as of December 31, 2023

Warrants exercisable as of December 31, 2023

Number of shares Weighted Average Exercise Price

Warrants outstanding as of December 31, 2023

Exercised 0 $ —

Terminated 0 $ —

Issued for line of credit 175,531 $ 1.25

Expired loan extension ( 1,000 ) $ 6.00

Terminated/Expired

Warrants outstanding as of December 31, 2024

Warrants exercisable as of December 31, 2024

The fair value of the warrants is calculated using the Black-Scholes pricing model based on the estimated market value of the underlying common stock at the valuation measurement date, the contractual term of the options, the risk-free interest rate at the date of grant and expected volatility of the price of the underlying common stock of 100 %.

There is a moderate degree of subjectivity involved when estimating the value of warrants with the Black-Scholes option pricing model as the assumptions used are moderately judgmental.

The weighted-average life of the warrants is 4.04 years.

The aggregate intrinsic value of the warrants outstanding and exercisable at December 31, 2023 is $ 0 .

The fair value of the warrants

is calculated using the Black-Scholes pricing model based on the estimated market value of the underlying common stock at the valuation

measurement date, the contractual term of the options, the risk-free interest rate at the date of grant and expected volatility of the

price of the underlying common stock of 100 %.

There is a moderate degree of subjectivity involved when estimating the value of warrants

with the Black-Scholes option pricing model as the assumptions used are moderately judgmental.

NOTE 18 – SEGMENTS

An operating segment is defined

as a component of a reporting entity that engages in business activities from which it recognizes revenues and incurs expenses with discrete

financial information available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) of the operating

The CODM utilizes this financial information to decide how to allocate resources to, and in assessing performance of, the operating

Management evaluates segment performance primarily based on operating segment gross profit.

The Company has identified

the following operating segments related to fiscal years 2024 and 2023:

● Equipment systems - Operating segment

that acts as an experienced vendor providing value-added reselling to clients when selling

vetted best-in-call commercial horticulture lighting solutions, rolling and automated container

benching systems, specialty fans, fertigation/irrigation systems, environmental control systems,

and microbial mitigation and odor reduction systems.

● Services - Operating segment that

generates revenue by providing clients with design-build service offerings that include architectural,

interior, and engineering design, construction management, as well as services for the operational

stages of the facility.

The Company’s in-house architectural, interior design, engineering,

construction and cultivation design services integrate design with pre-construction services

and thereby reduce project schedule and capital investments.

● Construction design-build - Operating

segment that engages as a general contractor to provide all the additional necessary parts

to deliver clients’ projects, from the initial estimate and bid process, to subcontractor

selection, and management of all construction details.

In addition to the operating

segments identified above, the Company recognizes other revenues and incurs costs at the corporate level where it develops and oversees

the implementation of company-wide strategic initiatives and provides support to our operating segments by centralizing certain administrative

Corporate management is responsible for, among other things:

evaluating and selecting the geographic markets in which we operate,

consistent with our overall business strategy;

making major personnel decisions related to employee compensation and benefits;

and monitoring

the financial and operational performance of the Company’s operating segments.

Corporate costs include general and administrative

expenses related to operating our corporate headquarters.

The Company’s operating

segments follow the same accounting policies used for our consolidated financial statements as described in Note 1 – Summary of

Significant Accounting Policies.

The results of each operating segment are not necessarily indicative of the results that would have

occurred had the operating segment been an independent, stand-alone entity during the periods presented, nor are they indicative of the

results to be expected in future periods.

The following tables present

financial information relating to our operating segments for the fiscal years ended December 31, 2024 and 2023:

Year Ended December 31, 2024

Corporate/ Other

Cost of revenues

$ ( 2,177,862 )

Gross profit %

Intangible asset amortization

Income (Loss) before income taxes

$ ( 10,570,814 )

$ ( 7,544,541 )

$ ( 17,102,560 )

$ ( 1,307,616 )

$ ( 36,525,531 )

Year Ended December 31, 2023

Corporate/ Other

Cost of revenues

Gross profit %

Intangible asset amortization

Income (Loss) before income taxes

$ ( 3,360,659 )

$ ( 1,414,727 )

$ ( 177,618 )

$ ( 20,390,448 )

$ ( 25,343,452 )

Total assets (liabilities)

$ ( 2,202,231 )

NOTE 19 – SUBSEQUENT EVENTS

Settlement of Pullar Lawsuit

On May 5, 2022, Robert Pullar

(“Pullar”) filed a lawsuit against the Company and Bradley Nattrass, in his capacity as the Company’s CEO, relating

to a prior settlement agreement the Company had entered into with Pullar.

