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 UNITED
STATES

 SECURITIES
AND EXCHANGE COMMISSION

 Washington,
D.C. 20549

 FORM

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2024

 OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 FOR
THE TRANSITION PERIOD FROM ____ TO _______

 Commission
File Number: 001-41266

 CEA
INDUSTRIES INC.

 (Exact
name of registrant as specified in its charter)

 Nevada

 27-3911608

 (State
 or other jurisdiction of

 incorporation
 or organization)

 (I.R.S.
 Employer

 Identification
 No.)

 South Pierce Avenue, Suite C

 Louisville,
 Colorado 80027

 80027

 (Address
 of principal executive offices)

 (Zip
 code)

 (303) 993-5271

 (Registrant's
telephone number, including area code)

 Securities
registered pursuant to Section 12(b) of the Exchange Act:

 Title
 of each class

 Trading
 Symbol(s)

 Name
 of each exchange on which registered

 Stock, $0.00001 par value

 CEAD

 Nasdaq
 Capital Markets

 Warrants
 to purchase common stock

 CEADW

 Nasdaq
 Capital Markets

 Securities
registered pursuant to Section 12(g) of the Act: None

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No.

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
.

by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the last 90 days. Yes No.

by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes No.

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer, "accelerated filer," "non-accelerated
filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 Large
 Accelerated Filer

 Accelerated
 Filer

 Non-accelerated
 Filer

 Smaller
 Reporting Company

 Emerging
 Growth Company

 If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No.

 The
aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of the last business day
of the registrant's most recently completed second fiscal quarter was approximately $ 5,171,944 based upon a closing price of $6.71
reported for such date on the Nasdaq Capital Markets.

 As
of March 27, 2025, the number of outstanding shares of common stock of the registrant was 802,346.

 DOCUMENTS
INCORPORATED BY REFERENCE

 None.

 CEA
Industries Inc. Annual Report on Form 10-K

 For
Fiscal Year Ended December 31, 2024

 Table
of Contents

 Page

 Part
 I

 Item
 1.

 Business

 Item
 1A.

 Risk
 Factors

 Item
 1B.

 Unresolved
 Staff Comments

 Item
 1C.

 Cybersecurity

 Item
 2.

 Properties

 Item
 3.

 Legal
 Proceedings

 Item
 4.

 Mine
 Safety Disclosures

 Part
 II

 Item
 5.

 Market
 for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item
 6.

 Selected
 Financial Data

 Item
 7.

 Management's
 Discussion and Analysis of Financial Condition and Results of Operations

 Item
 7A.

 Quantitative
 and Qualitative Disclosures About Market Risk

 Item
 8.

 Financial
 Statements and Supplementary Data

 Item
 9.

 Changes
 in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item
 9A.

 Controls
 and Procedures

 Item
 9B.

 Other
 Information

 Part
 III

 Item
 10.

 Directors,
 Executive Officers and Corporate Governance

 Item
 11.

 Compensation

 Item
 12.

 Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item
 13.

 Certain
 Relationships and Related Transactions, and Director Independence

 Item
 14.

 Principal
 Accountant Fees and Services

 Part
 IV

 Item
 15.

 Exhibits
 and Financial Statement Schedules

 Item
 16.

 Form
 10-K Summary

 Signatures

 In
this Annual Report, unless otherwise indicated, the "Company", "we", "us" or "our" refer
to CEA Industries Inc. and, where appropriate, its wholly-owned subsidiary.

 Hemp
and marijuana are technically both part of the "Cannabis sativa L." plant. "Hemp" is a term used to classify
varieties of cannabis that contain 0.3% or less tetrahydrocannabinol ("THC") content (by dry weight), the principal psychoactive
constituent of cannabis. Hemp and its derivatives were federally legalized in the United States as part the Agricultural Act of 2018.
"Marijuana" is a term used to classify varieties of cannabis that contain more than 0.3% THC (by dry weight). Marijuana is
not federally legal in the United States. Many states, however, have taken action to make marijuana legal for all purposes, made it available
for medical uses, decriminalized it, or a combination thereof. We currently provide nearly all of our products and services to customers
that cultivate marijuana. In this Annual Report, unless otherwise indicated, "cannabis" refers to "marijuana."

 Although
our customers do, we neither grow, manufacture, distribute nor sell cannabis (marijuana) and hemp or any of their related products.

 CAUTIONARY
STATEMENT

 This
Annual Report on Form 10-K, including "Management's Discussion and Analysis of Financial Condition and Results of Operations"
in Item 7, contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are
not historical facts but are based on current management expectations that involve substantial risks, uncertainties, and other factors,
some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed
in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance.
We generally identify forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "could," "intends," "target,"
"projects," "contemplates," "believes," "estimates," "predicts," "potential"
or "continue" or the negative of these terms or other similar words. All statements, other than statements of historical
fact, are statements that could be deemed forward-looking statements including, but not limited to, any projections of revenue, gross
profit, earnings or loss, tax provisions, cash flows or other financial items; any statements of the plans, strategies or objectives
of management for future operations; any statements regarding current or future macroeconomic or industry-specific trends or events and
the impact of those trends and events on us or our financial performance; any statements regarding pending investigations, legal claims
or tax disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing.

 These
forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause our
actual results of operations, financial condition, liquidity, performance, prospects, opportunities, achievements or industry results,
as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or suggested by, these forward-looking
statements. These forward-looking statements are based on assumptions regarding our present and future business strategies and the environment
in which we operate. Important factors that could cause those differences include, but are not limited to:

 our
 business prospects and the transition the company is making to limit its historic engineering and grow facility operations while
 seeking new opportunities;

 our
 overall financial condition;

 the
 impact on our business from our planned restructuring and our ability to transition our operations:

 the
 inherent uncertainty of product development and product selection to meet client requirements, meeting client expectations, and whether
 there are or will be warranty claims;

 regulatory,
 legislative and judicial developments;

 competitive
 pressures in our current and future businesses;

 the
 ability to effectively operate our business, including servicing our existing customers and obtaining new business;

 our
 relationships with our customers and suppliers and our reliance on a limited number of customers and suppliers;

 changes
 in our business strategy and development plans, and in our plans for seeking strategic alternatives;

 our
 ability to attract and retain qualified personnel;

 our
 ability to raise equity and debt capital, as needed from time to time, to fund our operations and business strategy, including possible
 strategic alternatives and acquisitions;

 our
 ability to identify, complete and integrate potential strategic alternatives and acquisitions;

 future
 revenue being lower than expected;

 the
 substantial changes in the amount and current size of our backlog and our ability to convert backlog into revenue in a timely manner,
 or at all;

 our
 intention not to pay dividends: and

 our
 ability to maintain our listing of the shares of common stock and common stock purchase warrants
 on NASDAQ and the price volatility and limited trading volumes of our securities in the public
 market.

 These
factors should not be construed as exhaustive and should be read with the other cautionary statements in this report.

 Although
we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove
to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these
and other uncertainties, the inclusion of a projection or forward-looking statement in this annual report on Form 10-K should not be
regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described
or identified in "Risk Factors" in this Annual Report on Form 10-K. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this Annual Report on Form 10-K. Except as required by the federal securities laws, we
undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or
otherwise, to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K. The forward-looking statements
and projections contained in this Annual Report on Form 10-K are excluded from the safe harbor protection provided by Section 27A of
the Securities Act.

 Non-GAAP
Financial Measures

 To
supplement our financial results on U.S. generally accepted accounting principles ("GAAP") basis, we use non-GAAP measures
including net bookings, backlog, as well as adjusted net income (loss) which reflects adjustments for certain non-cash expenses such
as stock-based compensation, certain debt-related items and depreciation expense. We believe these non-GAAP measures are helpful in understanding
our past performance and are intended to aid in evaluating our potential future results. The presentation of these non-GAAP measures
should be considered in addition to our GAAP results and are not intended to be considered in isolation or as a substitute for financial
information prepared or presented in accordance with GAAP. We believe these non-GAAP financial measures reflect an additional way to
view aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting
our business. For purposes of this Annual Report, (i) "adjusted net income (loss)" and "adjusted operating income (loss)"
mean GAAP net income (loss) and operating income (loss), respectively, after adjustment for non-cash equity compensation expense, debt-related
items and depreciation expense, and (ii) "net bookings" means new sales contracts executed during the quarter for which we
received an initial deposit, net of any adjustments including cancellations and change orders during the quarter.

 Our
backlog, remaining performance obligations and net bookings may not be indicative of future operating results, and our customers may
attempt to renegotiate or terminate their contracts for a number of reasons, including delays in or inability to obtain project financing
or licensing or abandonment of the project entirely. Accordingly, there can be no assurance that contracts included in the backlog or
remaining performance obligations will actually generate revenues or when the actual revenues will be generated.

 PART
I

 Item
1. Business

 Overview

 CEA
Industries, through our subsidiary, Surna Cultivation Technologies LLC, has been focused on selling environmental control and other technologies
and services to the Controlled Environment Agriculture ("CEA") industry. The CEA industry aims to optimize
the use of horticultural resources such as water, energy, space, capital, and labor, to create an agriculture business that is more efficient
and more productive than those that use traditional farming methods. Typically, the CEA industry has been focused on indoor agriculture
and vertical farming.

 Headquartered
in Colorado, we aim to provide customers with a variety of value-added technology solutions that help improve their overall crop quality
and yield, optimize energy and water efficiency, and satisfy the evolving state and local codes, permitting and regulatory requirements.
We offer our customers a variety of service and product offerings that include: (i) air handling equipment and systems, (ii) air sanitation
products, (iii) LED lighting, and (iv) benching and racking solutions for indoor cultivation.

 CEA
growers currently face a challenging business environment that includes high energy costs, water usage and conservation issues, continuously
evolving waste removal regulations, inflationary pressures, and labor shortages. In addition to these issues, our cannabis growing customers
face increasingly rigorous quality standards and declining cannabis prices in a growing industry whose standards are constantly evolving.
The part of the CEA industry focused on food related crops is also facing disruption from evolving market demand, competition, and reorganization,
including the lack of growth capital and several noteworthy bankruptcies.

 Recent
Developments – Acquisition of Fat Panda

 We
have entered into an acquisition agreement to acquire a group of Manitoba corporations that own all the assets used in the business of
Fat Panda Ltd. ("Fat Panda"). Fat Panda is engaged in the manufacture, distribution and retail sale of e-cigarettes, vape
devices and e-liquids and related products through multiple retail locations in the provinces of Manitoba, Ontario, and Saskatchewan,
Canada, as well as through its online e-commerce site.

 Fat
Panda, we believe, is central Canada's largest retailer and manufacturer of e-cigarettes, vape devices and e-liquids, with a market
share exceeding 50% in the region. Fat Panda operates 33 retail locations, including 29 Fat Panda stores and four Electric Fog vape outlets.
Fat Panda also serves a wide range of customers through its online e-commerce platform. Its retail footprint is complemented by a comprehensive
portfolio of products, including its own line of premium e-liquids manufactured in-house, along with a robust portfolio of trademarks
and intellectual property.

 The
acquisition will include all the assets of Fat Panda, including among other things, the leases for the retail outlets, intellectual property,
inventory, government licenses and permits, franchise agreements, manufacturing facilities and supply agreements, which are necessary
for the ongoing manufacturing and retail operations of Fat Panda. The acquisition will continue the employment of the current management
and of the production and retail staff, for the uninterrupted, continuous operations of the business. The sellers will enter into non-competition
agreements at closing. Certain of the senior management persons will enter into employment agreements for their continued employment
after the closing of the acquisition.

 The
purchase price is CAD$18,000,000 (approximately, US$12,600,000), payable in cash, securities and seller loans. The Company also expects
to borrow part of the cash portion of the purchase price, in an amount yet to be determined, which will be secured by the assets of Fat
Panda. The purchase price includes an initial cash payment of CAD$13,900,000, issuance of 39,000 shares of the common stock of the Company
with an agreed aggregate value of CAD$700,000 (approximately CAD$18.00 per share), and issuance of notes to the sellers in the aggregate
principal amount of CAD$2,060,000, and release of a CAD$100,000 due diligence deposit. The Company is also agreeing to pay certain financial
statement audit expenses of the selling parties. Of the notes to be issued by Fat Panda to the selling parties, one of the notes in the
principal amount of CAD$1,030,000, is convertible into the common stock of the Company at a conversion rate of USD$19.00 per share. At
closing the following will occur: first, a portion of the cash purchase price in the amount of CAD$1,375,000 will be held in a joint
escrow account for 120 days after closing as a working capital adjustment escrow; second, the sum of CAD$1,240,000, will be paid into
escrow for possible indemnity claims to be held for 18 months; and third, the purchase price will be reduced by CAD$112,500 and the sum
of CAD$112,500 will be paid into escrow to be held for 18 months, both in relation to employee obligation claims under Canadian employment
law.

 Completion
of the acquisition is subject to a number of conditions, which include the preparation and delivery of the Fat Panda companies audited consolidated financial statements and unaudited interim consolidated financial statements, satisfaction of the financial
condition of Fat Panda, completion of due diligence by the Company, receipt of all necessary government approvals and licenses, and
continuation and reformation of the various retail location leases. Completion is also subject to the Company obtaining financing
for a portion of the cash purchase price. The acquisition agreement also provides for the selling persons to make representations
and warranties and undertake certain covenants about many aspects of the business of Fat Panda that shall be true and correct and
performed at or prior to closing. The representations, warranties and covenants are those that are typical in relation to the
acquisition of an operating business. The Company has also made certain representations, warranties and covenants, the principal one
of which is to obtain financing for a part of the purchase price, which if not obtained will permit the Company to terminate the
purchase agreement.

 The
Company anticipates that it will complete the acquisition in the first half of fiscal year 2025.

 Shares
of our common stock and warrants currently are traded on the Nasdaq Capital Markets under the ticker symbols "CEAD" and "CEADW",
respectively.

 Our
Current CEA Services and Equipment Solutions

 Our
goal is to develop relationships with our prospects and customers that will afford us the opportunity to provide comprehensive services
and equipment for the complete lifecycle of indoor agriculture facilities. This lifecycle includes designing and engineering the facility,
providing the many required infrastructure technologies, advising on and ensuring proper installation of the technologies, providing
training and start-up support, and ultimately providing preventative and other ongoing services for ensuring proper maintenance and operations.

 We
provide a comprehensive range of service solutions that include facility design and budgeting, equipment selection and specification,
equipment installation advisory, and preventative maintenance services. In addition, we provide our customers with product offerings
that include both proprietary products and value-added reseller ("VAR") products.

 Our
CEA Customers and Prospects

 We
aim to provide our services and products to customers who are building, upgrading, or expanding an indoor cultivation facility for any
crop. Our customers vary based on the size of the facility, type of crop being cultivated, and extent of construction or retrofitting
of the facility.

 Most
of our customers are new entrants to the CEA industry and have no other cultivation facilities. Some customers have one or more facilities
which we classify as MFOs (multi-facility operators). We currently do not have projects with the largest, publicly traded firms (typically
referred to as "MSOs," or Multi-State Operators).

 Competition
in the CEA Marke t

 Our
environmental control systems and our related engineering and design services compete with various national and local Mechanical, Electrical
& Plumbing (MEP) engineering firms. We also compete with national and local HVACD contractors and traditional HVACD equipment suppliers
who resell, design, and implement climate control systems for commercial and industrial facilities, but most of whom do not have the
specific knowledge that we have about the complexities and challenges of CEA facilities. We have positioned ourselves to differ from
these competitors by providing a broad range of engineering and design services and environmental control systems, across most major
HVACD solutions, including chilled water systems, custom air handling units, split systems, and packaged roof-top units. Each is tailored
specifically for managing the distinct challenges involved in CEA facilities. We believe our industry-specific applications and experience
in the CEA market allow us to deliver the right solution to our cultivation customers. Unlike many of our competitors, our solutions
are designed specifically for cultivators to provide tight temperature and humidity control, reduce bio-security risks, reduce energy
requirements, and minimize maintenance complexity, costs and downtime. However, we are seeing more competitors enter the CEA market,
focused on emulating the same types of crop-specific climate control systems and engineering services that we offer. We believe this
increased competition may adversely impact our ability to obtain new facility projects from both MFOs and independent smaller growers
and could require us to accept lower gross margins on our projects.

 Intellectual

 In
our business operations, we generally rely on a combination of patent and trademark rights, licenses, trade secrets, and laws that protect
intellectual property, confidential procedures, and contractual restrictions with our employees and others to establish and protect our
intellectual property rights. While we have several issued patents, we do not believe that these issued patents currently provide us
with a meaningful competitive advantage. We have registered trademarks around our core Surna brand in the United States and select foreign
jurisdictions, as well as the Surna logo and the combined Surna logo and name in the United States. Our Surna trademark is also registered
in the European Union and Canada. We also recently secured trademark registration for our proprietary SCA platform, SentryIQ, in the
United States and Canada. Subject to ongoing use and renewal, trademark protection is potentially perpetual. We actively protect our
inventions, new technologies, and product developments by maintaining trade secrets and, in limited circumstances, filing for patent
protection.

