UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the

Securities Exchange Act of 1934

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[_]☐Preliminary Proxy Statement
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[_]☐Definitive Additional Materials
[_]☐Soliciting Material under Rule 14a-12§240.14a-12
URBAN-GRO, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):

urban-gro, Inc.

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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URBAN-GRO, INC.

(a Colorado corporation)

Notice of Annual Shareholder Meeting

and

Proxy Statement

 

URBAN-GRO, INC.

1751 Panorama Point

Suite 201

Denver,

Unit G
Lafayette, Colorado 80239

April 15, 2019

80026

May 1, 2023
To ourOur Stockholders:

On behalf of ourthe Board of Directors, I cordially invite you to attend our 2019the 2023 annual meeting of stockholders of urban-gro, Inc. (the “Annual Meeting”). The Annual Meeting of Stockholders. This meeting will be held atvirtually via live webcast on the Centennial Room at the Denver Athletic Club, 1325 Glenarm Pl, Denver, CO 80204,Internet on May 23, 2019,June 21, 2023, at 10:00 a.m., localMountain time. During the meeting,Annual Meeting, we will discuss the items of business described in the accompanying Notice of Annual Meeting and Proxy Statement,proxy statement, update you on important developments in our business, and respond to any questions that you may have about us.

Information about the matters to be acted upon at the meetingAnnual Meeting is contained in the accompanying Notice of Annual Meeting and Proxy Statement. Included with this Proxy Statement please findproxy statement. You are encouraged to vote, regardless of the number of shares that you own. You may vote your shares of common stock by (i) signing, dating, and mailing the proxy card instructions for voting. You are being askedin the envelope provided or faxing the completed proxy card to elect directors, ratify(202) 521-3464, (ii) going to www.iproxydirect.com/ugro to vote using the appointmentInternet, or (iii) calling (866) 752-8683 to vote via telephone. All shares of our auditors and conduct any other business properly raised atcommon stock represented by a proxy received by 11:59 p.m. Eastern time on Tuesday, June 20, 2023 will be voted as specified in the meeting or any adjournments or postponements thereof.

proxy, unless validly revoked as described below. Your vote is very important. Please take a moment now to cast your vote whether or not you plan to attend the meeting by completing, signing, dating and returning the enclosed proxy using the enclosed self-addressed, stamped envelope.Annual Meeting. You may still vote in person at the meeting,virtual Annual Meeting, even if you return a proxy.

I look forward to seeingthe proxy card.

Thank you atfor the meeting.

support of our company.
 Yours truly,
  
 /s/ Bradley J. Nattrass
 Bradley J. Nattrass
 
Chairperson of the Board of Directors

and
Chief Executive Officer
 




URBAN-GRO, INC.

1751 Panorama Point

Unit G

Lafayette, COColorado 80026

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

STOCKHOLDERS

TO BE HELD MAY 23, 2019

Important Notice Regarding the Availability of Proxy Materials for the

Shareholder Meeting to Be Held May 23, 2019

The Notice of 2019 Annual Meeting, Proxy Statement and 2018 Annual Report

to Shareholders are available at www.urban-gro.com /proxy.

To the Shareholders of URBAN-GRO, INC.

Pursuant to the Company’s Bylaws, please take notice ON WEDNESDAY, JUNE 21, 2023

NOTICE IS HEREBY GIVEN that an Annual Meeting (the “Annual Meeting”) of Shareholdersthe holders of common stock of urban-gro, Inc. (the “Company”) will be held atvirtually via live webcast on the Centennial Room at the Denver Athletic Club, 1325 Glenarm Pl, Denver, CO 80204Internet on May 23, 2019,June 21, 2023, at 10:00 a.m. local time, Mountain time. The Annual Meeting will be held in a completely virtual format through a live webcast. You will not be able to attend the Annual Meeting physically. At our virtual Annual Meeting, stockholders will be able to attend, vote and vote onsubmit questions by visiting https://agm.issuerdirect.com/ugro. We believe that the virtual format will provide a consistent experience to our stockholders and allow all stockholders to participate in the Annual Meeting regardless of location.
The Annual Meeting is being held for the following matters:

purposes:
 1.Toto elect seven (7) personssix directors to ourthe Board of Directors (the “Board”), each to serve for a term of one year;year or until their respective successors are elected and qualified;

2.to approve an amendment to the Company's Amended and Restated Certificate of Incorporation and Bylaws to remove a 2/3rds supermajority vote of outstanding shares requirement and replace with a majority requirement to change certain provisions of the Company's Amended and Restated Certificate of Incorporation and Bylaws;
3.to approve an amendment in the Company's Amended and Restated Certificate of Incorporation to take advantage of a new Delaware law to limit liability of Officers of the Company making business decisions on behalf of the Company;
4.to approve an amendment to the Company's 2021 Omnibus Stock Incentive Plan to increase the number of shares authorized for issuance under the plan and clarify certain other language in the plan;
 5.to ratify the appointment of BF Borgers CPA PC to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2023; and
6.to transact any and all other business that may properly come before the Annual Meeting or any adjournment(s) or postponement(s) thereof.
Stockholders are referred to the proxy statement accompanying this notice for more detailed information with respect to the matters to be considered at the Annual Meeting. After careful consideration, the Board recommends a vote “FOR” each director nominee, a “FOR” Proposal 2, a “FOR” Proposal 3, a “FOR” Proposal 4, and a "FOR" Proposal 5. The Board has fixed the close of business on April 24, 2023 as the record date (the “Record Date”) for the Annual Meeting. Only holders of record of shares of our common stock on the Record Date are entitled to receive notice of the Annual Meeting and to vote at the Annual Meeting or at any postponement(s) or adjournment(s) of the Annual Meeting. A complete list of registered stockholders entitled to vote at the Annual Meeting will be available for inspection at our offices during regular business hours for the 10 calendar days prior to and during the Annual Meeting. In addition, during the Annual Meeting that list of stockholders will be available for examination at https://agm.issuerdirect.com/ugro. It is important that your shares of common stock be represented at the Annual Meeting. You may vote your shares of common stock by (i) signing, dating, and mailing the proxy card in the envelope provided or faxing the completed proxy card to (202) 521-3464, (ii) going to www.iproxydirect.com/ugro to vote using the Internet, or (iii) calling (866) 752-8683 to vote via telephone. Voting in one of these ways will ensure that your shares of common stock are represented at the Annual Meeting. All shares of common stock represented by a proxy received by 11:59 p.m. Eastern time on Tuesday, June 20, 2023 will be voted as specified in the proxy, unless validly revoked as described below. If you attend the virtual Annual Meeting and wish to participate by voting electronically during the virtual Annual Meeting, you may revoke your previously submitted proxy as described in the proxy statement.
To attend and participate in the virtual Annual Meeting, you will need the control number included on your proxy card. For additional information regarding how to participate in the virtual meeting format, please see “How can I attend the vote at the virtual Annual Meeting?” on page 2 of the proxy statement.
By Order of the Board of Directors,

Bradley J. Nattrass
Chairperson of the Board of Directors and Chief Executive Officer
May 1, 2023
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 21, 2023: Our Notice of Annual Meeting of Stockholders, Proxy Statement, and Annual Report to Stockholders for the year ended December 31, 2022 are available at https://ir.urban-gro.com/.


URBAN-GRO, INC.
1751 Panorama Point
Unit G
Lafayette, Colorado 80026
PROXY STATEMENT
DATED MAY 1, 2023
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
WEDNESDAY, JUNE 21, 2023
Unless the context otherwise requires, references in this proxy statement to “we,” “us,” “our,” the “Company,” or “urban-gro” refer to urban-gro, Inc., a Delaware corporation. In addition, unless the context otherwise requires, references to “stockholders” are to the holders of our common stock, par value $0.001 per share, including restricted shares of common stock.
This proxy statement is furnished in connection with the solicitation of your proxy by the Board of Directors (the “Board”) and management on behalf of the Company, to be voted at the 2023 annual meeting of stockholders of the Company (the “Annual Meeting”) to be held on June 21, 2023, at the time and place and for the purposes set forth in the accompanying notice of annual meeting of stockholders (the “Notice”) and at any adjournments or postponements of that meeting. This proxy statement and accompanying form of proxy are expected to be mailed or made available to stockholders on or about May 5, 2023.
When proxies are properly executed and received, the shares represented thereby will be voted at the Annual Meeting in accordance with the directions noted thereon. If no direction is indicated, such shares will be voted “FOR” the election of the director nominees, "FOR" the approval of the amended and restated certificate of incorporation and bylaws changing the 2/3rds majority provisions to a simple majority, "FOR" the approval of an amendment to the certificate of incorporation for officer limitation of liability, "FOR" the approval of the amendment to the 2021 Omnibus Equity Plan, and “FOR” the ratification of the appointment of BF Borgers CPA PC to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2023.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 21, 2023: Our Notice of Annual Meeting of Stockholders, Proxy Statement, and Annual Report to Stockholders for the year ended December 31, 2022 (the “Annual Report”) are available at https://ir.urban-gro.com/.
ABOUT THE ANNUAL MEETING
The Annual Meeting will be held on Wednesday, June 21, 2023, at 10:00 a.m. Mountain time. The Annual Meeting will be held in a completely virtual format through a live webcast. A complete list of registered stockholders entitled to vote at the Annual Meeting will be available for inspection at the registered office of the Company during regular business hours and online at the Annual Meeting. The executive offices of the Company are located at, and the mailing address of the Company is, 1751 Panorama Point, Unit G, Lafayette, Colorado 80026.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
What will stockholders be voting on at the Annual Meeting?
1.To elect six directors to the Board, each to serve for a term of one year or until their respective successors are elected and qualified;
2.To approve an amendment in the Company's Amended and Restated Certificate of Incorporation and Bylaws to remove a 2/3rds supermajority vote of outstanding shares requirement and replace with a majority requirement to change certain provisions of the Company's Amended and Restated Certificate of Incorporation and Bylaws;
3.To approve an amendment in the Company's Amended and Restated Certificate of Incorporation to take advantage of a new Delaware law to limit liability of Officers of the Company making business decisions on behalf of the Company;
4.To approve an amendment to the Company's 2021 Omnibus Stock Incentive Plan to increase the number of shares authorized for issuance under the plan and clarify certain other language in the plan;
5.To ratify the appointment of BF Borgers CPA P.C.PC to serve as the Company’s independent registered public accountant to auditaccounting firm for the Company’s financial books and records for its fiscal year ending December 31, 2019;2023; and

 3.To approve the Company’s 2019 Equity Incentive Plan; and

4.To transact such other business as may properly come before the meeting or any adjournment thereof.

April 15, 2019, has been fixed as the record date of the shareholders entitled to vote at the meeting and only holders of shares of Common Stock of record at the close of business on that day will be entitled to vote. The stock transfer books will not be closed.

All shareholders are cordially invited to attend the meeting. To insure your representation at the meeting, please complete and promptly mail your proxy, which is solicited by the Board of Directors, in the return envelope provided. If desired, you may also complete your proxy card, scan it as a PDF or JPEG file, and send it to ugboard@urban-gro.com no later than May 22, 2019. Submission of your proxy by mail or email will not prevent you from voting in person, should you so desire, but will help to secure a quorum and avoid added solicitation costs.

By Order of the Board of Directors
  
 Bradley Nattrass,Chairperson of the Board of Directors

Dated: April 15, 2019

Please date and sign the accompanying Proxy Card

and either mail or email it promptly to the Street or E-Mail address as provided herein. If by regular mail, please send to the attention of George R. Pullar, Secretary, 1751 Panorama Point, Unit G, Lafayette, CO 80026.Email address: ugboard@urban-gro.com.

Votes not received via mail or email by May 22, 2019 will be considered to be non-timely and may, at the determination of the Chairperson not be included for consideration

urban-gro, Inc.

PROXY STATEMENT

FOR THE ANNUAL MEETING OF SHAREHOLDERS

To Be Held May 23, 2019

This Proxy Statement is furnished in conjunction with the solicitation of proxies by the Board of Directors of urban-gro, Inc., a Colorado corporation (the “Company”), to be used at the Company’s Annual Meeting of Shareholders (the “Meeting”) to be held on May 23, 2019, at 10:00 a.m. at the Centennial Room at the Denver Athletic Club, 1325 Glenarm Pl, Denver, CO 80204, and at any adjournments or postponements thereof.

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

What will stockholders be voting on at the Meeting?

1.To elect seven (7) persons to our Board of Directors, each to serve for a term of one year;

2.To ratify the appointment of BF Borgers, CPA P.C. as the Company’s independent registered public accountant to audit the Company’s financial books and records for its fiscal year ending December 31, 2019;

3.To approve the Company’s 2019 Equity Incentive Plan; and

4.6.To transact suchany and all other business asthat may properly come before the meetingAnnual Meeting or any adjournmentadjournment(s) or postponement(s) thereof.

1

Who is entitled to vote at the Annual Meeting and how many votes do they have?

Common stockholders of record at the close of business on the Record Date, April 15, 2019,24, 2023 (the “Record Date”), may vote at the Annual Meeting. Each share of Common Stockcommon stock has one vote. There were 25,654,53310,938,556 shares of our Common Stockcommon stock outstanding on the Record Date.

What percentage of our Common Stockcommon stock do the directors and executive officers own?

Our Board of Directors owns 77.5%directors and executive officers own 22.2% of our issued and outstanding shares of Common Stockcommon stock in the aggregate,

aggregate.

How do I vote?

You must be present, or representedmay vote by proxy or electronically at the Meeting tovirtual Annual Meeting. We suggest that you vote your shares. Evenby proxy even if you plan to attend the Meeting, we encouragevirtual Annual Meeting. If you toare the stockholder of record, you can vote your shares by proxy. Since we expect that many of our common stockholders will be unable to attend the Meeting in person, we send proxy cards to all our common stockholders to enable them to vote either by direct mail, email submission,fax, the Internet or telephone. Simply complete, sign and date the enclosed proxy card and return it in the postage-paid, self-addressed envelope provided or fax the completed card to (202) 521-3464. To vote using the Internet, please go to https://www.iproxydirect.com/ugro. To vote via Broadridge delivered electronic means.

telephone, please call (866) 752-8683. To vote via the Internet or telephone, you will need the control and request numbers included on your proxy card. If you are not the record holder of your shares of common stock, please follow the instructions provided by your broker, bank or other nominee.

All shares of common stock represented by a proxy received by 11:59 p.m. Eastern time on Tuesday, June 20, 2023 will be voted as specified in the proxy, unless validly revoked as described below. If you return a proxy and do not specify your vote, your shares will be voted as recommended by the Board.
What is a proxy?

A proxy is a person you appoint to vote on your behalf. If you complete and return the enclosed proxy card, your shares will be voted in accordance with your instructions by the proxies identified on the proxy card.

1
 

By completing and returning this proxy card, who am I designating as my proxy?

You will be designating Brett Roper,Bradley J. Nattrass, our Chief Executive Officer, or Richard A. Akright, our Chief Financial Officer, as your proxy. HeEither one of these officers may act on your behalf and will have the authority to appoint a substitute to act as proxy.

How will my proxy vote my shares?

Your proxy will vote according to the instructions on your proxy card.

We do not intend to bring any other matter for a vote at the Annual Meeting, and we do not know of anyone else who intends to do so. However, your proxiesIf, however, other matters are authorized to vote on your behalf, in their discretion, on any other business that properly comesbrought before the Annual Meeting or any adjournmentsadjournment(s) or postponements thereof.

How do Ipostponement(s) of the Annual Meeting, the persons appointed as proxies will have, unless the terms of their appointment otherwise provide, discretionary authority to vote using my proxy card?

Simply complete, signthe shares represented by proxies in accordance with their discretion and date the enclosed proxy card and return it in the postage-paid, self-addressed envelope provided or via email (PDF or JPEG format attachment) to ugboard@urban-gro.com.

judgment.

How do I change or revoke my proxy?

You may change or revoke your proxy at any time before your shares are voted at the Annual Meeting by:

•executing and delivering another later dated proxy card;

•notifying the Company’s Corporate Secretary,corporate secretary, in writing, at that you are changing or revoking your proxy; or

•attending and voting by ballot in personelectronically at the virtual Annual Meeting.

Attendance at the virtual Annual Meeting will not itself revoke a proxy. All signed proxies that have not been revoked will be voted at the Annual Meeting. If your proxy contains any specific instructions, they will be followed.


How can I attend the vote at the virtual Annual Meeting?
The Annual Meeting will be held on June 21, 2023, at 10:00 a.m. Mountain time in a virtual online format. To attend and participate in the Annual Meeting, stockholders will need to access the virtual webcast of the meeting. To do so, stockholders of record will need to log in at https://agm.issuerdirect.com/ugro, using their control number provided to them in the proxy card. Beneficial owners of shares held in street name will need to follow the instructions provided by the broker, bank, or other nominee that holds their shares.
What if during the Annual Meeting I have technical difficulties or trouble accessing the virtual meeting website?
We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting website during the meeting time, please call the technical support number that will be posted on the Annual Meeting login page.
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Who will count the votes?

An inspector of election designated by the Board will count the votes.

What constitutes a quorum?

A quorum, which is necessary to conduct business at the Annual Meeting, constitutes a majority of the outstanding shares of our Common Stockcommon stock entitled to be cast at the Annual Meeting, present in person or represented by proxy. If you sign and return your proxy card, your shares will be counted in determining the presence of a quorum, even if you withhold your vote or abstain from voting. If a quorum is not present at the Annual Meeting, the Chairperson of the Annual Meeting or the stockholders present in personelectronically or by proxy may adjourn the Annual Meeting to a date not more than 120 days after the Record Date, until a quorum is present.

2
 

What are my voting choices when voting on director nominees, and what vote is needed to elect directors?

When voting on the election of director nominees to serve until the 20202024 Annual Meeting of Stockholders andor until their respective successors are elected and qualified, you may:

•vote in favor of all nominees;“FOR” any nominee; or

withhold votes as to all nominees; or•vote “WITHHOLD” any nominee.

withhold votes as to one or more specific nominees.

A nominee is elected to the Board if a plurality of votes cast inat the election of directors is cast “for”Annual Meeting are voted “FOR” the nominee. AnyWithheld votes withheld will not be counted in determining the number of votes cast and, therefore, will have no effect on the outcome of the proposal. In the event that any nominee for director is unavailable for election, the Board may either reduce the number of directors or choose a substitute nominee. If the Board chooses a substitute nominee, the shares represented by a proxy will be voted for the substitute nominee, unless other instructions are given in the proxy.


The Board recommends that the stockholders vote “FOR” all of the nominees.

What are my voting choices when voting on the approval of the Company's Amended and Restated Certificate of Incorporation (the "Amended and Restated COI") and Bylaws to remove Supermajority Voting Requirements?
When voting on the approval of the Company's Amended and Restated COI and Bylaws to remove Supermajority Voting Requirements, you may:
•vote “FOR” the proposal;
•vote “AGAINST” the proposal; or
•“ABSTAIN” from voting for or against the proposal.
The affirmative vote of a 2/3rds supermajority of the outstanding shares of common stock of the Company "FOR" the proposal is required for approval of the Amended and Restated COI to remove Supermajority Voting Requirements. Abstentions will not be counted in determining the number of votes cast and, therefore, will have no effect on the outcome of the proposal except that it will be more difficult to attain the required number of votes "FOR" the proposal to enable the proposal to pass.
The Board recommends that the stockholders vote “FOR” the approval of the Company's Amended and Restated COI and Bylaws.

What are my voting choices when voting on the approval of the Company's Amended and Restated COI to limit the liability of certain officers in limited circumstances for making business decisions on behalf of the Company?

When voting on the approval of the Company's Amended and Restated COI to limit the liability of certain officers in limited circumstances for making business decisions on behalf of the Company, you may:
•vote “FOR” the proposal;
•vote “AGAINST” the proposal; or
•“ABSTAIN” from voting for or against the proposal.
The affirmative vote of a majority of the outstanding shares of common stock of the Company "FOR" the proposal is required for approval of the Amended and Restated COI to limit the liability of certain officers in limited circumstances for making business decisions on behalf of the Company. Abstentions will not be counted in determining the number of votes cast and, therefore, will have no effect on the outcome of the proposal except that it will be more difficult to attain the required number of votes "FOR" the proposal to enable the proposal to pass.
The Board recommends that the stockholders vote “FOR” the approval of the Company's Amended and Restated COI to limit the liability of certain officers in limited circumstances for making business decisions on behalf of the Company.
3


What are my voting choices when voting on the approval of the amendment to the 2021 Omnibus Stock Plan to increase the number of shares authorized for issuance under the plan and clarify certain other language in the plan?
When voting on the approval of the amendment to the 2021 Omnibus Stock Plan, you may:
•vote “FOR” the proposal;
•vote “AGAINST” the proposal; or
•“ABSTAIN” from voting for or against the proposal.
The affirmative vote of a majority of the votes cast at the Annual Meeting on the proposal is required for approval of the amendment to the 2021 Omnibus Stock Plan. Abstentions will not be counted in determining the number of votes cast and, therefore, will have no effect on the outcome of the proposal.
The Board recommends that the stockholders vote “FOR” the ratification of the amendment of the 2021 Omnibus Equity Plan.

What are my voting choices when voting on the ratification of the appointment of BF Borgers CPA PC to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2023?
When voting on the ratification of the appointment of BF Borgers CPA PC as our independent registered public accounting firm, you may:
•vote “FOR” the proposal;
•vote “AGAINST” the proposal; or
•“ABSTAIN” from voting for or against the proposal.
The affirmative vote of a majority of the votes cast at the Annual Meeting on the proposal is required for approval of the ratification of BF Borgers CPA PC. Abstentions will not be counted in determining the number of votes cast and, therefore, will have no effect on the outcome of the proposal.
The Board recommends that the stockholders vote “FOR” the ratification of BF Borgers CPA PC.
What vote is required to approve each Proposal?

proposal?

Proposal No. l.l: Election of Directors. The election of each director nominee requires the affirmative vote of a plurality of the votes cast, if a quorum is present, in the election of directors.


Proposal No. 2. RatificationNo.2: Approval of Auditorsthe Company's Amended and Restated COI and amended Bylaws to remove Supermajority Voting Requirements. An affirmative vote of a 2/3rds supermajority of the outstanding shares of common stock of the Company "FOR" the proposal is required for approval of the Amended and Restated COI and amended Bylaws to remove Supermajority Voting Requirements.

Proposal No.3: Approval of the Company's Amended and Restated COI to limit the liability of certain officers in limited circumstances for making business decisions on behalf of the Company. An affirmative vote of a majority of the outstanding shares of common stock of the Company "FOR" the proposal is required for approval of the Amended and Restated COI to limit the liability of certain officers in limited circumstances for making business decisions on behalf of the Company.

Proposal No.4: Approval of the 2021 Omnibus Equity Plan Amendment. An affirmative vote of a majority of the votes cast, atif a quorum is present, is required for approval of the Meeting,amendment to the 2021 Omnibus Equity Plan.

Proposal No.5: Ratification of Auditors. An affirmative vote of a majority of the votes cast, if a quorum is present, is required for ratification of the selection of BF Borgers CPA P.C.,PC, to serve as independent auditors for the fiscal year ending December 31, 2019.

Proposal No. 3. To approve the Company’s 2019 Equity Incentive Plan;An affirmative vote of a majority of the votes cast at the Meeting, if a quorum is present, is required for approval of this Plan.

What are my voting choices when voting on the ratification of the appointment of BF Borgers, CPA P.C. as our independent registered public accounting firm?

When voting on the ratification of the appointment of BF Borgers, CPA P.C. as ourCompany's independent registered public accounting firm you may:

vote in favor offor the ratification;

vote against the ratification; or

abstain from voting.

The affirmative vote of a majority of the votes cast is required for approval of the ratification of BF Borgers, CPA P.C. Abstentions will not be counted in determining the number of votes cast and, therefore, will have no effect on the outcome of the proposal.

The Board recommends that the stockholders vote “FOR” the ratification of BF Borgers, CPA P.C.

3
year ending December 31, 2023.
 

What if I do not specify a choice for a matter when returning a proxy?

If you sign your proxy but do not give voting instructions, the individuals named as proxy holders on the proxy card will vote “FOR” the election of all nominees, "FOR" the two amendments in the Company's Amended and Restated COI and related removal of Supermajority Voting Requirements in the Company's Bylaws, "FOR" the ratification of the 2021 Omnibus Stock Plan Amendment, “FOR” the ratification of BF Borgers CPA P.C., and “FOR” the amendment to the 2019 Equity Incentive PlanPC and in their discretion on any other matters that may properly come before the Annual Meeting.

4

Will my shares be voted if I do not provide my proxy or vote at the Annual Meeting?


If you do not provide your proxy or vote at the Annual Meeting and you are a stockholder whose shares of Common Stockcommon stock are registered directly in your name with our transfer agent, (CorporateEquiniti Trust Company (f/k/a Corporate Stock Transfer, Inc. r)), your shares of Common Stockcommon stock will not be voted.

If you do not provide your proxy or vote at the Annual Meeting and you are a stockholder whose shares of Common Stockcommon stock are held in street name withthrough a bank, brokerage firm or other nominee (i.e., in “street name”), your nominee may vote your shares in its discretion on Proposal 5, the proposal to elect directors and the proposals to ratify BF Borgers, CPA P.C., and adoptionratification of the amendment toappointment of the 2019 Equity Incentive Plan. The election of directors andCompany’s independent registered public accounting firm, as the ratification of our independent registered public accounting firm areis a “routine matters”matter” on which nominees are permitted to vote on behalf of their clients if no voting instructions are furnished.

A broker “non-vote” occurs when a nominee (such as a broker) holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular matter, such as Proposals 1, 2, 3 and 4, and has not received instructions from the beneficial owner. Broker “non-votes” are counted as present for purposes of establishing a quorum. Broker “non-votes” will have no effect on the outcome of Proposals 1, 2, 3 and 4, except that it will be more difficult to attain the required number of votes "FOR" proposals 2-4 to enable such proposals to pass.

Who is soliciting my proxy, how is it being solicited and who pays the cost?

The Board is soliciting your proxy for the Annual Meeting. The solicitation process is being conducted primarily by mail. However, proxies may also be solicited in person, by telephone, facsimile or other electronic means. We pay the cost of soliciting proxies and may use employees to solicit proxies and also reimburse stockbrokers and other custodians, nominees, and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation material to the owners of our Common Stock.

common stock.

What does it mean if I receive more than one proxy card?

If you receive more than one proxy card, it means you have multiple accounts with our transfer agent, and to vote all your shares you will need to sign and return all proxy cards.

May stockholders ask questions at the Meeting?

Yes. At the end of the Meeting, our representatives will answer questions from stockholders. 

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PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the ownership of Common Stock as of April 15, 2019, by (i) each of our directors, (ii) each of our executive officers, and (iii) all of our directors and executive officers as a group. Unless otherwise indicated, all shares are owned directly and the indicated person has sole voting and investment power. Included in the table are shares of our Common Stock that underlie outstanding options that may be exercised over the next year. The percentages listed are based upon 25,654,833 shares issued and outstanding.