On January 31, 2025, the parties entered into a settlement

agreement, without any admission of liability or wrongdoing, to settle all claims associated with the litigation in exchange for a cash

payment by the Company to Pullar of $ 250,000 and an issuance of a warrant to purchase up to 75,000 shares of the Company’s common

stock at an exercise price per share of $ 1.00 .

Nasdaq Deficiencies

The Company has received

the following communications from The Nasdaq Stock Market LLC (“Nasdaq”) and, where required, responded as indicated:

● January 29, 2025

– Nasdaq granted the Company an extension to regain compliance with Nasdaq Listing

Rule 5250(c)(1) (the “Filing Requirement”) by February 18, 2025.

regained compliance with the Filing Requirement Rule on February 18, 2025.

● February 24, 2025:

o The Listing Qualifications Department of Nasdaq notified the Company that, for the last 30 consecutive business days, the bid price for the Company’s common stock had closed at a price of below $ 1.00 per share, which is the minimum closing price required to maintain continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”).

The notice had no immediate effect on the listing of the Company’s common stock on Nasdaq.

In accordance with Nasdaq Listing Rule 58100(c)(3)(H), the Company had 180 calendar days to regain compliance with the Minimum Bid Requirement.

To regain compliance with the Minimum Bid Requirement, the closing bid price of the Company’s common stock must be at least $ 1.00 per share for a minimum of the consecutive trading days during this 180 -day compliance period, unless the Nasdaq Staff (the “Staff”) exercises its discretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(H).

The time period for the Company to regain compliance with the Minimum Bid Requirement expired on August 25, 2025.

In the event that the Company does not regain compliance within the 180-day compliance period, the Company may be eligible for an additional 180 calendar day compliance period.

To qualify, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for Nasdaq, with the exception of the Minimum Bid Requirement, and provide written notice to the Staff of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary.

However, if it appears to the Staff that the Company will not be able to cure the deficiency, or if the Company does not meet the other listing standards, the Staff could provide notice that the Common Stock will become subject to delisting.

In the event the Company receives notice that the Common Stock is being delisted, the Nasdaq Listing Rules permit the Company to appeal any such delisting determination by the Staff to a Hearings Panel.

o The Listing Qualifications Department of Nasdaq notified the Company that, because the stockholder’s equity of the Company was below $ 2.5 million as reported on the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024, the Company no longer meet the minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market under Nasdaq Rule 5550(b)(1), requiring a minimum stockholders’ equity of $ 2.5 million (the “Minimum Stockholders’ Equity Requirement”).

The notice of the Company’s failure to meet the Minimum Stockholders’ Equity Requirement had no immediate effect on the listing of the Common Stock on Nasdaq.

In accordance with Nasdaq Marketplace Rule 5810(c)(2)(C), the Company had 45 calendar days, or until April 10, 2025, to submit a plan to regain compliance.

If the plan was accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the original notice to evidence compliance, or until August 25, 2025, to regain compliance with the Minimum Stockholders’ Equity Requirement.

In the event the plan was not accepted by Nasdaq, or in the event the plan was accepted by Nasdaq and the 180-day extension period was granted, but the Company fails to regain compliance within such plan period, the Company would have the right to a hearing before a Hearings Panel.

The hearing request would stay any suspension or delisting action pending the conclusion of the hearing process and the expiration of any additional extension period granted by the Hearings Panel following the hearing.

● April 16, 2025

– Nasdaq sent the Company a notice (the “April 16 Notice”) stating that

because the Company had not yet filed its Annual Report on Form 10-K for the fiscal quarter

ended December 31, 2024 (the “Form 10-K”), the Company was no longer in compliance

with Nasdaq Listing Rule 5250(c)(1).