 Employees

 We
currently have 6 active full-time employees. We review our staffing needs in light of our contract obligations and attempt to size and
skill match our employees as required. However, we may engage, and have in the past utilized, the services of consultants, independent
contractors, and other non-employee professionals. Additional employees may be hired in the future depending on need, available resources,
and our achieved growth.

 The
Company has experienced a decline in activity, as indicated in its 2024 sales and its current backlog. This decline is due to many factors,
including (i) recent challenges in the cannabis market, (ii) continued supply chain-related delays and cancellations that have affected
many of its vendors and partners, and (iii) a broader slowdown in the macroeconomic environment.

 US
Government Regulation in Relation to Cannabis

 While
we do not generate any revenue from the direct sale of cannabis products, we have historically, and continue to, offer our services and
engineering solutions to indoor cultivators that are engaged in various aspects of the cannabis industry. Cannabis is a Schedule I controlled
substance and is illegal under federal law. Even in those states in which specific uses of marijuana have been legalized, such as medical
marijuana or for adult recreational purpose, its use remains a violation of federal laws.

 A
Schedule I controlled substance is defined as a substance that has no currently accepted medical use in the United States, a lack of
safety for use under medical supervision and a high potential for abuse. The Department of Justice defines Schedule I controlled substances
as "the most dangerous drugs of all the drug schedules with potentially severe psychological or physical dependence." If
the federal government decides to enforce the Controlled Substances Act with respect to cannabis, persons that are charged with distributing,
possessing with intent to distribute, or growing cannabis could be subject to fines and terms of imprisonment, the maximum being life
imprisonment and a $50 million fine. Any change in the federal government's enforcement of current federal laws could cause significant
financial damage to us. While we do not intend to harvest, manufacture, distribute or sell cannabis or cannabis products, we may be irreparably
harmed by a change in the enforcement of cannabis laws by the federal or state governments.

 In
the past, the Obama administration took the position that it was not an efficient use of resources to direct federal law enforcement
agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical marijuana. The Trump
administration revised this policy but made no major changes in enforcement through Attorney General Jeffrey Sessions rescinding the
Cole Memorandum. Although President Biden stood for decriminalization and descheduling during his campaign, his administration has not
formulated an explicit policy on cannabis. The Biden administration has implemented pardons for past federal cannabis possession convictions
and encouraged governors to do the same. Also, in May 2021 the Drug Enforcement Administration approved licensed facilities to grow cannabis
for the purpose of medical research, and on December 2, 2022, President Biden signed the Medical Marijuana and Cannabidiol Research Expansion
Act. This act is "the first standalone marijuana-related bill approved by both chambers of the United States Congress" and
allows medical marijuana research. The act requires the Drug Enforcement Administration to register researchers and suppliers of cannabis
for medical research in a timely manner, who will then be able to legally manufacture, distribute, dispense and possess the substance.
It also creates a mechanism for FDA approval of drugs derived from the cannabis plant and "protects doctors who may now discuss
the harms and benefits of using cannabis and cannabis derivatives." It also requires the Department of Health and Human Services
to investigate the medical utility of cannabis and barriers that exist to conducting research and requires the U.S. Attorney General
to conduct an annual review to ensure that cannabis is being adequately produced for research purposes. In January 2023, the FDA stated
that given the growing cannabidiol (CBD) products market, it had convened a high-level internal working group to explore potential regulatory
pathways for CBD products and is prepared to find a new regulatory pathway for CBD to balance individuals' desire for access to
CBD products with the regulatory oversight needed to manage risks.

 Currently,
there is much legislation being considered to reform cannabis products and use. The proposed laws cover a wide spectrum from complete
federal legalization to specific industry nuances. In September 2023, the MORE Act was introduced that would provide full federal legalization
through descheduling with a particular focus on equity provisions, including expungement for certain cannabis offenses and a community
reinvestment program. The MORE Act has not passed through committee. There are two proposed federal bills that would remove cannabis
from the Controlled Substances Act (CSA) entirely and task the Food and Drug Administration (FDA) with regulation of cannabis products.
One of these bills, The States Reform Act, adopts a dual federal-state regulatory model, like the regulation of alcohol. Another bill,
the Strengthening the Tenth Amendment Through Entrusting States (STATES) 2.0 Act, would permit states to to maintain the prohibition
of cannabis, but interstate commerce in state-law-compliant cannabis would be legalized, so non-legal states would not be able to prohibit
shipments to and from legal states from crossing through their borders. Finally, only one piece of legislation took the rescheduling
approach to cannabis legalization in 2023. The Marijuana 1-to-3 Act of 2023, opens new tab would simply direct the Attorney General to
transfer cannabis from Schedule I to Schedule III of the CSA without clarifying or addressing any other provisions of federal law. However,
that was not the only piece of rescheduling-related legislation introduced last year.

 Lawmakers
continued to offer various solutions for providing financial relief for cannabis businesses and legal protections for ancillary businesses
in 2023. The most well-known of these bills is the Secure and Fair Enforcement Regulation (SAFER) Banking Act, which would provide safe
harbor for financial institutions and other ancillary businesses that work with cannabis industry clients, thus increasing the industry's
access to traditional financial services like loans and deposit accounts. Similar to SAFER but with a narrower scope, the Clarifying
Law Around Insurance of Marijuana (CLAIM) Act would provide a specific safe harbor for insurance companies that serve the cannabis industry.
As for financial support, the Small Business Tax Equity Act of 2023, would exempt cannabis sales conducted in compliance with state law
from the prohibition of 26 U.S.C. § 280E, thereby allowing businesses to deduct normal business expenses from their taxes.

2023, there have been a myriad of additional bills introduced that govern the expungement and/or sealing of criminal records for non-violent
cannabis offenses, legalizing hem and CBD products and adding FDA regulation for these products, facilitating research on cannabis, access
for veterans to medical cannabis, and restoring eligibility for federal employment and the right of medical cannabis patient to purchase
and possess firearms.

 Notwithstanding
the actions of the Biden administration, it should be expected that the Department of Justice will continue at this time to enforce the
Controlled Substances Act with respect to cannabis under established principles in setting their law enforcement priorities to prevent:

 the
 distribution of cannabis products, such as marijuana, to minors;

 criminal
 enterprises, gangs and cartels receiving revenue from the sale of cannabis;

 the
 diversion of cannabis products from states where it is legal under state law to states where it is not legal under state law;

 the
 use of state-authorized cannabis activity as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;

 violence
 and the use of firearms in the cultivation and distribution of cannabis products;

 driving
 while impaired and the exacerbation of other adverse public health and safety consequences associated with cannabis product usage;

 the
 growing of cannabis on public lands; and

 cannabis
 possession or use on federal property.

 Since
the use of marijuana is illegal under federal law, most federally chartered banks will not accept deposit funds from businesses involved
with marijuana. Consequently, businesses involved in the marijuana industry generally bank with state-chartered banks and credit unions
to provide banking to the industry.

 In
2014, Congress passed a spending bill containing a provision (the Rohrabacher-Farr amendment and sometimes referred to as the Rohrabacher-Blumenauer
Amendment) blocking federal funds and resources allocated under the federal appropriations bills from being used to "prevent such
States from implementing their own State medical marijuana laws." The Rohrabacher-Blumenauer Amendment, however, did not codify
any federal protections for medical marijuana patients and producers operating within state law. The Justice Department maintains that
it can still prosecute violations of the federal cannabis laws and continue cases already in the courts. The Rohrabacher-Blumenauer Amendment
must be re-enacted every year, and it is continued through March 8, 2024. However, state laws do not supersede the prohibitions set forth
in the federal drug laws.

 In
order to participate in either the medical or the adult use aspects of the cannabis industry, all businesses and employees must obtain
licenses from the state and, for businesses, local jurisdictions as well. As an example, Colorado issues four types of business licenses
including cultivation, manufacturing, dispensing, and testing. In addition, all owners and employees must obtain an occupational license
to be permitted to own or work in a facility. All applicants for licenses undergo a background investigation, including a criminal record
check for all owners and employees.

 Colorado
has also enacted stringent regulations governing the facilities and operations of cannabis businesses that are involved with the plant
and its products. All facilities are required to be licensed by the state and local authorities and are subject to comprehensive security
and surveillance requirements. In addition, each facility is subject to extensive regulations that govern its businesses practices, which
includes mandatory seed-to-sale tracking and reporting, health and sanitary standards, packaging and labeling requirements, and product
testing for potency and contaminants.

 Laws
and regulations affecting the medical marijuana industry are constantly changing, which could detrimentally affect our proposed operations.
Local, state and federal medical marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could
require us to incur substantial costs associated with compliance or alter our business plan. In addition, violations of these laws, or
allegations of such violations, could disrupt our business and result in a material adverse effect on our operations. It is also possible
that regulations may be enacted in the future that will be directly applicable to our business. We cannot predict the nature of any future
laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative
policies and procedures, when and if promulgated, could have on our business.

 Item
1A. Risk Factors

 Investing
in our securities involves significant risks. Certain factors may have a material adverse effect on our business, financial condition,
and results of operations. You should carefully consider the risks and uncertainties described below, in addition to other information
contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. The risks and uncertainties
described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe
are not material, may also become important factors that adversely affect our business. If any of the following risks actually occur,
our business, financial condition, results of operations, and future prospects could be materially and adversely affected. In that event,
the trading price of our securities could decline, and you could lose part or all of your investment.

 Summary
Of Risk Factors Relating to our Current CEA Operations

 Our
CEA business is subject to a number of risks and uncertainties, including those risks discussed at length in the section below titled
"Risk Factors." These risks include, among others, the following:

 we have had limited revenues and operated our business with a working capital deficit. Additionally, our operating results have fluctuated
 over the years.

 We
 enter into contracts that are performed over a period of time; therefore, we have a contract backlog in differing amounts from quarter
 to quarter. Converting backlog to revenue depends on many factors, such as the customer obtaining financing, building permits and
 construction of their facility. We may not be able to convert all of our contracts representing backlog into revenue. We currently
 do not convert our backlog on a consistent basis quarter to quarter.

 Although
 we are not cannabis plant or product touching, historically we have provided services and equipment to the cannabis industry segment.
 As a result, we may be subject to the changes within that sector and certain of the regulations and enforcement issues of the cannabis
 industry.

 We
 have material weaknesses in our controls and procedures for financial reporting.

 We
 may not be able to implement a successful growth program and, even if that is successful, we may not manage such a program effectively,
 which may affect our investors' return on investment.

 To
 the extent we continue in the CEA industry, we will need to expand our customer base, expand and develop our products and services
 and increase marketing and achieve timely contract execution.

 Due
 to supply disruptions and competing demand for products, we continue to experience supply issues similar to other members of the
 CEA industry. International trade disputes, tariffs, international shipping and domestic trucking issues all contribute to the challenges
 we face in obtaining the products we need for contract performance. We have experienced and are likely to continue to experience
 inflationary effects on the cost of products and labor, which is likely to adversely affect our margins. The failure to procure the
 products we need to satisfy our customer contracts would disrupt our business, harm our reputation, result in losses and potently
 cause us to lose our market.

 We
 rely on third party manufacturers to supply the equipment we sell or lease for our CEA customers. If the equipment does not perform
 to specifications or to our customers' satisfaction, there may be an adverse impact on our business and our revenues.

 We
 rely on a limited number of customers and suppliers.

 The
 build side of the CEA industry is very competitive. To be able to compete successfully, we will need to offer a wide range of products,
 have adequate capital for expansion, supply and execution, and develop robust marketing.

 We
 will need to attract and retain top quality employee talent. We are dependent on certain key sales, managerial and executive personnel
 for our current and future success.

 Risk
Factors

 Risks
Relating to Our Current CEA Business

 Our
revenues have been limited, and we will need to obtain financing for any substantive growth, and possibly our continued operations, which
may not be available to us.

we have raised equity and debt capital to support our operations. We raised approximately $22 million from a public offering completed
in February 2022. As of December 31, 2024, we had working capital of approximately $9,064,000 and our cash balance was approximately
$9,453,000.

 We
expect to need additional funds in the longer term, from time to time, to complete aspects of the overall development of our business
plan, such as in connection with the acquisition of Fat Panda and other strategic assets. We also anticipate needing additional funds
for ongoing operating expenses. The precise amount and timing of our funding needs cannot be determined accurately at this time, and
will depend on a number of factors, including demand for our products and services, the success of our product development efforts, the
timing of receipts for customer payments, the management of working capital, and the continuation of normal payment terms and conditions
for our purchase of goods and services. The continuation of normal payment terms and conditions with our customers and suppliers, including
our ability to obtain advance payments from our customers, significantly impacts our ability to fund our ongoing operations.

 Any
future equity offering will result in dilution to our shareholders; obtaining borrowed capital may not be possible for us.

 To
the extent that we raise equity and equity linked securities in any future offerings, our existing shareholders will experience a dilution
in the voting power and ownership of their common stock, and our earnings per share, if any, would be impacted. Any borrowings made to
finance acquisitions and operations, could make us more vulnerable to a downturn in our operating results, a downturn in economic conditions,
or increases in interest rates on borrowings that are subject to interest rate fluctuations. The amount and timing of additional financing
needs will vary principally depending on the timing of new product launches, investments and/or acquisitions, and the amount of cash
flow from our operations. If our resources are insufficient to satisfy our cash requirements, we may seek to issue additional equity
or debt securities or obtain a credit facility.

 There
is no assurance that we will be able to convert our backlog related to our CEA operations into revenue or make a profit.

 While
we continue our CEA business, we may be unable to convert the full contract value of our backlog in a timely manner, or at all. We inconsistently
convert our backlog into revenue on a quarter-to-quarter basis. The performance of our obligations under a sales contract, and the timing
of our revenue recognition, is dependent upon our customers' ability to secure funding and real estate, obtain a license and then
build their cultivation facility so they can use our services and take possession of the equipment we provide. Our sales contracts currently
are not time specific as to when our customers are required to take delivery of our services and equipment. More recently, we determined
that some of our new construction facility projects are becoming larger and more complex and, as a result, delays were more likely due
to licensing and permitting, lack of, or delay in, funding, staged facility construction, and/or the shifting priorities of certain customers
with multiple facility projects in progress at one time. Even if we obtain more customers, or increase the average size of our projects,
there is no guarantee that we will be able to generate a profit. Because we are a small company with limited capital, limited products
and services, and limited marketing activities, we may not be able to generate sufficient revenue to operate profitably. If we cannot
operate profitably, we may have to suspend or cease operations.

 We
may extend credit to our CEA customers in the future and, if we are unable to collect these accounts receivable, our future profitability
could be adversely impacted.

we had little exposure to the collection risk on accounts receivable since we typically received payments from our customers in advance
of our performance of services or delivery of equipment. However, in certain situations, especially as we expand our products and services
offering for a customer's entire facility lifecycle, we may extend credit to our customers, in which case we are at risk for the
collection of account receivables. Accordingly, we will be at greater risk for the collection of account receivables. Any customer credit
arrangements are negotiated and may not protect us if a customer develops operational difficulty or incurs operating losses which could
lead to a bankruptcy. In these cases, we may lose most of the outstanding balance due. In addition, we are typically not able to insure
our accounts receivables. The risk is that we derive our revenue and profits from selling products and services to the emerging cannabis
industry. The failure of our customers to pay the full amounts due to us could negatively affect future profitability.

 Because
we currently do not maintain effective internal controls over financial reporting, we may be unable to accurately report our financial
results or prevent fraud, and investor confidence and the market price of our common stock may, therefore, be adversely impacted.

 Our
reporting obligations as a public company place significant requirements on our management, operational and financial resources, and
systems, and will continue to do so for the foreseeable future. Annually, we are required to prepare a management report on our management's
assessment of the effectiveness of our internal control over financial reporting. Management has concluded that our internal control
over financial reporting is currently not effective. In the event that our status with the U.S. Securities and Exchange Commission ("SEC")
changes to that of an accelerated filer from a smaller reporting company, our independent registered public accounting firm will be required
to attest to and report on our management's assessment of the effectiveness of our internal control over financial reporting. Under
such circumstances, even if our management concludes that our internal control over financial reporting is effective, our independent
registered public accounting firm may still decline to attest to our management's assessment, or may issue a report that is qualified,
if it is not satisfied with our controls, or the level at which our controls are documented, designed, operated or reviewed, or if it
interprets the relevant requirements differently from us.