Class of Shares Name and Address # of Shares % of Class 
        
Common 

Bradley Nattrass(1)

1751 Panorama Point

Unit G

Lafayette, CO 80026

 9,569,684 37.3% 
        
Common 

Octavio Gutierrez(1)

1751 Panorama Point

Unit G

Lafayette, CO 80026

 9,569,684 37.3% 
        
Common 

George R. Pullar(1)

1751 Panorama Point

Unit G

Lafayette, CO 80026

 25,000 * 
        
Common 

James Lowe(1)(2)

1751 Panorama Point

Unit G

Lafayette, CO 80026

 644,775(2) 2.5% 
        
Common 

James H. Dennedy(1)(3)

1751 Panorama Point

Unit G

Lafayette, CO 80026

 75,000 * 
        
Common 

All Officers and Directors as a Group (8 persons)

 

 19,884,143 80.7% 

___________________________

*Less than 1%
(1)Officer and/or director of our Company.
(2)Shares are held in the name of Cloud 9 Support LLC.
(3)Shares are held in the name of HMG MRB Partners

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MULTIPLE STOCKHOLDERS SHARING ONE ADDRESS
 

BOARD OF DIRECTORS

The primary responsibility of the Board is to foster the long-term success of the Company consistent

In accordance with its fiduciary duty to the stockholders. The Board has responsibility for establishing broad corporate policies, setting strategic direction, and overseeing management, which is responsible for the day-to-day operations of the Company. In fulfilling this role, each director must act in good faith in a manner he reasonably believes to be in the best interests of the Company with the care an ordinarily prudent person in a like position would useRule 14a-3(e)(1) under similar circumstances. The directors are regularly kept informed about our business at meetings of the Board and its Committees and through supplemental reports and communications. The responsibilities of the Board’s standing Committees are addressed separately in this Proxy Statement.

The Board held _five meetings in FY 2018 and took action by consent pursuant to the laws of the State of Colorado on thirteen (13) occasions. 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 2018, each nominee for director attended more than 75% of the aggregate number of meetings of the Board and all Committees on which they served.

Communications with the Board

Stockholders and other interested parties who wish to communicate with the Board may do so by writing to:

Bradley Nattrass, Chairperson of the Board of Directors

urban-gro, Inc.

1751 Panorama Point

Unit G

Lafayette, Colorado 80026

Our Audit Committee has also adopted a whistle-blower policy to allow employees, stockholders and other interested persons to communicate directly with our Audit Committee, including reporting complaints relating to accounting, internal accounting controls, or auditing matters. Communications should be addressed to:

Mr. Jim Dennedy, Chairperson of the Audit Committee

Urban-gro, Inc.

1751 Panorama Point

Unit G

Lafayette, Colorado 80026

Any communications may be made on an anonymous or confidential basis but should contain sufficiently specific information to permit the Audit Committee or Board to pursue the matter.

Committees of the Board

The Board has established various Committees of the Board to assist it with the performance of its responsibilities. These Committees and their members are listed below. The Board designates the members of these Committees and the Committee Chairs based on the recommendation of the Nominating and Corporate Governance 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 athttp://urban-gro.com. Copies are also available in print to any stockholder upon written request to urban-gro, Inc., 1751 Panorama Point, Suite 201, 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.

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Audit Committee

Our Board has established an Audit Committee, which is composed of two independent directors, Mr. Jim Dennedy (Chairperson) and Mr. Lewis Wilkes. 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;

·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;

·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 reporting;

·prepare the Audit Committee report for inclusion in our proxy statement for our annual stockholder meetings; and

·establish procedures for complaints received regarding our accounting, internal accounting control and auditing matters.

Our Audit Committee charter also mandates that our Audit Committee approve all audit and permissible non-audit services conducted by our independent registered public accounting firm. The Audit Committee was established in 2018.

Audit Committee Matters.

The functions of the Audit Committee are more fully described under “Report of the Audit Committee” below. Upon the recommendation of the Nominating and Governance Committee, the Board has determined that each of our Audit Committee members are 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”), one proxy statement and one annual report or one notice may be delivered to two or more stockholders who share an address in the United States, unless the Company has received contrary instructions from one or more of the stockholders. The Company will deliver promptly upon written or oral request a separate copy of the proxy statement and the rules promulgated thereunder.

annual report or notice at a shared address to which a single copy of the proxy statement and the annual report or notice was delivered. Requests for additional copies of the proxy statement and the annual report or notice, and requests that in the future separate proxy statements and annual reports or notices be sent to stockholders who share an address, should be directed to the Company’s Corporate Secretary, urban-gro, Inc., 1751 Panorama Point, Unit G, Lafayette, Colorado 80026, or at telephone number (720) 439-2941. In addition, stockholders who share a single address in the United States but receive multiple copies of the proxy statement and the annual report or notice may request that they receive a single copy in the future by contacting the Company at the address and phone number set forth in the prior sentence.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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 April 24, 2023 by (i) each current director and director nominee; (ii) each named executive officer; and (iii) all of the Company’s 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 April 24, 2023. 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 10,938,556 shares of common stock outstanding on April 24, 2023. Unless otherwise indicated, the address for each stockholder listed below is urban-gro, Inc., 1751 Panorama Point, Unit G, Lafayette, Colorado 80026.


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Shares Beneficially Owned(1)
Name and Address of Beneficial OwnerNumber Percent
5% Stockholder:  
AWM Investment Company, Inc.(2)
837,248 7.7 %
Octavio Gutierrez(3)
 662,503  6.1 %
AdvisorShares Trust(4)
 569,497  5.2 %
Named Executive Officers and Directors:    
Bradley J. Nattrass 1,584,349  14.5 %
Richard A. Akright 72,207  *
Jason T. Archer2,400 *
James R. Lowe 381,206  3.6 %
Lewis O. Wilks 72,418  *
Anita Britt 25,285  *
Sonia Lo 21,798  *
David Hsu 25,164  *
All executive officers and directors as a group (12 persons) 2,449,576  22.2 %
*Indicates beneficial ownership of less than 1%.
(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. The 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 April 24, 2023 and that will vest within 60 days of April 24, 2023. Shares of common stock subject to stock options exercisable and restricted stock units that will vest within 60 days after April 24, 2023 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.
(2)Based on Schedule 13G filed with the SEC on February 14, 2023 by AWM Investment Company, Inc. The Schedule 13G states that AWM Investment Company, Inc. has sole voting and dispositive power over 837,248 shares of our common stock as of December 31, 2022. The address of AWM Investment Company, Inc. is 527 Madison Avenue, Suite 2600, New York, NY.
(3)The address of Mr. Gutierrez is 615 15th Ave. NE St. Petersburg, FL 33704
(4)Based on Schedule 13G/A filed with the SEC on March 3, 2023 by AdvisorShares Trust. The Schedule 13G/A states that AdvisorShares Trust has sole voting and dispositive power over 569,497 shares of our common stock as of December 31, 2022. The address of AdvisorShares Trust is 4800 Montgomery Lane, Suite 150, Bethesda, Maryland 20814.


ELECTION OF DIRECTORS
(Proposal 1)
The Company’s Board currently consists of six members. During 2022, James H. Dennedy resigned from his positions of President, Chief Operating Officer and a Director of the Company. The Company does not intend to fill his board vacancy and the Board has reduced the number of directors from seven to six. All six members of the Board are standing for re-election at the Annual Meeting. The persons whose names are listed below (“Director Nominees”) have been nominated for election as directors by the Board to serve for a term of office to expire at the 2024 Annual Meeting of Stockholders, with each to hold office until his successor has been duly elected or appointed. Each Director Nominee has expressed her/his intention to serve the entire term for which election is sought.
The Board has determined that Mr. Dennedy is an “audit committee financial expert,” as that term is defined in the rules promulgated by the Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2012. The Board has further determined thatrecommends a vote “FOR” 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.

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Audit Committee Pre-Approval Policies.

The Audit Committee must pre-approve all services rendered by the Company’s independent registered public accounting firm. The Audit Committee has delegated to its Chairperson the authority to grant any pre-approvals in between scheduled meetings. Any decision to grant pre-approval is presented to the full Audit Committee at its next scheduled meeting.

Audit Committee Composition, Post Annual Meeting.

Based upon the nominated Board members being approved, we expect to re-appoint Jim Dennedy as the Audit Committee Chairperson, with the balance of the committee continuing to include Mr. Wilkes. 

Compensation Committee

Our Board has established a Compensation Committee, which is composed of two independent directors (as defined under the general independence standards of the NYSE listing standards and our Corporate Governance Guidelines). Mr. Lewis Wilkes (Chairperson) is a “non-employee director” (within the meaning of Rule 16b-3 of the Exchange Act) and “outside director” (within the meaning of Section 162(m) of the Internal Revenue Code). Mr. Jim Dennedy serves as the other member of this committee and meet similar requirements as noted herein. 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; and

·prepare a report on executive compensation for inclusion in our proxy statement for our annual stockholder meetings.

Our Compensation Committee determines and approves all elements of executive officer compensation. It also provides recommendations to the full Board of Directors with respect to non-employee director compensation. The Compensation Committee may not delegate its authority to any other person, although it may delegate its authority to a subcommittee.

The Compensation Committee was established in 2018 and met once in FY 2018.

Compensation Committee Composition, Post Annual Meeting.

Based upon the nominated Board members being approved, we expect to re-appoint Jim Dennedy as a committee member. Lewis Wilkes will remain as the Compensation Committee Chairperson.

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Nominating and Corporate Governance Committee

Our Board has also established a Governance Committee. The Corporate Governance Committee consists of Mr. James Lowe, Chairperson and Lance Galley. 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 its Committees;

·oversee the evaluation of the Board;

·recommend actions to increase the Board’s effectiveness; and

·develop, recommend and oversee our corporate governance principles, including our Code of Business Conduct and Ethics and our Corporate Governance Guidelines.

The Nominating and Corporate Governance Committee was established in 2018.

Nominating and Corporate Governance Committee Composition, Post Annual Meeting.

Based upon the nominated Board members being approved, we expect to re-appoint Lance Galley as a committee member. James Lowe will continue to serve as the Nominating and Corporate Governance Committee Chairperson.

Code of Business Conduct and Ethics

Our Code of Business Conduct and Ethics applies to all of our officers, employees and directors, including our Chief Executive Officer and Chief Financial Officer. We have always conducted our business in accordance with the highest standards of conduct. Full compliance with the letter and spirit of the laws applicable to our businesses is fundamental to us. Equally important are equitable conduct and fairness in our business operations and in our dealings with others. Our Code of Business Conduct and Ethics reflects the foregoing principles.

We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of the Code of Business Conduct and Ethics applicable to our Chief Executive Officer and Chief Financial Officer by posting such information on our website http://urban-gro.com in the near future.

Corporate Governance Guidelines

The Board has also adopted a set of Corporate Governance Guidelines that reflect our governance principles and our commitment to maintaining high corporate governance standards.

The Corporate Governance Committee is responsible for periodically reviewing the Corporate Governance Guidelines and the Code of Business Conduct and Ethics and for considering, as necessary, making recommendations on governance issues that should be addressed by the Board.

9

PROPOSAL 1—ELECTION OF DIRECTORS

In accordance with our current Bylaws, Board members are elected to one-year terms. Our Bylaws provide for the election of directors at the Annual Meeting of shareholders. Each director serves until his or her successor is elected and qualified, or until his or her resignation or removal. Directors are elected by a plurality of the votes cast, so that only votes cast “for” directors are counted in determining which directors are elected.

The size of the Board of Directors will remain as previously set at seven directors, all of whom are running for re-election. Therefore, the seven directors receiving the most votes “for” will be elected. Broker non-votes (if any) and withheld votes will be treated as shares present for purposes of determining the presence of a quorum but will have no effect on the vote for the election of directors. Information with respect to the nominees proposed for election is set forth below.

The Board of Directors recommends a vote FOR the director nominees.Director Nominees. The persons named in the accompanying proxy card will vote for“FOR” the election of the nominees named in this proxy statementDirector Nominees unless shareholdersstockholders specify otherwise in their proxies.If any nomineeDirector Nominee at the time of election is unable to serve, or otherwise is unavailable for election, and if other nominees are designated by the Board, of Directors, the persons named as proxy holders on the accompanying proxy card intend to vote for such nominees. Management is not aware of the existence of any circumstance, which would render the nomineesDirector Nominees named below unavailable for election. All

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Director Nominees
The following table and text set forth the name, age, position with the Company, and terms of service of each Director Nominee as of April 24, 2023:
Name Age Position Director Since
Bradley J. Nattrass 50 Chairperson of the Board and Chief Executive Officer 2017
       
James R. Lowe (1)(4)
 42 Director 2018
       
Lewis O. Wilks (1)(3)
 69 Director 2018
       
Anita Britt (1)(2)(3)
 59 Director 2021
       
David Hsu (2)(3)(4)
 41 Director 2021
       
Sonia Lo(2)(4)
 55 Director 2021
(1)Member of the Corporate Governance and Nominating Committee.
(2)Member of the Audit Committee.
(3)Member of the Compensation Committee.
(4)Member of the Environment, Social and Governance ("ESG") Committee.

Information with respect to the securities beneficially owned by each of the nominees are currently directorsDirector Nominees can be found under the heading “Security Ownership of Certain Beneficial Owners and Management.” The following sets forth the biographical background information for each Director Nominee. In addition, the biographies of the Company.

Director Nominees 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 Director Nominees have the professional experience and personal character that make them highly qualified Director Nominees for Directors

Set forth below are the namesCompany and ages of the nominees for directors of the Company.

collectively comprise an experienced board that works well together as a whole.

Bradley J. Nattrass, is one of our founders and has been our Chief Executive Officer and Chairperson of our Board since March 2017. Mr. Nattrass was our Managing Member from March 2014 until March 2017 when we converted to a corporation and he became our Chief Executive Officer, President and our Chairman.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 products.products. 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. From April 2011 to January 2014, he was a Vice President for Barbeque Wood Flavors, Inc., a Texas corporation engaged in the manufacturing, import and sale of barbeque grilling products. Mr. Nattrass received a Bachelor of Commerce degree from the University of Calgary in marketing in 1995 and an MBAa Master of Business Administration from the University of Phoenix in 2001. He devotes substantially all of his time to our affairs.

Octavio (“Tavo”) Gutierrez is also one of our foundersMr. Nattrass brings executive leadership experience, organizational experience, and was one of our Managing Members from March 2014 until March 2017 when we converted to a corporation and he became our Chief Development Officer and a director. Starting in October 2015 he has been the Managing Member of enviro-glo, LLC, a Colorado limited liability company engagedextensive experience in the manufacturingindustry to the Board. Mr. Nattrass is familiar with the Company’s day-to-day operations and branding of commercial lighting products.Previously, startingperformance and the controlled environment agriculture industry in January 2012 he has beengeneral. Mr. Nattrass’ insight into the Managing Member of Bravo Lighting, LLC, a Colorado limited liability company engaged in the distribution of commercial lighting products. From July 2010 through November 2013, he was the Vice President of Operations for Stone Lighting, LLC, an Illinois limited liability company engaged in the material sourcing, manufacturing, assembly,Company’s operations and distribution of premium decorative and low voltage lighting systems. Mr. Gutierrez received a Bachelor of International Business from Universidad Autonoma de Guadalajara in Guadalajara, Mexico. He devotes substantially all of his timeperformance is critical to our affairs.

Board discussions.

George
James R. Pullar was appointed as a directorLowe in May2018 and as our Chief Financial Officer in August 2018. He had been advising with us since October 2016, primarily in the areas of accounting, finance and strategic planning. Previously, from December 2016 through October 2017 he was the Chief Financial Officer for Massroots, Inc., a publicly held social media company in the cannabis industry based in Denver Colorado. Additionally, since 2006, Mr. Pullar has been the Managing Director of Axis Private Equity Group LLC, a private equity firm in Englewood, Colorado. Mr. Pullar received a Bachelor of Arts degree from the University of Toledo in 1991 and an MBA degree from Southern Methodist University in 2002.He devotes substantially all of his time to our affairs.

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James H Dennedy, age 52, was appointed as a director of our Company in August 2018. In addition to his position with our Company Mr. Dennedy is a Director and Chief Financial Officer for Interurban Capital Group, a capital investment and management services company based in Seattle, WA. Prior to this position, from May 2011 through January 2017, he was the President and CEO of Agilysis, Inc., a company offering software solutions to the hospitality industry and based in Alpharetta, GA.  Mr. Dennedy received an MA degree in Economics from the University of Colorado, Boulder in 1995, an MBA degree from The Ohio State University in 1992 and a BS degree in Economics from the US Air Force Academy in 1984.

Lance Galey, age 43, was appointed as a director of our Company in August 2018. In addition to his position with our Company, Mr. Galey is also currently Vice President of Engineering, Oracle Cloud Infrastructure at Oracle, a position he has held since July 2017. Prior, from June 2016 to July 2017, Mr. Galey was Chief Technology Officer for MassRoots, Inc., a Denver, CO based publicly traded company providing a technology platform for the cannabis industry. From May 2016 through June 2017, Mr. Galey was the Principal Cloud Architect at Dynamics 365 at Microsoft, Inc. From February 2014 through April 2016 he was Chief Cloud Architect at Autodesk, where he helped transform their products into strategic SaaS businesses. From June 2012 through February 2014, he was Vice President and Principal Architect at Salesforce.com, where he led the architecture and development of numerous core infrastructure services underlying a large portfolio of Salesforce SaaS applications and was selected as the executive MVP for the technology division of Salesforce.com. Prior to his time at Salesforce, Mr. Galey served as Chief Architect and Head of OpenStack Engineering of Cloud Services for WebEx, a division of Cisco (2011-2012); and as the Director of Architecture for the Disney Connected and Advanced Technologies division of The Walt Disney Company (2009-2011). Mr. Galey also served as Sr. Program Manager at Microsoft Inc. (2006-2009) and began his career at Amazon (2005-2006) and Level 3 Communications (2000-2005). He received a Bachelor of Science degree from Regis University in 2004.

Lewis O. Wilks, Jr., age 65, was appointed as a director of our Company in August 2018. In addition to his position with our Company, since 2004 Mr. Wilks has been the Senior Managing Partner at Bright Peaks Venture Capital LLC, Cherry Hills Village, CO, where he oversees the company’s investments. In addition, since November 2015, he has been the Executive Chairman of NCS Analytics, a Denver, CO based company that is implementing its patent pending, predictive analytics engine to provide financial, regulatory, and audit service to clients with real-time alerts for cash intensive businesses, including marijuana related businesses. Since June 2017, he has also been Chairman of El Dorado Hills, CA based FuseIntel, a companydoing intelligence sector analytics. From September 1997 to September 2001, he served as the Chief Strategy Officer for Qwest Communications. Mr. Wilks received a Bachelor of Science degree in Computer Science from the University of Central Missouri in 1979.

James R. Lowe, age 39, was appointed as a director of our Company in August 2018.  In addition to his position with our Company, Mr. Lowecofounded MJardin Group in 2014 where he served as President of Cultivation, overseeing all cultivation operations through 2017. He was a director of MJardin from March 2014 through June 2018. Mr. Lowe left MJardin Group to become EVP of Operations of GrowForce, a spinout from MJardin Group based in Canada focusing on international cannabis opportunities. Mr. Lowe is no longer an officer of GrowForce. Mr. Lowe has served as a director of MJardin Group (CSE: MJAR) (OTCQX: MJARF) from March 2014 to September 2018, and again from January 2020 to March 2021. 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. Mr. 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. Lastly, MrMr. Lowe entered the legal cannabis market in 2009 as the owner of Cloud 9Cloud9 Support LLC, a retail horticulture supplies and design company that was responsible for over 50 design projects and construction assists while layingassists. Mr. Lowe brings to the groundwork for future endeavors.  

AllBoard significant experience in the CEA sector and prior public company director experience within the sector. Mr. Lowe’s extensive knowledge of the nomineesindustry brings valuable insights to the Board regarding customer demand and product offerings. These views add important insights within discussions of the Board.

Lewis O. Wilks was appointed as a director of our Company in August 2018 and as Lead Independent Director in May 2021. Since 2004, Mr. Wilks has been the Senior Managing Partner at Bright Peaks Venture Capital LLC, where he oversees the company’s investments. In addition, since November 2015, he has been the Executive Chairman of NCS Analytics, a Denver based company that is implementing its patent pending, predictive analytics engine to provide financial, regulatory, and audit services to clients with real-time alerts for cash intensive businesses. Since June 2017, he has also been Chairman of FuseIntel, a company doing intelligence sector analytics. From September 1997 to September 2001, he served as the Chief Strategy Officer for Qwest Communications. Mr. Wilks received a Bachelor of Science degree in Computer Science from the University of Central Missouri in 1979. Mr. Wilks brings
7

valuable experience to the Board through his prior management and technical experience. His business understanding and technological background provide the Board with important insights regarding the Company’s operations, product offering and business development.
Anita Britt was appointed as a director of our Company in June 2021. Ms. 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, Smith & Wesson Brands and Delta Apparel. Ms. Britt is a Certified Public Accountant; a Board 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, Ms. Britt has extensive corporate finance, wall street and capital markets experience in both public and private sectors. She brings board and business leadership experience. Ms. 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. Mr. 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 to 2016, Mr. Hsu served in various roles with CRG Partners (“CRG”), and later Deloitte & Touche 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. Mr. 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. Mr. Hsu also received a Certification in Financing and Deploying Clean Energy from Yale University, which he received in 2021. Mr. 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.
Sonia Lo was appointed as a director of our Company in October 2021. Ms. 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 and Temasek, focused on developing the next generation of seeds for vertical farmers. From May 2020 to May 2021, Ms. Lo 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 company. Ms. Lo has a Bachelor’s degree in Political Science & Mathematics from Stanford University and an MBA from Harvard Business School. Ms. 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, Director Nominee, or executive officer and any other person pursuant to which any person was selected as a director, Director Nominee, or executive officer. There are no family relationships between any of the Company’s directors, presently. OurDirector Nominees, 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, Director Nominees, or executive officers. Excluding Proposal 1 (Election of Directors) and Proposal 3 (approval of the Amended and Restated COI to limit the liability of certain officers in limited circumstances), 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” EACH DIRECTOR NOMINEE FOR ELECTION TO THE BOARD OF DIRECTORS
Board Committees and Meetings
The Board has established four standing committees, the Audit Committee, the Compensation Committee, the Corporate Governance and Nominating Committee, did not receive any recommendations of director candidates from any stockholder or group of stockholders during FY 2017. We did not utilize any third-party search firmsand the ESG Committee, to assist in identifying potential director candidates during FY 2017.it with the performance of its responsibilities. The Board upondesignates 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 eight meetings during 2022. 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 2022, 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 2022 Annual Meeting of Stockholders.
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Audit Committee
Our Board has established an Audit Committee, which consists of three independent directors, Ms. Britt (Chairperson), Ms. Lo, and Mr. Hsu. The Audit Committee held four meetings during 2022. 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 reporting;
•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; and
•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 are 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 that Ms. 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 consists of three independent directors (as defined under the general independence standards of the Nasdaq listing standards and our Corporate Governance Guidelines): Mr. Wilks (Chairperson), Ms. Britt, and Mr. Hsu. Messrs. Wilks and Hsu and Ms. 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 2022. 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; and
•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.
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Corporate Governance and Nominating Committee
Our Board has established a Corporate Governance and Nominating Committee, which consists of three independent directors, Mr. Lowe (Chairperson), Mr. Wilks and Ms. Britt. The Corporate Governance and Nominating Committee held two meetings during 2022. 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; and
•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 has established an ESG Committee, which consists of three independent directors, Mr. Hsu (Chairperson), Mr. Lowe and Ms. Lo. Due to the ESG Committee being formed on February 16, 2023, the ESG Committee held no meetings during 2022. The committee’s primary duties are to:
•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; and
•review stockholder proposals relating to ESG issues and recommend responses to the Board. 

Corporate Governance
Composition of our Board
Our business and affairs are managed under the direction of our Board. The number of directors will be fixed from time to time by our Board, subject to the terms of our certificate of incorporation and bylaws, which will include a requirement that the number of directors be fixed exclusively by a resolution adopted by directors constituting a majority of the total number of authorized directors, whether or not there exist any vacancies in previously authorized directorships. Our Board currently consists of six directors.
When considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable our Board to satisfy its oversight responsibilities effectively in light of our business and structure, the Board focuses primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth above. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business.
Corporate Governance Profile
We intend to structure our corporate governance in a manner we believe closely aligns our interests with those of our stockholders. Notable features of our corporate governance structure will include the following:
•our Board will not be classified, with each of our directors subject to re-election annually;
•we expect that a majority of our directors will satisfy the Nasdaq listing standards for independence;
•generally, all matters to be voted on by stockholders will be approved by a majority (or, in the case of election of directors, by a plurality) of the votes cast by all stockholders present in person or represented by proxy, voting together as a single class, if a quorum is present;
•we intend to comply with the requirements of the Nasdaq marketplace rules, including having committees comprised solely of independent directors; and
•we do not have a stockholder rights plan.
Our directors will stay informed about our business by attending meetings of our Board and its committees and through supplemental reports and communications. Our independent directors will meet regularly in executive sessions without the presence of our corporate officers or non-independent directors.
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The Corporate Governance and Nominating Committee does not have a policy with regard to consideration of director candidates recommended by stockholders. The Company does not believe that it is necessary for the Corporate Governance and Nominating Committee to have such a policy because to date, the Company has not received any recommendations from stockholders requesting that the Corporate Governance and Nominating Committee consider a candidate for inclusion among the slate of nominees in the Company’s proxy statement and the directors are elected by a majority of the votes cast in person or by proxy at a meeting at which a quorum is present. The Corporate Governance and Nominating Committee will consider all proposed nominees for the Board, including those put forward by stockholders. Stockholders nominations should be addressed to the Corporate Secretary at urban-gro, Inc., 1751 Panorama Point, Unit G, Lafayette, Colorado 80026, who will provide it to the Corporate Governance and Nominating Committee.
Each notice of a stockholder proposal for a director nominee must set forth:
•the name and address of such stockholder, as they appear on our books, and of such beneficial owner;
•the number of shares of each class of our stock which are owned beneficially and of record by such stockholder and such beneficial owner; and
•as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected). 
If the Board has determined that directors will be elected at a special meeting of stockholders, any stockholder of the Company who is a stockholder of record both at the time of giving of notice of such meeting and at the time of the special meeting, and who is entitled to vote at the meeting and who complies with the required notice procedures may nominate a person for election to the Company’s Board. Such stockholder must deliver a notice containing the information described above to the Corporate Secretary not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. These requirements are in addition to the requirements of the SEC that a stockholder must meet to have a proposal included in our proxy statement.
Role of the Board in Risk Oversight
The Board actively manages the Company’s risk oversight process and receives periodic reports from management on areas of material risk to the Company, including operational, financial, legal, and regulatory risks. The Board committees assist the Board in fulfilling its oversight responsibilities in certain areas of risk. The Audit Committee assists the Board with its oversight of the Company’s major financial risk exposures. The Compensation Committee assists the Board with its oversight of risks arising from the Company’s compensation policies and programs. The Corporate Governance and Nominating Committee assists the Board with its oversight of risks associated with Board organization, Board independence, and corporate governance. The ESG Committee assists the Board with oversight of external risks associated with changing environmental and social conditions impacting the marketplace. While each committee is responsible for evaluating certain risks and overseeing the management of those risks, the entire Board is regularly informed about the risks.
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, Hsu and Wilks and Mses. Britt and Lo qualify as an independent director, as defined under the following nominees for director is independent within our Corporate Governance Guidelines: Messrs. Dennedy, Galey and Wilks.