Nasdaq Listing Rule 5250(c)(1) requires listed companies

to timely file all required periodic financial reports with the Securities and Exchange Commission.

The April 16 Notice stated that the Company had 60 calendar days from April 16, 2025, or

until June 16, 2025, to submit to Nasdaq a plan to regain compliance with the Nasdaq Listing

The Company intended to file the Form 10-K as soon as practicable and, if necessary,

to submit a plan with Nasdaq to regain compliance.

If Nasdaq accepted the Company’s

plan, then Nasdaq may, at its discretion, grant the Company up to 180 days from the prescribed

due date for filing the Form 10-K, or until October 13, 2025, to regain compliance.

did not accept the Company’s plan, then the Company had an opportunity to appeal that

decision to a Nasdaq Hearings Panel.

The April 16 Notice had no immediate effect on the listing

of the Company’s common stock on The Nasdaq Capital Market.

● May 21, 2025 –

Nasdaq sent the Company a notice (the “May 21 Notice”) stating that because the

Company had not yet filed its Quarterly Report on Form 10-Q for the fiscal quarter ended

March 31, 2025 (the “March 31 Form 10-Q”) or its Annual Report on Form 10-K for

the fiscal year ended December 31, 2024 (the “Form 10-K”), the Company continues

to be out of compliance with Nasdaq Listing Rule 5250(c)(1).

Nasdaq Listing Rule 5250(c)(1)

requires listed companies to timely file all required periodic financial reports with the

Securities and Exchange Commission.

The May 21 Notice stated that the Company had 60 calendar

days from April 16, 2025, or until June 16, 2025, to submit to Nasdaq a plan to regain compliance

with the Nasdaq Listing Rules.

The Company intended to file the Form 10-K as soon as practicable

and, if necessary, to submit a plan with Nasdaq to regain compliance.

If Nasdaq accepted

the Company’s plan, then Nasdaq may, at its discretion, grant the Company up to 180

days from the prescribed due date for filing the Form 10-K, or until October 13, 2025, to

regain compliance.

If Nasdaq did not accept the Company’s plan, then the Company had

the opportunity to appeal that decision to a Nasdaq Hearings Panel.

The May 21 Notice had

no immediate effect on the listing of the Company’s common stock on The Nasdaq Capital

● August 18, 2025 – Nasdaq sent the Company a determination letter (the “August 18 Determination”) stating that Nasdaq had determined that the Company did not file the Form 10-K and the March 31 Form 10-Q by August 15, 2025, the date required for the delinquent filings by an exception previously received from Nasdaq staff.

The August 18 Determination stated that, as a result, unless that Company timely requests an appeal, the trading of the Company’s common stock (the “Common Stock”) would be suspended at the opening of business on August 27, 2025 and (iii) a Form 25-NSE will be filed with the SEC, which would remove the Company’s securities from listing and registration on Nasdaq.

The August 18 Determination also stated that the Company was not in compliance (i) with Listing Rule 5250(c)(1) due to the Company’s delay in filing its Quarterly Report on Form 10-Q for the period ended June 30, 2025, and (ii) with Listing Rule 5550(b)(1), which requires the Company to maintain minimum stockholders’ equity of $ 2.5 million.

As previously reported, on February 24, 2025, Nasdaq notified the Company that it was not in compliance with Listing Rule 5550(b)(1) due to having stockholders’ equity of less than $ 2.5 million.

The Determination informed the Company that it may appeal the decision to a Hearings Panel (the “Panel”).

If the Company chose to appeal, the request must be received by Nasdaq no later than 4:00 p.m.

Eastern Time on August 25, 2025.

The Company requested a hearing before the Panel and a preliminary date of October 7, 2025 was set for the hearing.

On October 7, 2025, the Company announced that the hearing was postponed to October 14, 2025.

This request stayed the suspension of the Company’s Common Stock for a period of 15 days from the date of the request.

In connection with this request, the Company also requested a stay of the suspension pending the hearing (the “Additional Stay”).

