urban-gro, Inc. Stock Compensation Disclosure
NOTE 14 – STOCK-BASED COMPENSATION
Stock-based compensation expense for the years ended December 31, 2024 and 2023 was $1,426,877 and $2,199,046, respectively based on the vesting schedule of the RSUs and Stock Options (“Options”). During the year ended December 31, 2024, 477,574 RSUs vested and were issued to employees and directors. During the year ended December 31, 2023, 397,210 RSUs vested and were issued to employees and directors. No cash flow effects are anticipated for stock grants.
The Company’s shareholders approved the 2021 Omnibus Stock Incentive Plan, as amended (the “Omnibus Incentive Plan”), which provides for the issuance of incentive stock options, stock grants and stock-based awards to employees, directors, and consultants of the Company to reward and attract employees and compensate the Company’s Board of Directors (the “Board”) and vendors when applicable, up to an aggregate 1,100,000 authorized shares of common stock. In 2023, an additional $1,200,000 shares were authorized by the shareholders. The Omnibus Incentive Plan is administered by the Company’s Board. Grants of RSUs under the Omnibus Incentive Plan are valued at no less than the market price of the stock on the date of grant. The fair value of the options is calculated using the Black-Scholes pricing model based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the options, risk-free interest rate and expected volatility of the price of the underlying common stock of 100%. There is a moderate degree of subjectivity involved when estimating the value of stock options with the Black-Scholes option pricing model as the assumptions used are moderately judgmental. Stock grants and stock options are sometimes offered as part of an employment offer package, to ensure continuity of service or as a reward for performance. Stock grants and stock options typically require a 1 to 3 year period of continued employment or service performance before the stock grant of RSUs or stock option vests.
The following schedule shows grants of RSU activity for the years ended December 31, 2024 and 2023:
| Number of Shares | ||||
| Grants unissued as of December 31, 2022 | 505,009 | |||
| Grants awarded | 628,523 | |||
| Forfeiture/cancelled | (50,066 | ) | ||
| Grants vested and issued | (397,210 | ) | ||
| Grants vested unissued at year-end | (106,844 | ) | ||
| Grants unissued as of December 31, 2023 | 579,412 | |||
| Grants awarded | 1,251,051 | |||
| Forfeiture/Cancelled | (96,337 | ) | ||
| Grants vested and issued | (477,574 | ) | ||
| Grants unissued as of December 31, 2024 | 1,256,552 | |||
The following table summarizes grants of RSU vesting periods:
|
Number of Shares |
Unrecognized Stock Compensation Expense |
As of December 31, | ||||||||
| 520,346 | $ | 717,901 | 2025 | |||||||
| 403,958 | $ | 172,605 | 2026 | |||||||
| 311,748 | $ | 11,373 | 2027 | |||||||
| 20,500 | $ | 2028 | ||||||||
| 1,256,552 | $ | 901,879 | ||||||||
The following schedules show stock option activity for the years ended December 31, 2024 and 2023:
Number of Shares | Weighted Life (Years) | Weighted Exercise Price | ||||||||||
| Stock options outstanding as of December 31, 2022 | 601,427 | 5.49 | $ | 6.84 | ||||||||
| Issued | 0.00 | $ | 0.00 | |||||||||
| Exercised | 0.00 | $ | 0.00 | |||||||||
| Forfeited | (99,598 | ) | 0.00 | $ | 7.01 | |||||||
| Stock options outstanding at December 31, 2023 | 501,829 | 4.67 | $ | 6.81 | ||||||||
| Stock options exercisable at December 31, 2023 | 471,288 | 0.00 | $ | 6.70 | ||||||||
Number of Shares | Weighted Life (Years) | Weighted Average Exercise Price | ||||||||||
| Stock options outstanding as of December 31, 2023 | 501,829 | 4.67 | $ | 6.81 | ||||||||
| Issued | 0 | 0.00 | $ | |||||||||
| Exercised | 0 | 0.00 | $ | |||||||||
| Forfeited | (44,609 | ) | 0.00 | $ | 6.78 | |||||||
| Stock options outstanding at December 31, 2024 | 457,220 | 7.85 | $ | 6.77 | ||||||||
| Stock options exercisable at December 31, 2024 | 454,452 | 7.85 | $ | 6.82 | ||||||||
The following table summarizes stock option vesting periods under the Incentive Plans:
| Number of Shares |
Unrecognized Stock Compensation Expense |
As of December 31, | ||||||||
| 2,768 | $ | 1,511 | 2024 | |||||||
The aggregate intrinsic value of the stock options outstanding and exercisable at December 31, 2024 is $0.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.