 We
have identified material weaknesses in our internal control over financial reporting and, if we do not remediate the material weakness
or are unable to implement and maintain effective internal control over financial reporting in the future, the accuracy and timeliness
of our financial reporting may be adversely affected.

 The
Company did not maintain effective controls over certain aspects of the financial reporting process because: (i) we lack a sufficient
complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our
financial reporting requirements, (ii) there is inadequate segregation of duties due to the limitation on the number of our accounting
personnel, and (iii) we have insufficient controls and processes in place to adequately verify the accuracy and completeness of spreadsheets
that we use for a variety of purposes including revenue, taxes, stock-based compensation and other areas, and place significant reliance
on, for our financial reporting. A material weakness is a deficiency or a combination of deficiencies in internal control over financial
reporting such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements
will not be prevented or detected on a timely basis. If we are unable to achieve effective internal control over financial reporting,
or if our independent registered public accounting firm determines we continue to have a material weakness in our internal control over
financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of
our shares could decline, and our reputation may be damaged.

 The
inability to effectively manage our operational reorganization could harm our business and materially and adversely affect our operating
results and financial condition.

 If
there is any growth in or reorganization of our business and operations, including integrating any acquired business and assets, it is
likely to place a strain on our management and administrative resources, infrastructure and systems. We expect that in those instances
we will need to further refine and expand our business development capabilities, our systems and processes and our access to financing
sources. We also will need to hire, train, supervise, and manage employees. These processes are time consuming and expensive, will increase
management responsibilities and will divert management attention. We cannot assure that we will be able to:

 execute
 on our business plan and strategy;

 expand
 our products effectively or efficiently or in a timely manner;

 allocate
 our human resources optimally;

 meet
 our capital needs;

 identify
 and hire qualified employees or retain valued employees; or

 effectively
 incorporate the components of any business or product line that we may acquire in our effort to achieve growth.

 Our
inability or failure to manage our company effectively could harm our business and materially and adversely affect our operating results
and financial condition.

 Our
operating results may fluctuate significantly based on customer acceptance of our services and products, industry uncertainty, project
financing concerns, and regulatory requirements. As a result, period-to-period comparisons of our results of operations are unlikely
to provide a good indication of our future performance.

expects that, under typical operating conditions, we will experience substantial variations in our revenues and operating results from
quarter to quarter. This variance may change with fundamental changes in our operations, such as the planned acquisition of Fat Panda.

 In
our CEA operations, we have been experiencing a decline in revenues, which has also affected our operating results. Our revenue recognition
in our CEA operations is dependent upon shipment of the equipment portions of our sales contracts, which, in many cases, may be delayed
while our customers complete permitting, prepare their facilities for equipment installation or obtain project financing. Uncertainty
in the CEA industry, project financing concerns, and the licensing and qualification of our prospective customers, which are out of our
control, make it difficult for us to predict when we will recognize revenue. If customers are unable to obtain licensing, permitting
or financing, our sales and revenue will decline, resulting in a reduction in our operating income or possible increase in losses.

 To
date, the majority of our revenues have been generated from clients that operate in the legal cannabis industry in the United States
and Canada.

 We
provide the overwhelming majority of our facility engineering design and equipment integration and solutions to facilities in the legal
cannabis industry. While we are hopeful that the proportion of non-cannabis revenues might increase over time, decreases in demand from
the legal cannabis industry will have a material adverse effect on our revenues and the success of our business operations.

 The
cannabis industry has been an emerging industry over the last several years, and cannabis has only been legalized in some states and
remains illegal in other states and under U.S. federal law, making it difficult to accurately forecast the demand for our engineering
and product solutions in this specific industry. Losing clients from the cannabis industry may have a material adverse effect on our
revenues and the success of our business.

 The
cannabis industry is still developing in the United States. While the majority of U.S. states now have legal cannabis, it remains illegal
under U.S. federal law, making it difficult to accurately predict and forecast the demand for our engineering and product solutions.
If the U.S. Department of Justice ("DOJ") did take action against the cannabis industry, we believe those of our clients
operating in the legal cannabis industry would be lost to us.

 In
our operations, we rely heavily upon the various U.S. federal governmental memos issued in the past, including the memorandum issued
by the DOJ on October 19, 2009, known as the "Ogden Memorandum", the memorandum issued by the DOJ on August 29, 2013, known
as the "Cole Memorandum" and other guidance, in the attempt to keep our operations acceptable to those state and federal
entities that regulate, enforce, or choose to defer enforcement of certain current regulations regarding cannabis. By doing this, we
seek to avoid the many possible consequences of providing grow equipment to the cannabis industry as our customers continue to comply
with their state and local jurisdictional laws, rules and regulations and the interpretations of relevant authorities.

 The
legal cannabis industry is not yet well or fully developed, and many aspects of this industry's development and evolution cannot
be accurately predicted. Therefore, the loss of any of our current clients or our inability to capture new client contracts will have
a material adverse effect on our business. While we have attempted to identify our business risks in the legal cannabis industry, you
should carefully consider that there are other risks that cannot be foreseen or are not described in this report, which could materially
and adversely affect our business and financial performance.

 There
is heightened scrutiny by Canadian regulatory authorities related to the cannabis industry.

 Our
existing and future operations may become the subject of heightened scrutiny by those regulators and other authorities in Canada that
oversee the cannabis industry. As a result, we may become subject to direct and indirect interaction with public officials in one or
both the United States and Canada. No assurance can be provided that any heightened scrutiny will not in turn lead to the imposition
of restrictions on our ability to operate in Canada, in addition to those described herein.

 If
we do not successfully have additional products and services, or if those products and services are not successfully commercialized,
we could lose revenue opportunities.

 Our
future success depends, in part, on our ability to expand our product and service offerings in our current operational sector or otherwise
expand or change our operations. The processes of identifying and commercializing products are complex and uncertain, and if we fail
to accurately predict customers' changing needs and emerging technological or other trends, then our business could be harmed.
We have already and may have to continue to commit significant resources to commercializing products before knowing whether our investments
will result in products the market will accept. We may be unable to differentiate our products from those of our competitors, and our
products may not be accepted by the market. There can be no assurance that we will successfully identify additional product opportunities,
develop and bring products to market in a timely manner, or achieve market acceptance of our products or that products and technologies
developed by others will not render our products or technologies obsolete or non-competitive. Furthermore, we may not execute successfully
on commercializing those products because of errors in product planning or timing, technical hurdles that we fail to overcome in a timely
fashion, or a lack of appropriate resources. This could result in competitors providing those solutions before we do and a reduction
in revenue and earnings.

 Our
future success depends on our ability to grow and expand our customer base. Our failure to achieve such growth or expansion could materially
harm our business.

 Our
success depends on us achieving greater and broader acceptance of our products and services in our current and proposed business operations.
This will require us to expand our commercial customer base and win larger contracts. There can be no assurance that customers will purchase
our services or products or that we will continue to expand our customer base. If we are unable to effectively market or expand our product
and service offerings, we will be unable to grow and expand our business or implement our business strategy. This could materially impair
our ability to increase sales and revenue, and materially and adversely affect our margins, which could harm our business and cause our
stock price to decline.

 Our
suppliers in our CEA operations could fail to fulfil our orders for parts used to assemble our products, which would disrupt our business,
increase our costs, harm our reputation, and potentially cause us to lose our market.

 We
depend on third party suppliers around the world, including those in The People's Republic of China, for materials used in our
CEA operations, to assemble our products. Any of these suppliers could fail to produce products to our specifications or in a workmanlike
manner and may not deliver the material or products on a timely basis. Our suppliers may also have to obtain inventories of the necessary
parts and tools for production. Any change in our suppliers' approach to resolving production issues could disrupt our ability
to fulfil orders and could also disrupt our business due to delays in finding new suppliers, providing specifications and testing initial
production.

 Equipment
failures or poor performance may negatively impact our business.

 We
rely on third party manufacturers for equipment used in CEA operations which we sell or lease. From time to time, such equipment may
not perform to specifications or to our customers' satisfaction. Such equipment deficiencies may lead to down time impacting our
revenue. Further, frequent downtime at customers' sites due to equipment failures may result in such customers generating less
revenue and increasing credit default risk. In addition, these failures may also result in additional time spent by our personnel, decreasing
profit margins on certain ancillary services.

 The
failure of equipment supplied by third parties may also result in breach of contract and warranty claims from our customers. Whether
or not we will be able to pass the responsibility for equipment failures that are not of our making will depend on many factors. We,
however, will take all action necessary to identify the correct responsible party and pass through any responsibility in respect of an
equipment or other failure. We may not be successful in such action and may ultimately be responsible for damages.

 We
have a concentration of customers and suppliers, which could affect our financial results.

 Two
customers accounted for 45% and 10% of the Company's revenue for the year ended December 31, 2024. Three customers accounted for
37%, 21% and 12% of the Company's revenue for the year ended December 31, 2023. The Company's accounts receivable from two
customers made up 61% and 36%, respectively, of the total balance as of December 31, 2024. The Company's accounts receivable from
three customers made up 59%, 29%, and 12%, respectively, of the total balance as of December 31, 2023. One supplier accounted for 80%
of the Company's purchases of inventory for the year ended December 31, 2024, and three suppliers accounted for 34%, 17%, and 16%
of the Company's purchases of inventory for the year ended December 31, 2023. Our results of operations will be significantly affected
if we lose our primary customer, or if we are not able to replace the customer at the conclusion of our services to that customer. Our
operations will also be impacted negatively if we are not able to find suppliers to replace those that we currently use. Overall, our
operations and, therefore, financial results are dependent on a limited number of customers and suppliers.

 International
trade disputes could result in tariffs and other protectionist measures that could adversely affect the Company's business.

 Tariffs
could increase the cost of our products and the components and raw materials that go into making them. These increased costs could adversely
impact the gross margin that we earn on sales of our products. Tariffs could also make our products more expensive for customers, which
could make our products less competitive and reduce customer demand. Countries may also adopt other protectionist measures that could
limit our ability to offer our products and services.

 Our
inability to effectively protect our intellectual property would adversely affect our ability to compete effectively, our revenue, our
financial condition, and our results of operations.

 We
may be unable to obtain intellectual property rights to effectively protect our branding, products, and other intangible assets. Our
ability to compete effectively may be affected by the nature and breadth of our intellectual property rights. While we intend to defend
against any threats to our intellectual property rights, there can be no assurance that any such actions will adequately protect our
interests. If we are unable to secure intellectual property rights to effectively protect our branding, products, and other intangible
assets, our revenue and earnings, financial condition, or results of operations could be adversely affected.

 We
also rely on non-disclosure and non-competition agreements to protect portions of our intellectual property portfolio. There can be no
assurance that these agreements will not be breached, that we will have adequate remedies for any breach, that third parties will not
otherwise gain access to our trade secrets or proprietary knowledge, or that third parties will not independently develop competitive
products with similar intellectual property.

 We
may become subject to additional regulation of CEA facilities that are unrelated to cannabis.

 Our
engineering and design services and solutions are focused on CEA facilities that are able to grow a wide variety of crops other than
that of cannabis, such as leafy greens (kale, Swiss chard, mustard, cress), microgreens (leafy greens harvested at the first true leaf
stage), ethnic vegetables and small fruits (such as strawberries, blackberries and raspberries), bell peppers, cucumbers, and tomatoes.
Some of these crops and their growing methodologies are subject to regulation by the United States Food and Drug Administration, environmental
agencies, public utility agencies and other federal, state or foreign agencies. Changes to any regulations and laws that complicate the
design and engineering of a subject CEA facility, such as wastewater treatment and electricity-related mandates, make it possible that
potential related zoning and enforcement could decrease the demand for our services, and in turn negatively impact our revenues and business
opportunities.

 The
CEA industry is highly competitive, and we have less capital and resources than many of our competitors, which may give them an advantage
in developing and marketing services and products similar to ours or make our services and products obsolete.

 There
are many competitors in the CEA industry, including some companies that focus on the cannabis industry. These companies generally offer
products and services similar or the same as those offered by us. There can be no guarantees that in the future other companies will
not enter this arena by developing products that are in direct competition with us or even superior in quality or price. The barriers
to entry into the CEA industry are not significant. Over time we anticipate growth and intensity in our competition. Some of our current
and future competition may have longer operating histories, greater name recognition, larger client bases and significantly greater financial,
technical, sales and marketing resources. One or more of these qualities may allow them to respond more quickly than us to market opportunities.
They may be able to devote greater resources to the marketing, promotion and sale of their products and/or services. Competitors may
also adopt more aggressive pricing policies and make more attractive offers to clients, employees, strategic partners, distribution channels
and advertisers. Increased competition is likely to result in price reductions, reduced gross margins and a potential loss of market
share.

 We
will be required to have top quality talent to compete in the marketplace.

 We
believe our success will depend in part on our ability to have skilled managerial, product development, sales and marketing, and finance
personnel. Our ability to attract and retain personnel with the requisite credentials, experience and skills will depend on several factors
including, but not limited to, our ability to offer competitive wages, benefits and professional growth opportunities. There can be no
assurance of success in attracting and retaining such personnel. Shortages in qualified personnel could limit our ability to increase
sales of existing products and services and launch new product and service offerings.

 We
are dependent upon certain key sales, managerial and executive personnel for our future success. If we lose any of our key personnel,
our ability to implement our business strategy could be significantly harmed.

 We
depend on the industry knowledge, technical and financial skill, and network of business contacts of certain key employees. Our future
success will depend on the continued service of these key employees or our ability to engage others who are similarly situated in the
industry. While we may have employment agreements with certain of these key employees, they are free to terminate their employment with
us at any time, although they may be subject to certain restrictive covenants on their post-termination activities. We do not carry key-man
life insurance on the lives of our key employees. The departure of any one of our key employees could have a material adverse effect
on our ability to achieve our business objective and maintain the specialized services that we offer our customers.

 We
have a limited number of employees that may not be sufficient to service our contracts.

 As
a result of various factors affecting the CEA industry in which we operate, we have made employee reductions from time to time in the
last year. We believe we are operating as leanly as needed to be able to service our contract obligations. The mix of our current employees
and their number may not be sufficient for our current needs and if we increase our business we will need additional employees, which
may not be available. If we are not able to service our contract obligations, our business will suffer and we may be liable for contract
damages.

 System
security risks, data protection breaches, cyber-attacks and systems integration issues could disrupt our internal operations or services
provided to customers, and any such disruption could reduce our expected revenue, increase our expenses, damage our reputation and adversely
affect our stock price.

 Experienced
computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential information
or that of third parties, create system disruptions or cause shutdowns. Computer programmers and hackers also may be able to develop
and deploy viruses, worms, and other malicious software programs that attack or otherwise exploit any security vulnerabilities of the
products that we may sell in the future, especially our SentryIQ sensors, controls and automation platform. The costs to us to eliminate
or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be
significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of
service and loss of existing or potential customers that may impede our engineering, sales, manufacturing, distribution or other critical
functions.

 Portions
of our IT infrastructure may also experience interruptions, delays or cessations of service or produce errors in connection with systems
integration or migration work that takes place from time to time. We may not be successful in implementing new systems and transitioning
data, which could cause business disruptions and be more expensive, time consuming, disruptive and resource intensive. Such disruptions
could adversely impact our ability to fulfill orders and interrupt other processes. Delayed sales, lower profits, or lost customers resulting
from these disruptions could adversely affect our financial results, stock price and reputation.

 We
incur significant costs as a result of being a public company, which will make it more difficult for us to achieve profitability.

 As
a public company, we incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements
applicable to a company whose securities are registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act, and other rules implemented
by the SEC. These costs will make it more difficult for us to achieve profitability.

 Changes
in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could
significantly affect our financial results.

 U.S.
generally accepted accounting principles ("GAAP") and related pronouncements, implementation guidelines and interpretations
with regard to a wide variety of matters that are relevant to our business, such as, but not limited to, revenue recognition, stock-based
compensation, trade promotions, and income taxes are highly complex and involve many subjective assumptions, estimates and judgments
by our management. Changes to these rules or their interpretation or changes in underlying assumptions, estimates or judgments by our
management could significantly change our reported results.

 Our
ability to use net operating losses to offset future taxable income may be subject to limitations.

 As
of December 31, 2024, the Company has U.S. federal and state net operating losses ("NOLs") of approximately $31,985,000,
of which $11,196,000 will expire, if not utilized, in the years 2034 through 2037. However, the balance of $20,789,000 NOLs generated
subsequent to December 31, 2017, do not expire but may only be used against taxable income to 80%. In addition, under Section 382 of
the Internal Revenue Code of 1986, as amended (the "Code"), and corresponding provisions of state law, if a corporation undergoes
an "ownership change," which is generally defined as a greater than 50% change, by value, in its equity ownership over a
three-year period, the corporation's ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes
to offset its post-change income or taxes may be limited. We have experienced ownership changes in the past and we may experience additional
ownership changes in the future as a result of subsequent changes in our stock ownership, some of which may be outside of our control.
Our September 2021 and February 2022 securities sales also will have to be taken into account for determination of any "ownership
change" that we have undergone during a determination period. If an ownership change occurs and our ability to use our net operating
loss carryforwards is materially limited, it would harm our post tax income by effectively increasing our future tax obligations.