● August 28, 2025 – Nasdaq sent the Company a determination letter (the “August 28 Determination”) stating that Nasdaq had determined that the Company did not regain compliance with the Minimum Bid Requirement by August 25, 2025.

The August 28 Determination stated that the failure to comply with the Minimum Bid Requirement during the compliance period would serve as an additional basis for delisting the Company’s securities from the Nasdaq Capital Market and would be considered by a Hearings Panel (the “Panel”), in addition to the Company’s failure to comply with (i) Nasdaq Listing Rule 5250(c)(1) due to the Company’s delay in filing its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and its Quarterly Reports on Form 10-Q for the periods ended March 31, June 30, 2025 (the “Timely Filing Requirement”), and (ii) Nasdaq Listing Rule 5550(b)(1), which requires the Company to maintain minimum stockholders’ equity of $ 2.5 million (the “Stockholders’ Equity Requirement”).

● October 14, 2025

– The Company presented to the Panel.

● October 30, 2025

– Nasdaq sent the Company a notice notifying the Company that the Panel had determined

to grant the Company’s request to continue its listing on The Nasdaq Capital Market,

subject to certain conditions.

Specifically, the Panel conditioned the Company’s continued

listing on the Company regaining compliance with the Timely Filing Requirement and the Stockholders’

Equity Requirement on or before December 31, 2025 and regaining compliance with the Bid Price

Rule on or before January 28, 2026.

During the exception period, the Company is required

to provide prompt notification to the Panel of any significant event that may affect the

Company’s compliance with Nasdaq requirements.

Any documentation evidencing the Company’s

compliance will be subject to review by the Panel, which may, in its discretion, request

additional information before determining whether the Company has regained compliance.

● November 18, 2025 – Nasdaq sent the Company a notice (the “November

18 Notice”) stating that because the Company had not yet filed its Quarterly Report on Form 10-Q for the fiscal quarter ended September

30, 2025 (the “September 30 Form 10-Q”) or its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the

“Form 10-K”), the Company continues to be out of compliance with Nasdaq Listing Rule 5250(c)(1).

Nasdaq Listing Rule 5250(c)(1)

requires listed companies to timely file all required periodic financial reports with the Securities and Exchange Commission.

● On January 6, 2026, the Company received a determination

letter (the “January 6, 2026 Determination”) from Nasdaq stating that because the Company did not hold an annual meeting of

stockholders within twelve months from the Company’s prior fiscal year end as required by Nasdaq Listing Rule 5620(a), the resulting

non-compliance would be an additional basis for delisting the Company’s securities.

The January 6, 2026 Determination notified the

Company that the Panel would consider the matter in their decision regarding the Company’s continued listing on the Nasdaq Capital

Market, and requested that the Company present its views with respect to the additional deficiency in writing by January 9, 2026.

Company intends to make a submission to the Panel by the requested date, and has requested an additional extension to comply with the

Bid Price Rule, the Stockholders’ Equity Requirement and the Timely Filing Requirement.

Gemini Line of Credit – Loan Amendment;

Notice of Default;

Foreclosure and Article 9 Sale Process;

Loan Amendment – On

March 18, 2025, UG Construction, a wholly owned subsidiary of the Company, entered into an agreement with Gemini Finance Corp.

(the “Lender”)

to amend the terms of the original Loan Agreement and Promissory Note and waiver (the “Amendment”) between UG Construction

and the Lender.

Pursuant to the Amendment, the Lender waived any potential or perceived events of default arising under certain circumstances,

which events did not constitute specified events of default under the Promissory Note or the Loan Agreement.

Pursuant to the Amendment,

the Promissory Note was amended to provide that (i) the term during which the Lender may consider advances under the Loan Agreement has

been extended to January 1, 2026, and (ii) the interest applied on the outstanding principal amount of the Promissory Note will accrue

interest at a monthly rate of 1.75 %, and all accrued by unpaid interest shall be paid to the Lender on the first business day of each

month for the prior month.

The Amendment also amended the Loan Agreement to require monthly reporting of certain accounts receivable

and to include a covenant that such accounts receivable equal or exceed 125 % of the sum of the total amount drawn down under the Promissory

Note, plus outstanding interest, as of the applicable measurement date.