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applicable corporate governance standards of Nasdaq.
 

Board Leadership
The Nominating Committeeoffices of the Chairperson of the Board and Chief Executive Officer are currently combined. Mr. Nattrass serves as the Company’s Chairperson of the Board and Chief Executive Officer. The Board believes that this structure is the most appropriate structure at this time for several reasons. Mr. Nattrass is responsible for reviewingthe day-to-day operations of the Company and the execution of its strategies. Since these topics are an integral part of Board discussions, Mr. Nattrass is the director best qualified to chair those discussions. In addition, Mr. Nattrass’ experience and knowledge of the Company and the industry are critical to Board discussions and the Company’s success. The Board believes that Mr. Nattrass is well qualified to serve in the combined roles of Chairperson and Chief Executive Officer and that Mr. Nattrass’ interests are sufficiently aligned with the stockholders he represents.
Mr. Wilks is the Board’s lead independent director. Responsibilities of the lead independent director include, among others, presiding at meetings of the Board at which the Chairman is not present, serving as a liaison between the Chairman and the
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independent directors, previewing the information to be provided to the Board, approving meeting agendas for the Board, organizing and leading the Board’s evaluation of the Chief Executive Officer and leading the Board’s annual self-assessment. To help ensure the independence of the Board, the independent directors of the Board generally meet without members of management at various times during the year.

Diversity of the Board
Diversity and inclusion is important to the Board and the Company. The current and proposed Board complies with the Nasdaq’s Board Diversity Rule. The following is the Board Diversity Matrix Disclosure:
urban-gro, Inc. Board Diversity Matrix as of May 1, 2023
Total Number of Directors 6
  Female Male Non-Binary 
Did Not
Disclose Gender
Part I: Gender Identity        
Directors 2 4 — —
Part II: Demographic Background        
African American or Black — — — —
Alaskan Native or Native American — — — —
Asian 1 1 — —
Hispanic or Latinx — — — —
Native Hawaiian or Pacific Islander — — — —
White 1 3 — —
Two or More Races or Ethnicities — — — —
LGBTQ+ —
Did Not Disclose Demographic Background —
Communication with the Board
Stockholders and other interested parties who wish to communicate with the Board may do so by writing to the requisite skills and characteristics of new Board members as well as the compositionfollowing address: c/o Bradley J. Nattrass, Chairperson of the Board asof Directors, urban-gro, Inc., 1751 Panorama Point, Unit G, Lafayette, Colorado 80026. Our Audit Committee has also adopted a whole. This assessment includes members’ qualification as independent, as well as consideration of diversity, age, skills and experience in the context of the Board’s needs. Nominees for directorships are selected by the Nominating Committee and recommendedwhistle-blower policy to the Board in accordance with the policies and principles in its charter. The Nominating Committee does not distinguish between nominees recommended byallow employees, stockholders and other nominees. Stockholders wishinginterested persons to suggest candidatescommunicate directly with our Audit Committee, including reporting complaints relating to the Nominating Committee for consideration as directors must submit a written noticeaccounting, internal accounting controls, or auditing matters. Communications should be addressed to the Company’s Corporate Secretary, who will provide it to the Nominating Committee. Our Bylaws set forth the procedures a stockholder must follow to nominate directors. These procedures are summarized in this Proxy Statement under the caption “Stockholder Proposals for 2020 Annual Meeting of Stockholders.”

The following table sets forth the name and the position(s) currently held by each person nominated as a director:

NameAgePosition
Bradley Nattrass46Chairman of the Board
Octavio (“Tavo”) Gutierrez48Director
George R. Pullar50Director
James C. Dennedy53Independent Director
Lance Galey43Independent Director
Lewis O. Wilks65Independent Director
James Lowe38Independent Director

EachMs. Anita Britt, Chairperson of the above persons, if reelected, will serve asAudit Committee, at urban-gro, Inc., 1751 Panorama Point, Unit G, Lafayette, Colorado 80026.

COMPENSATION OF DIRECTORS
Elements of Director Compensation
Beginning in January 2020, non-employee directors until the Annual Meetingwere granted restricted shares of Stockholders held in 2020 and the election and qualification of the director’s respective successor or until the director’s earlier death, removal or resignation.

All nominees have consented to be named and have agreed to serve if elected. Although it is not anticipated that any of the persons named above will be unable or unwilling to stand for reelection, a proxy, in the event of such occurrence, may be voted for a substitute nominee to be designated by the Board, or,common stock as an alternative, the Board may reduce the number of directors to be elected at the Meeting or leave the position(s) vacant.

Compensation of Directors

Each Independent director has been issued a stock option to acquire up to 100,000 shares of the Company’s Common Stock, exercisable at $1.20 per share. The stock options shall vest proportionately on each annual anniversary of their respective appointment over a 3-year period. In addition, a director who agrees to participateretainer and becomefor serving as a member of a standing committeecommittee. 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 Board, including Audit Committee, Nominating and Corporate Governance and Compensation, will receive an additional option to purchase 10,000 shares at an exercise price of $1.20, which will vest at end of each year of service for each committee that they are on. 2022 Director Compensation:

MemberChair
(additional, all cash)
Position CashRSU Value Total 
Board of Director $45,000  $80,000  $125,000  $— 
Audit Committee $10,000  $—  $10,000  $10,000 
Compensation Committee $5,000  $—  $5,000  $5,000 
Nominating & Governance Committee $5,000  $—  $5,000  $5,000 
ESG Committee$5,000 $— $5,000 $5,000 
Special Committee $7,500  $—  $7,500  $7,500 
Each director will be required to attend a minimum of 75% of all boardBoard meetings per year in person or telephonically. AllDirectors are reimbursed for travel and other expense incurred by each Director will be reimbursed by us. It is also possible that director compensation will include monetary fees at some time in the near future. They may also be considered for additional compensation by the Compensation Committee, should such consideration be determined advisable.

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 but may be considered for additionaltime.

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Fiscal Year 2022 Director Compensation Table
The following table provides information regarding director compensation as determined byduring 2022. The compensation of Mr. Nattrass and Mr. Dennedy (a former director and officer who resigned his Board membership and employment on August 26, 2022) is reported in the BoardFiscal Year 2022 and 2021 Summary Compensation Committee.

Table.
Name Fees Earned or Paid in Cash ($) 
Stock Awards ($)(1)(2)
 Non-equity incentive plan compensation ($) Change in pension value and nonqualified deferred compensation earnings 
All other compensation ($)(3)
Total ($)
Anita Britt 57,500  80,000  —  —  — 137,500 
David Hsu 42,500  80,000  —  —  30,000 152,500 
James R. Lowe 42,500  80,000  —  —  — 122,500 
Lewis O. Wilks 55,000  80,000  —  —  — 135,000 
Sonia Lo 33,867  80,000  —  —  — 113,867 
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(1)Amounts represent the aggregate fair value of stock grants based on the closing stock price on the date of the grant.
(2)The chart below shows the aggregate number of outstanding restricted stock units and stock options held by each non-employee director as of December 31, 2022.
Director Stock Options Restricted Stock Units
Anita Britt —  8,081 
David Hsu —  7,960 
James Lowe 37,709  381,206 
Lewis Wilks 21,667  30,047 
Sonia Lo —  4,595 

OUR EXECUTIVE OFFICERS

The following individuals currently serve as our executive officers.

NameAgePosition
(3)
Bradley Nattrass47Chief Executive Officer, President
Octavio (“Tavo”) Gutierrez48Chief Development Officer
George R. Pullar50Chief Financial Officer, Secretary
Larry Dodson61Chief Technology Officer

The resumes of all of the above persons other than Mr. Dodson are included above. Following is Mr. Dodson’s resume.

Larry Dodson was appointed as our Chief Technology Officer in September 2018. Prior, from December 2015 through September 2018, Mr. Dodson was the Vice President of Controls for Fluence Bioengineering, Inc., where he was responsible for product and market development of lighting controls for horticulture and IT, as well as facilities and manufacturing operations. From July 2015 to December 2015 we as a Senior Vice President for Clarus Vision, Inc. From January 2012 through July 2015 he was the Vice President of Marketing and Operations for Unipixel, Inc., where he was responsible for product development of touch screen films, process development and operations. Mr. Dodson received a Master of Business Administration from Houston Baptist University in 1993, a Bachelor of Science degree in electrical engineering and a Bachelor of Arts degree in Chemistry, each from Southern Illinois University in 1983 and 1982, respectively. He devotes substantially all of his business time to our affairs.

EXECUTIVE COMPENSATION

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation SK with management of the Company. Based on this review, the Compensation Committee recommended to the Company’s Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Submitted by:
Compensation Committee
Lewis O. Wilkes (Chairperson)
______________________________

March 29, 2019

The information contained in the report above shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference in such filing.

13Represents compensation paid to Mr. Hsu pursuant to a consulting agreement for professional services.

Compensation Discussion

COMPENSATION OF EXECUTIVE OFFICERS
We are an “emerging growth company” under applicable SEC rules and Analysis

are providing disclosure regarding our executive compensation arrangements pursuant to the rules applicable to emerging growth 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 2022, consisting of Bradley J. Nattrass, our Chairperson and Chief Executive Officer, and our two other most highly compensated executive officers as of December 31, 2022, Richard A. Akright, Chief Financial Officer, and James Dennedy, former Chief Operating Officer and President.

We have a Compensation Committee comprised of Messrs. WilkesWilks and Dennedy as directors.Hsu and Ms. Britt. Under our Compensation Committee charter, our Compensation Committee determines and approves all elements of executive officer compensation. This committee was formed and effective with the filing of our annual report on Form 10-K related to FY 2018.

The Compensation Committee’s primary objectives in determining executive officer compensation are:

·developing an overall compensation package that is at market levels and thus fosters executive officer retention; and

·aligning the interests of our executive officers with our stockholders by linking a significant portion of the compensation package to performance.

SUMMARY COMPENSATION TABLE

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.

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Fiscal Year 2022 and 2021 Summary Compensation Table
The table below summarizes allfollowing Fiscal Year 2022 and 2021 Summary Compensation Table contains information regarding compensation awarded to, earned by, orfor 2022 and 2021 that the Company paid to our Chief Executive OfficerMr. Nattrass and ourits two other most highly compensated executive officers as of December 31, 2022.

Name and Principal Position Year Salary ($) 
Bonus ($)(1)
 
Stock Awards ($)(2)
 
All Other Compensation ($)(3)
 Total ($)
Bradley J. Nattrass (4)
 2022320,000 210,600 960,000 23,642 1,514,242 
Chairperson of the Board and Chief Executive Officer 2021270,000 100,000 270,000 21,425 661,425 
  
James Dennedy (5)
 2022201,923 146,250 — 573,983 922,156 
Former Chief Operating Officer and President 2021218,750 60,000 624,233 25,319 928,302 
  
Richard A. Akright (6)
 2022250,000 89,512 250,000 16,549 606,061 
Chief Financial Officer 2021232,500 80,000 116,250 14,968 443,718 
(1)The 2021 bonus amounts have been amended to reflect actual cash payments made during fiscal year 2021.
(2)Amounts represent the aggregate fair value of stock grants based on the closing stock price on the date of the grant.
(3)Represents amounts paid to Mr. Nattrass, Mr. Dennedy, and Mr. Akright for health insurance premiums paid on their behalf, severance payments to Mr. Dennedy in 2022, and stock awards and cash compensation for service on our Board of Directors to Mr. Dennedy in 2021.
(4)Mr. Nattrass received a stock grant of 91,600 shares on January 1, 2022. Mr. Nattrass received a stock grant of 28,754 shares on May 27, 2021.
(5)Mr. Dennedy received a stock grant of 85,900 shares on January 1, 2022. In August of 2022, Mr. Dennedy resigned and the Company clawed back these shares. Mr. Dennedy received a stock grant of 19,968 shares on May 27, 2021. Upon becoming an officer of the Company, Mr. Dennedy received a stock grant of 40,000 shares and a cash bonus of $60,000 on February 15, 2021. Includes stock awards of $61,133 and cash compensation of $5,000 for service on our Board of Directors in 2021.
(6)Mr. Akright received a stock grant of 23,855 shares on January 1, 2022. Mr. Akright received a stock grant of 12,380 shares on May 27, 2021.
Employee Agreements
The following discussion relates to compensation arrangements on behalf of, and compensation paid by us to, Messrs. Nattrass, Dennedy and Akright.
Bradley J. Nattrass. We are a party to an employment agreement with Mr. Nattrass (the “Nattrass Agreement”), whereby he serves as our Chief Executive Officer. 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. The term of the Nattrass Agreement is three years, however, if a change in control occurs during the term, the term shall expire no earlier than the first anniversary of the change in control.
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.
James H. Dennedy. We were a party to an employment agreement in 2022 with Mr. Dennedy (the “Dennedy Agreement”), whereby he served as our Chief Operating Officer and President. Pursuant to the Dennedy 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. The term of the Dennedy Agreement was three years, however, if a change in control occurred during the term, the term would expire no earlier than the first anniversary of the change in control. The Dennedy Agreement terminated on August 26, 2022 with his termination of employment and negotiated severance.
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Richard A. Akright. We are a party to an employment agreement with Mr. Akright (the “Akright Agreement”), whereby he serves as our Chief Financial Officer. Pursuant to the Akright 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. The term of the Akright Agreement is three years, however, if a change in control occurs during the term, the term shall expire no earlier than the first anniversary of the change in control.
Under certain circumstances, the Akright 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 Akright Agreement). In the event of a termination without “cause,” Mr. Akright is 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. Akright is 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 includes confidentiality and non-compete provisions.
Equity Incentive Awards
Mr. Nattrass received a restricted common stock grant of 91,600 shares on January 1, 2022. Of this grant, 45,800 shares vest proportionally on each December 31, over a 3-year period beginning on December 31, 2022. Additionally, 45,800 shares vest 100% on December 31, 2024 based on compounding total annual stockholder return. Mr. Nattrass received a restricted common stock grant of 28,754 shares on May 27, 2021 that vests proportionately on each December 31 over a 3-year period beginning on December 31, 2021.
Mr. Dennedy received a restricted common stock grant of 85,900 shares on January 1, 2022. All of this grant was clawed back upon Mr. Dennedy's resignation in August of 2022. Mr. Dennedy received a restricted common stock grant of 19,968 shares on May 27, 2021 that was scheduled to vest proportionately on each December 31 over a 3-year period beginning on December 31, 2021. Mr. Dennedy also received a stock grant of 40,000 shares on February 15, 2021 that was scheduled to vest 25%, 35%, and 40% on each December 31 over a 3-year period beginning on December 31, 2021. Upon Mr. Dennedy's resignation in August 2022, the remaining unvested stock grants were all clawed back.
Mr. Akright received a restricted common stock grant of 23,855 shares on January 1, 2022, that vests proportionately on each December 31 over a 3-year period beginning on December 31, 2022. Mr. Akright received a restricted common stock grant of 12,380 shares on May 27, 2021 that vests proportionately on each December 31 over a 3-year period beginning on December 31, 2021. Mr. Akright also received a restricted common stock grant of 50,000 shares on January 1, 2020 that vests proportionately on each January 1 over a 3-year period beginning on January 1, 2021.
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% up to 4%.

Fiscal Year 2022 Outstanding Equity Awards at Fiscal Year-End Table
The following table lists all of the outstanding stock awards held on December 31, 2022 by each of the Company’s named executive officers:
Stock Awards
Name Number of shares or units of stock that have not vested Market value of shares of units of stock that have not vested Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested
Bradley J. Nattrass 70,652 $192,173 — — 
Richard A. Akright 20,031 $54,484 — — 
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The following table lists all of the outstanding option awards held on December 31, 2022 by each of the Company’s named executive officers:
Option Awards
Name Number of securities underlying unexercised options exercisable Number of securities underlying unexercised options unexercisable Equity incentive plan awards: Number of securities underlying unexercised unearned options Option exercise price Option expiration date
Bradley J. Nattrass — — — $— — 
Richard A. Akright 833 — — $7.20 March 2029
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, 2022, except for Form 4s for Messrs. Nattrass, Wilks, Lowe, Akright and Hsu and Mses. Britt and Lo.
Certain Relationships and Related Transactions

Following is a description of transactions since January 1, 2021, 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 (including nominees), 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. Our policy requires that any transactions with related parties requires a formal agreement to be entered into and the approval of the Board.
During the fourth quarter of 2020, James Lowe agreed to convert a $1,000,000 note plus $4,500 of accrued interest into a convertible note bridge financing. The note bridge financing carried interest at the rate of 12% and would have matured on December 31, 2021. The note bridge financing was converted into shares of our common stock upon the closing of a qualified offering, at 75% of the per share price paid by investors in a qualified offering, which offering and conversion occurred on February 17, 2021.
Equity Incentive Plans
As of December 31, 2022, 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 price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plan approved by stockholders 953,497  $6.77  454,225 
Equity compensation plan not approved by stockholders 210,750  $6.35  181,510 
Total 1,164,247  $7.34  635,735 

ADOPTION OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO ELIMINATE SUPERMAJORITY VOTING REQUIREMENTS
(Proposal 2)

The amended certificate of incorporation of the Company (the “Current COI” attached to this proxy statement as Appendix A) requires the affirmative vote of the holders of at least two-thirds of the voting power of all of the then outstanding shares of capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class, to amend or repeal any provision of Article VI, Article VII, Article IX or Article X of the Current COI. The Current COI also currently provides that, in addition to any affirmative vote required by applicable law or the Current COI, the affirmative vote of the holders of at least two-thirds of the voting power of all of the then outstanding shares of capital stock of the Company entitled to vote generally in the election of
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directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the bylaws of the Company (together, the “Supermajority Voting Requirements”). The Board has adopted a resolution proposing an amendment to the Current COI to eliminate the Supermajority Voting Requirements. Stockholders are being asked to approve the elimination of these Supermajority Voting Requirements from the Current COI and to replace such requirements with a majority voting standard as set forth in the Amended and Restated Certificate of Incorporation, attached to this proxy statement as Appendix B (the “Amended and Restated COI”). The Amended and Restated COI will include a revised Article IV to reflect a reduction in authorized capital from 110,000,000 authorized shares, consisting of 100,000,000 shares of common stock and 10,000,000 shares of preferred stock to 33,000,000 authorized shares, consisting of 30,000,000 shares of common stock and 3,000,000 shares of preferred stock in order to reduce our Delaware franchise tax liabilities. This reduction in authorized capital was previously authorized by our stockholders at the 2021 annual meeting, but the amended certificate of incorporation was never filed with the state of Delaware by our prior outside counsel. Because we plan to seek authorization to make other changes to our certificate of incorporation, we decided to wait to file with the state of Delaware to make all the changes authorized at the 2023 Annual Meeting and the prior authorized amendment in one filing.

Reasons for Amendment

The proposed amendment to eliminate Supermajority Voting Requirements is a result of feedback that the Company received from Institutional Shareholder Services Inc. (“ISS”). ISS recommended that the Company modify the Supermajority Voting Requirements as a corporate governance improvement to help prevent the locking in of provisions in the Company’s governing documents that may not be in the best interests of the Company’s stockholders and may prevent future stockholders from effecting change. It is the Board’s view that, subject to any applicable laws, the stockholders of the Company should have the ability to make certain changes to the Current COI and bylaws of the Company (the “Bylaws”) with majority support.

In adopting and declaring the advisability of the Amended and Restated COI, the Board carefully considered the implications of amending the Current COI to eliminate the provisions requiring a supermajority stockholder vote for certain amendments to the Current COI and for stockholders to amend the Bylaws. These Supermajority Voting Requirements are intended to protect against self-interested action by large stockholders by requiring broad stockholder support for certain types of governance changes. By eliminating the Supermajority Voting Requirements, the Amended and Restated COI will make it easier for stockholders to effect corporate governance changes in the future. The Board believes that eliminating these Supermajority Voting Requirements is consistent with generally held views of good corporate governance, as evidenced by the fact that many other public companies have transitioned away from similar Supermajority Voting Requirements in the years after going public.
In consideration of the details described above, the Board believes this action is in the best interest of the Company and its stockholders. The Board has authorized and approved the Amended and Restated COI and recommends that the stockholders approve the elimination of Supermajority Voting Requirements contained in the Amended and Restated COI.

Effect of Proposal

If Proposal 2 is approved by the stockholders, Article X of the Current COI would be amended to remove the second clause of Article X with the effect that all amendments to the Amended and Restated COI would require approval by a majority of the voting power of all the then outstanding shares of capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class, to amend or repeal the Amended and Restated COI. As a result, if Proposal 2 is approved by the stockholders of the Company, the voting standard for stockholder approval of any future amendments to the Amended and Restated COI would be by the affirmative vote of the holders of at least a majority in voting power of the then outstanding shares of the capital stock of the Company entitled to vote thereon, voting together as a single class, which is the default voting standard under the General Corporation Law of the State of Delaware (the “DGCL”). If passed, the Board will retain the right to amend, alter, change or repeal any provision of the Amended and Restated COI of the Company without seeking approval of the stockholders of the Company, where permitted by the DGCL.

Currently, in addition to any affirmative vote required by law or by the Current COI, any bylaw that is to be adopted, amended or repealed by the stockholders of the Company requires the affirmative vote of the holders of at least two-thirds of the voting power of all the then outstanding shares of capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class.

If Proposal 2 is approved by the stockholders of the Company, Article IX of the Current COI would be amended to replace the reference to “two-thirds” with “a majority.” As a result, if Proposal 2 is approved by the stockholders of the Company, the stockholders will be able to amend the Bylaws with the affirmative vote of the holders of at least a majority in voting power of the then outstanding shares of the capital stock of the Company entitled to vote thereon, voting together as a single class. If passed, the Board will also retain its right under the Amended and Restated COI to adopt, amend and repeal the Bylaws.

Related Changes to the Bylaws

In connection with the Amended and Restated COI, the Board has approved a conforming amendment to the Bylaws. The amendment, which is contingent upon stockholder approval and implementation of Proposal 2, would amend Section 8.1 of the
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Bylaws to replace the provision requiring the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the then-outstanding shares of the capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class, to adopt, amend or repeal any provision of the Bylaws, with a majority vote threshold. The text of the Amendment No. 2 to the Bylaws is attached as Appendix C to this proxy statement and incorporated herein by reference. The Board will retain its right to adopt, amend or repeal the Bylaws.

Required Vote

The Current COI currently requires the approval of at least two-thirds of the voting power of all of the then outstanding shares of capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class, to approve Proposal 2. If Proposal 2 is approved by the requisite number of stockholders, the Amended and Restated COI shall be filed with the Secretary of State of the State of Delaware, which Amended and Restated Certificate of Incorporation will become effective at the time of filing. Additionally, the related conforming amendment to the Bylaws adopted by the Board will become effective immediately following such effectiveness.

If Proposal 2 is not approved by the requisite vote of stockholders, then the Amended and Restated COI will still be filed with the Secretary of State of the State of Delaware to reduce our authorized capital and potentially to add provisions allowing for officer exculpation described below, just with no change to the Supermajority Voting Requirements, the related amendment to the Bylaws approved by the Board subject to approval of Proposal 2 will not become effective, and the Supermajority Voting Requirements described above in both the Amended and Restated COI and Bylaws will remain in place.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” PROPOSAL 2 TO ELIMINATE SUPERMAJORITY VOTING REQUIREMENTS IN THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.

ADOPTION OF AN AMENDMENT AND RESTATEMENT OF THE COMPANY’S CERTIFICATE OF INCORPORATION TO REFLECT NEW DELAWARE LAW PROVISIONS REGARDING OFFICER EXCULPATION
(Proposal 3)

The State of Delaware, which is the Company’s state of incorporation, recently enacted legislation that enables Delaware corporations to limit the liability of certain officers in limited circumstances under Section 102(b)(7) of the DGCL. Prior to such legislation, Delaware law permitted Delaware corporations to exculpate directors from personal liability for monetary damages associated with breaches of the duty of care, but that protection did not extend to a Delaware corporation’s officers. The new Delaware legislation permits exculpation for direct claims brought by stockholders for breach of an officer’s fiduciary duty of care, including class actions, but does not eliminate officers’ monetary liability for breach of fiduciary duty claims brought by the Company itself or for derivative claims brought by stockholders in the name of the Company. Furthermore, the limitation on liability does not apply to breaches of the duty of loyalty, acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, or any transaction in which the officer derived an improper personal benefit.

The Board has adopted a resolution proposing an amendment to the Current COI to add a provision exculpating certain of the Company’s officers from liability in specific circumstances, as permitted by Delaware law. Stockholders are being asked to approve the Amended and Restated COI, which includes provisions providing for officer exculpation as set forth in the Amended and Restated COI reflecting revisions to Article VIII: Limitation of Director and Officer Liability: Indemnification, to provide officer exculpation to the same extent as previously provided only to directors. The full text of the Amended and Restated COI, including revised Article VIII, is attached to this proxy statement as Appendix B (the “Second Proposed Amendment”).

Reasons for Amendment

The Board desires to amend and restate the Current COI to maintain provisions consistent with the governing statutes contained in the DGCL and believes that amending the Current COI to add the authorized liability protection for certain officers of the Company, consistent with the protection the Current COI currently affords directors of the Company, is necessary in order to attract and retain experienced and qualified officers and would potentially reduce litigation costs associated with frivolous lawsuits.

Further, the Board believes there is a need for directors and officers to remain free of the risk of financial ruin as a result of an unintentional misstep. Frequently, directors and officers must make decisions in response to time-sensitive opportunities and challenges, which can create substantial risk of investigations, claims, actions, suits or proceedings seeking to impose liability on the basis of hindsight, especially in the current litigious environment and regardless of merit. Limiting concern about personal risk would empower both directors and officers to best exercise their business judgment in furtherance of stockholder interests. Furthermore, the Company expects other public companies to adopt exculpation clauses that limit the personal liability of officers in their certificates of incorporation and failing to adopt this amendment could impact the Company’s recruitment and retention of exceptional officer candidates that conclude that the potential exposure to liabilities, costs of defense and other risks of proceedings exceeds the benefits of serving as an officer of the Company.

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The Board believes that adopting the Second Proposed Amendment will better position the Company to attract top officer candidates and retain our current officers as well as enabling officers to exercise their business judgment in furtherance of the interests of the stockholders, without the potential for distraction posed by the risk of personal liability. The Second Proposed Amendment will also align the protections available to our directors with those available to our officers.

In consideration of the details described above, the Board believes this action is advisable and in the best interest of the Company and its stockholders. The Board has authorized and approved the Amended and Restated Certificate of Incorporation, which includes revised of Article VIII Limitation of Director and Officer Liability: Indemnification, and recommends that the stockholders approve the Second Proposed Amendment.