 We
may not be able to successfully identify, consummate or integrate acquisitions or to successfully manage the impacts of such transactions
on our operations.

 Part
of our business strategy includes evaluating and pursuing synergistic and other acquisitions. Currently, we are in the process of acquiring
Fat Panda. Material acquisitions and other strategic transactions, such as the acquisition of Fat Panda involve a number of risks, including:
(i) the potential disruption of our ongoing business; (ii) the distraction of management away from the ongoing oversight of our existing
business activities; (iii) incurring additional indebtedness; (iv) the anticipated benefits and cost savings of those transactions not
being realized fully, or at all, or taking longer to realize than anticipated; (v) an increase in the scope and complexity of our operations;
(vi) the disruption of a significant reorganization of the company; and (vii) the loss or reduction of control over certain of our assets.

 The
pursuit of any acquisitions may pose certain risks to us. We may not be able to identify acquisition candidates that fit our criteria
for growth and profitability. Even if we are able to identify such candidates, we may not be able to acquire them on terms or financing
satisfactory to us. We will incur expenses and dedicate attention and resources associated with the review of acquisition opportunities,
whether or not we consummate such acquisitions.

 Risks
Related to the Cannabis Industry

 Cannabis
remains illegal under federal law, and therefore, strict enforcement of federal laws regarding cannabis, particularly against our customers,
would likely result in our inability to execute our business plan.

 Marijuana
legalization is mixed across the country. And it is constantly evolving. In four states it continues to be fully illegal. In the other
states it is either legalized, available for medical uses and decriminalized, available for medical uses, decriminalized, or permitted
for low-tetrahydrocannabinol ("THC")/high-CBD extracts.

 Under
U.S. federal law, however, those activities are illegal.

 Cannabis,
other than hemp (defined by the U.S. government as Cannabis sativa L. with a THC concentration of not more than 0.3% on a dry
weight basis), is a Schedule I controlled substance under the U.S. Controlled Substances Act (21 U.S.C. § 801, et seq.) (the "CSA").
Even in states or territories that have legalized cannabis to some extent, the cultivation, possession, and sale of cannabis all violate
the CSA and are punishable by imprisonment, substantial fines and forfeiture. Moreover, individuals and entities may violate federal
law if they aid and abet another in violating the CSA, or conspire with another to violate the law, and violating the CSA is a predicate
for certain other crimes, including money laundering laws and the Racketeer Influenced and Corrupt Organizations Act. The U.S. Supreme
Court has ruled that the federal government has the authority to regulate and criminalize the sale, possession and use of cannabis, even
for individual medical purposes, regardless of whether it is legal under state law. For over six years, however, the U.S. government
has not enforced those laws against companies complying with state cannabis law and their vendors.

 The
likelihood of any future adverse enforcement against companies complying with state cannabis laws remains uncertain. The U.S. Attorney's
Office will follow established principles that govern all federal prosecutions when deciding which cannabis activities to prosecute.
As a result, federal prosecutors could and still can use their prosecutorial discretion to decide to prosecute even state-legal cannabis
activities. However, generally, U.S. Attorneys have not targeted state law compliant entities. The policy of not prosecuting companies
complying with state cannabis laws is likely to continue under the Biden Administration.

 Additionally,
since 2014, versions of the U.S. omnibus spending bill have included a provision prohibiting the DOJ, which includes the Drug Enforcement
Administration, from using appropriated funds to prevent states from implementing their medical-use cannabis laws. In USA vs. McIntosh,
the U.S. Court of Appeals for the Ninth Circuit held that the provision prohibits the DOJ from spending funds to prosecute individuals
who engage in conduct permitted by state medical-use cannabis laws and who strictly comply with such laws. The court noted that, if the
spending bill provision were not continued, prosecutors could enforce against conduct occurring during the statute of limitations even
while the provision was previously in force. Other courts that have considered the issue have ruled similarly, although courts disagree
about which party bears the burden of proof of showing compliance or noncompliance with state law.

 We
cannot predict the timing of any change in federal law or possible changes in federal enforcement. In the unlikely event that the federal
government were to reverse its long-standing hands-off approach to the state legal cannabis markets and start more broadly enforcing
federal law regarding cannabis, we would likely be unable to execute our business plan, and our business and financial results would
be adversely affected.

 Certain
of our customers may be outside any protections extended to medical-use cannabis under the spending bill provision and more recent medical-use
and research laws. This could subject them to greater and/or different federal legal and other risks as compared to businesses where
cannabis is sold exclusively for medical use, which could in turn materially adversely affect our business. Furthermore, any change in
the federal government's enforcement posture with respect to state-licensed cannabis sales, including the enforcement postures
of individual federal prosecutors in judicial districts where we operate, could result in our inability to execute our business plan,
and we would likely suffer significant losses with respect to our customer base, which would adversely affect our operations, cash flow
and financial condition.

 We
are and will be subject to applicable anti-money laundering laws and regulations.

 We
are subject to a variety of laws and regulations in the United States and Canada that involve money laundering, financial recordkeeping
and proceeds of crime, including the U.S. Currency and Foreign 125 Transactions Reporting Act of 1970 (commonly known as the Bank Secrecy
Act), as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (USA PATRIOT Act), the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), as amended and
the rules and regulations thereunder, and any related or similar rules, regulations or guidelines, issued, administered or enforced by
governmental authorities in the United States, Canada and internationally. Further, under U.S. federal law, banks or other financial
institutions that provide a cannabis business with a checking account, debit or credit card, small business loan, or any other service
could be found guilty of money laundering if certain other elements are met.

 Despite
these laws, the FinCEN Memorandum states that in some circumstances, it is permissible for banks to provide services to cannabis-related
businesses without risking FinCEN enforcement. It refers to and incorporates supplementary Cole Memo guidance issued to federal prosecutors
relating to the prosecution of money laundering offenses predicated on cannabis-related violations of the CSA on the same day.

 Notwithstanding
former Attorney General Sessions' revocation of the Cole Memo, the status of the FinCEN Memorandum has not been affected, nor has
the Department of the Treasury given any indication that it intends to rescind the FinCEN Memorandum itself. Though it was originally
intended for the Cole Memo and the FinCEN Memorandum to work in tandem, the FinCEN Memorandum appears to remain in effect as a standalone
document which explicitly lists the eight enforcement priorities originally cited in the rescinded Cole Memo. Although the FinCEN Memorandum
remains intact, indicating that the Department of the Treasury and FinCEN intend to continue abiding by its guidance, it is unclear whether
the current administration will continue to follow the guidelines of the FinCEN Memorandum.

 We
face risks related to civil asset forfeiture due to the regulatory environment of the cannabis industry in the United States.

 Because
the cannabis industry remains illegal under U.S. federal law, any property owned by participants in the cannabis industry, which are
either used in the course of conducting such business, or are the proceeds of such business, could be subject to seizure by law enforcement
and subsequent civil asset forfeiture. Even if the owner of the property were never charged with a crime, the property in question could
still be seized and subject to an administrative proceeding by which, with minimal due process, it could be subject to forfeiture. As
a result, the equipment that our customers acquire from us in the United States may be subject to such seizure and forfeiture. Additionally,
a broad interpretation of the law could potentially result in the seizure and forfeiture of proceeds we generate from client payments
who are subject to property seizure.

 Public
opinion and perception of the cannabis industry may have an adverse effect on our business reputation.

 Government
policy changes or public opinion may also result in a significant influence over the regulation of the cannabis industry in the United
States, Canada, or elsewhere. Public opinion and support for medical and adult-use marijuana has traditionally been inconsistent and
varies from jurisdiction to jurisdiction. While public opinion and support appears to be improving for legalizing medical and adult-use
marijuana, it remains a controversial issue subject to differing opinions surrounding the level of legalization (for example, medical
marijuana as opposed to legalization in general). A negative shift in the public's perception of cannabis in the United States
or any other applicable jurisdiction could affect future legislation or regulation. Among other things, such a shift could cause state
jurisdictions to abandon initiatives or proposals to legalize medical and/or adult-use cannabis, thereby limiting the number of new state
jurisdictions into which we could expand. Any inability to fully implement our expansion strategy may have a material adverse effect
on our business, results of operations or prospects.

 We
may have difficulty accessing bankruptcy courts.

 Because
cannabis is illegal under federal law, federal bankruptcy protection is currently not available to parties who engage in the cannabis
industry or cannabis-related businesses. Recent bankruptcy rulings have denied bankruptcies for dispensaries upon the justification that
businesses cannot violate federal law and then claim the benefits of federal bankruptcy for the same activity and upon the justification
that courts cannot ask a bankruptcy trustee to take possession of and distribute cannabis assets as such action would violate the CSA.
Therefore, we may not be able to seek the protection of the bankruptcy courts, and this could materially affect our business or our ability
to obtain credit.

 Our
historical business efforts in Canada have presented opportunities, but no assurance can be given that our revenues and earnings will
be improved on the basis of our addressing the Canadian business.

 In
addition to U.S. operations, we seek to sell products and services to CEA and cannabis growers in Canada, where medical and recreational
cannabis has been legal since 2018 across the country both federally and provincially (subject to certain restrictions relating to CBD).
We believe Canada, with its federal legal regime, represents a business opportunity for us, but we have noticed softening demand from
Canadian prospects due, in part, to limited capital being available for new facilities and an overbuilding of cultivation capacity following
federal legalization. As a result, Canada now appears to be in a period of correction. There can be no assurance that we will be able
to make any additional sales of products or services in Canada.

 Variations
in state and local regulation and enforcement in states that have legalized cannabis may impose certain restrictions on cannabis-related
activities that may adversely impact our revenue and earnings.

 Variations
exist among states that have legalized, decriminalized, or created medical cannabis programs. For example, Alaska and Colorado have limits
on the number of cannabis plants that can be grown by an individual in the home. In most states, the cultivation of cannabis for personal
use continues to be prohibited except by those states that allow small-scale cultivation by the individual in possession of cannabis
for medicinal purposes or that person's caregiver. Active enforcement of state laws that prohibit personal cultivation of cannabis
may indirectly and adversely affect our revenue and earnings.

 The
cannabis industry could face strong opposition from other industries.

 We
believe that established businesses in other industries may have a strong economic interest in opposing the development of the cannabis
industry. Cannabis may be seen by companies in other industries as an attractive alternative to their products, including recreational
marijuana as an alternative to alcohol, and medical marijuana as an alternative to various commercial pharmaceuticals. Many industries
that could view the emerging cannabis industry as an economic threat are well established, with vast economic and United States federal
and state lobbying resources. It is possible that companies within these industries could use their resources to attempt to slow or reverse
legislation legalizing cannabis. Any inroads these companies make in halting or impeding legislative initiatives that would be beneficial
to the cannabis industry could have a detrimental impact on our clients and, in turn on our operations.

 Changing
legislation and evolving interpretations of law, could negatively impact our clients and, in turn, our operations.

 Laws
and regulations affecting the medical and adult-use marijuana industry are constantly changing, which could detrimentally affect our
clients involved in that industry and, in turn, our operations. Local, state and federal cannabis laws and regulations are often broad
in scope and subject to constant evolution and inconsistent interpretations, which could require our clients and ourselves to incur substantial
costs associated with modification of operations to ensure compliance. In addition, violations of these laws, or allegations of such
violations, could disrupt our clients' business and result in a material adverse effect on our operations. In addition, it is possible
that regulations may be enacted in the future that will limit the amount of cannabis grown or related products that our commercial clients
are authorized to produce. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can it
determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have
on our operations.

 The
fact that we provide products and services to companies in the cannabis industry may impact our ability to raise adequate capital for
future expansion, which could hinder our growth potential as well as our revenue and earnings.

 A
very large percentage of our customers are operating in an industry that is still illegal under U.S. federal law. With the lingering
uncertainty of federal enforcement, many potential investors, especially institutional investors, either refuse to invest in the industry
or are very reluctant to make such investments. Our inability to raise adequate capital for future expansion could substantially hinder
our growth potential as well as our revenue and earnings.

 Our
success may be dependent on additional states legalizing recreational and/or medical cannabis use.

 Continued
development of the recreational and medical cannabis markets is dependent upon continued legislative authorization of cannabis at the
state level for recreational and/or medical purposes. Any number of factors could slow or halt the progress. Furthermore, progress, while
encouraging, is not assured, and the process normally encounters setbacks before achieving success. While there may be ample public support
for legislative proposals, key support must be created in the relevant legislative committee, or a bill may never advance to a vote.
Numerous factors impact the legislative process. Any one of these factors could slow or halt the progress and adoption of cannabis for
recreational and/or medical purposes, which would limit the overall available market for our products and services, which could adversely
impact our business, revenue and earnings.

 Our
customers may have difficulty accessing the service of banks, which may make it difficult for them to purchase our products and services.

 As
a result of the federal illegality of marijuana, many banks do not provide banking services to the cultivation and distribution segments
of the cannabis industry, the argument being that they would be accepting for deposit funds derived from the operation of a federally
illegal business. On February 14, 2014, the U.S. Department of the Treasury Financial Crimes Enforcement Network ("FinCEN")
released guidance to banks "clarifying Bank Secrecy Act ("BSA") expectations for financial institutions seeking to
provide services to marijuana-related businesses." In addition, there have been legislative attempts to allow banks to transact
business with state-authorized cannabis businesses. While these are positive developments, there can be no assurance that legislation
will be successful, or that, even with the FinCEN guidance, banks will decide to do business with cannabis companies, or that, in the
absence of actual legislation, state and federal banking regulators will not strictly enforce current prohibitions on banks handling
funds generated from an activity that is illegal under federal law. Moreover, the FinCEN guidance may be rescinded or amended at any
time in order to reconcile the now conflicting guidance of the Sessions Memo. At present, few banks have taken advantage of the FinCEN
guidance, resulting in many cannabis businesses still operating on an all-cash basis. This makes it difficult for cannabis businesses
to manage their businesses and pay their employees and taxes; in addition, having so much cash on hand creates significant public safety
issues. Many ancillary businesses that service cannabis businesses have to deal with the unpredictability of their clients or customers
not having a bank account. The inability of our customers to open bank accounts and otherwise access the services of banks, including
obtaining credit, may make it more difficult and costly for them to operate and more difficult for such customers to purchase our products
and services, which could materially harm our business, revenue and earnings.

 We
are subject to certain federal regulations relating to cash reporting.

 The
BSA, enforced by FinCEN, requires us to report currency transactions in excess of $10,000, including identification of the customer by
name and social security number, to the Internal Revenue Service. This regulation also requires us to report certain suspicious activity,
including any transaction that exceeds $5,000 that we know, suspect or have reason to believe involves funds from illegal activity or
is designed to evade federal regulations or reporting requirements and to verify sources of funds. Substantial penalties can be imposed
against us if we fail to comply with this regulation. If we fail to comply with these laws and regulations, the imposition of a substantial
penalty could have a material adverse effect on our business, financial condition and results of operations.

 State
and municipal governments in which our customers do business or seek to do business may have or may adopt laws that adversely affect
our ability to do business with such customers.

 While
the federal government has the right to regulate and criminalize cannabis, state and municipal governments may adopt or amend additional
laws and regulations that further criminalize or adversely affect cannabis businesses. States that currently have laws that decriminalize
or legalize certain aspects of cannabis, such as medical marijuana, could in the future, reverse course and adopt new laws that further
criminalize or adversely affect cannabis businesses. Additionally, municipal governments in certain states may have laws that adversely
affect cannabis businesses, even though there are no such laws at the state level. For example, municipal governments may have zoning
laws that restrict where cannabis operations can be located and the manner and size of which they can expand and operate. These municipal
laws, like the federal laws, may adversely affect our customers' ability to do business. Also, given the complexity and rapid change
of the federal, state and local laws pertaining to cannabis, our customers may incur substantial legal costs associated with complying
with these laws and in acquiring the necessary state and local licenses required by their business endeavour's. All the foregoing
may impact our customers' ability to purchase our products and services, which may adversely affect our business, revenue and earnings.

 Most,
if not all, of our customers are impacted by Section 280E of the Code, which limits certain expenses marijuana companies can deduct.
This negative impact could affect the financial condition of our customers, which in turn may negatively affect the ability of our customers
to purchase our products and services.