In connection with the execution of the Amendment, the Company

issued to the Lender, as an amendment fee, one hundred and fifty thousand ( 150,000 ) shares (the “Fee Shares”) of the Company’s

common stock, par value $ 0.001 per share.

Notice of Default –

On July 31, 2025, the Lender issued a notice of default to UG Construction claiming that UG Construction was in default under the Line

of Credit due to a failure to submit receivables calculations and failing to maintain sufficient eligible accounts and to forward accounts

The notice indicated that the remaining outstanding amount due under the Line of Credit of approximately $ 1.76 million was

immediately due and payable with default of 1 % per week accruing from the June 16, 2025 date of default claimed by the Lender, and that

the Lender intended to pursue legal action if full payment was not received by August 8, 2025.

Foreclosure and Article 9

Sale Process – On August 21, 2025, the Company received a notification from the Lender stating that the Lender would proceed with

a foreclosure and private sale of substantially all of the assets of UG Construction in an Article 9 sale process, pursuant to Section

of the California Commercial Code (the “Asset Sale”).

The Asset Sale occurred on September 4, 2025, at which

the Lender acquired the assets constituting the collateral under the Line of Credit for $ 450,000 .

Lawsuit – On August

29, 2025, the Lender commenced a lawsuit captioned Gemini Finance Corp.

UG Construction, Inc.

et al., case number 25CV2259 W SBC,

District Court for the Southern District of California, which lawsuit (the “Lawsuit”) included the Company and

certain of its officers as defendants and pursuant to which the Lender claimed it was owed $ 1,486,189 (the “Claim Amount”).

On September 26, 2025, the Company entered into a Settlement and Mutual General Release (the “Settlement Agreement”) with

Pursuant to the terms of the Settlement Agreement, among other things, the Company agreed to file a joint motion requesting

an expedited fairness hearing under Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), which

motion was filed on September 30, 2025.

Following such fairness hearing, and subject to the satisfaction of all applicable conditions

and requirements of Section 3(a)(10) of the Securities Act, the Company would issue to the Lender shares of the Company’s common

stock (the “Common Stock”) that, upon sale by the Lender, would result in net proceeds to the Lender equal to the Claim Amount,

provided that the Lender shall at no time be issued shares if it would beneficially own more than 4.99 % of the Common Stock, and the

aggregate number of shares issued to the Lender shall not exceed 19.99 % of the outstanding Common Stock as of immediately prior to the

signing of the Settlement Agreement to the extent required by Nasdaq Listing Rule 5635.

Additionally, the Lender agreed to use its best

efforts to not sell Common Stock exceeding 10 % of the Company’s daily volume on any given trading day.

Upon the issuance of the

last tranche of shares under the Settlement Agreement, the Lender will dismiss the Lawsuit with prejudice.

The Settlement Agreement also

includes a customary mutual release of claims by the parties.

Business Loan and Security Agreement with Agile

On June 26, 2025, the Company

entered into a business loan and security agreement (the “Loan Agreement”) with an effective date of June 24, 2025 (the “Effective

Date”) by and among, Agile Capital Funding, LLC, Agile Lending , LLC, a Virginia limited liability company and each assignee that

becomes a party pursuant to Section 12.1 of the Loan Agreement (the “Lenders”), the Company and 2WR Of Colorado Inc., UG

Construction, Inc., 2WR of Georgia, Inc., urban-gro Canada Technologies Inc., urban-gro Engineering, Inc.

and urban-gro Architect Holdings,

LLC, each a wholly owned subsidiary of the Company (individually, collectively, jointly and severally, the “Guarantors”).

Pursuant to the Loan Agreement,

the Lenders extended to the Company a term loan of $ 1,050,000.00 (the “Term Loan”) to be used to fund the Company’s

general business requirements.