Required Vote; Effect of Proposal

The Current COI requires the approval of at least a majority of the voting power of all of the then outstanding shares of capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class to approve Proposal 3. If Proposal 2 and 3 are approved by the requisite number of stockholders, the Amended and Restated COI shall be filed with the Secretary of State of the State of Delaware, which will become effective at the time of filing.

If neither Proposals 2 or 3 are approved by the requisite vote of stockholders, the Amended and Restated COI will still be filed with the Delaware Secretary of State solely to revise Article IV to reflect the reduction in authorized capital in order to reduce our Delaware franchise tax liabilities as discussed above. To be clear, the Amended and Restated COI would not eliminate the Supermajority Voting Requirements or contain exculpation for officers if neither of Proposals 2 or 3 are approved by the requisite vote of stockholders..

If Proposal 2 is approved by the requisite vote of stockholders, but Proposal 3 is not, then the Amended and Restated COI shall be revised to only include the elimination of the Supermajority Voting Requirements (and replacement with a majority voting standard) and the Second Proposed Amendment to limit the liability of certain officers in limited circumstances will not be included with the Amended and Restated COI filed with the Secretary of State of the State of Delaware. Similarly, if Proposal 3 is approved by the requisite vote of stockholders, but Proposal 2 is not, then the Amended and Restated COI shall be revised to only include the Second Proposed Amendment adding a new Article IX (and renumbering the remaining Articles with applicable updates to Article references elsewhere in the Amended and Restated COI), and the elimination of the Supermajority Voting Requirements will not be included with the Amended and Restated COI filed with the Secretary of State of the State of Delaware. Under either scenario, the Amended and Restated COI will include the revision to Article IV to reflect the reduction in authorized capital in order to reduce our Delaware franchise tax liabilities as discussed above.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” PROPOSAL 3 TO EXCULPATE CERTAIN OFFICERS IN LIMITED CIRCUMSTANCES AS PERMITTED BY RECENTLY ENACTED DELAWARE LEGISLATION.

ADOPTION OF AN AMENDMENT TO THE COMPANY'S 2021 EQUITY INCENTIVE PLAN
(Proposal 4)


The Board has adopted and declared advisable, and recommends for stockholder approval, the first amendment (the “Plan Amendment”) to the Company’s 2021 Stock Incentive Plan (the “2021 Plan”). The 2021 Plan, as amended by the Plan Amendment, is referred to herein as the “Amended Plan.” The Amended Plan will increase the number of shares of common stock of the Company authorized for issuance under the 2021 Plan by 1,200,000 shares (the “Share Increase”). A copy of the 2021 Plan is attached hereto as Appendix D and the Plan Amendment is attached hereto as Appendix E each of which is incorporated herein by reference.

The 2021 Plan was adopted by the Board on February 23, 2021 and approved by the stockholders of the Company at the annual meeting of the stockholders held on May 27, 2021. 1,100,000 shares of common stock were initially available for issuance under the 2021 Plan.

The purpose of the 2021 Plan is to create incentives designed to motivate eligible employees, directors and consultants to put forth maximum effort toward the success and growth of the Company, and to enable the Company to attract and retain experienced individuals who by their position, ability and diligence, are able to make important contributions to the Company’s success. Awards under the 2021 Plan are granted at no less than the price of the stock at the day of the award date and vest typically over a three-year period. Aspirationally, the Company's goal is to have every employee grant going forward to have the share price the highest of the following: 12 month trailing volume weighted average price ("VWAP") on the day of the grant; $6.32 (which was the 2022 12 month VWAP); or the share price on the day of the grant. The Share Increase represents approximately 11% of the total number of outstanding shares of common stock as of December 31, 2022.

As of December 31, 2022, the Company had three equity incentive plans in existence with a total of 412,642 number of shares available to be issued under the 2021 Plan, 41,583 number of shares available to be issued under the 2019 Equity Incentive Plan, and 181,510 number of shares available to be issued under the 2018 Equity Incentive Plan. If the Amended Plan (which includes
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the Share Increase) is approved by the requisite vote of the stockholders, the Board will terminate the Company’s 2019 and 2018 Plans, which will have the effect of retiring 223,093 number of shares available to be issued under the plans being terminated. Therefore, the Share Increase will actually consist of a net increase of 976,907 shares. If the Amended Plan is not approved, the Company’s 2018 and 2019 Equity Incentive Plans will remain in place and the shares still available for issuance under such plans will still be eligible to be awarded pursuant to such plans.

Summary of the 2021 Plan and the Changes Proposed by the Amended Plan

Administration

The 2021 Plan is administered by the Compensation Committee of the Board. With respect to grants of awards to our officers or directors, the 2021 Plan is administered by our Compensation Committee in a manner that permits such grants and related transactions to be exempt from Section 16(b) of the Securities Exchange Act of 1934, as amended. The plan administrator has the full authority to select recipients of the grants, determine the extent of the grants, establish additional terms, conditions, rules or procedures to accommodate rules or laws of applicable non-U.S. jurisdictions, adjust awards and to take any other action deemed appropriate; however, no action may be taken that is inconsistent with the terms of the 2021 Plan.

Available Shares

Subject to adjustment upon certain corporate transactions or events, a maximum of 1,100,000 shares of the common stock of the Company may be issued under the 2021 Plan which will be increased by 1,200,000 shares if the Amended Plan is approved by the requisite vote of stockholders. In addition, subject to adjustment upon certain corporate transactions or events, a participant in the 2021 Plan may not receive options or SARs with respect to more than 100,000 shares of common stock in any calendar year or an award of restricted stock, restricted stock units, dividend equivalent rights or other awards that are valued with reference to shares covering more than 100,000 shares of common stock. Pursuant to Section 3(b) of the 2021 Plan, any shares covered by an award (or portion of an Award) which is forfeited, canceled, or expired (whether voluntarily or involuntarily) will be deemed to have not been issued for purposes of determining the maximum aggregate number of shares which may be issued under the 2021 Plan, except that the maximum aggregate number of Shares which may be issued pursuant to the exercise of Incentive Stock Options shall not exceed the number specified in Section 3(a). Shares that actually have been issued under the 2021 Plan pursuant to an award shall not be returned to the 2021 Plan and shall not become available for future issuance under the 2021 Plan, other than unvested shares that are forfeited or repurchased by the Company, which shall become available for future issuance under the 2021 Plan.

The Board has determined that although the 2021 Plan does allow unvested shares which are forfeited or repurchased by the Company to again be available for future issuance under the 2021 Plan, the language in the 2021 Plan is not as clear as it should be and should be amended. The Amended Plan, if approved by the requisite vote of stockholders, will replace the first two sentences of Section 3(b) described above with the following language: “Any Shares subject to an Award that is canceled, forfeited or expires prior to exercise or realization, either in full or in part, shall again become available for issuance under the Plan, except that the maximum aggregate number of Shares which may be issued pursuant to the exercise of Incentive Stock Options shall not exceed the number specified in Section 3(a).” To be clear, the amended language in Section 3(b) does not change the plan, it just uses more clear and concise language to describe the same terms of the 2021 Plan.

In the event any option or other award granted under the 2021 Plan is exercised through the tendering of shares (either actually or through withholding), or in the event tax withholding obligations are satisfied by tendering or withholding shares, any shares so tendered or withheld are not again available for awards under the 2021 Plan. To the extent that cash is delivered in lieu of shares of common stock upon the exercise of an SAR, then the Company will be deemed, for purposes of applying the limitation on the number of shares, to have issued the number of shares of common stock which it was entitled to issue upon such exercise. Shares of common stock the Company repurchases on the open market or otherwise using cash proceeds from the exercise of options will not be available for awards under the 2021 Plan.

Eligibility and Types of Awards

The 2021 Plan permits the Company to grant stock awards, including stock options, SARs, restricted stock, restricted stock units and dividend equivalent rights to our employees, directors, and consultants.

Stock Options. A stock option may be an incentive stock option within the meaning of, and qualifying under, Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or a nonstatutory stock option. However, only our employees (or employees of our parent or subsidiaries, if any) may be granted incentive stock options. Incentive and nonstatutory stock options are granted pursuant to option agreements adopted by the plan administrator. The plan administrator determines the exercise price for a stock option, within the terms and conditions of the 2021 Plan, provided that the exercise price of a stock option cannot be less than 100% of the fair market value of our common stock on the date of grant. Options granted under the 2021 Plan will become exercisable at the rate specified by the plan administrator.

The plan administrator determines the term of the stock options granted under the 2021 Plan, up to a maximum of 10 years, except in the case of certain incentive stock options, as described below. Unless the terms of an optionholder’s stock option agreement
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provide otherwise, if an optionholder’s relationship with us, or any of our affiliates, ceases for any reason other than disability or death, the optionholder may exercise any options otherwise exercisable as of the date of termination, but only during the post-termination exercise period designated in the optionholder’s stock option award agreement. The optionholder’s stock option award agreement may provide that upon the termination of the optionholder’s relationship with us for cause, the optionholder’s right to exercise his or her options shall terminate concurrently with the termination of the relationship. If an optionholder’s service relationship with us, or any of our affiliates, ceases due to disability or death, or an optionholder dies within a certain period following cessation of service, the optionholder or his or her estate or person who acquired the right to exercise the award by bequest or inheritance may exercise any vested options for a period of 12 months. The option term may be extended in the event that exercise of the option within the applicable time periods is prohibited by applicable securities laws or such longer period as specified in the stock option award agreement but in no event beyond the expiration of its term.

Acceptable consideration for the purchase of common stock issued upon the exercise of a stock option will be determined by the plan administrator and may include (a) cash or check, (b) delivery of a promissory note acceptable to the plan administrator (subject to minimum interest provisions set forth in the 2021 Plan), (c) a broker-assisted cashless exercise, (d) the tender of common stock previously owned by the optionholder, (e) a net exercise of the option, (f) past or future services rendered, (g) any combination of the foregoing methods of payment, and (h) any other legal consideration approved by the plan administrator.

Unless the plan administrator provides otherwise, awards generally are not transferable, except by will or the laws of descent and distribution.

Incentive stock options may be granted only to our employees (or to employees of our parent company and subsidiaries, if any). To the extent that the aggregate fair market value, determined at the time of grant, of shares of our common stock with respect to which incentive stock options are exercisable for the first time by an optionholder during any calendar year under any of our equity plans exceeds $100,000, such options will not qualify as incentive stock options. A stock option granted to any employee who, at the time of the grant, owns or is deemed to own stock representing more than 10% of the voting power of all classes of stock (or any of our affiliates) may not be an incentive stock option unless (a) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant, and (b) the term of the incentive stock option does not exceed five years from the date of grant.

Stock Appreciation Rights. SARs may be granted under the 2021 Plan either concurrently with the grant of an option or alone, without reference to any related stock option. The plan administrator determines both the number of shares of common stock related to each SAR and the exercise price for an SAR, within the terms and conditions of the 2021 Plan, provided that the exercise price of an SAR cannot be less than 100% of the fair market value of the common stock subject thereto on the date of grant. In the case of an SAR granted concurrently with a stock option, the number of shares of common stock to which the SAR relates will be reduced in the same proportion that the holder of the stock option exercises the related option.

The plan administrator determines whether to deliver cash in lieu of shares of common stock upon the exercise of an SAR. If common stock is issued, the number of shares of common stock that will be issued upon the exercise of an SAR is determined by dividing (a) the number of shares of common stock as to which the SAR is exercised multiplied by the amount of the appreciation in such shares, by (b) the fair market value of a share of common stock on the exercise date.

If the plan administrator elects to pay the holder of the SAR cash in lieu of shares of common stock, the holder of the SAR will receive cash equal to the fair market value on the exercise date of any or all of the shares that would otherwise be issuable.

The exercise of an SAR related to a stock option is permissible only to the extent that the stock option is exercisable under the terms of the 2021 Plan on the date of surrender. Any incentive stock option surrendered will be deemed to have been converted into a nonstatutory stock option immediately prior to such surrender.

Restricted Stock. Restricted stock awards are awards of shares of our common stock that are subject to established terms and conditions. The plan administrator sets the terms of the restricted stock awards, including the size of the restricted stock award, the price (if any) to be paid by the recipient and the vesting schedule and criteria (which may include continued service to us for a period of time or the achievement of performance criteria). If a participant’s service terminates before the restricted stock is fully vested, all of the unvested shares generally will be forfeited to, or repurchased by, us.

Restricted Stock Units. A restricted stock unit is a right to receive stock, cash equal to the value of a share of stock or other securities or a combination of the three at the end of our last fiscal year for all services rendereda set period or the attainment of performance criteria. No stock is issued at the time of grant. The plan administrator sets the terms of the restricted stock unit award, including the size of the restricted stock unit award, the consideration (if any) to be paid by the recipient, the vesting schedule and criteria and the form (stock or cash) in all capacities to us duringwhich the years during which they served as executive officers. Where a named executive officer is also a director, all compensation relates to such individual’s position as an officer only.

Name and Principal Position Year  

Salary

($)

  

Bonus

($)

  

Option Awards

($)

  

All Other

Compensation ($)

  

Total

($)

 
                   
Bradley J. Nattrass  2016  $49,097  $–  $–  $–  $49,097 
President, CEO,  2017  $150,000  $50,000          $200,000 
   2018  $202,998  $25,000          $227,998 
                         
Octavio Gutierrez, CDO,  2016  $5,200  $–  $–  $–  $5,200 
Secretary  2017  $150,000  $50,000          $200,000 
   2018  $174,836  $25,000          $199,836 
                         
George R. Pullar, CFO  2018  $69,231  $–  $–  $118,666  $187,897 
Larry Dodson, CTO  2018  $40,154  $–  $–  $–  $45,154 

Further refinement and compensation for officers and directorsaward will be settled. If a participant’s service terminates before the restricted stock is fully vested, the unvested portion of the restricted stock unit award generally will be forfeited to us.


Dividend Equivalent Right. Dividend equivalent rights entitle the recipient to compensation measured by dividends paid with respect to a specified number of shares of common stock.

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Performance-Based Compensation

The 2021 Plan establishes procedures for our Company to grant performance-based awards, meaning awards structured so that they will vest only upon the achievement of performance criteria established by the Compensation Committeeplan administrator for a specified performance period. The plan administrator will establish the performance goals before the 90th day of the applicable performance period (or, if the performance period is less than a year, no later than the number of days which is equal to 25% of the performance period).

Corporate Transactions

Effective upon the consummation of a corporate transaction, all outstanding awards under the 2021 Plan will terminate unless they are assumed in connection with the corporate transaction.

The plan administrator has the authority, exercisable either in advance of any actual or anticipated corporate transaction or at the time of an actual corporate transaction, and exercisable at the time of the grant of an award under the 2021 Plan or any time while an award remains outstanding, to provide for the full or partial automatic vesting and exercisability of one or more outstanding unvested awards under the 2021 Plan and the release from restrictions on transfer and repurchase or forfeiture rights of such awards in connection with a corporate transaction on such terms and conditions as the plan administrator may specify. The plan administrator may also condition any such award’s vesting and exercisability or release from such limitations upon the subsequent termination of the continuous service of the holder of the award within a specified period following the effective date of the corporate transaction. The plan administrator may provide that any awards so vested or released from such limitations in connection with a corporate transaction shall remain fully exercisable until the expiration or sooner termination of the award.

Amendment and Termination

The Board generally may amend, suspend or terminate the 2021 Plan, but it may not amend, suspend or terminate the 2021 Plan without stockholder approval for certain actions, such as an increase in the future. Since inceptionnumber of shares reserved under the 2021 Plan, modifications to the terms and conditions of awards, modifications to exercise prices at which shares may be offered pursuant to options, extension of the 2021 Plan’s expiration date and certain modifications to awards, such agreements had been established by ouras reducing the exercise price per share, canceling and regranting new awards with lower prices per share than the original prices per share of the cancelled awards, or canceling any awards in exchange for cash or the grant of replacement awards with an exercise price that is less than the exercise price of the original awards.

Pursuant to Section 4(c)(vii) of the 2021 Plan, the plan administrator has the authority to amend the terms of any outstanding award granted under the 2021 Plan, provided that any amendment that would adversely affect a grantee’s rights under an outstanding award shall not be made without the grantee’s written consent (an amendment or modification that may cause an Incentive Stock Option to become a Non- Qualified Stock Option will not be treated as adversely affecting the rights of the grantee).

While the Board believes the above-described grant of Directors.

Employment Agreements

None of our executive officers haveauthority to the plan administrator includes the power to accelerate the time at which an employment agreement with us.

award may first be exercised or the time during which an award or any part thereof will vest, the Board desires to amend the 2021 Plan to clarify that the plan administrator has such power. The Board Recommendsbelieves this to be especially useful in the case of employees transitioning to a consultant role or leaving employment on good terms after exemplary service and that You Vote “FOR”this express authority is typical in equity incentive plans of other companies.

The Amended Plan, if approved by the requisite vote of stockholders, will include a new Section 4(c)(viii) as follows with the remaining subsections and any cross references renumbered as applicable: “The Administrator shall have the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.”

Tax Withholding
each
The Board may require a participant to satisfy any federal, state, local, or foreign tax withholding obligation relating to a stock award by (a) causing the participant to tender a cash payment, (b) withholding shares of common stock from the shares of common stock issued or otherwise issuable to the participant in connection with the award, (c) delivering to our Company already-owned shares of common stock, (d) selling shares of common stock from the shares of common stock issued or otherwise issuable to the participant in connection with the award, (e) withholding cash from an award settled in cash or other amounts payable to the participant, and/or (f) any other means that the plan administrator determines both to comply with applicable laws and be consistent with the purposes of the nominees named2021 Plan.

Summary of Federal Income Tax Consequences of the 2021 Plan

The following summary is intended only as a general guide to certain U.S. federal income tax consequences under current law of participation in the 2021 Plan and does not attempt to describe all possible federal, state or local, foreign, or other tax consequences of such participation or tax consequences based on any participant’s particular circumstances. Furthermore, the tax
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consequences are complex and subject to change, and a participant’s particular situation may be such that some variation of the described rules is applicable. Recipients of awards under the 2021 Plan should consult their own tax advisors to determine the tax consequences to them as a result of their particular circumstances.

Incentive Stock Options. A participant recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an incentive stock option qualifying under Section 422 of the Code. If a participant holds stock acquired through exercise of an incentive stock option for more than two years from the date on which the option was granted and more than one year after the date the option was exercised for those shares, any gain or loss on a disposition of those shares (a “qualifying disposition”) will be a long-term capital gain or loss. Upon such a qualifying disposition, we will not be entitled to any income tax deduction.

If a participant disposes of shares within two years after the date of grant of the option or within one year after the date of exercise of the option (a “disqualifying disposition”), the difference between the fair market value of the shares on the option exercise date and the exercise price (not to exceed the gain realized on the sale if the disposition is a transaction with respect to which a loss, if sustained, would be recognized) will be taxed to the participant as ordinary income at the time of disposition. Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. To the extent the participant recognizes ordinary income by reason of a disqualifying disposition, generally the Company will be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax-reporting obligation) to a corresponding income tax deduction in the tax year in which the disqualifying disposition occurs. The difference between the option exercise price and the fair market value of the shares on the exercise date of an incentive stock option is treated as an adjustment in computing the participant’s alternative minimum taxable income and may subject the participant to alternative minimum tax liability for the year of exercise. Special rules may apply after exercise for (a) sales of the shares in a disqualifying disposition, (b) basis adjustments for computing alternative minimum taxable income on a subsequent sale of the shares, and (c) tax credits that may be available to participants subject to the alternative minimum tax.

Nonstatutory Stock Options. Options not designated or qualifying as incentive stock options will be nonstatutory stock options having no special tax status. A participant generally recognizes no taxable income upon the grant of such an option so long as (a) the exercise price is no less than the fair market value of the stock on the date of grant and (b) our option (and not the underlying stock) at such time does not have a readily ascertainable fair market value (as defined in Treasury Regulations under the Code). Upon exercise of a nonstatutory stock option, the participant normally recognizes ordinary income in the amount of the difference between the option exercise price and the then-fair market value of the shares purchased, and withholding of income and employment taxes will apply if the participant is or was an employee. Generally, the Company will be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax-reporting obligation) to an income tax deduction in the tax year in which such ordinary income is recognized by the participant.

Upon the disposition of stock acquired by the exercise of a nonstatutory stock option, any recognized gain or loss, based on the difference between the sale price and the fair market value on the exercise date, will be taxed as capital gain or loss, which will be short-term or long-term gain or loss, depending on the holding period of the stock.

Stock Appreciation Rights. A participant recognizes no taxable income upon the receipt of an SAR. Upon the exercise of an SAR, the participant will recognize ordinary income in an amount equal to the excess of the fair market value of the underlying shares of common stock on the exercise date over the exercise price. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. The Company generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant in connection with the exercise of the SAR, except to the extent such deduction is limited by applicable provisions of the Code.

Restricted Stock: A participant acquiring restricted stock generally will recognize ordinary income equal to the difference between the fair market value of the shares on the “determination date” (as defined below) and their purchase price, if any. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. The “determination date” is the date on which the participant acquires the shares unless they are subject to a substantial risk of forfeiture and are not transferable, in which case the determination date is the earliest of (a) the date the shares become transferable, (b) the date the shares are no longer subject to a substantial risk of forfeiture, or (c) the date the shares are acquired if the participant makes a timely election under Code Section 83(b). If the shares are subject to a substantial risk of forfeiture and not transferable when issued, the participant may elect, pursuant to Section 83(b) of the Code, to have the date of acquisition be the determination date by filing an election with the Internal Revenue Service, and other provisions, no later than 30 days after the date the shares are acquired. Upon the taxable disposition of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the determination date, will generally be taxed as capital gain or loss; however, for any shares returned to our Company pursuant to a forfeiture provision, a participant’s loss may be computed based only on the purchase price (if any) of the shares and may not take into account any income recognized by reason of a Section 83(b) election. Such gain or loss will be long-term or short-term depending on whether the stock was held for more than one year. The Company generally will be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax reporting obligation) to a corresponding income tax deduction in the year in which the ordinary income from restricted stock is recognized by the participant.
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Restricted Stock Units. No taxable income is recognized upon receipt of a restricted stock unit award. In general, the participant will recognize ordinary income in the year in which the units vest and are settled in an amount equal to any cash received and the fair market value of any nonrestricted shares received. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. The Company generally will be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax reporting obligation) to an income tax deduction equal to the amount of ordinary income recognized by the participant. In general, the deduction will be allowed for the taxable year in which such ordinary income is recognized by the participant.

Dividend Equivalent Rights. A recipient of dividend equivalent rights generally will recognize ordinary income at the time the dividend equivalent right is paid. If required, income and employment tax must be withheld on the income recognized by the participant. The Company will generally be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax reporting obligation) to an income tax deduction equal to the amount of ordinary income recognized by the participant.

Other Awards. The Company generally will be entitled to an income tax deduction in connection with an award under the 2021 Plan in an amount equal to the ordinary income realized by the participant at the time the participant recognizes such income (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax-reporting obligation). Participants typically are subject to income (and employment) tax and recognize such tax at the time that an award is granted, exercised, vests or becomes nonforfeitable, unless the award provides for a further deferral.

Section 409A

Section 409A of the Code (“Section 409A”) imposes certain requirements on nonqualified deferred compensation arrangements. These include requirements on an individual’s election to defer compensation and the individual’s selection of the timing and form of distribution of the deferred compensation. Section 409A also generally provides that adverse tax consequences will apply unless distributions must be made on or following the occurrence of certain events (e.g., the individual’s separation from service, a predetermined date, or the individual’s death). Section 409A imposes restrictions on an individual’s ability to change his or her distribution timing or form after the compensation has been deferred.

Certain awards under the 2021 Plan may be subject to the requirements of Section 409A in form and in operation, but designed to meet the conditions under Section 409A for avoiding its adverse tax consequences. For example, restricted stock units that provide for a settlement date following the vesting date may be subject to Section 409A. If an award under the 2021 Plan is subject to Section 409A and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be before the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with the requirements of Section 409A, Section 409A imposes an additional 20% federal penalty tax on the participant’s compensation recognized as ordinary income, as well as interest on such deferred compensation.

The foregoing is only a summary, based on the current Code and the Treasury Regulations promulgated by the U.S. Department of the Treasury thereunder, of the U.S. federal income tax consequences to the participant and our Company with respect to the grant and exercise of options and other awards under the 2021 Plan. The summary does not purport to be complete and does not address all income tax laws that may be relevant to any particular participant. It does not address the tax consequences of the participant’s death, any tax laws of any municipality, state or foreign country in which a participant might reside, or any other laws other than U.S. federal income tax law.

New Plan Benefits

The 2021 Plan administrator, in its discretion, selects the person(s) to whom awards may be granted and the number of shares subject to each such grant. For this reason, it is not possible to determine the benefits or amounts that will be received by any particular individual(s) in the future.

Reasons for Amendment

The Board has determined the Share Increase is necessary for the Company to continue to offer a competitive broad-based equity incentive program that enables us to recruit, motivate and retain talented and highly qualified employees and directors who are critical to the Company’s plans and the Company’s ability to successfully operate its business. Our compensation philosophy is weighted towards providing broad-based equity incentive awards, in addition to salary or wages, under the belief that this helps to retain employees and aligns their interests with those of the stockholders by allowing employees to participate in the longer-term success of the Company. We believe that equity awards motivate our employees to contribute to the Company’s long-term success.

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If the Company were unable to continue to grant competitive equity incentive awards, the Company may be required to offer additional cash-based incentives as a means of competing for talent. This could have a significant effect on the Company’s financial and operating results, put it at a competitive disadvantage in the market for talent and reduce the alignment between the interests of the Company’s employees and those of the stockholders.

Further, the Board has determined the Share Increase is necessary to guarantee that equity incentive awards granted under the 2021 Plan have the same economic incentive as the Company originally intended. The 2021 Plan is based on equity-driven awards, a majority of which consists of restricted stock awards, the value of which depends entirely on the price of the Company’s common stock. Due to the drop in our common stock price, the Company requires the Share Increase to ensure incentive awards granted under the 2021 plan have the value the Company intended when approving the 2021 Plan. If approved, with the subsequent termination of the Company’s 2018 and 2019 Equity Incentive Plans, the Share Increase will consist of a net increase of 976,907 shares.

Additionally, the Amended Plan clarifies certain aspects of the 2021 Plan where the Board believes existing language was insufficient. This includes clarifying that any shares subject to an Award that is canceled, forfeited or expires prior to exercise or realization, either in full or in part, shall again become available for issuance under the Amended Plan. The Board believes that the existing 2021 Plan provides for this, just that the language used is not as clear and concise as it should be and will become if the Amended Plan is approved by the requisite vote of stockholders. Additionally, the Amended Plan includes specific reference to the power of the plan administrator to accelerate the time at which an award may first be exercised or the time during which an award or any part thereof will vest in accordance with the Amended Plan. The Board believes the 2021 Plan contains that power, just not with the specificity proposed in the Amended Plan.