 Section
280E of the Code forbids businesses from deducting otherwise ordinary business expenses from gross income associated with the "trafficking"
of Schedule I or II substances, as defined by the CSA. The Internal Revenue Service (the "IRS") has subsequently applied
Section 280E to state-legal cannabis businesses since marijuana is still a Schedule I substance. Section 280E states that no deductions
should be allowed on any amount "in carrying on any trade or business if such trade or business consists of trafficking in controlled
substances." Section 280E affects all businesses that engage in the cultivation, sale or processing of marijuana. This includes
cultivators, medical dispensaries, marijuana retail stores and infused product manufacturers, as well as marijuana-derived concentrates
and oil manufacturers. Because Section 280E limits certain deductions, it can have a dramatic effect on the profitability of these businesses,
which in turn may adversely affect their ability to purchase our products and services. Such result may adversely impact our revenue
and earnings.

 There
may be difficulty enforcing certain of our commercial agreements and contracts.

 Courts
will not enforce a contract deemed to involve a violation of law or public policy. Because cannabis remains illegal under U.S. federal
law, parties to contracts involving the state legal cannabis industry have argued that the agreement was void as federally illegal or
against public policy. Some courts have accepted this argument in certain cases, usually against the company trafficking in cannabis.
While courts have enforced contracts related to activities by state-legal cannabis companies, and the trend is generally to enforce contracts
with state-legal cannabis companies and their vendors, there remains doubt and uncertainty that we will be able to enforce our commercial
agreements in court for this reason. We cannot be assured that we will have a remedy for breach of contract, which would have a material
adverse effect on our business.

 Due
to our involvement in the cannabis industry, we may have a difficult time obtaining the various insurances that are desired to operate
our business, which may expose us to additional risk and financial liability.

 Insurance
that is otherwise readily available, such as general liability and directors' and officers' insurance, is more difficult
for us to find, and more expensive, because we are product and service providers to companies in the cannabis industry. There are no
guarantees that we will be able to find such insurances in the future, or that the cost will be affordable to us. If we are forced to
go without such insurances, it may prevent us from entering into certain business sectors, may inhibit our growth, and may expose us
to additional risk and financial liabilities.

 A
drop in the retail price of cannabis products may negatively impact our business.

 The
fluctuations in economic and market conditions that impact the prices of commercially grown cannabis, such as increases in the supply
of cannabis and decreases in demand for cannabis, could have a negative impact on our clients that are cannabis producers, and therefore
could negatively impact our business.

 Risks
Related to Our Common Stock

 Our
securities prices may be volatile and may decrease substantially.

 The
public trading prices of our securities fluctuate, in some cases substantially, and we expect that they will continue to do so. The price
of our securities in the market on any particular day depends on many factors including, but not limited to, the following:

 our
 ability to maintain the listing of our securities on the Nasdaq Stock Market, and our ability to satisfy current continued listing
 standards;

 price
 and volume fluctuations in the overall stock market from time to time;

 investor
 demand for our shares and warrants;

 significant
 volatility in the market price and trading volume of companies in the cannabis industry;

 variations
 in our operating results and market conditions specific to our business;

 the
 emergence of new competitors or new technologies;

 operating
 and market price performance of other companies that investors deem comparable;

 changes
 in our Board of Directors (the "Board") or management;

 sales
 or purchases of our securities by insiders, including sales of our common stock issued to employees, directors and consultants under
 our equity incentive plans which were registered under the Securities Act of 1933, as amended (the "Securities Act")
 under our S-8 registration statement;

 commencement
 of, or involvement in, litigation;

 changes
 in governmental regulations, in particular with respect to the cannabis industry;

 actual
 or anticipated changes in our earnings, and fluctuations in our quarterly operating results;

 market
 sentiments about the cannabis industry;

 general
 economic conditions and trends; and

 departures
 of any of our key employees.

 In
the past, following periods of volatility in the market price of a company's securities, securities class action litigation has
often been brought against that company. Due to the potential volatility of our securities prices, we may therefore be the target of
securities litigation in the future. Securities litigation could result in substantial costs and divert management's attention
and resources from our business.

 In
addition, if the market for equity stocks of companies in our industry, or the stock market in general, experiences a loss of investor
confidence, the market price of our securities could decline for reasons unrelated to our business, financial condition, or results of
operations. If any of the foregoing occurs, it could cause the price of our securities to fall and may expose us to lawsuits that, even
if unsuccessful, could be costly to defend and a distraction to our Board of Directors and management.

 Our
Board of Directors is authorized to reclassify any unissued shares of our preferred stock into one or more classes, which could convey
special rights and privileges to its owners.

 Our
articles of incorporation permit our Board of Directors to reclassify any authorized but unissued shares of preferred stock into one
or more classes. Our Board of Directors will generally have broad discretion over the size and timing of any such classification, subject
to a finding that the classification and issuance of preferred stock is in our best interests. In the event our Board of Directors opts
to classify a portion of our unissued shares of preferred stock into a class of preferred stock, those preferred shares would have a
preference over our common stock with respect to dividends and liquidation. The class voting rights of any preferred shares we may issue
could make it more difficult for us to take some actions that may, in the future, be proposed by the Board of Directors and/or the holders
of our common stock, such as a merger, exchange of securities, liquidation, or alteration of the rights of a class of our securities,
if these actions were perceived by the holders of preferred shares as not in their best interests. These effects, among others, could
have an adverse effect on your investment in our common stock.

 Registration
rights and Rule 144 sales contain risks for shareholders.

 From
time to time, we issue our securities on an unregistered basis, which may be eligible for resale under SEC Rule 144 promulgated under
the Securities Act or may require us to register with the SEC the securities for resale. In the event there are securities outstanding
that can be sold under Rule 144 or under a registration statement for resale, there may be market pressure on our stock to absorb the
securities in respect of the then market value of the company.

 We
have a substantial number of options and public warrants outstanding, which if exercised for shares of common stock, may put pressure
on the market price of a share.

 We
have sold to public investors a substantial number of warrants to purchase common stock that may be exercised from time to time over
the next several years. In addition, we have a substantial number of options and public warrants outstanding held by investment bankers
who provided us with underwriting and placement services that were issued warrants and employees that were issued options. To the extent
that these are exercised for shares, there may be pressure on our stock price while the market absorbs them. The potential of exercise
may also have the same effect. Investors should expect that the options and warrants will be exercised when the stock price is substantially
above the exercise price.

 We
do not anticipate paying any cash dividends on our common stock in the foreseeable future.

 We
currently intend to retain our future earnings, if any, for the foreseeable future, to repay indebtedness and to fund our business. We
do not intend to pay any dividends to holders of our common stock in the foreseeable future. Any decision to declare and pay dividends
in the future will be made at the discretion of our Board taking into account various factors, including our business, operating results
and financial condition, current and anticipated cash needs, plans for expansion, any legal or contractual limitations on our ability
to pay dividends under our loan agreements or otherwise. As a result, if our Board does not declare and pay dividends, the capital appreciation
in the price of our common stock, if any, will be your only source of gain on an investment in our common stock, and you may have to
sell some or all of your common stock to generate cash flow from your investment.

 The
market price of our securities may be adversely affected by the sale of shares by our management or large stockholders.

 Sales
of our shares of common stock by our officers or senior managers through 10b5-1 plans or otherwise or by large stockholders could adversely
and unpredictably affect the price of our common stock. Additionally, the price of our shares of common stock could be affected even
by the potential for sales by these persons. We cannot predict the effect that any future sales of our common stock, or the potential
for those sales, will have on our share price. Furthermore, due to relatively low trading volume of our stock, should one or more large
stockholders seek to sell a significant portion of their stock in a short period of time, the price of our stock may decline.

 An
active, liquid trading market for our common stock and warrants may not develop or be sustained, and as a result, investors may not be
able to sell their common stock at or above their acquisition price, or at all.

 Prior
to February 10, 2022, our common stock was quoted on the OTC Markets Group, Inc., OTCQB. Trading on the OTCQB marketplace was infrequent
and in limited volume. Although our common stock is now listed on Nasdaq, along with our public warrants, an active trading market for
these securities may never develop or be sustained. If an active trading market does not develop, investors will have difficulty selling
their shares of common stock and warrants at an attractive price, or at all. An inactive market may also impair our ability to raise
capital and may impair our ability to expand our business by using our common stock and common stock related securities as consideration
in an acquisition. If we are unable to maintain our listing on the Nasdaq Market, it is possible that our securities will once again
trade on the OTC with the limitations noted above.

 Investors
may be diluted by future issuances of preferred stock or additional common stock in connection with our incentive plans, acquisitions
or otherwise; future sales of such shares in the public market, or the expectations that such sales may occur, could lower our stock
price.

 Our
articles of incorporation authorize us to issue shares of our common stock and options, rights, warrants and appreciation rights relating
to our common stock for the consideration and on the terms and conditions established by our Board in its sole discretion. We could issue
a significant number of shares of common stock in the future in connection with investments or acquisitions. Any of these issuances could
dilute our existing stockholders, and such dilution could be significant. Moreover, such dilution could have a material adverse effect
on the market price for the shares of our common stock.

 The
future issuance of shares of preferred stock with voting rights may adversely affect the voting power of the holders of shares of our
common stock, either by diluting the voting power of our common stock if the preferred stock votes together with the common stock as
a single class, or by giving the holders of any such preferred stock the right or ability to block an action on which they have a separate
class vote, even if the action were approved by the holders of our shares of our common stock.

 The
future issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable
to the holders of preferred stock, when compared to the rights of the common stockholders, could adversely affect the market price for
our common stock by making an investment in the common stock less attractive. For example, investors in the common stock may not wish
to purchase common stock at a price above the conversion price of a series of convertible preferred stock because the holders of the
preferred stock would effectively be entitled to purchase common stock at the lower conversion price, causing economic dilution to the
holders of common stock.

 Item
1B. Unresolved Staff Comments

 We
are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, and therefore we are not required to provide information
under this item.

 Item
1C. Cybersecurity

 We
have a cybersecurity program to identify, monitor, and mitigate cybersecurity risks. The security program consists of responsibilities
for information security and incident response and is overseen by a third-party consultant with guidance from subcontracted cybersecurity
vendors that our third-party consultant contracts. We consider cybersecurity risks alongside other company risks and consult with subject
matter experts where necessary to identify cybersecurity risks and evaluate their nature and severity.

offers cybersecurity updates to the Audit Committee on at least an annual basis, and more frequently if circumstances warrant. These
briefings include assessments of risks, the threat landscape, and updates on any incidents.

 Our
 third-party consultant provides and assists with implementation on a formal IT Security Policy to provide appropriate governance over
information security including control requirements for change management and patching, multifactor authentication, data backup, security
monitoring, and mobile device management. Management coordinates with its third-party consultant on security controls and any issues
are reported to the Audit Committee. In addition, we carry insurance that provides levels of reimbursement protection against the potential
losses arising from a cybersecurity incident; however, the insurance may not cover all the costs that we might incur, and we may suffer
direct economic loss.

 We
have not had any reportable cybersecurity breaches, including what we may perceive or recognize as cybersecurity incidents or credible
threats during the fiscal year ended December 31, 2024. To date, as a result, there has not been any material adverse effect on our business
operations or financial condition. If there is a cybersecurity attack and an infiltration of our files, data, customer data and the like,
there would be a material adverse effect on our business, our reputation, our operations and financial condition. For example, our reputation
would be damaged in the event of a cybersecurity infiltration. If there were a cybersecurity infiltration, we could lose access to our
data which would disrupt our operations, and we even may not be able to operate. Such a loss of access might be temporary or permanent,
and it might be localized or general. The level of disruption will depend on our backup systems. Our clients financial and other data
could be taken and used against us reputationally or to damage our clients in different ways. In the latter instance, we may be liable
for monetary damages to our clients. We may be held for cyber ransom, which would be loss to our financial resources. Our inability to
operate, payment of damages, payment of ransom, and the costs of reparation of our systems, consultants and tangential expenses will
all result in damage to our business and our financial resources.

 Item
2. Properties

 We
own no real property. On July 28, 2021, we executed a lease, which became effective November 1, 2021, for our manufacturing and headquarters
office space at 385 S. Pierce Avenue, Suite C, Louisville, Colorado 80027. The term of the lease commenced November 1, 2021, and continues
through January 31, 2027. Our leased space is approximately 11,491 square feet. We believe that our lease is at market rates and that
there is sufficient space available in the Louisville, Colorado area to obtain additional or other space if and when required.

 Item
3. Legal Proceedings

 On
October 20, 2023, Sweet Cut Grow, LLC and Green Ice, LLC (collectively, "Claimant") a client of the Company with which it
had an equipment contract and engineering contract, filed a demand for arbitration asserting claims for breach of contract, breach of
warranty, and unjust enrichment, and demand for $1,049,280 in damages, plus interest ("Claims"). The Company continues to
deny all the Claims and has asserted a counterclaim. The Company believes Claimant is owed nothing as the Company fulfilled all its obligations
under the contracts to Claimant, and further, that the negligence of a third-party supplier is the basis of the Claims. We intend to
generally defend the claims on the basis that we promptly addressed all problems, and that any issues with defective HVAC equipment are
the responsibility of our third-party equipment manufacturer. The Company's equipment contract with Claimant requires the parties
to arbitrate their disputes under the rules of the American Arbitration Association ("AAA"). The arbitration will be heard
in Denver, Colorado. The matter is in the discovery phase. The parties will pay their own legal fees and expenses. The Company intends
to defend itself vigorously, believing there are no merits to the claims as currently presented.

 On
or about April 17, 2024, Optima Consulting Services, LLC (the "Claimant"), a client of the Company with which it had an
equipment contract and engineering contract, advised the Company of a potential claim related to work performed by the Company for
Claimant and demanded mediation under the parties' contract. On or about October 28, 2024, Claimant informed the Company it
was asserting claims for negligent/defective design and breach of warranty, and alleges its damages exceed $2,000,000
(Claims"). The Company denies all the Claims and that Claimant is entitled to any damages. The Company believes Claimant is
owed nothing as the Company fulfilled all its obligations under the contracts to Claimant and performed all work in line with all
applicable standards. We intend to generally defend the Claims on the basis that all work was performed pursuant to the contract and
any alleged issues that may have occurred were the result of actions by Claimant and/or third parties. If Claimant moves forward
with its Claims, the Company's equipment contract with Claimant requires the parties to arbitrate their dispute with the
American Arbitration Association ("AAA"). The arbitration will be heard in Denver, Colorado. The matter is in the
preliminary phase. The parties will pay their own legal fees and expenses. The Company intends to defend itself vigorously,
believing there are no merits to the Claims as currently presented.

 Given
the current uncertainty around estimating the likelihood of success of claims and potential damages, we have not recorded an accrual
for any potential loss related to these matters.

 From
time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the
enforcement of our rights under contracts with our customers. While the outcome of these legal proceedings cannot be predicted with certainty,
we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

 Item
4. Mine Safety Disclosures

 Not
applicable.

 PART
II

 Item
5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Public
Securities: Common Stock and Warrants

 Our
shares of common stock currently are quoted on Nasdaq under the symbol "CEAD". In addition, we have a class of publicly traded
warrants to purchase shares of common stock that are quoted on Nasdaq under the symbol "CEADW."

 As
of March 7, 2025, we had approximately 40 shareholders of record and we believe we have approximately 12,247 shareholders who hold their
shares in street name based on the solicitation of proxies for our 2024 annual meeting.

 We
currently intend to retain our future earnings, if any, for the foreseeable future, to repay indebtedness and to fund our business. We
do not intend to pay any dividends to holders of our common stock in the foreseeable future. Any decision to declare and pay dividends
in the future will be made at the discretion of our Board taking into account various factors, including our business, operating results
and financial condition, current and anticipated cash needs, plans for expansion, any legal or contractual limitations on our ability
to pay dividends under our loan agreements or otherwise.

Compensation Plans

 2017
Equity Incentive Plan

 On
August 1, 2017, our Board of Directors adopted and approved the 2017 Equity Incentive Plan (the "2017 Equity Plan") in order
to attract, motivate, retain, and reward high-quality executives and other employees, officers, directors, consultants, and other persons
who provide services to us by enabling such persons to acquire an equity interest in us. Under the 2017 Equity Plan, our Board of Directors
may award stock options, stock appreciation rights ("SARs"), restricted stock awards ("RSAs"), restricted stock
unit awards ("RSUs"), shares granted as a bonus or in lieu of another award, and other stock-based performance awards. The
2017 Equity Plan allocates 27,778 shares of our common stock ("Plan Shares") for issuance of equity awards under the 2017
Equity Plan. If any shares subject to an award are forfeited, expire, or otherwise terminate without issuance of such shares, the shares
will, to the extent of such forfeiture, expiration, or termination, again be available for awards under the 2017 Equity Plan. As of December
31, 2024, we have granted, under the 2017 Equity Plan, awards in the form of RSAs for services rendered by independent directors and
consultants, non-qualified stock options, RSUs, and stock bonus awards.