The Loan Agreement is for a term of twenty-eight weeks from the Effective Date (the “Maturity Date”)

and includes an administrative agent fee of $ 50,000 to be remitted to Agile Capital Funding, LLC which was added to the amount of the

The Company may make a full prepayment or partial prepayment of the Term Loan, however, upon the prepayment of any principal amount,

the Company shall be obligated to pay a premium payment of such principal so paid, which shall be equal to the aggregate and actual amount

of interest that would be paid through the Maturity Date (the “Prepayment Fee”);

provided however that, if the Company made

a prepayment within 60 calendar days after the Effective Date, the Company would receive the discounted Prepayment Fee that is included

in Exhibit E to the Loan Agreement.

The Loan contains standard

events of default and representations and warranties by the Company and the Lenders including a mandatory prepayment, and an additional

five ( 5 %) percent interest rate following the occurrence of an event of default.

The term loan is evidenced by a secured promissory note

issued by the Company to the Lenders (the “Promissory Note”).

Pursuant to the Loan Agreement, upon an event of default, the

Lenders will receive a security interest in certain of the Company’s assets, subject to certain exceptions.

RK Mechanical- complaint filed

On June 27, 2025, RK Mechanical

LLC (“RK”) filed a complaint against UG Construction and certain other defendants, with SVC Manufacturing Inc.

as cross-claimant

and UG Construction as cross-defendant, in the Superior Court of Arizona for Maricopa County (Case No.

CV2025-022680).

The complaint alleged

that UG Construction served as general contractor for the construction of the construction of a PepsiCo plant in Tolleson, Arizona, and

that as a result of work completed by RK, UG Construction owed $ 1,522,716 to RK as a result of alleged breach of contract, breach of implied

covenant of good faith and fair dealing, violation of the Arizona Prompt Payment Act, and lien foreclosure.

On or about October 2025,

a default judgment was entered against UG Construction for $ 1,511,716 , plus prejudgment interest of $ 288,346 and post-judgment interest

at 8.25 % plus $ 10,057 in attorney fees.

Action Equipment- complaint filed

On April 21, 2025, Action Equip.

(“Action”) filed a complaint against UG Construction in the Superior Court of Arizona for Maricopa County (Case No.

CV2025-014165).

The complaint alleged that UG Construction owed Action $ 380,932 plus interest and attorneys’ fees in connection with a contract

pursuant to which Action leased equipment to UG Construction, and alleged breach of contract, breach of covenant of good faith and fair

dealing, and unjust enrichment.

A default judgment was subsequently entered against UG Construction, and Action filed a writ of garnishment

on October 21, 2025.

Settlement with Vendor

On August 8, 2025, the Company

entered into a Settlement and Release Agreement (the “Settlement Agreement”) with J Brrothers LLC (“J Brrothers”)

and Herb-a-More LLC relating to a dispute arising from amounts due for certain heating, ventilation and air conditioning equipment.

to the terms of the Settlement Agreement, among other things, the Company issued a promissory note to J Brrothers with an original principal

amount of $ 395,556 (the “Note”) and issued 150,000 unregistered shares of the Company’s common stock to J Brrothers

(the “Shares”).

The Note will accrue simple interest at an annual rate of 12 % and has a maturity date of March 18, 2026 .

Note will be repaid in monthly installments over a period of eight months, with the first seven payments being $ 50,000 per month and the

final monthly payment being $ 64,047 .

Any remaining principal and accrued but unpaid interest will become due and payable on the maturity

date, and the Note may be prepaid without penalty.

The Note includes customary representations and warranties, customary events of default

and a 17 % default interest rate.

The Company is currently

in a payment default under the terms of the Note.

Services – Sale of 2WR Georgia, Inc.;

of Customer Lists:

Remaining Services

On August 27, 2025, the Company

announced that certain subsidiaries (the “Seller Parties”) of the Company entered into a Stock and Asset Purchase Agreement

(the “August 27 Purchase Agreement”) with 2WR Holdco, LLC (the “Buyer”).

Pursuant to the August 27 Purchase Agreement,

the Buyer acquired (the “Acquisition”) all of the outstanding shares of stock of 2WR of Georgia, Inc.

and certain assets of other subsidiaries of the Company relating to those entities’ business of providing commercial, industrial

and municipal architectural and construction administration services for projects not involving CEA, with such CEA business being retained

by the Company.