Required Vote; Effect of Proposal

The approval of a majority of the votes cast at the Annual Meeting is required to approve Proposal 1.4 to amend the 2021 Omnibus Stock Plan . If Proposal 4 is approved by the requisite number of stockholders, all of the Share Increase will be available for grant under the 2021 Plan and the above-described clarifying language will be changed in the 2021 Plan.

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If Proposal 4 is not approved by the requisite vote of stockholders, no shares will be added to the number of shares available for issuance under the 2021 Plan and no clarifying language will be added or changed in the 2021 Plan.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” PROPOSAL 4 (THE PLAN AMENDMENT).
 

PROPOSAL 2—RATIFICATION

APPOINTMENT OF BF BORGERS, CPA P.C. AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

(Proposal 5)
The Board of Directors has appointed BF Borgers CPA P.C.,PC as our independent registered public accounting firm for the yearsyear ending December 31, 2016 and 2017.2023. A representative of BF Borgers CPA P.C.PC is expected to be present at the virtual Annual Meeting, will have an opportunity to make a statement if he, she or they so desires and will be available to respond to appropriate questions.

Stockholder ratification of the appointment of our independent registered public accounting firm is not required by our bylaws or otherwise. However, our Board is submitting the appointment of BF Borgers CPA P.C.PC to the stockholders for ratification as a matter of what it considers to be good corporate practice.ratification. Even if the appointment is ratified, our Board in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Board determines that such a change would be in our and our stockholders’ best interests.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” PROPOSAL 5 TO RATIFY THE APPOINTMENT OF BF BORGERS CPA PC TO SERVE AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2023.
Fees Paid to Independent Registered Public Accounting Firms

BF Borgers CPA PC

The following table presentsshows the aggregate fees for professional audit services renderedprovided to the Company by B FBF Borgers CPA P.C., our independent auditors,PC for 2022 and Sensiba San Flippo, LLP our tax accounting firm during our fiscal year ended December 31, 2018 and 2017:

  December 31, 2017  December 31, 2018 
Audit Fees $86,400  $102,600 
Tax Fees  5,000   5,800 
All Other Fees  –   – 
Total $91,400  $108,400 

2021:

  2022 2021
Audit Fees $235,000  $217,000 
Audit-Related Fees 23,500  17,360 
Tax Fees —  — 
All Other Fees —  — 
Total $258,500  $234,360 
Audit Fees. Consist of amounts billed for professional services rendered forFees. This category includes the audit of ourthe Company’s annual consolidated financial statements, reviews of the Company’s financial statements included in our Form S-1 registration statement filed with the Securities and Exchange Commission in May 2018 and reviews of our interim financial statements included in ourCompany’s Quarterly Reports on Form 10-Q.

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

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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.
Tax Fees. ConsistsFees. This category consists of amounts billed for professional services rendered by the Company’s independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and statutory tax planningaudit services and tax advice.

compliance services.

All Other Fees. ConsistsFees. This category consists of amounts billedfees for services other than those noted above.

We organized our Audit Committee in January 2018. miscellaneous items.

Our Audit Committee is responsible for approving all audit, audit-related, tax and other services.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. Non-audit 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.

The Board Recommends that You Vote “FOR”

the ratification of Benaudit, audit-related fees, tax fees, and other fees paid to BF Borgers CPA P.C.

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PROPOSAL #3

APPROVAL OF THE COMPANY’S 2019 EQUITY INCENTIVE PLAN

A proposal will be presented at the annual meeting to approve the urban-gro 2019 Equity Incentive Plan, which we refer to as the Plan. The Plan, as proposed authorizes 3,500,000 shares of common stock that may be issued under the Plan A full copy of the Plan is attached hereto as Appendix “A”.

General Details and Provisions of the Plan

Purpose of the Plan. The Plan was established by the Company to (i) promote the success and enhance the value of the Company by linking the personal interests of participants to those of Company stockholders and by providing participants with an incentive for outstanding performance; and (ii) provide flexibility to the Company in its ability to motivate, attract, and retain the services of participants upon whose judgment, interest and special effort the successful conduct of its business is largely dependent.

The Board has the sole authority to implement, interpret, and/or administer the Plan unless the Board delegates (i) all or any portion of its authority to implement, interpret, and/or administer the Plan to a committee of the Board consisting of non-employee directors (the “Committee”), or (ii) the authority to grant and administer awards to non-executive employees of the Company under the Plan to an officer of the Company.

The Plan relates to the issuance of up to 3,500,000 shares of Common Stock, including shares that may be issued related to the exercise of options awarded under the Plan, subject to adjustment as described below, and shall be effective for ten (10) years, unless earlier terminated.

Any employee of the Company or an affiliate, a director, or a consultant to the Company or an affiliate may be an “Eligible Person” under the Plan. The Plan provides Eligible Persons the opportunity to participate in the enhancement of shareholder value by the award of options and awards of Common Stock, granted as stock bonus awards, restricted stock awards, deferred share awards and performance-based awards, under the Plan. This further provides for the Company to make payment of bonuses and/or consulting fees to certain Eligible Persons in options and Common Stock, or any combination thereof. As of the date hereof, the Company has eight employees and two non-employee directors who may be Eligible Persons under the Plan; however, this does not include potential consultants who may be an Eligible Person under the terms of the Plan or those who may become an Eligible Person in the future. While our directors and our executive officers may participate in the Plan, the amounts and benefits that they may receive from the Plan (if any) has not been determined and is not currently determinable.

No single participant under the Plan may receive more than 25% of all options awarded in a single year.

In the event of a corporate transaction involving the Company (including, without limitation, any merger, reorganization, consolidation, recapitalization, separation, liquidation, split-up, or share combination), the Committee shall adjust awards in any manner determined by the Committee to be an appropriate and equitable means to prevent dilution or enlargement of rights.

Stock Options

The Board, or the Committee, shall have sole and absolute discretionary authority (i) to determine, authorize, and designate those persons pursuant to the Plan who are to receive options under the Plan, (ii) to determine the number of shares of Common Stock to be covered by such options and the terms thereof, (iii) to determine the type of option granted (ISOs or Nonqualified Options), and (iv) to determine other such details concerning the vesting, termination, exercise, transferability and payment of such options. The Board or Committee shall thereupon grant options in accordance with such determinations as evidenced by a written option agreement.

The exercise price per share for Common Stock of options granted under the Plan shall be determined by the Board or Committee, but in no case shall be less than one hundred percent (100%) of the fair market value of the Common Stock (determined in accordance with the Plan at the time the option is granted), provided that,PC with respect to ISOs granted to a person who holds ten percent (10%) or more of2022 and 2021 were pre-approved by the total combined voting power of all classes of stock of the Company, the exercise price per share for Common Stock shall not be less than 110% of the fair market value of the Common Stock and the term of the ISO shall be no more than 5 years from date of grant. The fair market value of the Common Stock with respect to which ISOs may be exercisable for the first time by any Eligible Person during any calendar year under all such plans of the Company and its affiliates shall not exceed $100,000, or such other amount provided in Section 422 of the Code.

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Audit Committee.
 

ISOs under the Plan may not be transferred except by will or laws of descent and, during the lifetime of the recipient of the ISO, only be exercised by such recipient. Nonqualified Options may be transferred as a gift in accordance with the applicable securities laws and regulations and with any stock option agreement. Shares issued pursuant to the exercise of options may be endorsed with a legend restricting their transfer or sale.

Bonus, Deferred, and Restricted Stock Awards

The Board, or the Committee, may, in its sole discretion, grant awards of Common Stock in the form of bonus awards, deferred awards, and restricted stock awards. Each stock award agreement shall be in such form and shall contain such terms and conditions as the Board, or the committee, deems appropriate. The terms and conditions of each stock award agreement may change from time to time and need not be uniform with respect to Eligible Persons, and the terms and conditions of separate stock award agreements need not be identical.

Performance Share Awards

The Board, or the Committee, may authorize grants of shares of Common Stock to be awarded upon the achievement of specified performance objectives, upon such terms and conditions as the Board, or the Committee, may determine. Such awards shall be conferred upon the Eligible Person upon the achievement of specified performance objectives during a specified performance period, such objectives being set forth in the grant and including a minimum acceptable level of achievement and, optionally, a formula for measuring and determining the number of performance shares to be issued. Each performance share award agreement shall be in such form and shall contain such terms and conditions as the Board, or the Committee, deems appropriate. The terms and conditions of each performance share award may change from time to time and need not be uniform with respect to Eligible Persons, and the terms and conditions of separate performance share award agreements need not be identical.

Adjustments

If the Company shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of the Common Stock outstanding, without receiving consideration therefore in money, services or property, then (i) the number, class, and per share price of shares of Common Stock subject to outstanding options and other awards under the Plan, and (ii) the number of and class of shares then reserved for issuance under the Plan and the maximum number of shares for which awards may be granted to an Eligible Person during a specified time period shall be appropriately and proportionately adjusted. The Board, or the Committee, shall make such adjustments, and its determinations shall be final, binding and conclusive.

Change in Control

If the Company is merged or consolidated with another entity or sells or otherwise disposes of substantially all of its assets to another company while options or stock awards remain outstanding under the Plan, unless provisions are made in connection with such transaction for the continuance of the Plan and/or the assumption or substitution of such options or stock awards with new options or stock awards covering the stock of the successor company, or parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, then all outstanding options and stock awards which have not been continued, assumed or for which a substituted award has not been granted shall, whether or not vested or then exercisable, unless otherwise specified in the stock option or stock award agreement, will terminate immediately as of the effective date of any such merger, consolidation or sale.

Plan Amendment or Termination.

Our Board has the authority to amend, suspend, or terminate our Plans, provided that such action does not materially impair the existing rights of any participant without such participant's written consent. The Plans will terminate ten (10) years after the earlier of (i) the date the Plan is adopted by the Board, and (ii) the date a Plan is approved by the shareholders, except that awards that are granted under the Plan prior to its termination will continue to be administered under the terms of the that Plan until the awards terminate, expire or are exercised.

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Federal Income Tax Consequences

Subject to other customary terms, the Company may, prior to certificating any Common Stock, deduct or withhold from any payment pursuant to a stock option or stock award agreement an amount that is necessary to satisfy any withholding requirement of the Company in which it believes, in good faith, is necessary in connection with U.S. federal, state, local or transfer taxes as a consequence of the issuance or lapse of restrictions on such Common Stock.

Individual who receives a grant of options (an “Optionee”) will generally not recognize any taxable income on the date Nonqualified Options are granted pursuant to the Plan. Upon exercise of the option, however, the Optionee must recognize, in the year of exercise, compensation taxable as ordinary income in an amount equal to the difference between the option price and the fair market value of Company common stock on the date of exercise. Upon the sale of the shares, any resulting gain or loss will be treated as capital gain or loss. The Company will receive an income tax deduction in its fiscal year in which NSOs are exercised equal to the amount of ordinary income recognized by those Optionees exercising options, and must comply with applicable tax withholding requirements. ISOs granted under the Plan are intended to qualify for favorable tax treatment under Section 422 of the Internal Revenue Code. Under Section 422, an Optionee recognizes no taxable income when the option is granted. Further, the Optionee generally will not recognize any taxable income when the option is exercised if he or she has at all times from the date of the option’s grant until three months before the date of exercise been an employee of the Company. The Company ordinarily is not entitled to any income tax deduction upon the grant or exercise of an incentive stock option. This favorable tax treatment for the Optionee, and the denial of a deduction for the Company, will not, however, apply if the Optionee disposes of the shares acquired upon the exercise of an incentive stock option within two years from the granting of the option or one year from the receipt of the shares.

Required Vote

The affirmative vote of the holders of a majority of the Company’s common stock present at the annual meeting in person or by proxy and entitled to vote on this proposal is required to approve this proposal to adopt our 2019 Equity Incentive Plan. 

The Board Recommends that You Vote “FOR”

Adoption of the 2019 Equity

Incentive Plan

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The Audit Committee

Report of the Audit Committee

In accordance with our Audit Committee Charter, our Audit Committee oversees our financial reporting process on behalf of our Board. Management has the primary responsibility for the preparation, presentation and integrity of our financial statements, accounting and financial reporting principles, internal control over financial reporting, and procedures designed to ensure compliance with accounting standards, applicable laws and regulations. The Audit Committee’s responsibility is to monitor and oversee these processes. In fulfilling its oversight responsibilities, our Audit Committee reviewed and discussed the audited financial statements for the year ended December 31, 2018,2022, with management, including a discussion of the quality of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.

Our Audit Committee reviewed with the independent registered public accounting firm, which is responsible for auditing our financial statements and for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States, the firm’s judgments as to the quality of our accounting principles and such other matters as are required to be discussed with the Audit Committee under Statement on Auditing Standards No. 61,Communication with Audit Committees, as amended.

by the Public Company Accounting Oversight Board and the Securities and Exchange Commission.

In addition, our Audit Committee received the written disclosures and the letter from our independent registered public accounting firm required by the Independence Standards Board Standard No. 1,Independence Discussions with Audit Committees, as amended, discussed with our independent registered public accounting firm the firm’s independence from both management and our Company, and considered the compatibility of our independent registered public accounting firm’s provision of non-audit services to our company with its independence.

In reliance on the reviews and discussions referred to above, but subject to the limitations on the role and responsibility of our Audit Committee referred to below, our Audit Committee recommended to our Board that (and our Board has approved) the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2018,2022, for filing with the Securities and Exchange Commission.

NoneSEC.

Ms. Britt is a member of the members of our Audit Committee areand a professional accountants. Committeeaccountant. Nevertheless, committee members rely on the information provided to them and on the representations made by management and the independent registered public accounting firm. Accordingly, our Audit Committee serves an oversight role and does not in itself determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal control over financial reporting and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, our Audit Committee’s considerations and discussions referred to above do not assure that the audit of our financial statements has been carried out in accordance with the standards of the Public Company Accounting Oversight Board (United States), that the financial statements are presented in accordance with United States generally accepted accounting principles, or that BF Borgers CPA P.C.PC is in fact “independent.”

Submitted by:
Audit Committee
Jim Dennedy (Chairperson)
____________________

March 29, 2019

The information contained

AUDIT COMMITTEE
Anita Britt
David Hsu
Sonia Lo
STOCKHOLDER PROPOSALS
All proposals that stockholders seek to have included in the report above shall not be deemed to be “soliciting material” or to be “filed” with the Securitiesproxy statement and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Actform of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference in such filing.

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Certain Relationships and Related Transactions

Related Party Transactions

We purchase some cultivation products from Bravo Lighting d/b/a Bravo Enterprises (“Bravo”), Bravo Aviation, and Enviro-Glo, distributors of commercial building lighting and other product solutions with common control by our CEO, Bradley Nattrass and CDO Octavio Gutierrez. Purchases from Bravo, Bravo Aviation and Enviro-Gloproxy, including proposals for director nominees, for the years ended December 31, 2018 and 2017 were $276,443 and $526,002, respectively Outstanding receivables from Bravo and Enviro-Glo as of December 31, 2018 and 2017 totaled $43,120 and $13,540, respectively. Net outstanding payables incurred for purchases of inventory and other services to Bravo and Enviro-Glo as of December 31, 2018 and 2017 totaled $5,562 and $93,394, respectively.

We entered into a lease agreement with Bravo Lighting a related party, to sublease office space for 12 months commencing in September 2017, which was renewed in September 2018. Minimum lease payments are $24,000 in 2019.

We have consulted with Cloud 9 Support, LLC a company owned by James Lowe, a board member and debt holder. Cost of Services provided by Cloud 9 Support, LLC during the years ended December 31, 2018 and 2017 were 84,746 and $58,196, respectively. Cloud 9 Support LLC also purchases materials from us for use with their customers. Total Purchases by Cloud 9 Support, LLC from us during the years ended December 31, 2018 and 2017 were $370,948 and $312,041, respectively. Outstanding receivables from Cloud 9 Support, LLC as of December 31, 2018 and 2017 totaled $79,235 and $42,237, respectively. Net outstanding payables incurred for purchases of inventory and other services to Cloud 9 Support, LLC as of December 31, 2018 and 2017 totaled $13,240 and $7,168, respectively.

In October 2018, we received a $1 million unsecured loan from James Lowe, a director, which is due on or before April 30, 2019. The loan had a one-time origination fee of $12,500. Interest accrues at the rate of 12% per annum and is paid monthly. As additional consideration for the loan we granted Mr. Lowe an option to purchase 30,000 shares of our common stock at an exercise price of $1.20 per share, which option is exercisable for a period of five (5) years. The loan is guaranteed by Messrs. Nattrass and Gutierrez, two of our officers, directors and our principal shareholders.

SECTION 16(A) BENEFICIAL OWNERSHIP

REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who own more than 10% of our shares of Common Stock to file reports of ownership and changes in ownership of our shares of Common Stock and any other equity securities with the Securities and Exchange Commission (“SEC”). Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. To our knowledge, based solely upon a review of Section 16(a) reports furnished to us for fiscal year 2016 or written representations that no other reports were required, we believe that all filing requirements under Section 16(a) for fiscal year 2018 were complied with, except that some of these reports were filed late due in part to delays in their obtaining their personal codes.

2018 ANNUAL REPORT TO STOCKHOLDERS

A copy of our 2018 Annual Report to Stockholders that includes all financial statements and schedules is included herewith. It is also available on our website, http://urbangro.com.

OTHER MATTERS

As of the date of this Proxy Statement the Board does not intend to present any matter for action at the 2019Company’s 2023 Annual Meeting of Stockholders other than as set forth in the Notice of Annual Meeting. If any other matters properly come before the Meeting, or any adjournment or postponement thereof, it is intended that the holders of the proxies will act in accordance with their best judgment.

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STOCKHOLDER PROPOSALS FOR

2020 ANNUAL MEETING OF STOCKHOLDERS

To be eligible for inclusion in the proxy materials for the Company’s 2020 Annual Meeting of Stockholders, stockholder proposals must be received at the Company’s principal executive offices Attention: Corporate Secretary,at 1751 Panorama Point, Unit G, Lafayette, Colorado 80026, not later than December 31, 2022; provided, however, that if the date of the 2023 Annual Meeting of Stockholders is more than 30 days before or after June 15, 2023, notice by December 29, 2019. Wethe stockholder must be delivered a reasonable time before the Company begins to print and send its proxy materials. Upon timely receipt of any such

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proposal, the Company will consider written proposals received by that date for inclusiondetermine whether or not to include such proposal in ourthe proxy statement and form of proxy in accordance with regulations governing the solicitation of proxies. applicable law.
A stockholder who wishes to present a proposal at the Company’s 20202023 Annual Meeting of Stockholders, including proposals for director nominees, but who does not request that the Company solicit proxies for the proposal, must submit the proposal to the Company’s principal executive offices Attention: Corporate Secretary, no earlier than December 29, 2019, andat 1751 Panorama Point, Unit G, Lafayette, Colorado 80026, no later than January 28, 2020.

Because this Proxy Statement was first mailedMarch 20, 2023.

OTHER BUSINESS
Management is not aware of any other business to our stockholders on April 15, 2019, our Corporate Secretary must receive written notice of a stockholder’s intent to make such nomination or nominations atcome before the 2020 Annual Meeting other than as set forth in the Notice. Should any other business be properly brought before the Annual Meeting, it is the intention of the persons named in the form of proxy to vote the shares of common stock represented thereby in accordance with their discretion and best judgment on such matter.
ADDITIONAL INFORMATION
Stockholders not later thanthat have additional questions about the close of business on January 28, 2020, and not earlier thaninformation contained in this proxy statement should contact the close of business on December 29, 2019.

Each notice of a stockholder proposal must set forth:

Company at urban-gro, Inc., 1751 Panorama Point, Unit G, Lafayette, Colorado 80026 or at phone number (720) 390-3880.
 ·as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934 (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and

·as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and of the beneficial owner, if any, on whose behalf the proposal is made.

The stockholder giving the notice, and the beneficial owner, if any, on whose behalf the nomination or proposal is made, must set forth:

·the name and address of such stockholder, as they appear on our books, and of such beneficial owner; and

·the number of shares of each class of our stock which are owned beneficially and of record by such stockholder and such beneficial owner.

If the Board has determined that directors will be elected at a special meeting of stockholders, any stockholder of the Company who is a stockholder of record both at the time of giving of notice of such meeting and at the time of the special meeting, and who is entitled to vote at the meeting and who complies with the notice procedures in the next sentence may nominate a person for election to the Company’s Board. Such stockholder must deliver a notice containing the information described above to the Corporate Secretary not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting.

These requirements are separate from the requirements of the SEC that a stockholder must meet to have a proposal included in our proxy statement.

We will also furnish any stockholder a copy of our bylaws without charge upon written request to the Corporate Secretary.

By Order of the Board,BY ORDER OF THE BOARD OF DIRECTORS,
  
 Bradley J. Nattrass
 George R. PullarChairperson of the Board of Directors and
 Corporate SecretaryChief Executive Officer

April 15, 2019

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May 1, 2023
 

IT IS IMPORTANT THAT PROXIES BE VOTED PROMPTLY. STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE VIRTUAL ANNUAL MEETING AND WISH THEIR SHARES TO BE VOTED ARE URGED TO VOTE BY PROXY ---Urban-gro,AS DESCRIBED IN THE NOTICE.

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APPENDIX A: CURRENT COI
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APPENDIX B: PROPOSED AMENDMENT TO COI
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
urban-gro, Inc. ---
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
urban-gro, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”),
DOES HEREBY CERTIFY:
1.That the name of this corporation is urban-gro, Inc., and that this corporation was originally incorporated pursuant to the General Corporation Law on October 29, 2020 under the name urban-gro, Inc.
2.That the Board of Directors duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:
I.

NAME

The name of this corporation is urban-gro, Inc. (the “Corporation”).

II.

REGISTERED AGENT

The address of the Corporation's registered office in the State of Delaware is located at 251 Little Falls Drive, Wilmington, New Castle County, Delaware 19808. The name of the Corporation’s registered agent at such address is Corporation Service Company.

III.
PURPOSE

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.

IV.

CAPITAL STOCK

Section I. Authorized Shares. The total number of shares of stock which the Corporation shall have authority to issue is thirty-three million (33,000,000) shares; of which 30,000,000 shares shall be designated as "Common Stock," $0.001 par value per share, and 3,000,000 shares shall be designated as "Preferred Stock," $0.10 par value per share.

Section 2. Preferred Stock Designation. The Board of Directors is hereby expressly authorized, by resolution or resolutions, to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of
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such series, the voting powers (if any) of the shares of such series, and the preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, of the shares of such series, to the full extent now or hereafter permitted by the laws of the State of Delaware and the DGCL. The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.

Section 3. Assessment of Stock. The capital stock of the Corporation, after the amount of the subscription price has been fully paid in, shall not be assessable for any purpose, and no stock issued as fully paid shall ever be assessable or assessed. No stockholder of the Corporation is individually liable for the debts or liabilities of the Corporation.

Section 4. Increase or Decrease in Authorized Capital Stock. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any Preferred Stock Designation. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.

Section 5. Voting Rights. Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Preferred Stock Designations) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any Preferred Stock Designations).

V.
INCORPORATOR

The incorporator is Bradley J. Nattrass, whose mailing address is 1751 Panorama Point, Unit G, Lafayette, Colorado 80026 (the “Incorporator”).

VI.

BOARD OF DIRECTORS

Section 1. Number of Directors. The members of the governing board of the Corporation are styled as directors. The Board of Directors of the Corporation shall be elected in such manner as shall be provided in the Bylaws of the Corporation. The number of directors shall be not less than one (1) nor more than ten (10). The number of directors may be changed from time to time within this range in such manner as shall be provided in the Bylaws of the Corporation.

Section 2. Ballot and Nominees. Nominations by stockholders of persons for election to the Board of Directors shall be made only in accordance with the procedures set forth in the Bylaws of the Corporation. Elections of directors need not be by written ballot except and to the extent provided in the Bylaws of the Corporation.

Section 3. Removal and Filling of Newly Created Directorships. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director, or the entire Board of Directors, may be removed
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from office with or without cause, at any time, only by the affirmative vote of the holders of a majority of the shares of voting stock then outstanding. Subject to the rights of the holders of any series of Preferred Stock, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall, unless otherwise provided by law or by resolution of the Board of Directors, be filled only by a majority vote of the directors then in office, though less than a quorum (and not by stockholders), and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been chosen expires or until such director's successor shall have been duly elected and qualified. No decrease in the authorized number of directors shall shorten the term of any incumbent director.

Section 4. Advance Notice of Nominations. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.

VII.
STOCKHOLDER ACTION

Section I. Action by Consent. Any election of directors or other action by the stockholders of the Corporation that can be effected at an annual or special meeting of stockholders can be effected by written consent without a meeting so long as such written consent is signed by the holders of at least the number of shares required to approve such action at a duly held annual or special stockholders meeting at which all shares entitled to vote thereon were present and voted.

Section 2. Special Meetings. Except as othe1wise expressly provided by the terms of any series of Preferred Stock permitting the holders of such series of Preferred Stock to call a special meeting of the holders of such series, special meetings of the stockholders of the Corporation may be called only by the Board of Directors, the chairperson of the Board of Directors, the chief executive officer or the president (in the absence of a chief executive officer), and the ability of the stockholders to call a special meeting is hereby specifically denied. The Board of Directors may cancel, postpone or reschedule any previously scheduled special meeting at any time, before or after the notice for such meeting has been sent to the stockholders.

VIII.
LIMITATION OF DIRECTOR AND OFFICER LIABILITY; INDEMNIFICATION

A director or officer of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, provided that this provision shall not eliminate or limit the liability of a director or an officer (i) for any breach of the director’s or officer’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) under Section 174 of the DGCL, (iv) for any transaction from which the director or officer derives and improper personal benefit, or (v) an officer in any action by or in the right of the Corporation. If the DGCL is hereafter amended to authorize corporate action further limiting or eliminating the personal liability of directors or officers, then the liability of the directors or officers of the Corporation shall be limited or eliminated to the fullest extent permitted by the DGCL, as so amended from time to time. Any repeal or modification of this Article by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director or officer of the Corporation existing at the time of such repeal or modification. All references in this paragraph to an officer shall mean only a person who at the time of an act or omission as to which liability is asserted is deemed to have consented to service by the delivery of process to the registered agent of the Corporation pursuant to §3114(b) of Title 10 (for purposes of this sentence only, treating residents of the State of Delaware as if they were nonresidents to apply of §3114(b) of Title 10 to this sentence).
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IX.

BYLAWS

The Board of Directors is expressly authorized to adopt, amend or repeal any or all of the Bylaws of the Corporation. Any adoption, amendment or repeal of the Bylaws of the Corporation by the Board of Directors shall require the approval of a majority of the Board of Directors. The stockholders shall also have the power to adopt, amend or repeal the Bylaws of the Corporation as prescribed by law; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation (including any Preferred Stock Designation), the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the Corporation.

X.
AMENDMENT

In addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of a majority of the voting power of all of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal the provisions of this Certificate of Incorporation.

* * *
3.That the foregoing amendment and restatement was approved by the stockholders of the Corporation at a meeting of the stockholders held in accordance with the General Corporation Law.
4.That this Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this Corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this __ day of _________, 2023.