 The
information for our 2017 Equity Plan as of December 31, 2024 is summarized as follows:

 of shares to be issued upon exercise of outstanding options

 Weighted-average
 exercise price of outstanding options

 of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column)

 compensation plans approved by shareholders

 -

 -

 -

 compensation plans not approved by shareholders (1)

 11,615

 $
 140.70

 2,522

 Total

 11,615

 $
 140.70

 2,522

 (1)
Of the 27,778 Plan Shares allocated for issuance under the 2017 Equity Plan, as of December 31, 2024, 13,641 shares have been issued,
non-qualified stock options over 11,615 shares were issued and outstanding, and securities in respect of the remaining 2,522 shares were
available for future issuance.

 2021
Equity Incentive Plan

 On
March 22, 2021, the Board approved the 2021 Equity Incentive Plan (the "2021 Equity Plan"), which was approved by the stockholders
on July 22, 2021. The 2021 Equity Plan permits the Board to grant awards of up to 55,556 shares of common stock. The 2021 Plan provides
for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), non-qualified stock options, stock appreciation rights ("SARs"), restricted stock awards and restricted
stock unit awards and other equity linked awards to our employees, consultants and directors. If an equity award (i) expires or otherwise
terminates without having been exercised in full or (ii) is settled in cash ( i.e., the holder of the award receives cash rather
than stock), such expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of common stock that
may be issued pursuant to this Plan. As of December 31,
2024, we have granted under the 2021 Equity Plan, incentive stock options, non-qualified stock options, and a stock bonus award.

 of shares to be issued upon exercise of outstanding options

 Weighted-average
 exercise price of outstanding options

 of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column)

 compensation plans approved by shareholders (1)

 16,035

 $
 33.81

 15,581

 compensation plans not approved by shareholders

 -

 -

 -

 Total

 16,035

 $
 33.81

 15,581

 (1)
Of the 55,556 Plan Shares allocated for issuance under the 2021 Equity Plan, as of December 31, 2024, 23,940 shares have been issued,
non-qualified stock options over 11,104 shares were issued and outstanding, incentive stock options over 3,401 shares were issued and
outstanding, restricted stock units over 1,529 shares were issued and outstanding, and securities in respect of the remaining 15,581
shares were available for future issuance.

 Refer
to Note 12 – Equity Incentive Plan of our consolidated financial statements, which are included as part of this Annual Report
for further details on our 2017 Equity Plan and 2021 Equity Plan.

 Item
6. Selected Financial Data

 We
are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and therefore we are not required to provide the information
under this item.

 Item
7. Management's Discussion and Analysis of Financial Condition and Results of Operations

 The
following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information
included elsewhere in this Annual Report, which include additional information about our accounting policies, practices, and the transactions
underlying our financial results. In addition to historical information, this Annual Report contains forward-looking information that
involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information
due to the factors discussed under "Cautionary Statements" appearing elsewhere herein and the risks and uncertainties described
or identified in "Item 1A – Risk Factors" in this Annual Report.

 Please
also refer to "Non-GAAP Financial Measures" discussed elsewhere in this Annual Report.

 The
following discussion should be read in conjunction with Item 1 – Business in this Annual Report, and our consolidated financial
statements and accompanying notes to consolidated financial statements included in this Annual Report. Our Management's Discussion
and Analysis of Financial Condition and Results of Operations ("MD&A") is segregated into four sections, including:

Overview. This section provides a summary of our operating performance and cash flows, industry trends and our strategic initiatives.

 Critical
Accounting Policies and Estimates. This section describes the accounting areas where management makes critical estimates
to report our financial condition and results of operations.

 Results
of Operations. This section provides an analysis of our consolidated results of operations for the two comparative periods
presented in our consolidated financial statements.

 Liquidity,
Capital Resources and Financial Position. This section provides an analysis of cash flow, contractual obligations, and
certain other matters affecting our financial position.

Overview

 CEA
Industries Inc. currently is focused on selling environmental control and other technologies and services to the Controlled Environment
Agriculture ("CEA") industry. Our service and product offerings include: (i) floor plans and architectural design of cultivation
facilities, (ii) licensed mechanical, electrical, and plumbing (MEP) engineering of commercial scale environmental control systems specific
to cultivation facilities, (iii) process cooling systems and other climate control systems, (iv) air handling equipment and systems,
(v) LED lighting, (vi) benching and racking solutions for indoor cultivation, (vii) automation and control devices, systems and technologies
used for environmental, lighting and climate control, and (viii) preventative maintenance services for CEA facilities. Our customers
include commercial, state- and provincial-regulated CEA growers in the U.S. and Canada as well as in other international locations. Customers
are those growers building new facilities and those expanding or retrofitting existing facilities, with both ranging in size from several
thousand to more than 100,000 square feet.

our revenue stream is derived primarily from supplying our products, services and technologies to commercial indoor facilities that grow
cannabis, but we have served facilities growing other crops and we intend to pursue such facilities as customers more in the future.

nearly all of our customers have been in the cannabis cultivation business. We believe our customers engage us for their environmental
and climate control systems because they value our reputation as experts in the industry. We leverage our reputation and know-how against
the many local contractors and MEP engineers who collectively constitute our largest competitors.

 The
following table summarizes results for the years ended December 31, 2024 and December 31, 2023.

 2024

 2023

 $ Change

 % Change

 $
 2,803,000

 $
 6,911,000

 $
 (4,108,000
)

 (59
)%

 Net loss

 $
 (3,146,000
)

 $
 (2,912,000
)

 $
 (234,000
)

 (-8
)%

 Adjusted net loss

 $
 (3,046,000
)

 $
 (2,698,000
)

 $
 (348,000
)

 (-13
)%

 Our
adjusted net income (loss) is our GAAP net income (loss) after addback for our non-cash equity compensation expenses, debt-related items, and depreciation expense. Historically, one of the most significant financial challenges we face is the
inconsistent and unpredictable revenue we generate quarter-over-quarter, and our revenue and cash flow remain difficult to predict.

 Impact
of the COVID-19 Pandemic on Our Business

 The
impact of the government and the business economic response to the COVID-19 pandemic affected demand across the majority of our markets
and disrupted workflow and completion schedules on projects. We believe we continue to have adverse effects on our sales, project implementation,
supply chain infrastructure, operating margins, costs, and working capital, as a result of the pandemic. We continue to monitor costs
and continue to take actions to reduce costs in order to mitigate the long-term impact of the COVID-19 pandemic to the best of our ability.
However, these actions may not be sufficient in the long run to avoid reduced sales, increased losses, and reduced operating cash flows
in our business. During the year ended December 31, 2024,, the Company experienced delays in the receipt of equipment it had ordered
to meet its customer orders due to disruption and delays in its supply chain. Consequently, our revenue recognition of some customer
sales has been delayed until future periods when the shipment of orders can be completed.

 Impact
of Ukrainian and Israeli Conflicts

 We
believe that the conflicts involving Ukraine and Israel do not have any direct impact on our operations, financial condition, or financial
reporting. We believe the conflicts will have only a general impact on our operations in the same manner as it is having a general impact
on all businesses that have their operations limited to North America resulting from international sanction and embargo regulations,
possible shortages of goods and goods incorporating parts that may be supplied from countries involved in the conflicts, supply chain
challenges, and the international and US domestic inflation resulting from the conflict and government spending in relation to the conflicts.
As our operations are related only to the North American controlled agricultural industry, largely within the cannabis space, we do not
believe we will be specifically targeted for cyber-attacks related to the conflicts. We have no operations in the countries directly
involved in the conflict or are specifically impacted by any of the sanctions and embargoes specifically related to those conflicts,
as we principally operate in the United States and Canada. We do not believe that the conflicts will have any impact on our internal
control over financial reporting. Other than general securities market trends, we do not have reason to believe that investors will evaluate
the company as having special risks or exposures related to the conflicts.

 Revenue.
Our 2024 revenue was approximately $2,803,000. Our 2024 revenue represents a decrease of 59% compared to 2023 See Results of Operations on page 33 below.

 Gross
Margin. Our 2024 gross loss margin was 7.8%, a decrease from a gross profit margin of 7.8% in 2023. This decrease was
primarily due to lower revenue and an increase in our fixed cost base as a percent of revenue. See Results of Operations on
page 33 below.

 Profitability.
Our 2024 adjusted net loss was approximately $3,046,000, compared to a 2023 adjusted net loss of approximately $2,698,000, an
increase of $348,000, or 13%. See Results of Operations on page 33 below. Our adjusted net income (loss) is a key management
metric for us because it provides a proxy for the cash we generate from (use in) operations.

 Capital
Resources. We continue to experience softening demand in the markets we serve, and an inability to replace our backlog of
projects. As a result, we have taken steps during 2023, 2024, and early 2025 to reduce our operating costs and general and administrative
expenses to better reflect the activity levels we are observing in the industry. The reductions have been offset by higher costs for
professional fees related to a potential acquisition.

 Nonetheless,
there remain risks and uncertainties regarding our ability to grow revenue and generate sufficient revenues and cash flows. And there
can be no assurances that we will be able to raise future capital on commercially reasonable terms, or at all.

Bookings. Our bookings increased in 2024, and our backlog at December 31, 2024, was $490,000, an increase of $55,000, or
13%, from our December 31, 2023 backlog. The increase in bookings was primarily due to one large equipment contract of approximately
$1,300,000 booked in the second quarter of 2024. During 2024, we had net bookings of $2,769,000, consisting of: (i) $2,874,000 of new
sales contracts executed in 2023, (ii) $92,000 in net negative change orders, and (iii) $14,000 in project cancellations.

 The
following table sets forth: (i) our beginning backlog (the remaining contract value of outstanding sales contracts for which we have
received an initial deposit as of the previous period), (ii) our net bookings for the period (new sales contracts executed during the
period for which we received an initial deposit, net of any adjustments including cancellations and change orders during the period),
(iii) our recognized revenue for the period, and (iv) our ending backlog for the period (the sum of the beginning backlog and net bookings,
less recognized revenue). Based on the current economic climate and our cost cutting measures, there is no assurance that we will be
able to continue to obtain the level of bookings that we have had in the past and or fulfil our current backlog, and we may experience
contract cancellations, project scope reductions and project delays.

 Our
recognized revenue for the quarters ended December 31, 2023, March 31, 2024, June 30, 2024, September 30, 2024, and December 31, 2024
in the table below, excludes $0, $31,000, $12,000, $0, and $46, respectively, in revenue arising from the forfeiture of non-refundable
deposits from former customers on previously cancelled contracts. The contracts were removed from the backlog at the time of cancellation.

 For
 the quarter ended

 31, 2023

 March

 June
 30, 2024

 September
 30, 2024

 Backlog,
 beginning balance

 $
 548,000

 $
 435,000

 $
 535,000

 $
 227,000

 $
 352,000

 Net
 bookings, current period

 138,000

 303,000

 1,440,000

 516,000

 510,000

 Recognized
 revenue, current period

 (251,000
)

 (203,000
)

 (1,748,000
)

 (391,000
)

 (372,000
)

 Backlog,
 ending balance

 $
 435,000

 $
 535,000

 $
 227,000

 $
 352,000

 $

 The
completion of a customer's new build facility project is dependent upon the customer's ability to secure funding and real
estate, obtain a license and then build their cultivation facility so they can take possession of the equipment. Accordingly, the time
it takes for these customers to complete a new build project, which corresponds to when we are able to recognize revenue, is driven by
numerous factors including: (i) the large number of first-time participants interested in the indoor cannabis cultivation business; (ii)
the complexities and uncertainties involved in obtaining state and local licensure and permitting; (iii) local and state government delays
in approving licenses and permits due to lack of staff or the large number of pending applications, especially in states where there
is no cap on the number of cultivators; (iv) the customer's need to obtain cultivation facility financing; (v) the time needed,
and coordination required, for our customers to acquire real estate and properly design and build the facility (to the stage when climate
control systems can be installed); (vi) the large price tag and technical complexities of the climate control and air sanitation systems;
(vii) the availability of power; and (viii) delays that are typical in completing any construction project.

 We
have provided an estimate in our consolidated financial statements of when we expect to recognize revenue on our remaining performance
obligations (i.e., our Q4 2024 backlog). However, there continues to be significant uncertainty regarding the timing of our recognition
of revenue in our Q4 2024 backlog. Refer to the Revenue Recognition section of Note 2 in our consolidated financial statements,
included as part of this Annual Report for additional information on our estimate of future revenue recognition on our remaining performance
obligations.

 Our
backlog, remaining performance obligations and net bookings may not be indicative of future operating results, and our customers may
attempt to renegotiate or terminate their contracts for a number of reasons, including delays in, or inability to, obtain project financing
or licensing or abandonment of the project entirely. Accordingly, there can be no assurance that contracts included in backlog or remaining
performance obligations will actually generate revenues or when the actual revenues will be generated. Net bookings and backlog are considered
non-GAAP financial measures, and therefore, they should be considered in addition to, rather than as a substitute for, our GAAP measures
for recognized revenue, deferred revenue and remaining performance obligations. Further, we can provide no assurance as to the profitability
of our contracts reflected in remaining performance obligations, backlog and net bookings.

 Critical
Accounting Policies and Estimates

 This
discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which
have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain accounting policies
are particularly important to the understanding of our financial position and results of operations and require the application of significant
judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are
outside of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, management uses
its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based
on our historical operations, our future business plans and projected financial results, the terms of existing contracts, observance
of trends in the industry, information provided by our customers, and information available from other outside sources, as appropriate.
Actual results could materially differ from those estimates. For information regarding our critical accounting policies as well as recent
accounting pronouncements, see Note 2 of our consolidated financial statements.

 Our
management has discussed the development and selection of critical accounting estimates with the Board of Directors, and the Board of
Directors has reviewed our disclosure relating to critical accounting estimates in this Annual Report. We believe the following are the
more significant judgments and estimates used in the preparation of our consolidated financial statements.

receivable and allowance for accounts receivable. Accounts receivables are recorded at the invoiced amount or based on revenue earned
for items not yet invoiced, and generally do not bear interest. In accordance with ASU No. 2016-13 (as amended), Measurement of Credit
Losses on Financial Instruments, which the Company adopted on a prospective basis effective January 1, 2023, an
allowance for doubtful accounts is recorded against the Company's receivables by applying an expected credit loss model.
Each period, management assesses the appropriateness of the level of allowance for credit losses by considering credit risk inherent
within its receivables as of the end of the period. The Company considers a receivable past due when a debtor has not paid us by the
contractually specified payment due date. Account balances are written off against the allowance for credit losses if collection efforts
are unsuccessful and the receivable balance is deemed uncollectible (debtor default), based on factors such as the debtor's credit
rating as well as the length of time the amounts are past due. As of December 31, 2024, and December 31, 2023, the allowance for doubtful
accounts was $85,000 and $125,000, respectively. If the financial condition of our customers were to deteriorate, resulting in an impairment
of their ability to make payments, additional allowances may be required.

 Inventory.
Inventory is stated at the lower of cost or net realizable value. The inventory is valued based on a first-in, first-out ("FIFO")
basis. Lower of cost or net realizable value is evaluated by considering obsolescence, excessive levels of inventory, deterioration and
other factors. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolescence
or impaired inventory. Excess and obsolete inventory is charged to cost of revenue and a new lower-cost basis for that inventory is established;
subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. As of
December 31, 2024, and December 31, 2023, the allowance for excess and obsolete inventory was $220,000 and $193,000, respectively.

warranty. We warrant the products that we manufacture for a warranty period equal to the lesser of 12 months from start-up or 18
months from shipment. Our warranty provides for the repair, rework, or replacement of products (at our option) that fail to perform within
stated specification. Our third-party suppliers also warrant their products under similar terms, which are passed through to our customers.
We assess the historical warranty claims on our manufactured products and, since 2016, warranty claims have been approximately 1% of
annual revenue generated on these products. We continue to assess the need to record a warranty reserve at the time of sale based on
historical claims and other factors. As of December 31, 2024, and December 31, 2023, we had an accrued warranty reserve amount of $53,000
and $191,000, respectively, which are included in accounts payable and accrued liabilities on our consolidated balance sheets.