The purchase price paid by

the Buyer for the Acquisition consisted of $ 2.0 million in cash and by any assumed indebtedness.

The August 27 Purchase Agreement includes

non-competition and non-solicitation restrictions applicable to the Seller Parties and customary representations and warranties and covenants

of the parties.

Subject to certain limitations, (i) the Seller Parties will indemnify the Buyer and its affiliates and representatives

against certain losses related to, among other things, breaches of the Seller Parties’ representations, warranties or covenants,

any liabilities other than those assumed by the Buyer under the August 27 Purchase Agreement, assets excluded from the Acquisition, pre-closing

taxes, operation of the CEA business and pre-closing employment matters, and (ii) the Buyer will indemnify the Seller Parties and their

respective affiliates and representatives against certain losses related to breaches of the Buyer’s representations, warranties

or covenants, and any losses related to any asset acquired by the Buyer or any liability assumed by the Buyer under the August 27 Purchase

On November 5, 2025, the

Seller Parties entered into a Bill of Sale, Assignment and Assumption, and Purchase Agreement (the “November 5 Purchase Agreement”)

Pursuant to the November 5 Purchase Agreement, 2WRGA acquired (the “Follow On Acquisition”) certain customer

lists of the Seller Parties.

The purchase price paid by

2WRGA for the Follow On Acquisition consisted of $ 143,000 in cash.

Additionally, pursuant to the November 5 Purchase Agreement, the parties

agreed to waive and terminate the non-solicitation provision applicable to 2WRGA that was contained in the August 27 Purchase Agreement

among the Seller Parties, the Company and the other parties thereto.

During the fourth quarter

of 2025, the Company began winding down the remaining services businesses and furloughed those employees.

Binding Letter of Intent with Flash Sports &

On October 14, 2025, the

Company entered into a binding letter of intent (the “LOI”) with Flash Sports & Media, Inc.

(“Flash”) regarding

a proposed transaction pursuant to which the parties intend to merge Flash with and into a newly formed wholly-owned subsidiary of the

Company, which would then merge with and into a second wholly-owned subsidiary of the Company (collectively, the “Merger”).

Pursuant to the LOI, the

parties have agreed, subject to satisfaction of certain conditions, to negotiate and execute a definitive merger agreement in accordance

with the terms set forth in the LOI.

The LOI provides that Flash would pay to the Company a cash deposit of $ 200,000 within fifteen days

of its execution.

In connection with the Merger, the stockholders of Flash would receive (i) unregistered shares of the Company’s

common stock, par value $ 0.001 per share (“Common Stock”) equal to 19.99 % of the outstanding shares of Common Stock as of

immediately prior to the Merger, and (ii) unregistered shares of a newly-created series of non-voting preferred stock that would be economically

equivalent to Common Stock (the “Preferred Stock”) and would automatically convert into Common Stock upon receipt of approval

by the Company’s stockholders.

The LOI contemplates that

the former stockholders of Flash would own approximately 90 % of the Company following the Merger, assuming full conversion of the Preferred

Upon closing of the Merger, the Company would change its name to Flash Sports & Media Holdings, Inc.

or a similar name.

Company would be required to obtain approval of its stockholders for conversion of the Preferred Stock as soon as reasonably practicable

following the Merger.

The LOI provides that following

the Merger, the board of directors (the “Board”) of the Company would be reconstituted such that four members of the Board

would be designated by the Board prior to the Merger and one member of the Board would be designated by the former stockholders of Flash.

Upon approval of the Company’s stockholders for the conversion of the Preferred Stock, the Board would be further reconstituted

such that one member of the Board would be designated by the Board prior to the Merger and four members of the Board would be designated

by the former stockholders of Flash.

The LOI provides for an exclusivity

period of 90 days following the execution of the LOI.

During that period, the Company agreed that neither it nor its affiliates will,

among other things, solicit, provide any information or enter into any agreement with any other party concerning a transaction similar

to the Merger.

Equity Issuances After December 31, 2024

Subsequent to the year ended

December 31, 2024, inclusive of RSU vesting, an additional 3,679,250 shares of common stock were issued.

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 9A. Controls and Procedures