By:
    Bradley J. Nattrass, Chief Executive Officer
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APPENDIX C: PROPOSED AMENDMENT TO BYLAWS

AMENDMENT NO. 2 TO
THE BYLAWS OF URBAN-GRO, INC.
WHEREAS, the board of directors (the "Board") of urban-gro, Inc. (the "Corporation") has determined that it is in the best interests of the Corporation to amend the bylaws of the Corporation (the "Bylaws"), subject to stockholder approval, to amend the voting threshold for the Corporation’s Stockholders to adopt, amend or repeal any provision of the Bylaws (the "Amendment”); and
WHEREAS, this Amendment will become effective upon approval by the Corporation’s stockholders at the 2023 Annual Meeting of Stockholders and if, for any reason, the Corporation’s stockholders fail to approve this Amendment, the existing Bylaws shall continue in full force and effect.
NOW, THEREFORE, the following amendments and modifications are hereby made a part of the Bylaws of the Corporation:
1.Article VIII, Section 8.1of the Bylaws is hereby deleted in its entirety and replaced as follows:
“Subject to the provisions of the Certificate of Incorporation, these Bylaws may be adopted, amended or repealed at any meeting of the Board of Directors by a resolution adopted by a majority of the Whole Board, provided notice of the proposed change was given in the notice of the meeting in a notice given no less than twenty-four (24) hours prior to the meeting. Subject to the provisions of the Certificate of Incorporation, the stockholders shall also have the power to adopt, amend or repeal these Bylaws, provided that notice of the proposed change was given in the notice of the meeting and provided further that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by the Certificate of Incorporation, the affirmative vote of a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of these Bylaws.”

This Amendment shall become effective upon the date that it is approved by the Company’s stockholders in accordance with applicable laws and regulations.

Except as set forth above, all other provisions of the Bylaws shall remain unchanged.


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APPENDIX D: CURRENT 2021 OMNIBUS STOCK INCENTIVE PLAN

URBAN-GRO, INC.

2021 OMNIBUS STOCK INCENTIVE PLAN

Approved by the Board: February 23, 2021
Approved by the Stockholders: May 27, 2021

1.Purposes of the Plan. The purposes of this Plan are to attract and retain the best available personnel; to provide additional incentives to Employees, Directors and Consultants to contribute to the successful performance of the Company and any Related Entity; to promote the growth of the market value of the Company’s Common Stock; to align the interests of Grantees with those of the Company’s stockholders; and to promote the success of the Company’s business.

2.Definitions. The following definitions shall apply as used herein and in all individual Award Agreements except as a term may be otherwise defined in an individual Award Agreement. In the event a term is separately defined in an individual Award Agreement, such definition shall supersede the definition contained in this Section 2.

(a)     “Administrator” means the Plan Administrator as described in Section 4.

(b)    “Applicable Laws” means the legal requirements relating to the Plan and the Awards under applicable provisions of federal and state securities laws, the corporate laws of Delaware, and, to the extent other than Delaware, the corporate law of the state of the Company’s incorporation, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to Awards granted to residents therein.

(c)     “Assumed” means, with respect to an Award, that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which at least preserves the compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Award.

(d)     “Award” means the grant of an Option, SAR, Dividend Equivalent Right, Restricted Stock, Restricted Stock Unit, or other right or benefit under the Plan.

(e)    “Award Agreement” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.

(f)    “Board” means the Board of Directors of the Company.

(g)    “Cause” means, with respect to the termination by the Company or a Related Entity of a Grantee’s Continuous Service:

(i)    that such termination is for “Cause” as such term (or word of like import) is expressly defined in a then-effective written employment agreement, consulting agreement, service agreement or other similar agreement between the Grantee and the Company or such Related Entity, provided, however, that with regard to any agreement that defines “Cause” on the occurrence of or in connection with a Corporate Transaction,
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such definition of “Cause” shall not apply until a Corporate Transaction actually occurs; or

(ii)    in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator: (A) the Grantee’s performance of any act, or failure to perform any act, in bad faith and to the detriment of the Company or a Related Entity; (B) the Grantee’s dishonesty, intentional misconduct or material breach of any agreement with the Company or a Related Entity; (C) the Grantee’s material breach of any noncompetition, confidentiality or similar agreement with the Company or a Related Entity, as determined under such agreement; (D) the Grantee’s commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person; (E) if the Grantee is an Employee or Consultant, the Grantee’s engaging in acts or omissions constituting gross negligence, misconduct or a willful violation of a Company or a Related Entity policy which is or is reasonably expected to be materially injurious to the Company and/or a Related Entity; or (F) if the Grantee is an Employee, the grantee’s failure to follow the reasonable instructions of the Board or such grantee’s direct supervisor, which failure, if curable, is not cured within ten (10) days after notice to such grantee or, if cured, recurs within one hundred eighty (180) days.

(h)    “Code” means the Internal Revenue Code of 1986, as amended, or any successor statute.

(i)    “Committee” means any committee composed of members of the Board appointed by the Board to administer the Plan.

(j)    “Common Stock” means the Company’s voting common stock, no par value per share.

(k)    “Company” means urban-gro, Inc., a Delaware corporation, or any successor entity that adopts the Plan in connection with a Corporate Transaction.

(l)    “Consultant” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

(m)    “Continuous Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated. In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws. A Grantee’s Continuous Service shall be deemed to have terminated either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services ceasing to be a Related Entity. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). An approved leave of absence for purposes of this Plan shall include sick leave, military leave, or any other authorized personal leave, so long as the Company or Related Entity has a reasonable expectation that the individual will return to provide services for the Company or Related Entity, and provided further that the leave does not exceed six (6) months, unless the individual has a statutory or contractual right to re-employment following a longer leave. For purposes of each Incentive Stock Option granted under the Plan, if such leave exceeds three (3) months, and reemployment upon expiration of such leave is not guaranteed by statute or
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contract, then the Incentive Stock Option shall be treated as a Non-Qualified Stock Option beginning on the day three (3) months and one (1) day following the expiration of such three (3) month period.

(n)    “Corporate Transaction” means any of the following transactions, provided, however, that the Administrator shall determine under parts (iv) and (v) whether multiple transactions are related, and its determination shall be final, binding and conclusive:

(i)    a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;

(ii)    the sale, transfer or other disposition of all or substantially all of the assets of the Company;

(iii)    the complete liquidation or dissolution of the Company;

(iv)    any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but (A) the Shares outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (B) in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger; or

(v)    acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities.

(o)    “Data” has the meaning set forth in Section 22 of this Plan.

(p)    “Director” means a member of the Board or the board of directors of any Related Entity.

(q)    “Disability” means a “disability” (or word of like import) as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator.

(r)    “Disqualifying Disposition” means any disposition (including any sale) of Common Stock received upon exercise of an Incentive Stock Option before either (i) two years after the date the Employee was granted the Incentive Stock Option, or (ii) one year after the date the Employee acquired Common Stock by exercising the Incentive Stock Option. If the Employee has died before such stock is sold, these holding period requirements do not apply and no Disqualifying Disposition can occur thereafter.

(s)    “Dividend Equivalent Right” means a right entitling the Grantee to compensation measured by dividends paid with respect to Common Stock.
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(t)    “Employee” means any person, including an Officer or Director, who is in the employ of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance. The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to make such person an “Employee” of the Company or a Related Entity.

(u)    “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(v)    “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows.

(i)    If the Common Stock is listed on one or more established stock exchanges or national market systems, including without limitation The NASDAQ Global Select Market, The NASDAQ Global Market, or The NASDAQ Capital Market of The NASDAQ Stock Market LLC, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Common Stock is listed (as determined by the Administrator) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(ii)    If the Common Stock is regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the closing sales price for such stock as quoted on such system or by such securities dealer on the date of determination, but if selling prices are not reported, the Fair Market Value of a Share shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

(iii)    In the absence of an established market for the Common Stock of the type described in (i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith by application of a reasonable valuation method consistently applied and taking into consideration all available information material to the value of the Company in a manner in compliance with Section 409A of the Code, or in the case of an Incentive Stock Option, in a manner in compliance with Section 422 of the Code.

(w)    “Grantee” means an Employee, Director or Consultant who receives an Award under the Plan.

(x)    “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

(y)    “Non-Qualified Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

(z)    “Officer” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(aa)    “Option” means an option to purchase one or more Shares pursuant to an Award Agreement granted under the Plan.

(bb)    “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.
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(cc)    “Performance Period” means the time period during which specified performance criteria must be met in connection with vesting of an Award as determined by the Administrator, as described in Section 6(d) below.

(dd)    “Plan” means this urban-gro, Inc. 2021 Omnibus Stock Incentive Plan, as the same may be amended from time to time.

(ee)    “Post-Termination Exercise Period” means the period specified in the Award Agreement of not less than thirty (30) days commencing on the date of termination (other than termination by the Company or any Related Entity for Cause) of the Grantee’s Continuous Service, or such longer period as may be applicable upon death or Disability.

(ff)    “Related Entity” means any Parent or Subsidiary of the Company.

(gg)    “Restricted Stock” means Shares issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.

(hh)    “Restricted Stock Units” means an Award which may be earned in whole or in part upon the passage of time or the attainment of performance criteria established by the Administrator and which may be settled for cash, Shares or other securities or a combination of cash, Shares or other securities as established by the Administrator.

(ii)    “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.

(jj)    “SAR” means a stock appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Common Stock.

(kk)    “Share” means a share of the Common Stock.

(ll)    “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

(mm)    “Tax Obligations” means all income tax, social insurance, payroll tax, fringe benefits tax, or other tax-related liabilities related to a Grantee’s participation in the Plan and the receipt of any benefits hereunder, as determined under the Applicable Laws.

3.Stock Subject to the Plan.

(a)    Subject to adjustment as described in Section 13 below, the maximum aggregate number of Shares which may be issued pursuant to all Awards (including Incentive Stock Options) is One Million One Hundred Thousand (1,100,000) Shares. The Shares may be authorized, but unissued, or reacquired Common Stock.

(b)    Any Shares covered by an Award (or portion of an Award) which is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued under the Plan, except that the maximum aggregate number of Shares which may be issued pursuant to the exercise of Incentive Stock Options shall not exceed the number specified in Section 3(a). Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited or repurchased
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by the Company, such Shares shall become available for future grant under the Plan. In the event any Option or other Award granted under the Plan is exercised through the tendering of Shares (either actually or through attestation), or in the event tax withholding obligations are satisfied by tendering or withholding Shares, any Shares so tendered or withheld shall not again be available for awards under the Plan. To the extent that cash in lieu of Shares is delivered upon the exercise of an SAR pursuant to Section 6(m), the Company shall be deemed, for purposes of applying the limitation on the number of shares, to have issued the number of Shares which it was entitled to issue upon such exercise, notwithstanding that cash was issued in lieu of such Shares. Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Options shall not be available for awards under the Plan.

4.Administration of the Plan.

(a)    Plan Administrator.

(i)    Administration with Respect to Directors and Officers. With respect to grants of Awards to Directors or Employees who are also Officers or Directors of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.

(ii)    Administration With Respect to Consultants and Other Employees. With respect to grants of Awards to Employees or Consultants who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.

(b)    Multiple Administrative Bodies. The Plan may be administered by different bodies with respect to Directors, Officers, Consultants, and Employees who are neither Directors nor Officers.

(c)    Powers of the Administrator. Subject to Applicable Laws and the provisions of the Plan
(including any other powers given to the Administrator hereunder), and except as otherwise provided by
the Board, the Administrator shall have the authority, in its discretion:

(i)    to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;

(ii)    to determine whether and to what extent Awards are granted hereunder;

(iii)    to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;

(iv)    to approve forms of Award Agreements for use under the Plan;

(v)    to determine the type, terms and conditions of any Award granted hereunder;

(vi)    to establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable non-U.S. jurisdictions and to afford Grantees favorable treatment under such rules or laws; provided, however, that no Award shall be granted under any such additional terms,
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conditions, rules or procedures with terms or conditions which are inconsistent with the provisions of the Plan;

(vii)    to amend the terms of any outstanding Award granted under the Plan, provided that any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent; provided, however, that an amendment or modification that may cause an Incentive Stock Option to become a Non- Qualified Stock Option shall not be treated as adversely affecting the rights of the Grantee;

(viii)    to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of award or Award Agreement, granted pursuant to the Plan;

(ix)    to institute an option exchange program;

(x)    to make other determinations as provided in this Plan; and

(xi)    to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

The express grant in the Plan of any specific power to the Administrator shall not be construed as limiting any power or authority of the Administrator; provided that the Administrator may not exercise any right or power reserved to the Board. Any decision made, or action taken, by the Administrator or in connection with the administration of this Plan shall be final, conclusive and binding on all persons having an interest in the Plan.

(d)    Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees of the Company or a Related Entity, members of the Board and any Officers or Employees of the Company or a Related Entity to whom authority to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to such liabilities, costs, and expenses as may arise out of, or result from, the bad faith, gross negligence, willful misconduct, or criminal acts of such persons; provided, however, that within thirty (30) days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.

5.    Eligibility. Awards other than Incentive Stock Options may be granted to Employees, Directors, and Consultants of the Company and any Related Entity. Incentive Stock Options may be granted only to Employees of the Company or a Related Entity. An Employee, Director, or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards. Awards may be granted to such Employees, Directors, or Consultants who are residing in non-U.S. jurisdictions as the Administrator may determine from time to time.

6. Terms and Conditions of Awards.

(a)    Types of Awards. The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash or (iii) an
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Option, an SAR, or similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions. Such awards include, without limitation, Options, SARs, sales or bonuses of Restricted Stock, Restricted Stock Units, and Dividend Equivalent Rights. An Award may consist of one such security or benefit, or two (2) or more of them in any combination or alternative.

(b)    Designation of Award. Each Award shall be evidenced by an Award Agreement in form and substance satisfactory to the Administrator. The type of each Award shall be designated in the Award Agreement. In the case of an Option, the Option shall be designated as either an Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding such designation, an Option will qualify as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded. The $100,000 limitation of Section 422(d) of the Code is calculated based on the aggregate Fair Market Value of the Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Related Entity). For purposes of this calculation, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the grant date of the relevant Option. Any Option granted which fails to satisfy the requirements of the Applicable Laws for treatment as an Incentive Stock Option shall be a Non-Qualified Stock Option.

(c)    Conditions of Award. Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria that may be established by the Administrator.

(d)    Performance-Based Awards. The Administrator may include in an Award provisions such that the vesting or other realization of an Award by a Grantee will be subject to the achievement of certain performance criteria as the Administrator may determine over the course of a Performance Period determined by the Administrator.

(i)    The performance criteria will be established by the Administrator and may include any one of, or combination of, the following criteria:

(A)    Net earnings or net income (before or after taxes);

(B)    Earnings per share;

(C)    Net sales growth;

(D)    Net operating profit;

(E)    Return measures (including, but not limited to, return on assets, capital,
equity, or sales);

(F)    Cash flow (including, but not limited to, operating cash flow, free cash
flow, and cash flow return on capital);

(G)    Cash flow per share;

(H)    Earnings before or after taxes, interest, depreciation, and/or amortization;

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(I)    Gross or operating margins;

(J)    Productivity ratios;

(K)    Share price (including, but not limited to, growth measures and total
stockholder return);

(L)    Expense targets or ratios;

(M)    Charge-off levels;

(N)    Improvement in or attainment of revenue levels;

(O)    Deposit growth;

(P)    Margins;

(Q)    Operating efficiency;

(R)    Operating expenses;

(S)    Economic value added;

(T)    Improvement in or attainment of expense levels;

(U)    Improvement in or attainment of working capital levels;

(V)    Debt reduction;

(W)    Capital targets; and

(X)    Consummation of acquisitions, dispositions, projects or other specific
events or transactions.

(ii)    The Administrator may provide in any grant of an Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (A) asset write-downs, (B) litigation or claim judgments or settlements, (C) the effect of changes in tax laws, accounting principles or regulations, or other laws or provisions affecting reported results, (D) any reorganization and restructuring programs, (E) Extraordinary Items for the applicable Performance Period, (F) mergers, acquisitions or divestitures, and (G) foreign exchange gains and losses. For this purpose, “Extraordinary Items” means extraordinary, unusual, and/or nonrecurring items of gain or loss as defined under United States generally accepted accounting principles.

(iii)    Before the 90th day of the applicable Performance Period (or, if the Performance Period is less than one year, no later than the number of days which is equal to 25% of such Performance Period), the Administrator will determine the duration of the Performance Period, the performance criteria on which performance will be measured, and the amount and terms of payment/vesting upon achievement of the such criteria.

(iv)    Following the completion of each Performance Period, the Administrator will certify in writing whether the applicable performance criteria have been achieved for the Awards for such Performance Period. A Grantee will be eligible to receive payment pursuant to an Award for a Performance Period only if the performance criteria for such Performance Period are achieved. In
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determining the amounts earned by a Grantee pursuant to an Award issued pursuant to this Section 6(d), the Administrator will have the right to (A) reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Administrator may deem relevant to the assessment of individual or corporate performance for the Performance Period, (B) determine what actual Award, if any, will be paid in the event of a Corporate Transaction or in the event of a termination of employment following a Corporate Transaction prior to the end of the Performance Period, and (C) determine what actual Award, if any, will be paid in the event of a termination of employment other than as the result of a Grantee’s death or Disability prior to a Corporate Transaction and prior to the end of the Performance Period to the extent an actual Award would have otherwise been achieved had the Grantee remained employed through the end of the Performance Period.

(v)    Payment of the Award to a Grantee shall be paid following the end of the Performance Period, or if later, the date on which any applicable contingency or restriction has ended.

(e)    Acquisitions and Other Transactions. The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form of transaction.

(f)    Deferral of Award Payment. The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award. The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.

(g)    Separate Programs. The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.

(h)    Individual Award Limit. No Grantee may be granted an Award of Options or SARs in any calendar year with respect to more than one hundred thousand (100,000) Shares, or an Award of Restricted Stock, Restricted Stock Units, Dividend Equivalent Rights, or other Awards that are valued with reference to shares covering more than one hundred thousand (100,000) Shares. The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 13 below.

(i)    Early Exercise. An Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award. Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.

(j)    Term of Award. The term of each Award shall be the term stated in the Award Agreement, provided, however, that the term shall be no more than ten (10) years from the date of grant thereof. However, in the case of an Incentive Stock Option granted to a Grantee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Related Entity, the term of the Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement. Notwithstanding the foregoing, the specified term of any Award shall not include any period
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for which the Grantee has elected to defer the receipt of the Shares or cash issuable pursuant to the Award.

(k)    Transferability of Awards. Unless the Administrator provides otherwise, no award may be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the Grantee. Notwithstanding the foregoing, the Grantee may designate one or more beneficiaries of the Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator.

(l)    Time of Granting Awards. The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other later date as is determined by the Administrator.

(m)    Stock Appreciation Rights. An SAR may be granted (i) with respect to any Option granted under this Plan, either concurrently with the grant of such Option or at such later time as determined by the Administrator (as to all or any portion of the Shares subject to the Option), or (ii) alone, without reference to any related Option. Each SAR granted by the Administrator under this Plan shall be subject to the following terms and conditions. Each SAR granted to any participant shall relate to such number of Shares as shall be determined by the Administrator, subject to adjustment as provided in Section 13. In the case of an SAR granted with respect to an Option, the number of Shares to which the SAR pertains shall be reduced in the same proportion that the holder of the Option exercises the related Option. The exercise price of an SAR will be determined by the Administrator at the date of grant but may not be less than 100% of the Fair Market Value of the Shares subject thereto on the date of grant. Subject to the right of the Administrator to deliver cash in lieu of Shares (which, as it pertains to Officers and Directors of the Company, shall comply with all requirements of the Exchange Act), the number of Shares which shall be issuable upon the exercise of an SAR shall be determined by dividing:

(i)    the number of Shares as to which the SAR is exercised multiplied by the amount of the appreciation in such Shares (for this purpose, the “appreciation” shall be the amount by which the Fair Market Value of the Shares subject to the SAR on the exercise date exceeds (1) in the case of an SAR related to an Option, the exercise price of the Shares under the Option or (2) in the case of an SAR granted alone, without reference to a related Option, an amount which shall be determined by the Administrator at the time of grant, subject to adjustment under Section 13); by

(ii)    the Fair Market Value of a Share on the exercise date.

In lieu of issuing Shares upon the exercise of an SAR, the Administrator may elect to pay the holder of the SAR cash equal to the Fair Market Value on the exercise date of any or all of the Shares which would otherwise be issuable. No fractional Shares shall be issued upon the exercise of an SAR; instead, the holder of the SAR shall be entitled to receive a cash adjustment equal to the same fraction of the Fair Market Value of a Share on the exercise date or to purchase the portion necessary to make a whole share at its Fair Market Value on the date of exercise. The exercise of an SAR related to an Option shall be permitted only to the extent that the Option is exercisable under Section 11 on the date of surrender. Any Incentive Stock Option surrendered pursuant to the provisions of this Section 6(m) shall be deemed to have been converted into a Non-Qualified Stock Option immediately prior to such surrender.

7. Award Exercise or Purchase Price, Consideration and Taxes.

(a)    Exercise or Purchase Price. The exercise or purchase price, if any, for an Award shall be as follows.

(i)    In the case of an Incentive Stock Option:
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(1)    granted to an Employee who, at the time of the grant of such Incentive Stock Option owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Related Entity, the per Share exercise price shall be not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or

(2)    granted to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

(ii)    In the case of a Non-Qualified Stock Option, the per Share exercise price shall be not less than one-hundred percent (100%) of the Fair Market Value per Share on the date of grant.

(iii)    In the case of other Awards, such price as is determined by the Administrator.

(iv)    Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award issued pursuant to Section 6(e), above, the exercise or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award.

(b)    Consideration. Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award, including the method of payment, shall be determined by the Administrator. In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following:

(i)    cash;

(ii)    check;

(iii)    delivery of Grantee’s promissory note with such recourse, interest, security, and redemption provisions as the Administrator determines as appropriate (but only to the extent that the acceptance or terms of the promissory note would not violate an Applicable Law); provided, however, that interest shall compound at least annually and shall be charged at the minimum rate of interest necessary to avoid (A) the imputation of interest income to the Company and compensation income to the Grantee under any applicable provisions of the Code, and (B) the classification of the Award as a liability for financial accounting purposes;

(iv)    surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require which have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised;

(v)    with respect to Options, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a broker-dealer acceptable to the Company to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates (or other evidence satisfactory to the Company to the extent that the Shares are uncertificated) for the purchased Shares directly to such broker-dealer in order to complete the sale transaction;

(vi)    with respect to Options, payment through a “net exercise” such that, without the payment of any funds, the Grantee may exercise the Option and receive the net number of Shares equal
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to (i) the number of Shares as to which the Option is being exercised, multiplied by (ii) a fraction, the numerator of which is the Fair Market Value per Share (on such date as is determined by the Administrator) less the Exercise Price per Share, and the denominator of which is such Fair Market Value per Share;

(vii)    past or future services actually or to be rendered to the Company or a Related Entity;

(viii)    any combination of the foregoing methods of payment; or

(ix)    any other method approved by the Administrator.

The Administrator may at any time or from time to time, by adoption of or by amendment to the standard forms of Award Agreement described in Section 4(c)(iv), or by other means, grant Awards which do not permit all of the foregoing forms of consideration to be used in payment for the Shares or which otherwise restrict one or more forms of consideration.

8.    Notice to Company of Disqualifying Disposition. Each Employee who receives an Incentive Stock Option must agree to notify the Company in writing immediately after the Employee makes a Disqualifying Disposition of any Common Stock acquired pursuant to the exercise of an Incentive Stock Option.

9. Tax Withholding.

(a)    Prior to the delivery of any Shares or cash pursuant to an Award (or the exercise thereof), or at such other time as the Tax Obligations are due, the Company, in accordance with the Code and any Applicable Laws, shall have the power and the right to deduct or withhold, or require a Grantee to remit to the Company, an amount sufficient to satisfy all Tax Obligations. The Administrator may condition such delivery, payment, or other event pursuant to an Award on the payment by the Grantee of any such Tax Obligations.

(b)    The Administrator, pursuant to such procedures as it may specify from time to time, may designate the method or methods by which a Grantee may satisfy the Tax Obligations. As determined by the Administrator from time to time, these methods may include one or more of the following:

(i)    paying cash;

(ii)    electing to have the Company withhold cash or Shares deliverable to the Grantee having a Fair Market Value equal to the amount required to be withheld;

(iii)    delivering to the Company already-owned Shares having a Fair Market Value equal to the amount required to be withheld or remitted, provided the delivery of such Shares will not result in any adverse accounting consequences as the Administrator determines;

(iv)    selling a sufficient number of Shares otherwise deliverable to the Grantee through such means as the Administrator may determine (whether through a broker or otherwise) equal to the Tax Obligations required to be withheld;

(v)    retaining from salary or other amounts payable to the Grantee cash having a sufficient value to satisfy the Tax Obligations; or

(vi)    any other means which the Administrator determines to both comply with Applicable Laws, and to be consistent with the purposes of the Plan.
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The amount of Tax Obligations will be deemed to include any amount that the Administrator determines may be withheld at the time the election is made, not to exceed the amount determined by using the maximum federal, state, local and foreign marginal income tax rates applicable to the Grantee or the Company, as applicable, with respect to the Award on the date that the amount of tax or social insurance liability to be withheld or remitted is to be determined. The Fair Market Value of the Shares to be withheld or delivered shall be determined as of the date that the Tax Obligations are required to be withheld.

10. Rights As a Stockholder.

(a)    Restricted Stock. Except as otherwise provided in any Award Agreement, a Grantee will not have any rights of a stockholder with respect to any of the Shares granted to the Grantee under an Award of Restricted Stock (including the right to vote or receive dividends and other distributions paid or made with respect thereto) nor shall cash dividends or dividend equivalents accrue or be paid in respect of any unvested Award of Restricted Stock, unless and until such Shares vest.

(b)    Other Awards. In the case of Awards other than Restricted Stock, except as otherwise provided in any Award Agreement, a Grantee will not have any rights of a stockholder, nor will dividends or dividend equivalents accrue or be paid, with respect to any of the Shares granted pursuant to such Award until the Award is exercised or settled and the Shares are delivered (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).

11. Exercise of Award.

(a)    Procedure for Exercise.

(i)    Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and as specified in the Award Agreement.

(ii)    An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised has been made, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b)(v).

(b)    Exercise of Award Following Termination of Continuous Service. In the event of termination of a Grantee’s Continuous Service for any reason other than Disability or death, such Grantee may, but only during the Post-Termination Exercise Period (but in no event later than the expiration date of the term of such Award as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested at the date of such termination or such other portion of the Grantee’s Award as may be determined by the Administrator. The Grantee’s Award Agreement may provide that upon the termination of the Grantee’s Continuous Service for Cause, the Grantee’s right to exercise the Award shall terminate concurrently with the termination of Grantee’s Continuous Service. In the event of a Grantee’s change of status from Employee to Consultant, an Employee’s Incentive Stock Option shall convert automatically to a Non-Qualified Stock Option on the day three (3) months and one day following such change of status. To the extent that the Grantee’s Award was unvested at the date of termination, or if the Grantee does not exercise the vested portion of the Grantee’s Award within the Post- Termination Exercise Period, the Award shall terminate.