 Share-based
compensation. We recognize the cost resulting from all share-based compensation arrangements, including stock options, restricted
stock awards and restricted stock units that we grant under our equity incentive plan in our consolidated financial statements based
on their grant date fair value. The expense is recognized over the requisite service period or performance period of the award. The service
inception date is typically the grant date, but the service inception date may be prior to the grant date. Awards with a graded vesting
period based on service are expensed on a straight-line basis for the entire award. Awards with performance-based vesting conditions
which require the achievement of a specific company financial performance goal at the end of the performance period and required service
period are recognized over the performance period. Each reporting period, we reassess the probability of achieving the respective performance
goal. If the goals are not expected to be met, no compensation cost is recognized, and any previously recognized amount recorded is reversed.
If the award contains market-based vesting conditions, the compensation cost is based on the grant date fair value and expected achievement
of market condition and is not subsequently reversed if it is later determined that the condition is not likely to be met or is expected
to be lower than initially expected. The grant date fair value of stock options is based on the Black-Scholes Model. The Black-Scholes
Model requires judgmental assumptions including volatility and expected term, both based on historical experience. The risk-free interest
rate is based on U.S. Treasury interest rates whose term is consistent with the expected term of the option.

Recognition. We account for revenue in accordance with ASC 606. Under the revenue standard, a performance obligation is a promise
in a contract with a customer to transfer a distinct good or service to the customer. Most of our contracts contain multiple performance
obligations that include engineering and technical services as well as the delivery of a diverse range of climate control system equipment
and components, which can span multiple phases of a customer's project life cycle from facility design and construction to equipment
delivery and system installation and start-up. We do not provide construction services or system installation services. Some of our contracts
with customers contain a single performance obligation, typically engineering only services contracts.

 A
contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance
obligation is satisfied. When there are multiple performance obligations within a contract, we allocate the transaction price to each
performance obligation based on standalone selling price. When estimating the selling price, we use various observable inputs. The best
observable input is our actual selling price for the same good or service, however, this input is generally not available for our contracts
containing multiple performance obligations. For engineering services, we estimate the standalone selling price by reference to certain
physical characteristics of the project, such as facility size and mechanical systems involved, which are indicative of the scope and
complexity of the mechanical engineering services to be provided. For equipment sales, the standalone selling price is determined by
forecasting the expected costs of the equipment and components and then adding an appropriate margin, based on a range of acceptable
margins established by management. Depending on the nature of the performance obligations, we may use a combination of different methods
and observable inputs if certain performance obligations have highly variable or uncertain standalone selling prices. Once the selling
prices are determined, we apply the relative values to the total contract consideration and estimates the amount of the transaction price
to be recognized as each promise is fulfilled.

 Generally,
satisfaction occurs when control of the promised goods is transferred to the customer or as we recognize revenue for the sale of goods
when control transfers to the customer, which primarily occurs at the time of shipment. We have elected to exclude from the measurement
of the transaction price all taxes (e.g., sales, use, value added, and certain excise taxes) that are assessed by a governmental authority
in connection with a specific revenue-producing transaction and collected by us from the customer. Accordingly, we recognize revenue
net of sales taxes. The revenue and cost for freight and shipping is recorded when control over the sale of goods passes to our customers.

 We
also have performance obligations to perform certain engineering services that are satisfied over a period of time. Revenue is recognized
from this type of performance obligation as services are rendered based on the percentage completion towards certain specified milestones.

 We
offer assurance-type warranties for its products and products manufactured by others to meet specifications defined by the contracts
with customers and does not have any material separate performance obligations related to these warranties. We maintain a warranty reserve
based on historical warranty costs.

performance obligations. The revenue standard requires certain quantitative and qualitative disclosures about our remaining performance
obligations, which are defined as performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting
period, including (i) the aggregate amount of the transaction price allocated to the remaining performance obligations, and (ii) when
we expect to recognize as revenue with respect to such amounts on either: (x) a quantitative basis using appropriate time bands for the
duration of the remaining performance obligations, or (y) by using qualitative information. Industry uncertainty, project financing concerns,
and the licensing and qualification of our prospective customers, which are out of our control, make it difficult for us to predict when
we will recognize revenue on our remaining performance obligations. There are risks that we may not realize the full contract value on
customer projects in a timely manner or at all, and completion of a customer's cultivation facility project is dependent upon the
customer's ability to secure funding and real estate, obtain a license and then build their cultivation facility so they can take
possession of the equipment. Accordingly, the time it takes for customers to complete a project, which corresponds to when we are able
to recognize revenue, is driven by numerous factors including: (i) the large number of first-time participants interested in the indoor
cannabis cultivation business; (ii) the complexities and uncertainties involved in obtaining state and local licensure and permitting;
(iii) local and state government delays in approving licenses and permits due to lack of staff or the large number of pending applications,
especially in states where there is no cap on the number of cultivators; (iv) the customer's need to obtain cultivation facility
financing; (v) the time needed, and coordination required, for our customers to acquire real estate and properly design and build the
facility (to the stage when climate control systems can be installed); (vi) the significant price and technical complexities of the climate
control and air sanitation system; (vii) the availability of power; and (viii) delays that are typical in completing any construction
project. Further, based on the current economic climate, and the Company's recent cost cutting measures, there is no assurance
that the Company will be able to fulfil its backlog, and the Company may experience contract cancellations, project scope reductions
and project delays.

 There
is significant uncertainty regarding the timing of our recognition on all remaining performance obligations as of December 31, 2024.
Customer contracts for which we have only received an initial advance payment to cover the allocated value of our engineering services
("engineering only paid contracts") carry enhanced risks that the equipment portion of these contracts will not be completed
or will be delayed, which could occur if the customer is dissatisfied with the quality or timeliness of our engineering services or there
is a delay or abandonment of the project due to the customer's inability to obtain project financing or licensing. In contrast,
after the customer has made an advance payment for a portion of the equipment to be delivered under the contract ("partial equipment
paid contracts"), we are typically better able to estimate the timing of revenue recognition since the risks and delays associated
with licensing, permitting and project funding are typically mitigated once the initial equipment payment is received.

and contingencies. In the normal course of business, we are subject to loss contingencies, such as legal proceedings and claims arising
out of our business, that cover a wide range of matters, including, among others, customer disputes, government investigations and tax
matters. An accrual for a loss contingency is recognized when it is probable that an asset has been impaired, or a liability has been
incurred and the amount of loss can be reasonably estimated.

 Results
of Operations

 Comparison
of Years ended December 31, 2024 and 2023

 Revenues
and Cost of Goods Sold

for the year ended December 31, 2024 was $2,803,000 compared to $6,911,000 for the year ended December 31, 2023, a decrease of $4,108,000,
or 59%. This revenue decrease was primarily the result of our significant decrease in net bookings since 2022, which dropped from $6,042,000
in 2022 to $1,535,000 in 2023, or 75%. Net bookings were higher in 2024, increasing to $2,769,000, or an increase of 80% over 2023. We
believe the lower bookings are due to the reduction in capital expenditures in the cannabis market environment as a result of the prolonged
effects of pricing and inflationary pressure, in addition to a reduced sales effort by the Company.

 Cost
of revenue decreased by $3,346,000, or 53%, from $6,369,000 for the year ended December 31, 2023 to $3,023,000 for the year ended December
31, 2024. The factors impacting this change are discussed below.

 The
gross loss for the year ended December 31, 2024 was $220,000 compared to a gross profit of $542,000 for the year ended December 31,
2023. Gross profit margin decreased by 15.7 percentage points from a 7.8% gross profit for the year ended December 31, 2023 to a
7.8% gross loss for the year ended December 31, 2024. This decrease was primarily due to a decrease in revenue, an increase in our
fixed cost base as a percent of revenue, offset by slightly lower variable costs as a percent of revenue.

 Our
revenue cost structure is comprised of both fixed and variable components. The fixed cost component represents engineering, manufacturing
and project management salaries and benefits and manufacturing overhead that totaled $892,000, or 32% of total revenue, for the year
ended December 31, 2024, as compared to $1,279,000, or 18% of total revenue, for the year ended December 31, 2023. The decrease of $388,000
was primarily due to a decrease in salaries and benefits (including stock-based compensation) of $327,000, and a decrease of $61,000
in fixed overhead. The variable cost component, which represents our cost of equipment, outside engineering costs, shipping and handling,
travel and warranty costs, totaled $2,132,000, or 76% of total revenue, in the year ended December 31, 2024, as compared to $5,090,000,
or 74% of total revenue, in the year ended December 31, 2023. In the year ended December 31, 2024, as compared to the prior year, our
cost of equipment decreased by $2,537,000 primarily due to the decrease in revenue, offset by a decrease in our equipment margin. Additionally
in the year ended December 31, 2024 as compared to the year ended December 31, 2023: (i) our warranty expense decreased by $190,000,
(ii) excess and obsolete inventory expenses decreased by $95,000, (iii) travel was down by $81,000, (iv) our outside engineering costs
were down $29,000, and (v) shipping and handling and other overhead expenses decreased by $26,000.

Expenses

expenses decreased by 16% from $3,495,000 for the year ended December 31, 2023 to $2,952,000 for the year ended December 31, 2024, a
decrease of $543,000. The operating expense decrease consisted of: (i) a decrease in advertising and marketing expenses of $257,000,
(ii) a decrease in selling, general and administrative expenses ("SG&A expenses") of $209,000, and (iii) a decrease in
product development expenses of $76,000.

 The
decrease in advertising and marketing expenses was due primarily to: (i) a decrease in salaries and benefits (including equity-based
compensation) of $133,000, (ii) a decrease of $114,000 for advertising and promotion, web development and other marketing expenses, (iii)
a decrease of $9,000 for outside marketing services, and (iv) a decrease of $1,000 in expenses related to trade shows and events.

 The
decrease in SG&A expenses for the year ended December 31, 2024 compared to the year ended December 31, 2023, was due primarily to:
(i) a decrease of $449,000 in salaries, benefits (including equity-based compensation) and other employee related costs, (ii) a decrease
of $53,000 for facility and office expenses, (iii) a decrease in bad debt expense of $38,000, and (iv) a decrease in commissions of $16,000,
offset by (v) an increase in accounting and professional fees of $299,000, (vi) higher business taxes and licenses of $33,000 primarily due to an increase in real estate taxes, and (vii)
an increase in loss on asset disposals of $13,000.

 The
decrease in product development costs was primarily due to (i) a decrease in salaries and benefits (including equity-based compensation)
of $70,000, (ii) a decrease in material costs of $4,000 and, (iii) a decrease in travel of $2,000.

Loss

 We
had an operating loss of $3,172,000 for the year ended December 31, 2024, as compared to an operating loss of $2,953,000 for the year
ended December 31, 2023, an increase of $219,000, or 7%. The operating loss included $82,000 of non-cash, stock-based compensation expenses
and $17,000 for depreciation and amortization in the year ended December 31, 2024, as compared to $188,000 for stock-based compensation,
and $26,000 of depreciation and amortization for the year ended December 31, 2023. Excluding these non-cash items, our adjusted operating
loss increased by $333,000.

 Other

 Our
other income (net) decreased by $15,000 from $42,000 for the year ended December 31, 2023, to $26,000 for the year ended December 31,
2024. The other income for 2024 consisted of interest on our money market account. The other income for 2023 consisted of (i) $34,000
of interest on the money market account, and (ii) $8,000 for an adjustment to our ERC credit and unclaimed property.

 Net
Loss

 Overall,
we had a net loss of $3,146,000 for the year ended December 31, 2024, as compared to a net loss of $2,912,000 for the year ended December
31, 2023, an increase of $234,000. The net loss included $82,000 of non-cash, stock-based compensation costs and depreciation and amortization
expense of $17,000 in the year ended December 31, 2024, as compared to $188,000 of non-cash, stock-based compensation costs and depreciation
and amortization expense of $26,000 in the year ended December 31, 2023. Excluding these non-cash items, our adjusted net loss increased
by $348,000.

 Liquidity,
Capital Resources and Financial Position

 Cash
and Cash Equivalents

 As
of December 31, 2024, we had cash and cash equivalents of $9,453,000, compared to cash and cash equivalents of $12,508,000 as of December
31, 2023. The decrease in cash and cash equivalents during the year ended December 31, 2024 was the result of cash used in operations
of $3,055,000. Our cash is held in bank depository accounts in certain financial institutions. During the year ended December 31, 2024,
we held deposits in financial institutions that exceeded the federally insured amount.

 As
of December 31, 2024, we had accounts receivable (net of allowance for doubtful accounts) of $13,000, contract assets (net of
allowance for doubtful accounts) of $234,000, inventory (net of excess and obsolete allowance) of $26,000, and prepaid expenses and
other of $368,000 (including $83,500 in advance payments on inventory purchases). While we typically require advance payment before
we commence engineering services or ship equipment to our customers, we have made exceptions requiring us to record accounts
receivable, which carry a risk of non-collectability, especially since most of our customers are funded on an as-needed basis to
complete facility construction.

 As
of December 31, 2024, we had no indebtedness, total accounts payable and accrued liabilities of $550,000, deferred revenue of $344,000,
and the current portion of operating lease liability of $136,000. As of December 31, 2024, we had working capital of $9,064,000, compared
to a working capital of $12,110,000 as of December 31, 2023.

 We
have never declared or paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable
future.

 Because
of the challenges to the CEA industry economy and the specific challenges of our business, we cannot predict the continuing level of
working capital that we will have in the future. As mentioned elsewhere, we have taken steps to conserve our cash resources by reducing
staff and taking other cost cutting measures and we will continue to evaluate further such measures in the future.

 Summary
of Cash Flows

 The
following summarizes our cash flows for the years ended December 31, 2024 and December 31, 2023:

 For
 the Year Ended December 31,

 2024

 2023

 Net
 cash used in operating activities

 $
 (3,055,000
)

 $
 (6,129,000
)

 Net
 cash provided by (used in) investing activities

 -

 -

 Net
 cash provided by (used in) financing activities

 -

 -

 Net
 decrease in cash

 $
 (3,055,000
)

 $
 (6,129,000
)

Activities

 We
incurred a net loss for the year ended December 31, 2024 of $3,146,000 compared to a net loss for the year ended December 31, 2023 of
$2,912,000. We had an accumulated deficit of $40,336,000 as of December 31, 2024.

 Cash
used in operations for the year ended December 31, 2024 was $3,055,000 compared to cash used in operations of $6,129,000 for the year
ended December 31, 2023, a decrease of $3,074,000. The decrease was primarily attributable to: (i) a decrease in cash used for working
capital of $3,539,000, (ii) a decrease in net loss of $234,000 and, (iii) a decrease in non-cash operating charges of $231,000. Significant
non-cash items during 2024 included: (i) $111,000 for the amortization on an ROU asset, and (ii) stock related compensation of $82,000.
Significant non-cash items during 2023 included: (i) stock-related compensation of $188,000, (ii) excess and obsolete inventory charges
of $122,000, and (iii) $107,000 for the amortization on an ROU asset.

 Investing
Activities

 There
was no cash provided by investing activities for the year ended December 31, 2024. Cash provided by investing activities was less than
$1,000 for the year ended December 31, 2023.

 Financing
Activities

 There
were no cash flows from financing activities during the year ended December 31, 2024 or the year ended December 31, 2023.

 Capital
Raising

 Since
inception, we have incurred significant operating losses and have funded our operations primarily through issuances of equity securities,
debt, and operating revenue. As of December 31, 2024, we had an accumulated deficit of $40,336,000, working capital of $9,064,000, and
stockholders' equity of $9,198,000.

 Inflation

 Our
operations are being influenced by the inflation existent in the larger economy and in the industries related to building renovations,
retrofitting and new build CEA facilities in which we operate. We believe that we will continue to face inflationary increases in the
cost of products and our operations, which will adversely affect our margins and financial results and the pricing of our service and
product supply contracts. Inflation is reflected in higher wages, increased pricing of equipment, delivery and transportation costs,
and general operational expenses. As we move forward, we plan to continuously monitor our various contract terms and may decide to add
clauses that will permit us to adjust pricing if inflation and price increase pressures on us will impact our ability to perform our
contracts and maintain our margins.

 Contractual
Payment Obligations

 Refer
to Note 3 – Leases of our consolidated financial statements, which are included as part of this Annual Report for further
details on our obligations under a lease for our manufacturing and office space.

and Contingencies

 Litigation

 On
October 20, 2023, Sweet Cut Grow, LLC and Green Ice, LLC (collectively, "Claimant") a client of the Company with which it
had an equipment contract and engineering contract, filed a demand for arbitration asserting claims for breach of contract, breach of
warranty, and unjust enrichment, and a demand for $1,049,280 in damages, plus interest ("Claims"). The Company continues
to deny all the Claims and has asserted a counterclaim. The Company believes Claimant is owed nothing as the Company fulfilled all its
obligations under the contracts to Claimant, and further, that the negligence of a third-party supplier is the basis of the Claims. We
intend to generally defend the claims on the basis that we promptly addressed all problems, and that any issues with defective HVAC equipment
are the responsibility of the third-party equipment manufacturer. The Company's equipment contract with Claimant requires the parties
to arbitrate their disputes under the rules of the American Arbitration Association ("AAA"). The arbitration will be heard
in Denver, Colorado. The matter is in the discovery phase. The parties will pay their own legal fees and expenses. The Company intends
to defend itself vigorously, believing there are no merits to the Claims as currently presented.