(c)    Disability of Grantee. In the event of termination of a Grantee’s Continuous Service as a result of his or her Disability, such Grantee may, but only within twelve (12) months from the date of
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such termination (or such longer period as specified in the Award Agreement but in no event later than the expiration date of the term of such Award as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested at the date of such termination; provided, however, that if such Disability is not a “disability” as such term is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive Stock Option shall automatically convert to a Non-Qualified Stock Option on the day three (3) months and one day following such termination. To the extent that the Grantee’s Award was unvested at the date of termination, or if Grantee does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.

(d)    Death of Grantee. In the event of a termination of the Grantee’s Continuous Service as a result of his or her death, or in the event of the death of the Grantee during the Post-Termination Exercise Period or during the twelve (12) month period following the Grantee’s termination of Continuous Service as a result of his or her Disability, the Grantee’s estate or a person who acquired the right to exercise the Award by bequest or inheritance may exercise the portion of the Grantee’s Award that was vested as of the date of termination, within twelve (12) months from the date of death (or such longer period as specified in the Award Agreement but in no event later than the expiration of the term of such Award as set forth in the Award Agreement). To the extent that, at the time of death, the Grantee’s Award was unvested, or if the Grantee’s estate or a person who acquired the right to exercise the Award by bequest or inheritance does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.

(e)    Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of an Award within the applicable time periods set forth in this Section 11 is prevented by the provisions of Section 12 below, the Award shall remain exercisable until one (1) month after the date the Grantee is notified by the Company that the Award is exercisable, but in any event no later than the expiration of the term of such Award as set forth in the Award Agreement.

12. Conditions Upon Issuance of Shares; Manner of Issuance of Shares.

(a)    If at any time the Administrator determines that the delivery of Shares pursuant to the exercise, vesting or any other provision of an Award is or may be unlawful under Applicable Laws, the vesting or right to exercise an Award or to otherwise receive Shares pursuant to the terms of an Award shall be suspended until the Administrator determines that such delivery is lawful and shall be further subject to the approval of counsel for the Company with respect to such compliance. The Company shall have no obligation to effect any registration or qualification of the Shares under any Applicable Law.

(b)    As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.

(c)    Subject to the Applicable Laws and any governing rules or regulations, the Company shall issue or cause to be issued the Shares acquired pursuant to an Award and shall deliver such Shares to or for the benefit of the Grantee by means of one or more of the following as determined by the Administrator: (i) by delivering to the Grantee evidence of book entry Shares credited to the account of the Grantee, (ii) by depositing such Shares for the benefit of the Grantee with any broker with which the Grantee has an account relationship, or (iii) by delivering such Shares to the Grantee in certificate form.

(d)    No fractional Shares shall be issued pursuant to any Award under the Plan; any Grantee who would otherwise be entitled to receive a fraction of a Share upon exercise or vesting of an Award will receive from the Company cash in lieu of such fractional Shares in an amount equal to the Fair Market Value of such fractional Shares, as determined by the Administrator.

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13.     Adjustments. Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued and outstanding Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued and outstanding Shares effected without receipt of consideration by the Company, or (iii) any other transaction with respect to the Company’s Common Stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Administrator and its determination shall be final, binding and conclusive. Except as the Administrator determines, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award. No adjustments shall be made for dividends paid in cash or in property other than Common Stock of the Company, nor shall cash dividends or dividend equivalents accrue or be paid in respect of unexercised Options or unvested Awards hereunder.

14. Corporate Transactions.

(a)    Termination of Award to Extent Not Assumed in Corporate Transaction. Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate. However, all such Awards shall not terminate to the extent they are Assumed in connection with the Corporate Transaction.

(b)    Acceleration of Award Upon Corporate Transaction. The Administrator shall have the authority, exercisable either in advance of any actual or anticipated Corporate Transaction or at the time of an actual Corporate Transaction, and exercisable at the time of the grant of an Award under the Plan or any time while an Award remains outstanding, to provide for the full or partial automatic vesting and exercisability of one or more outstanding unvested Awards under the Plan and the release from restrictions on transfer and repurchase or forfeiture rights of such Awards in connection with a Corporate Transaction on such terms and conditions as the Administrator may specify. The Administrator also shall have the authority to condition any such Award vesting and exercisability or release from such limitations upon the subsequent termination of the Continuous Service of the Grantee within a specified period following the effective date of the Corporate Transaction. The Administrator may provide that any Awards so vested or released from such limitations in connection with a Corporate Transaction shall remain fully exercisable until the expiration or sooner termination of the Award.

(c)    Effect of Acceleration on Incentive Stock Options. Any Incentive Stock Option accelerated under this Section 14 in connection with a Corporate Transaction shall remain exercisable as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded.

15.    Effective Date and Term of Plan. The Plan shall become effective at such time as it has been (a) approved by the Company’s stockholders and (b) adopted by the Board. Stockholder approval shall be obtained in the degree and manner required under Applicable Laws. The Plan shall continue in effect for a term of ten (10) years unless sooner terminated. Any Award granted before stockholder approval is obtained will be rescinded if stockholder approval is not obtained within the time prescribed, and Shares issued on the grant or exercise of any such Award shall not be counted in determining whether
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stockholder approval is obtained. Subject to the preceding sentence and the Applicable Laws, Awards may be granted under the Plan upon its becoming effective.

16. Amendment, Suspension or Termination of the Plan.

(a)    The Board may at any time amend, suspend or terminate the Plan in any respect, except that it may not, without the approval of the stockholders obtained within twelve (12) months before or after the Board adopts a resolution authorizing any of the following actions, do any of the following:

(i)    increase the total number of shares that may be issued under the Plan (except by adjustment pursuant to Section 13);

(ii)    modify the provisions of Section 6 regarding eligibility for grants of Incentive Stock Options;

(iii)    modify the provisions of Section 7(a) regarding the exercise price at which shares may be offered pursuant to Options (except by adjustment pursuant to Section 13);

(iv)    extend the expiration date of the Plan; and

(v)    except as provided in Section 13 (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the Company may not amend an Award granted under the Plan to reduce its exercise price per share, cancel and regrant new Awards with lower prices per share than the original prices per share of the cancelled Awards, or cancel any Awards in exchange for cash or the grant of replacement Awards with an exercise price that is less than the exercise price of the original Awards, essentially having the effect of a repricing, without approval by the Company’s stockholders.

(b)    No Award may be granted during any suspension of the Plan or after termination of the Plan.

(c)    No suspension or termination of the Plan shall adversely affect any rights under Awards already granted to a Grantee without his or her consent.

17. Reservation of Shares.

(a)    The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

(b)    The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

18.    No Effect on Terms of Employment/Consulting Relationship. The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or a Related Entity to terminate the Grantee’s Continuous Service at any time, with or without Cause, and with or without notice. The ability of the Company or any Related Entity to terminate the employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminated for Cause for the purposes of this Plan.

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19.    No Effect on Retirement and Other Benefit Plans. Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.

20. Information to Grantees. The Company shall provide to each Grantee, during the period for which such Grantee has one or more Awards outstanding, such information as required by Applicable Laws.

21. Electronic Delivery. The Administrator may decide to deliver any documents related to any Award granted under the Plan through an online or electronic system established and maintained by the Company or another third party designated by the Company or to request a Grantee’s consent to participate in the Plan by electronic means. By accepting an Award, each Grantee consents to receive such documents by electronic delivery and agrees to participate in the Plan through an online or electronic system established and maintained by the Company or another third party designated by the Company, and such consent shall remain in effect throughout Grantee’s Continuous Service with the Company and any Related Entity and thereafter until withdrawn in writing by Grantee.

22. Data Privacy. The Administrator may decide to collect, use and transfer, in electronic or other form, personal data as described in this Plan or any Award for the exclusive purpose of implementing, administering and managing participation in the Plan. By accepting an Award, each Grantee acknowledges that the Company holds certain personal information about Grantee, including, but not limited to, name, home address and telephone number, date of birth, social security number or other identification number, salary, nationality, job title, details of all Awards awarded, cancelled, exercised, vested or unvested, for the purpose of implementing, administering and managing the Plan (the “Data”). Each Grantee further acknowledges that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan and that these third parties may be located in jurisdictions that may have different data privacy laws and protections, and Grantee authorizes such third parties to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the recipient or the Company may elect to deposit any Shares acquired upon any Award.

23. Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set forth herein, the Award Agreement evidencing any Award that is not exempt from the requirements of Section 409A of the Code shall contain provisions such that the Award will comply with the requirements of Section 409A of the Code and avoid the consequences specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued or amended after the effective date of the Plan. Notwithstanding any provision of the Plan to the contrary, in the event that following the effective date of the Plan the Administrator determines that any Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the effective date of the Plan), the Administrator may adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or appropriate to (1) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (2) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.

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24.    Unfunded Obligation. Grantees shall have the status of general unsecured creditors of the Company. Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974, as amended. Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.

25.    Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
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APPENDIX E: PROPOSED AMENDMENT TO 2021 OMNIBUS STOCK INCENTIVE PLAN

AMENDMENT NO. 1 TO
URBAN GROW, INC.
2021 OMNIBUS STOCK INCENTIVE PLAN

WHEREAS, urban-gro, Inc. (the “Corporation”) maintains the urban-gro, Inc. 2021 Omnibus Stock Incentive Plan (the “Plan,” capitalized terms not defined in this Amendment shall have the meaning as defined in the Plan), which was previously adopted by the Board of Directors of the Corporation (the “Board”) on February 23, 2021, and approved by the stockholders of the Corporation effective May 27, 2021;

WHEREAS, pursuant to Section 3(a) of the Plan, a total of 1,100,000 shares of common stock of the Corporation (the “Shares”) have been approved for issuance under the Plan;

WHEREAS, pursuant to Section 16(a) of the Plan, the Board may not increase the total number of shares that may be issued under the Plan without the approval of the stockholders;

WHEREAS, the Board has determined that it is in the best interests of the Corporation to amend the Plan, subject to stockholder approval, to increase the aggregate number of Shares available for issuance under the Plan by 1,200,000 shares, to clarify certain language regarding the availability of unvested Shares which are canceled, forfeited, or expires prior to exercise or realization by the Company to again be available for future issuance under the 2021 Plan, and to clarify that the Administrator has the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest (this “Amendment”); and

WHEREAS, this Amendment will become effective upon approval by the Corporation’s stockholders at the 2023 Annual Meeting of Stockholders and if, for any reason, the Corporation’s stockholders fail to approve this Amendment, the existing Plan shall continue in full force and effect.

NOW, THEREFORE, the following amendments and modifications are hereby made a part of the Plan:

1.Section 3(a) of the Plan is hereby deleted in its entirety and replaced as follows:

“(a)     Subject to adjustment as described in Section 13 below, the maximum aggregate number of Shares which may be issued pursuant to all Awards (including Incentive Stock Options) is 2,300,000 Shares. The Shares may be authorized, but unissued, or reacquired Common Stock.”

2.     Section 3(b) of the Plan is hereby deleted in its entirety and replaced as follows:

“(b)    Any Shares subject to an Award that is canceled, forfeited or expires prior to exercise or realization, either in full or in part, shall again become available for issuance under the Plan, except that the maximum aggregate number of Shares which may be issued pursuant to the exercise of Incentive Stock Options shall not exceed the number specified in Section 3(a). In the event any Option or other Award granted under the Plan is exercised through the tendering of Shares (either actually or through attestation), or in the event tax withholding obligations are satisfied by tendering or withholding Shares, any Shares so tendered or withheld shall not again be available for awards under the Plan. To the extent that cash in lieu of Shares is delivered upon the exercise of an SAR pursuant to Section 6(m), the Company shall be deemed, for purposes of applying the limitation on the number of shares, to have issued the number of Shares which it was entitled to issue upon such exercise, notwithstanding that cash was issued in lieu of such Shares. Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Options shall not be available for awards under the Plan.”

3.A new Section 4(c)(viii) shall be added to the Plan with existing subsections (viii) through (xi) renumbered as (ix) through (xii), as follows:

“(viii)    The Administrator shall have the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with
E-1

the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.”

This Amendment to the Plan shall become effective upon the date it is approved by the Company’s stockholders in accordance with Applicable Laws.

Except as set forth above, all other provisions of the Plan shall remain unchanged.
E-2

↓ Please ensure you fold then detach and retain this port of this Proxy ↓
URBAN-GRO, INC. PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS – JUNE 21, 2023 AT 10:00 AM MT
CONTROL ID:
REQUEST ID:
The undersigned hereby appoints Bradley J. Nattrass and Richard A. Akright with power of substitution, as proxy to vote the shares of Common Stockcommon stock of the undersigned in Urban-gro,urban-gro, Inc. at the Annual Meeting of ShareholdersStockholders to be held atvirtually via live webcast on the Denver Athletic Club, 1325 Glenarm Pl, Denver, CO 80204Internet on May 23, 2019,June 21, 2023, at 10:00 a.m. localMountain time and at any adjournment thereof, upon all business that may properly come before the meeting, including the business identified (and in the manner indicated) on this proxy and described in the proxy statement furnished herewith. Indicate your
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
VOTING INSTRUCTIONS

If you vote by anphone, fax or Internet, please DO NOT mail your proxy card.
image_0a.jpg
MAIL:Please mark, sign, date, and return this Proxy Card promptly using the enclosed envelope.
image_1a.jpg
FAX:
Complete the reverse portion of this Proxy Card and Fax to 202-521-3464.
image_2a.jpg
INTERNET:www.iproxydirect.com/ugro
image_3a.jpg
PHONE:1-866-752-VOTE(8683)
þ
. It is recommended that you voteFOR all items.

Proposals



ANNUAL MEETING OF THE STOCKHOLDERS OF
URBAN-GRO, INC.

PLEASE COMPLETE, DATE, SIGN AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR
BLACK INK AS SHOWN HERE: ☒
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
 1.To elect the following persons as directors
Proposal 1FORWITHHOLD
Election of the CompanyDirectors

 Bradley J. Nattrass o☐FOR☐ oAGAINST oABSTAIN
 Octavio GutierrezJames R. Lowe o☐FOR☐ oAGAINSToABSTAIN
George PullaroFORoAGAINSToABSTAINCONTROL ID:
 Lewis O. Wilks o☐FOR☐ oAGAINSToABSTAINREQUEST ID:
 James H. DennedyAnita Britt o☐FOR☐ oAGAINST oABSTAIN
 Lance GaleyDavid Hsu o☐FOR☐ oAGAINST oABSTAIN
 James LoweSonia Lo o☐FOR☐ oAGAINST
Proposal 2 oFORAGAINSTABSTAIN

 2.Approval of an amendment to and restatement of the Company's Certificate of Incorporation to Eliminate Supermajority Voting Requirements.☐☐☐


Proposal 3FORAGAINSTABSTAIN
Approval of an amendment to and restatement of the Company’s Certificate of Incorporation to to limit the liability of certain officers in limited circumstances in accordance with new Delaware legislation.☐☐☐
Proposal 4FORAGAINSTABSTAIN
Approval of an amendment to the Company's 2021 Stock Incentive Plan.☐☐☐
Proposal 5FORAGAINSTABSTAIN
To ratify the appointment of BF Borgers CPA P.C.PC as the Company’s independent registered public accountant, to audit the Company’s financial books and records for its fiscal year ending December 31, 2019.

o2023.FORo☐AGAINSTo☐ABSTAIN

3.To approve the Company’s 2019 Equity Incentive Plan as may be amended in the future by the Board of Directors via the consent of the Shareholders of the Company.

oFORoAGAINSToABSTAIN

(Please return promptly in the stamped, enclosed envelope.)

THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY’S BOARD OF DIRECTORSWHO RECOMMEND VOTINGFOR ALL ITEMS. IT WILL BE VOTED AS SPECIFIED. IF NOT SPECIFIED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTEDFOR ALL ITEMS.

_____/_____/_____________________________________________
DateSignature
☐ 
_________________________________________________________________
No. of SharesPrinted Name

Please sign exactly as name(s) appear on this proxy. If joint account, each joint owner should sign. If signing for a corporation or partnership or as agent, attorney or fiduciary, indicate the capacity in which you are signing.

ADDITIONAL SIGNATURES:_______________________________________
(if necessary)Signature
________________________________________
Printed Name

PLEASE DATE AND SIGN THE ACCOMPANYING PROXY CARD AND EITHER MAIL OR EMAIL IT PROMPTLY TO THE STREET OR E-MAIL ADDRESS AS PROVIDED HEREIN. IF BY REGULAR MAIL, PLEASE SEND TO THE ATTENTION OF BRADLEY NATTRASS AT THE FOLLOWING ADDRESS.

1751 Panorama Point

Unit G

Lafayette, CO 80026

22

Urban-gro, Inc.

2019 Equity Incentive Plan

1.Purpose

Urban-gro, Inc.’s 2019 Equity Incentive Plan is intended to promote the best interests of urban-gro, Inc. and its stockholders by (i) assisting the Corporation and its Affiliates in the recruitment and retention of persons with ability and initiative, (ii) providing an incentive to such persons to contribute to the growth and success of the Corporation’s businesses by affording such persons equity participation in the Corporation and (iii) associating the interests of such persons with those of the Corporation and its Affiliates and stockholders.

2. Definitions

As used in this Plan the following definitions shall apply:

A.            “Affiliate” means (i) any Subsidiary, (ii) any Parent, (iii) any corporation, or trade or business (including, without limitation, a partnership, limited liability company or other entity) which is directly or indirectly controlled fifty percent (50%) or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) by the Corporation or one of its Affiliates, and (iv) any other entity in which the Corporation or any of its Affiliates has a material equity interest and which is designated as an “Affiliate” by resolution of the Committee.

B.            “Award” means any Option or Stock Award granted hereunder.

C.            “Board” means the Board of Directors of the Corporation.

D.           “Code” means the Internal Revenue Code of 1986, and any amendments thereto.

E.            “Committee” means the Board or any Committee of the Board to which the Board has delegated any responsibility for the implementation, interpretation or administration of this Plan.

F.            “Common Stock” means the common stock, $0.001 par value, of the Corporation.

G.            “Consultant” means (i) any person performing consulting or advisory services for the Corporation or any Affiliate, or (ii) a director of an Affiliate.

H.           “Corporation” means urban-gro, Inc., a Colorado corporation.

I.             “Corporation Law” means the Colorado Revised Statutes, as the same shall be amended from time to time.

J.             “Date of Grant” means the date that the Committee approves an Option grant; provided, that all terms of such grant, including the amount of shares subject to the grant, exercise price and vesting are defined at such time.

K.           “Deferral Period” means the period of time during which Deferred Shares are subject to deferral limitations under Section 7.D of this Plan.

L.            “Deferred Shares” means an award pursuant to Section 7.D of this Plan of the right to receive shares of Common Stock at the end of a specified Deferral Period.

M.          “Director” means a member of the Board.

N.            “Eligible Person” means an employee of the Corporation or an Affiliate (including a corporation that becomes an Affiliate after the adoption of this Plan), a Director or a Consultant to the Corporation or an Affiliate (including a corporation that becomes an Affiliate after the adoption of this Plan).

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O.           “Exchange Act” means the Securities Exchange Act of 1934, as amended.

P.             “Fair Market Value” means, on any given date, the current fair market value of the shares of Common Stock as determined as follows:

(i)If the Common Stock is traded on a national securities exchange, the closing price for the day of determination as quoted on such market or exchange, including the NASDAQ Global Market or NASDAQ Capital Market, which is the primary market or exchange for trading of the Common Stock or if no trading occurs on such date, the last day on which trading occurred, or such other appropriate date as determined by the Committee in its discretion, as reported in The Wall Street Journal or such other source as the Committee deems reliable;

(ii)If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high and the low asked prices for the Common Stock for the day of determination; or

(iii)In the absence of an established market for the Common Stock, Fair Market Value shall be determined by the Committee in good faith.

Q.           “Family Member” means a parent, child, spouse or sibling.

R.           “Incentive Stock Option” means an Option (or portion thereof) intended to qualify for special tax treatment under Section 422 of the Code.

S.            “Nonqualified Stock Option” means an Option (or portion thereof) which is not intended or does not for any reason qualify as an Incentive Stock Option.

T.            “Option” means any option to purchase shares of Common Stock granted under this Plan.

U.            “Parent” means any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation if each of the corporations (other than the Corporation) owns stock possessing at least fifty percent (50%) of the total combined voting power of all classes of stock in one of the other corporations in such chain.

V.           “Participant” means an Eligible Person who (i) is selected by the Committee or an authorized officer of the Corporation to receive an Award and (ii) is party to an agreement setting forth the terms of the Award, as appropriate.

W.          “Performance Agreement” means an agreement described in Section 8 of this Plan.

X.            “Performance Objectives” means the performance objectives established by the Committee pursuant to this Plan for Participants who have received grants of Awards. Performance Objectives may be described in terms of Corporation-wide objectives or objectives that are related to the performance of the individual Participant or the Affiliate, division, department or function within the Corporation or Affiliate in which the Participant is employed or has responsibility. Any Performance Objectives applicable to Awards to the extent that such an Award is intended to qualify as “Performance Based Compensation” under Section 162(m) of the Code shall be limited to specified levels of or increases in the Corporation’s or a business unit’s return on equity, earnings per share, total earnings, earnings growth, return on capital, return on assets, economic value added, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization, sales growth, gross margin return on investment, increase in the Fair Market Price of the shares, net operating profit, cash flow (including, but not limited to, operating cash flow and free cash flow), cash flow return on investments (which equals net cash flow divided by total capital), internal rate of return, increase in net present value or expense targets. The Awards intended to qualify as “Performance Based Compensation” under Section 162(m) of the Code shall be pre-established in accordance with applicable regulations under Section 162(m) of the Code and the determination of attainment of such goals shall be made by the Committee. If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Corporation (including an event described in Section 9), or the manner in which it conducts its business, or other events or circumstances render the Performance Objectives unsuitable, the Committee may modify such Performance Objectives or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate and equitable; provided, however, that no such modification shall be made to an Award intended to qualify as “Performance Based Compensation” under Section 162(m) of the Code unless the Committee determines that such modification will not result in loss of such qualification or the Committee determines that loss of such qualification is in the best interests of the Corporation.

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Y.            “Performance Period” means a period of time established under Section 8 of this Plan within which the Performance Objectives relating to a Stock Award are to be achieved.

Z.            “Performance Share” means an award pursuant to Section 8 of this Plan of the right to receive shares of Common Stock upon the achievement of specified Performance Objectives.

AA.        “Plan” means this Urban-gro, Inc. 2019 Equity Incentive Plan.

BB.         “Repricing” means, other than in connection with an event described in Section 9 of this Plan, (i) lowering the exercise price of an Option after it has been granted or (ii) canceling an Option at a time when the exercise price exceeds the then-Fair Market Value of the Common Stock in exchange for another Option.

CC.         “Restricted Stock Award” means an award of Common Stock under Section 7.B.

DD.        “Securities Act” means the Securities Act of 1933, as amended.

EE.          “Stock Award” means a Stock Bonus Award, Restricted Stock Award, Stock Appreciation Right, Deferred Shares, or Performance Shares.

FF.          “Stock Bonus Award” means an award of Common Stock under Section 7.A.

GG.         “Stock Award Agreement” means a written agreement between the Corporation and a Participant setting forth the specific terms and conditions of a Stock Award granted to the Participant under Section 7. Each Stock Award Agreement shall be subject to the terms and conditions of this Plan and shall include such terms and conditions as the Committee shall authorize.

HH.        “Stock Option Agreement” means an agreement (written or electronic) between the Corporation and a Participant setting forth the specific terms and conditions of an Option granted to the Participant. Each Stock Option Agreement shall be subject to the terms and conditions of this Plan and shall include such terms and conditions as the Committee shall authorize.

II.            “Subsidiary” means any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation if each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing at least fifty percent (50%) of the total combined voting power of all classes of stock in one of the other corporations in such chain.

JJ.           “Ten Percent Owner” means any Eligible Person owning at the time an Option is granted more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation or of a Parent or Subsidiary. An individual shall, in accordance with Section 424(d) of the Code, be considered to own any voting stock owned (directly or indirectly) by or for such Eligible Person’s brothers, sisters, spouse, ancestors and lineal descendants and any voting stock owned (directly or indirectly) by or for a corporation, partnership, estate or trust shall be considered as being owned proportionately by or for its stockholders, partners, or beneficiaries.

3. implementation, interpretation and Administration

A.           Delegation to Board Committee. The Board shall have the sole authority to implement, interpret, and/or administer this Plan unless the Board delegates all or any portion of its authority to implement, interpret, and/or administer this Plan to a Committee. To the extent not prohibited by the Certificate of Incorporation or Bylaws of the Corporation, the Board may delegate all or a portion of its authority to implement, interpret, and/or administer this Plan to a Committee of the Board appointed by the Board and constituted in compliance with the applicable Corporation Law. The Committee shall consist solely of two (2) or more Directors who are (i) Non-Employee Directors (within the meaning of Rule 16b-3 under the Exchange Act) for purposes of exercising administrative authority with respect to Awards granted to Eligible Persons who are subject to Section 16 of the Exchange Act; (ii) to the extent required by the rules of the market on which the Corporation’s shares are traded or the exchange on which the Corporation’s shares are listed, “independent” within the meaning of such rules; and (iii) at such times as an Award under this Plan by the Corporation is subject to Section 162(m) of the Code (to the extent relief from the limitation of Section 162(m) of the Code is sought with respect to Awards and administration of the Awards by a committee of “outside directors” is required to receive such relief), “outside directors” within the meaning of Section 162(m) of the Code.

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B.           Delegation to Officers. The Committee may delegate to one or more officers of the Corporation the authority to grant and administer Awards to Eligible Persons who are not Directors or executive officers of the Corporation; provided that the Committee shall have fixed the total number of shares of Common Stock that may be subject to such Awards. No officer holding such a delegation is authorized to grant Awards to himself or herself. In addition to the Committee, the officer or officers to whom the Committee has delegated the authority to grant and administer Awards shall have all powers delegated to the Committee with respect to such Awards.

C.           Powers of the Committee. Subject to the provisions of this Plan, and in the case of a Committee appointed by the Board, the specific duties delegated to such Committee, the Committee (and the officers to whom the Committee has delegated such authority) shall have the authority:

(i)To construe and interpret all provisions of this Plan and all Stock Option Agreements, Stock Award Agreements, Performance Agreements, or any other agreement under this Plan.

(ii)To determine the Fair Market Value of Common Stock in the absence of an established market for the Common Stock.

(iii)To select the Eligible Persons to whom Awards are granted from time to time hereunder.

(iv)To determine the number of shares of Common Stock covered by an Award; to determine whether an Option shall be an Incentive Stock Option or Nonqualified Stock Option; and to determine such other terms and conditions, not inconsistent with the terms of this Plan, of each such Award. Such terms and conditions include, but are not limited to, the exercise price of an Option, purchase price of Common Stock subject to a Stock Award, the time or times when Options or a Stock Award may be exercised or Common Stock issued thereunder, the vesting schedule of an Option, the right of the Corporation to repurchase Common Stock issued pursuant to the exercise of an Option or a Stock Award and other restrictions or limitations (in addition to those contained in this Plan) on the forfeitability or transferability of Options, Stock Awards or Common Stock issued upon exercise of an Option or pursuant to a Stock Award. Such terms may include conditions which shall be determined by the Committee and need not be uniform with respect to Participants.

(v)To accelerate the time at which any Option or Stock Award may be exercised, or the time at which a Stock Award or Common Stock issued under this Plan may become transferable or non-forfeitable.

(vi)To determine whether and under what circumstances an Option or Stock Award may be settled in cash, shares of Common Stock or other property under Section 6.H instead of in Common Stock.

(vii)To waive, amend, cancel, extend, renew, accept the surrender of, modify or accelerate the vesting of or lapse of restrictions on all or any portion of an outstanding Award. Except as otherwise provided by this Plan, Stock Option Agreement, Stock Award Agreement or Performance Agreement or as required to comply with applicable law, regulation or rule, no amendment, cancellation or modification shall, without a Participant’s consent, adversely affect any rights of the Participant; provided, however, that (x) an amendment or modification that may cause an Incentive Stock Option to become a Nonqualified Stock Option shall not be treated as adversely affecting the rights of the Participant and (y) any other amendment or modification of any Stock Option Agreement, Stock Award Agreement or Performance Agreement that does not, in the opinion of the Committee, adversely affect any rights of any Participant, shall not require such Participant’s consent. Notwithstanding the foregoing, the restrictions on the Repricing of Options, as set forth in this Plan, may not be waived.

(viii)To prescribe the form of Stock Option Agreements, Stock Award Agreements, Performance Agreements, or any other agreements under this Plan; to adopt policies and procedures for the exercise of Options or Stock Awards, including the satisfaction of withholding obligations; to adopt, amend, and rescind policies and procedures pertaining to the administration of this Plan; and to make all other determinations necessary or advisable for the administration of this Plan. Except for the due execution of the award agreement by both the Corporation and the Participant, the Award’s effectiveness will not be dependent on any signature unless specifically so provided in the award agreement.

The express grant in this Plan of any specific power to the Committee shall not be construed as limiting any power or authority of the Committee; provided that the Committee may not exercise any right or power reserved to the Board. Any decision made, or action taken, by the Committee or in connection with the implementation, interpretation, and administration of this Plan shall be final, conclusive and binding on all persons having an interest in this Plan.

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4. Eligibility

A.           Eligibility for Awards. Awards, other than Incentive Stock Options, may be granted to any Eligible Person selected by the Committee. Incentive Stock Options may be granted only to employees of the Corporation or a Parent or Subsidiary.

B.           Eligibility of Consultants. A Consultant shall be an Eligible Person only if the offer or sale of the Corporation’s securities would be eligible for registration on Form S-8 Registration Statement (or any successor form) because of the identity and nature of the service provided by such person, unless the Corporation determines that an offer or sale of the Corporation’s securities to such person will satisfy another exemption from the registration under the Securities Act and complies with the securities laws of all other jurisdictions applicable to such offer or sale. Accordingly, an Award may not be granted pursuant to this Plan for the purpose of the Corporation obtaining financing or for investor relations purposes.

C.           Substitution Awards. The Committee may make Awards under this Plan by assumption, in substitution or replacement of performance shares, phantom shares, stock awards, stock options or similar awards granted by another entity (including an Affiliate) in connection with a merger, consolidation, acquisition of property or stock or similar transaction. Notwithstanding any provision of this Plan (other than the maximum number of shares of Common Stock that may be issued under this Plan), the terms of such assumed, substituted, or replaced Awards shall be as the Committee, in its discretion, determines is appropriate.

5. Common Stock Subject to Plan

A.           Share Reserve and Limitations on Grants. The maximum aggregate number of shares of Common Stock that may be (i) issued under this Plan pursuant to the exercise of Options (without regard to whether payment on exercise of the Stock Option is made in cash or shares of Common Stock) and (ii) issued pursuant to Stock Awards, shall be 3,500,000 shares in the aggregate. The number of shares of Common Stock subject to the Plan shall be subject to adjustment as provided in Section 9. Notwithstanding any provision hereto to the contrary, shares subject to the Plan shall include shares forfeited in a prior year as provided herein. For purposes of determining the number of shares of Common Stock available under this Plan, shares of Common Stock withheld by the Corporation to satisfy applicable tax withholding obligations pursuant to Section 10 of this Plan shall be deemed issued under this Plan. No single participant may receive more than 25% of the total Options awarded in any single year.

B.           Reversion of Shares. If an Option or Stock Award is terminated, expires or becomes unexercisable, in whole or in part, for any reason, the unissued or unpurchased shares of Common Stock which were subject thereto shall become available for future grant under this Plan. Shares of Common Stock that have been actually issued under this Plan shall not be returned to the share reserve for future grants under this Plan; except that shares of Common Stock issued pursuant to a Stock Award which are forfeited to the Corporation or repurchased by the Corporation at the original purchase price of such shares, shall be returned to the share reserve for future grant under this Plan.

C.           Source of Shares. Common Stock issued under this Plan may be shares of authorized and unissued Common Stock or shares of previously issued Common Stock that have been reacquired by the Corporation.

6. Options

A.           Award. In accordance with the provisions of Section 4, the Committee will designate each Eligible Person to whom an Option is to be granted and will specify the number of shares of Common Stock covered by such Option. The Stock Option Agreement shall specify whether the Option is an Incentive Stock Option or Nonqualified Stock Option, the exercise price of such Option, the vesting schedule applicable to such Option, the expiration date of such Option, events of termination of such Option, and any other terms of such Option. No Option that is intended to be an Incentive Stock Option shall be invalid for failure to qualify as an Incentive Stock Option.

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B.           Option Price. The exercise price per share for Common Stock subject to an Option shall be determined by the Committee, but shall comply with the following:

(i)The exercise price per share for Common Stock subject to an Option shall not be less than one hundred percent (100%) of the Fair Market Value on the date of grant.
(ii)The exercise price per share for Common Stock subject to an Incentive Stock Option granted to a Participant who is deemed to be a Ten Percent Owner on the date such option is granted, shall not be less than one hundred ten percent (110%) of the Fair Market Value on the date of grant.
     

C.           Maximum Option Period. The maximum period during which an Option may be exercised shall be ten (10) years from the date such Option was granted. In the case of an Incentive Stock Option that is granted to a Participant who is or is deemed to be a Ten Percent Owner on the date of grant, such Option shall not be exercisable after the expiration of five (5) years from the date of grant.

D.           Maximum Value of Options which are Incentive Stock Options. To the extent that the aggregate Fair Market Value of the Common Stock with respect to which Incentive Stock Options granted to any Participant are exercisable for the first time during any calendar year (under all stock option plans of the Corporation or any Parent or Subsidiary) exceeds $100,000 (or such other amount provided in Section 422 of the Code), the Options shall not be deemed to be Incentive Stock Options. For purposes of this section, the Fair Market Value of the Common Stock will be determined as of the time the Incentive Stock Option with respect to the Common Stock is granted. This section will be applied by taking Incentive Stock Options into account in the order in which they are granted.

E.            Nontransferability. Options granted under this Plan which are intended to be Incentive Stock Options shall be nontransferable except by will or by the laws of descent and distribution and, during the lifetime of the Participant, shall be exercisable by only the Participant to whom the Incentive Stock Option is granted. Except to the extent transferability of a Nonqualified Stock Option is provided for in the Stock Option Agreement or is approved by the Committee, during the lifetime of the Participant to whom the Nonqualified Stock Option is granted, such Option may be exercised only by the Participant. If the Stock Option Agreement so provides or the Committee so approves, a Nonqualified Stock Option may be transferred by a Participant through a gift or domestic relations order to the Participant’s family members to the extent such transfer complies with applicable securities laws and regulations and provided that such transfer is not a transfer for value (within the meaning of applicable securities laws and regulations). The holder of a Nonqualified Stock Option transferred pursuant to this section shall be bound by the same terms and conditions that governed the Option during the period that it was held by the Participant. No right or interest of a Participant in any Option shall be liable for, or subject to, any lien, obligation, or liability of such Participant, unless such obligation is to the Corporation itself or to an Affiliate.

F.            Vesting. Options will vest as provided in the Stock Option Agreement.

G.           Termination. Options will terminate as provided in the Stock Option Agreement.

H.           Exercise. Subject to the provisions of this Plan and the applicable Stock Option Agreement, an Option may be exercised to the extent vested in whole at any time or in part from time to time at such times and in compliance with such requirements as the Committee shall determine. A partial exercise of an Option shall not affect the right to exercise the Option from time to time in accordance with this Plan and the applicable Stock Option Agreement with respect to the remaining shares subject to the Option. An Option may not be exercised with respect to fractional shares of Common Stock. The Participant may face certain restrictions on his/her ability to exercise Options and/or sell underlying shares when such Participant is potentially in possession of insider information. The Corporation will make the Participant aware of any formal insider trading policy it adopts, and the provisions of such insider trading policy (including any amendments thereto) shall be binding upon the Participant.

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I.             Payment. Unless otherwise provided by the Stock Option Agreement, payment of the exercise price for an Option shall be made in cash or a cash equivalent acceptable to the Committee or if the Common Stock is traded on an established securities market, by payment of the exercise price by a broker-dealer or by the Option holder with cash advanced by the broker-dealer if the exercise notice is accompanied by the Option holder’s written irrevocable instructions to deliver the Common Stock acquired upon exercise of the Option to the broker-dealer or by delivery of the Common Stock to the broker-dealer with an irrevocable commitment by the broker-dealer to forward the exercise price to the Corporation. With the consent of the Committee, payment of all or a part of the exercise price of an Option may also be made (i) by surrender to the Corporation (or delivery to the Corporation of a properly executed form of attestation of ownership) of shares of Common Stock that have been held for such period prior to the date of exercise as is necessary to avoid adverse accounting treatment to the Corporation, or (ii) any other method acceptable to the Committee. If Common Stock is used to pay all or part of the exercise price, the sum of the cash or cash equivalent and the Fair Market Value (determined as of the date of exercise) of the shares surrendered must not be less than the Option price of the shares for which the Option is being exercised.

J.             Stockholder Rights. No Participant shall have any rights as a stockholder with respect to shares subject to an Option until the date of exercise of such Option and the certificate for shares of Common Stock to be received on exercise of such Option has been issued by the Corporation.

K.           Disposition and Stock Certificate Legends for Incentive Stock Option Shares. A Participant shall notify the Corporation of any sale or other disposition of Common Stock acquired pursuant to an Incentive Stock Option if such sale or disposition occurs (i) within two years of the grant of an Option or (ii) within one year of the issuance of the Common Stock to the Participant. Such notice shall be in writing and directed to the Chief Financial Officer of the Corporation or is his/her absence, the Chief Executive Officer. The Corporation may require that certificates evidencing shares of Common Stock purchased upon the exercise of Incentive Stock Options issued under this Plan be endorsed with a legend in substantially the following form:

THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED PRIOR TO ___, 20___, IN THE ABSENCE OF A WRITTEN STATEMENT FROM THE CORPORATION TO THE EFFECT THAT THE CORPORATION IS AWARE OF THE FACTS OF SUCH SALE OR TRANSFER.

The blank contained in this legend shall be filled in with the date that is the later of (i) one year and one day after the date of the exercise of such Incentive Stock Option or (ii) two years and one day after the grant of such Incentive Stock Option.

L.           No Repricing. In no event shall the Committee permit a Repricing of any Option without the approval of the stockholders of the Corporation.

7. Stock Awards

A.           Stock Bonus Awards. Stock Bonus Awards may be granted by the Committee. Each Stock Award Agreement for a Stock Bonus Award shall be in such form and shall contain such terms and conditions (including provisions relating to consideration, vesting, reacquisition of shares following termination, and transferability of shares) as the Committee shall deem appropriate. The terms and conditions of Stock Award Agreements for Stock Bonus Awards may change from time to time and need not be uniform with respect to Participants, and the terms and conditions of separate Stock Bonus Awards need not be identical.

B.           Restricted Stock Awards. Restricted Stock Awards may be granted by the Committee. Each Stock Award Agreement for a Restricted Stock Award shall be in such form and shall contain such terms and conditions (including provisions relating to purchase price, consideration, vesting, reacquisition of shares following termination, and transferability of shares) as the Committee shall deem appropriate. The terms and conditions of the Stock Award Agreements for Restricted Stock Awards may change from time to time and need not be uniform with respect to Participants, and the terms and conditions of separate Restricted Stock Awards need not be identical. Vesting of any grant of Restricted Stock Awards may be further conditioned upon the attainment of Performance Objectives established by the Committee in accordance with the applicable provisions of Section 8 of this Plan regarding Performance Shares.

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C.           Deferred Shares. The Committee may authorize grants of Deferred Shares to Participants upon the recommendation of the Corporation’s management, and upon such terms and conditions as the Committee may determine in accordance with the following provisions:

(i)Each grant shall constitute the agreement by the Corporation to issue or transfer shares of Common Stock to the Participant in the future in consideration of the performance of services, subject to the fulfillment during the Deferral Period of such conditions as the Committee may specify.

(ii)Each grant may be made without additional consideration from the Participant or in consideration of a payment by the Participant that is less than the Fair Market Value on the date of grant.
   
 (iii)Each grant shall provide that the Deferred Shares covered thereby shall be subject to a Deferral Period, which shall be fixed by the Committee on the date of grant, and any grant or sale may provide for the earlier termination of such period in the event of a change in control of the Corporation or other similar transaction or event.

 (iv)DuringMARK “X” HERE IF YOU PLAN TO ATTEND THE MEETING: ☐
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY’S BOARD OF DIRECTORS WHO RECOMMENDS VOTING FOR ALL ITEMS. IT WILL BE VOTED SPECIFIED IF NOT SPECIFIED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR ALL ITEMS.
MARK “X” HERE FOR ADDRESS CHANGE ☐
New Address (if applicable):
____________________________
____________________________
____________________________
IMPORTANT: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the Deferral Period, the Participant shall not have any right to transfer any rights under the subject Award, shall not have any rights of ownershipsigner is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in the Deferred Shares and shall not have any right to vote such shares, but the Committee may on or after the date of grant, authorize the payment of dividend or other distribution equivalents on such shares in cash or additional shares on a current, deferred or contingent basis.partnership name by authorized person.
Dated: ________________________, 2023
 (v)Any grant, (Print Name of Stockholder and/or the vesting thereof, may be further conditioned upon the attainment of Performance Objectives established by the Committee in accordance with the applicable provisions of Section 8 of this Plan regarding Performance Shares.Joint Tenant)

 
(vi)Each grant shall be evidenced by an agreement delivered to and accepted by the Participant and containing such terms and provisions as the Committee may determine consistent with this Plan. The terms and conditions(Signature of the agreements for Deferred Shares may change from time to time and need not be uniform with respect to Participants, and the terms and conditions of separate Deferred Shares need not be identical.Stockholder)

8. Performance Shares

A.           The Committee may authorize grants of Performance Shares, which shall become payable to the Participant upon the achievement of specified Performance Objectives, upon such terms and conditions as the Committee may determine in accordance with the following provisions:

 
(i)(Second Signature if held jointly)
Each grant shall specify the number of Performance Shares to which it pertains, which may be subject to adjustment to reflect changes in compensation or other factors.

(ii)The Performance Period with respect to each Performance Share shall commence on the date established by the Committee and may be subject to earlier termination in the event of a change in control of the Corporation or similar transaction or event.

(iii)Each grant shall specify the Performance Objectives that are to be achieved by the Participant.

(iv)Each grant may specify in respect of the specified Performance Objectives a minimum acceptable level of achievement below which no payment will be made and may set forth a formula for determining the amount of any payment to be made if performance is at or above such minimum acceptable level but falls short of the maximum achievement of the specified Performance Objectives.

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(v)Each grant shall specify the time and manner of payment of Performance Shares that shall have been earned, and any grant may specify that any such amount may be paid by the Corporation in cash, shares of Common Stock or any combination thereof and may either grant to the Participant or reserve to the Committee the right to elect among those alternatives.

(vi)Any grant of Performance Shares may specify that the amount payable with respect thereto may not exceed a maximum specified by the Committee on the date of grant.

(vii)Any grant of Performance Shares may provide for the payment to the Participant of dividend or other distribution equivalents thereon in cash or additional shares of Common Stock on a current, deferred or contingent basis.

(viii)If provided in the terms of the grant and subject to the requirements of Section 162(m) of the Code (in the case of awards intended to qualify for exception therefrom), the Committee may adjust Performance Objectives and the related minimum acceptable level of achievement if, in the sole judgment of the Committee, events or transactions have occurred after the date of grant that are unrelated to the performance of the Participant and result in distortion of the Performance Objectives or the related minimum acceptable level of achievement.

(ix)Each grant shall be evidenced by an agreement that shall be delivered to and accepted by the Participant, which shall state that the Performance Shares are subject to all of the terms and conditions of this Plan and such other terms and provisions as the Committee may determine consistent with this Plan. The terms and conditions of the agreements for Performance Shares may change from time to time and need not be uniform with respect to Participants, and the terms and conditions of separate Performance Shares need not be identical.

(x)Until the achievement of the Performance Objectives and the resulting issuance of the Performance Shares, the Participant shall not have any rights as a stockholder in the Performance Shares and shall not have any right to vote such shares, but the Committee may on or after the date of grant, authorize the payment of dividend or other distribution equivalents on such shares in cash or additional shares on a current, deferred or contingent basis.

9. Changes in Capital Structure

A.           No Limitations of Rights. The existence of outstanding Awards shall not affect in any way the right or power of the Corporation or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Corporation’s capital structure or its business, or any merger or consolidation of the Corporation, or any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Corporation, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

B.           Changes in Capitalization. If the Corporation shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of the Common Stock outstanding, without receiving consideration therefore in money, services or property, then (i) the number, class, and per share price of shares of Common Stock subject to outstanding Options and other Awards hereunder and (ii) the number of and class of shares then reserved for issuance under this Plan and the maximum number of shares for which Awards may be granted to a Participant during a specified time period shall be appropriately and proportionately adjusted. The conversion of convertible securities of the Corporation shall not be treated as effected “without receiving consideration.” The Committee shall make such adjustments, and its determinations shall be final, binding and conclusive.

C.           Merger, Consolidation or Asset Sale. If the Corporation is merged or consolidated with another entity or sells or otherwise disposes of substantially all of its assets to another company while Options or Stock Awards remain outstanding under this Plan, unless provisions are made in connection with such transaction for the continuance of this Plan and/or the assumption or substitution of such Options or Stock Awards with new options or stock awards covering the stock of the successor company, or parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, then all outstanding Options and Stock Awards which have not been continued, assumed or for which a substituted award has not been granted shall, whether or not vested or then exercisable, unless otherwise specified in the Stock Option Agreement or Stock Award Agreement, terminate immediately as of the effective date of any such merger, consolidation or sale.

D.           Limitation on Adjustment. Except as previously expressly provided, neither the issuance by the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Corporation convertible into such shares or other securities, nor the increase or decrease of the number of authorized shares of stock, nor the addition or deletion of classes of stock, shall affect, and no adjustment by reason thereof shall be made with respect to, the number, class or price of shares of Common Stock then subject to outstanding Options or Stock Awards.

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10. Withholding of Taxes

The Corporation or an Affiliate shall have the right, before any certificate for any Common Stock is delivered, to deduct or withhold from any payment owed to a Participant any amount that is necessary in order to satisfy any withholding requirement that the Corporation or Affiliate in good faith believes is imposed upon it in connection with U.S federal, state, or local taxes, including transfer taxes, as a result of the issuance of, or lapse of restrictions on, such Common Stock, or otherwise require such Participant to make provision for payment of any such withholding amount. Subject to such conditions as may be established by the Committee, the Committee may permit a Participant to (i) have Common Stock otherwise issuable under an Option or Stock Award withheld to the extent necessary to comply with minimum statutory withholding rate requirements; (ii) tender back to the Corporation shares of Common Stock received pursuant to an Option or Stock Award to the extent necessary to comply with minimum statutory withholding rate requirements for supplemental income; (iii) deliver to the Corporation previously acquired Common Stock; (iv) have funds withheld from payments of wages, salary or other cash compensation due the Participant; (v) pay the Corporation or its Affiliate in cash, in order to satisfy part or all of the obligations for any taxes required to be withheld or otherwise deducted and paid by the Corporation or its Affiliate with respect to the Option of Stock Award; or (vi) establish a 10b5-1 trading plan for withheld stock designed to facilitate the sale of stock in connection with the vesting of such shares, the proceeds of which shall be utilized to make all applicable withholding payments in a manner to be coordinated by the Corporation’s Chief Financial Officer.

11. Compliance with Law and Approval of Regulatory Bodies

A.           General Requirements. No Option or Stock Award shall be exercisable, no Common Stock shall be issued, no certificates for shares of Common Stock shall be delivered, and no payment shall be made under this Plan except in compliance with all applicable federal and state laws and regulations (including, without limitation, withholding tax requirements), any listing agreement to which the Corporation is a party, and the rules of all domestic stock exchanges or quotation systems on which the Corporation’s shares may be listed. The Corporation shall have the right to rely on an opinion of its counsel as to such compliance. In the absence of an effective and current registration statement on an appropriate form under the Securities Act, or a specific exemption from the registration requirements of the Securities Act, shares of Common Stock issued under this Plan shall be restricted shares. Any share certificate issued to evidence Common Stock when a Stock Award is granted or for which an Option is exercised may bear such restrictive legends and statements as the Committee may deem advisable to assure compliance with federal and state laws and regulations. No Option or Stock Award shall be exercisable, no Stock Award shall be granted, no Common Stock shall be issued, no certificate for shares shall be delivered, and no payment shall be made under this Plan until the Corporation has obtained such consent or approval as the Committee may deem advisable from regulatory bodies having jurisdiction over such matters.

B.           Participant Representations. The Committee may require that a Participant, as a condition to receipt or exercise of a particular award, execute and deliver to the Corporation a written statement, in form satisfactory to the Committee, in which the Participant represents and warrants that the shares are being acquired for such person’s own account, for investment only and not with a view to the resale or distribution thereof. The Participant shall, at the request of the Committee, be required to represent and warrant in writing that any subsequent resale or distribution of shares of Common Stock by the Participant shall be made only pursuant to either (i) a registration statement on an appropriate form under the Securities Act of 1933, which registration statement has become effective and is current with regard to the shares being sold, or (ii) a specific exemption from the registration requirements of the Securities Act of 1933, but in claiming such exemption the Participant shall, prior to any offer of sale or sale of such shares, obtain a prior favorable written opinion of counsel, in form and substance satisfactory to counsel for the Corporation, as to the application of such exemption thereto.

12. General Provisions

A.           Effect on Employment and Service. Neither the adoption of this Plan, its operation, nor any documents describing or referring to this Plan (or any part thereof) shall (i) confer upon any individual any right to continue in the employ or service of the Corporation or an Affiliate, (ii) in any way affect any right and power of the Corporation or an Affiliate to change an individual’s duties or terminate the employment or service of any individual at any time with or without assigning a reason therefor or (iii) except to the extent the Committee grants an Option or Stock Award to such individual, confer on any individual the right to participate in the benefits of this Plan.

B.           Use of Proceeds. The proceeds received by the Corporation from any sale of Common Stock pursuant to this Plan shall be used for general corporate purposes.

C.           Unfunded Plan. This Plan, insofar as it provides for grants, shall be unfunded, and the Corporation shall not be required to segregate any assets that may at any time be represented by grants under this Plan. Any liability of the Corporation to any Participant with respect to any grant under this Plan shall be based solely upon any contractual obligations that may be created pursuant to this Plan. No such obligation of the Corporation shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Corporation.

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D.           Rules of Construction. Headings are given to the Sections of this Plan solely as a convenience to facilitate reference. The reference to any statute, regulation, or other provision of law shall be construed to refer to any amendment to or successor of such provision of law.

E.            Choice of Law. This Plan and all Stock Option Agreements, Stock Award Agreements, and Performance Agreements (or any other agreements) entered into under this Plan shall be interpreted under the Colorado Corporation Law excluding (to the greatest extent permissible by law) any rule of law that would cause the application of the laws of any jurisdiction other than the Colorado Corporation Law.

F.            Fractional Shares. The Corporation shall not be required to issue fractional shares pursuant to this Plan. The Committee may provide for elimination of fractional shares or the settlement of such fractional shares in cash.

 G.           Foreign Employees. In order to facilitate the making of any grant or combination of grants under this Plan, the Committee may provide for such special terms for Awards to Participants who are foreign nationals, or who are employed by the Corporation or any Affiliate outside of the United States, as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Committee may approve such supplements to, or amendments, restatements or alternative versions of, this Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of this Plan, as then in effect, unless this Plan could have been amended to eliminate such inconsistency without further approval by the stockholders of the Corporation.

13. Amendment and Termination

The Board may amend or terminate this Plan from time to time; provided, however, stockholder approval shall be required for any amendment that (i) increases the aggregate number of shares of Common Stock that may be issued under this Plan, except as contemplated herein; (ii) changes the class of employees eligible to receive Incentive Stock Options; (iii) modifies the restrictions on re-pricings set forth in this Plan; or (iv) is required by the terms of any applicable law, regulation or rule, including the rules of any market on which the Corporation shares are traded or exchange on which the Corporation shares are listed. Except as specifically permitted by this Plan, any Stock Option Agreement or any Stock Award Agreement or as required to comply with applicable law, regulation or rule, no amendment shall, without a Participant’s consent, adversely affect any rights of such Participant under any Option or Stock Award outstanding at the time such amendment is made; provided, however, that an amendment that may cause an Incentive Stock Option to become a Nonqualified Stock Option shall not be treated as adversely affecting the rights of the Participant. Any amendment requiring stockholder approval shall be approved by the stockholders of the Corporation within twelve (12) months of the date such amendment is adopted by the Board.

14. Effective Date of Plan; Duration of Plan

A.           This Plan shall be effective upon adoption by the Board, subject to approval within twelve (12) months by the stockholders of the Corporation. Unless and until the Plan has been approved by the stockholders of the Corporation, no Option or Stock Award may be exercised, no shares of Common Stock may be issued under this Plan. In the event that the stockholders of the Corporation shall not approve the Plan within such twelve (12) month period, the Plan and any previously granted Options or Stock Awards shall terminate.

B.           Unless previously terminated, this Plan will terminate ten (10) years after the earlier of (i) the date this Plan is adopted by the Board, or (ii) the date this Plan is approved by the stockholders, except that Awards that are granted under this Plan prior to its termination will continue to be administered under the terms of this Plan until the Awards terminate, expire or are exercised.

IN WITNESS WHEREOF, the Corporation has caused this Plan to be executed by a duly authorized officer as of the date of adoption of this Plan by the Board of Directors.

URBAN-GRO, INC.

By:/s/ Bradley Nattrass          

Bradley Nattrass

Chief Executive Officer

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