 On
or about April 17, 2024, Optima Consulting Services, LLC (the "Claimant"), a client of the Company with which it had an equipment
contract and engineering contract, advised the Company of a potential claim related to work performed by the Company for Claimant and
demanded mediation under the parties' contract. On or about October 28, 2024, Claimant informed the Company it was asserting claims
for negligent/defective design and breach of warranty, and alleges its damages exceed $2,000,000 (Claims"). The Company denies
all the Claims and that Claimant is entitled to any damages. The Company believes Claimant is owed nothing as the Company fulfilled all
its obligations under the contracts to Claimant and performed all work in line with all applicable standards. We intend to generally
defend the Claims on the basis that all work was performed pursuant to the contract and any alleged issues that may have occurred were
the result of actions by Claimant and/or third parties. If Claimant moves forward with its Claims, the Company's equipment contract
with Claimant requires the parties to arbitrate their dispute with the American Arbitration Association ("AAA"). The arbitration
will be heard in Denver, Colorado. The matter is in the preliminary phase. The parties will pay their own legal fees and expenses. The
Company intends to defend itself vigorously, believing there are no merits to the Claims as currently presented.

 Given
the current uncertainty around our ability to estimate the amount of loss and success of the Claims, we have not recorded an accrual
for any potential loss related to these matters.

 From
time to time, in the normal course of its operations, the Company is subject to litigation matters and claims. Litigation can be expensive
and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict, and the Company's
view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as
incurred. The Company records a liability for contingent losses when it is both probable that a liability has been incurred and the amount
of the loss is known. An unfavorable outcome to any legal matter, if material, could have an adverse effect on the Company's operations
or its financial position, liquidity or results of operations.

 Other

 In
the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business
partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of such
agreements, services to be provided by us, or from intellectual property infringement claims made by third parties. In addition, we have
entered into indemnification agreements with our directors and certain of our officers and employees that will require us to, among other
things, indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees.
We maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors
and certain of our officers and employees, and former officers, directors, and employees of acquired companies, in certain circumstances.

 Off-Balance
Sheet Arrangements

 We
are required to disclose any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on
our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures,
or capital resources that are material to investors. As of December 31, 2024, we had no off-balance sheet arrangements. During the years
ended December 31, 2024 and December 31, 2023, we did not engage in any off-balance sheet financing activities.

 Recent
Developments

 Refer
to Note 14 - Subsequent Events of our consolidated financial statements, included as part of this Annual Report, for the
significant events occurring since December 31, 2024.

 Item
7A. Quantitative and Qualitative Disclosures About Market Risk

 We
are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, therefore are not required to provide the information
under this item.

 Item
8. Financial Statements and Supplementary Data

 Our
consolidated financial statements are included herein, beginning on page F-1. The information required by this item is incorporated herein
by reference to the consolidated financial statements set forth in Item 15. "Exhibits and Financial Statement Schedules"
of this Annual Report.

 Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 None.

 Item
9A. Controls and Procedures

 Evaluation
of Disclosure Controls and Procedures

 Our
management conducted an evaluation, with the participation of our Chief Executive Officer and our Principal Financial and Accounting
Officer, who are the one in the same person, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation,
our Chief Executive Officer and Principal Financial and Accounting Officer concluded that as a result of the material weakness in our
internal control over financial reporting described below, our disclosure controls and procedures were not effective as of December 31,
2024.

 Management's
Annual Report on Internal Control over Financial Reporting

is responsible for the preparation of our financial statements and related information. Management uses its best judgment to ensure that
the financial statements present fairly, in material respects, our financial position and results of operations in conformity with generally
accepted accounting principles.

is responsible for establishing and maintaining adequate internal control over financial reporting as defined in the Exchange Act. These
internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures
are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations
in the effectiveness of any system of internal controls including the possibility of human error and overriding of controls. Consequently,
an effective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.

 Our
internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that, in reasonable
detail, accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary
for preparation of our financial statements in accordance with generally accepted accounting principles and that the receipts and expenditures
of company assets are made in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding
the prevention of or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on
our financial statements.

 Under
the supervision of our Chief Executive Officer and our Principal Financial and Accounting Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") published in 2013 and subsequent
guidance prepared by COSO specifically for smaller public companies. Based on that evaluation, our management concluded that our internal
control over financial reporting was not effective as of December 31, 2024, for the reasons discussed below.

 A
material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented
or detected on a timely basis.

identified the following material weakness in its assessment of the effectiveness of internal control over financial reporting as of
December 31, 2024:

 The
Company did not maintain effective controls over certain aspects of the financial reporting process because: (i) we lack a sufficient
complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our
financial reporting requirements, (ii) there is inadequate segregation of duties due to our limited number of accounting personnel, and
(iii) we have insufficient controls and processes in place to adequately verify the accuracy and completeness of spreadsheets that we
use for a variety of purposes including revenue, taxes, stock-based compensation and other areas, and place significant reliance on,
for our financial reporting.

 We
intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies. We are committed
to taking steps to improve our financial organization including, without limitation, evaluating our accounting staff requirements and
improving our systems and controls to reduce our reliance on the manual nature of our existing systems. However, due to our size and
our financial resources, remediating the several identified weaknesses has not always been possible and may not be economically feasible
now or in the future.

 Our
management, including our Chief Executive Officer and our Principal Financial and Accounting Officer, does not expect that our disclosure
controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter
how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must
be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.

 The
material weaknesses in internal control over financial reporting as of December 31, 2024, remained unchanged from December 31, 2023.
Management believes that the material weaknesses set forth above did not have an effect on our financial reporting for the year ended
December 31, 2024.

 We
will continue to monitor and evaluate the effectiveness of our internal control over financial reporting on an ongoing basis and are
committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. We do not,
however, expect that the material weaknesses in our disclosure controls will be remediated until such time as we have improved our internal
control over financial reporting.

 This
Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant
to rules of the SEC that permit us to provide only management's report in this Annual Report on Form 10-K.

 Changes
in Internal Control over Financial Reporting

 There
were no changes identified in connection with our internal control over financial reporting during the quarter ended December 31, 2024,
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 Item
9B. Other Information

 None.

 PART
III

 Item
10. Directors, Executive Officers and Corporate Governance

 Information
about our Directors

 The
Company's current directors are set forth below:

 Name

 Age

 Positions
 & Committees

 K. McDonald

 Chairman
 of the Board; Chief Executive Officer and President

 James

 Director;
 Compensation Committee Chair; Audit Committee Member

 Director;
 Audit Committee Chair, Compensation Committee Member; Nominations Committee Member

 Mariathasan

 Director;
 Nominations Committee Chair, Compensation Committee Member

 Tarallo

 Director;
 Compensation Committee Member, Nominations Committee Member

 Certain
information with respect to the Company's current directors is set forth below. The business address of each of the directors is
385 South Pierce Avenue, Suite C, Louisville, Colorado 80027.

 Name
 and Year First Elected Director

 Background
 Information and Principal Occupation(s) During Past Five Years and Beyond

 K. McDonald (2018)

 Mr.
 McDonald was appointed a director on September 12, 2018. On November 28, 2018, Mr. McDonald
 was appointed our Chief Executive Officer and President. On June 24, 2020, Mr. McDonald was
 appointed Chairman of the Board. Mr. McDonald has been involved in building businesses in
 the cleantech, energy efficiency and heating, ventilation and air conditioning ("HVACD")
 industries over the past 10 years. From 2008 to 2018, Mr. McDonald led sales and business
 development as Vice-President—Sales for Coolerado Corp., a manufacturer and marketer
 of innovative, energy-efficient air conditioning systems for commercial, government, and
 military use. Along with Coolerado's CEO, Mr. McDonald was instrumental in growing
 the business to become an INC. 600 high-growth company award winner and assisted in raising
 $15 million of private funding from a cleantech investment fund. In 2015, Coolerado was acquired
 by Seeley International, Australia's largest air conditioning manufacturer and an innovative
 global leader in the design and production of energy-efficient cooling and heating products,
 where Mr. McDonald served as National Account Manager. He is also the founder and Managing
 Partner of Cleantechsell.com and the author of Cleantech Sell: The Essential Guide To Selling
 Resource Efficient Products In The B2B Market.

 Prior
 to joining Coolerado, Mr. McDonald spent over ten years in the private equity industry where he was involved in numerous transactions
 in the technology, manufacturing, and power development industries. As a business development officer at several private equity acquisitions
 groups Mr. McDonald identified, financed, or acquired numerous transactions with total enterprise value in excess of $200 million.

 Mr.
 McDonald was also a consultant to international banks with KMPG from 1994 to 1997 and served as a director for Keating Capital, Inc.,
 a publicly traded business development company that made investments in pre-IPO companies. He previously served as a mentor for companies
 in the Clean Tech Open competition.

 Mr.
 McDonald is a U.S. Army veteran and a graduate of the U.S. Military Academy at West Point, N.Y. where he earned a B.S. degree in
 Engineering and Economics. He also received an M.B.A. degree from the Harvard Business School.

 Among
 the reasons for Mr. McDonald to be selected for service on the Board is his experience in sales, sales and operations management,
 mergers and acquisitions, the HVACD industry, his in-depth knowledge of climate control systems and technologies.

 James
 R. Shipley (2020)

 Mr.
 Shipley was appointed a director on June 24, 2020. Mr. Shipley recently retired from AgTech
 Holdings where he was the Chief Strategy Officer of GroAdvisor and the Vice-President of
 Sales at VividGro since 2017. Since 2017, Mr. Shipley has assisted in design and build consulting
 along with supply chain management for cultivation operations in 12 states covering more
 than 500,000 square feet of warehouse indoor cultivation and continues to consult independently
 with operators in North America. From 2014 to 2017 Mr. Shipley, acting in several executive
 roles, helped build multiple business lines for MJIC Inc. (now CNSX: MSVN); these roles included
 being a member of the board of directors, Chairman and President. Mr. Shipley is currently
 president and a principal in RSX Enterprises Inc., a sales agency and marketing firm that
 sells and markets equipment for use in controlled environment agriculture on behalf of various
 manufacturers. Mr. Shipley has been active in the cannabis business, where he has founded
 various summits such as the Marijuana Investor Summit and been involved in many educational
 workshops and business expos. Previously, Mr. Shipley was an officer and chief revenue officer
 with Carrier Access Corporation (CACS), a public company trading on Nasdaq. Prior to Carrier
 Access, Mr. Shipley worked at Williams Companies in their telecommunications divisions.

 Mr.
 Shipley was selected for service on the Board because of his experience in and commitment to the cannabis industry, his demonstrated
 and consistent record of success as an executive and entrepreneur, and his extensive network of contacts in the cannabis industry.

 J. Etten (2020)

 Mr.
 Etten was appointed a director on June 24, 2020. Mr. Etten joined Acreage Holdings in 2018
 where he served as the Head of Government Affairs until 2021. Acreage is a vertically integrated,
 multi-state operator of cannabis licenses and assets in the U.S. In 2017 he founded the Veterans
 Cannabis Project where he continues to serve as Chairman. Veterans Cannabis Project (VCP)
 is an organization dedicated to advocating on behalf of cannabis access issues for U.S. military
 veterans. From 2015 to 2017, Mr. Etten set aside his career to provide care for his seriously
 ill son. Mr. Etten's career has been focused on the growth equity market, and prior
 to Acreage, he held positions including Vice President of Global Business Development for
 FreightWatch International, and Director of Corporate Development for Triple Canopy. Mr.
 Etten was an investment professional at Trident Capital, where he focused on the cyber-security
 space, and an investment banker at Thomas Weisel Partners. Mr. Etten served on active duty
 as a U.S. Navy SEAL officer. He earned an MBA from the J.L. Kellogg Graduate School of Management
 at Northwestern University, and a BS in political science from the United States Naval Academy.

 Mr.
 Etten was selected for service on the Board because of his experience in and commitment to the cannabis industry, his experience
 with multi-site cannabis operators, his demonstrated and consistent record of success as an executive, and his extensive network
 of contacts in the cannabis industry and investment banking world.

 Mariathasan (2022)

 Mariathasan was appointed as a director on January 17, 2022. Mr. Mariathasan is the CEO and
 Co-Founder of Simplifya, the cannabis industry's leading regulatory and operational
 compliance software platform. The company's suite of products takes the guesswork out
 of confusing and continually changing state and local regulations. Featuring SOPs, badge
 tracking, document storage, tailored reporting and employee accountability features, the
 company's Custom Audit software reduces the time clients spend on compliance by up
 to 45 percent.

 Mr.
 Mariathasan is also a serial entrepreneur who has founded or advised numerous startups. He is currently an investor in 22 domestic
 and international companies that range from cannabis companies to dating apps - four of which he serves as a board member.

 Mr.
 Mariathasan studied Architecture and Computer Science at the University of Kansas and Computer Information Systems with a minor in
 Business Management from Emporia State University. Marion is a regular guest speaker at events such as Denver Start-Up Week, Colorado
 University's program on social entrepreneurship, various universities on the topic of entrepreneurship and the United Nations
 Global Accelerator Initiative.

 Mr.
 Mariathasan was selected for service on the Board because of his experience in and commitment to the cannabis industry, his demonstrated
 and consistent record of success as an executive and entrepreneur, and his extensive network of contacts in the cannabis industry.

 Tarallo (2024)

 Tarallo is the Founder & Principal of AETHER Brand Group, an Incubating and Operating
 Brand house focused on Adult Consumption Categories, which includes a current portfolio several
 consumer brands across alcohol and cannabis.

 With
 over 15 years in the consumer product goods space, Mr. Tarallo's career comes with deep experience and success building and
 leading global brands in both developed and emerging markets, which includes direct P&L ownership across large Fortune 500 &
 FTSE 100 companies as well as startups.

 Prior
 to starting AETHER Brand Group, Mr. Tarallo served as Senior Vice President of Business Development & Beyond Nicotine at Reynolds
 American, a subsidiary of British American Tobacco. Mr. Tarallo was part of the Reynolds American management team and accountable
 for building and leading new, multi-category transformational division (Beyond Nicotine) to deliver long-term value by commercializing
 fast growing, science-backed brands to reach new customers and consumers across wellbeing & stimulation and cannabis.

 Additionally,
 Mr. Tarallo was the Global Vice President for The Coca-Cola Company, where he led the Global Amazon Business Unit, a multi-billion-dollar
 retail business.

 Mr.
 Tarallo's success creating and scaling global brands has garnered large scale recognition and awards such as a nod from Cannes
 Lions for his global campaign with Coca-Cola, McLaren F1 and Amazon as well as the launch of the US Beyond Nicotine division at Reynolds
 American.

 Mr.
 Tarallo earned his BS in Business Management from Saint Vincent College as well as a Venture Capital Executive Certificate from the
 University of California, Berkeley, Haas School of Business. Mr. Tarallo lives in Atlanta area with his wife and two young children.

 Each
of the directors on our Board of Directors was elected or appointed because he has demonstrated an ability to make meaningful contributions
to our business and affairs and has skills, experience and background that are complementary to those of our other Board members.

 Board
Diversity

 While
a company is listed on Nasdaq, each year the board of directors, pursuant to the requirements of the Nasdaq Stock Market, will review
the appropriate characteristics, skills, and experience required for the board of directors as a whole and its individual members. In
evaluating the suitability of individual candidates, we will consider factors including, without limitation, an individual's character,
integrity, judgment, potential conflicts of interest, other commitments, and diversity. While we have no formal policy regarding board
diversity for our board of directors as a whole nor for each individual member, our board of directors will consider such factors as
gender, race, ethnicity and experience, area of expertise, as well as other individual attributes that contribute to the total diversity
of viewpoints and experience represented on the board of directors. If we are not listed on Nasdaq, we may not continue to consider diversity
in the nominations or appointment of directors.

 The
following is a table indicating the current board diversity as of March 27, 2025.

 Total
 Number of Directors

 Five

 Female

 Male

 Non-Binary

 Did
 Not Disclose Gender

 Part
 I: Gender Identity

 Directors

 -

 -

 -

 Part
 II: Demographic Background

 African
 American or Black

 -

 -

 -

 -

 Alaskan
 Native or Native American

 -

 -

 -

 -

 Asian

 -

 -

 -

 -

 Hispanic
 or Latinx

 -

 -

 -

 -

 Native
 Hawaiian or Pacific Islander

 -

 -

 -

 -

 White

 -

 -

 -

 Two
 or More Races or Ethnicities

 -

 -

 -

 -

 LGBTQ+

 -

 -

 -

 -

 Did
 Not Disclose Demographic Background

 -

 -

 -

 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. If we are
not listed on Nasdaq or another exchange or trading medium that does not have similar marketplace rules, then we may not continue to
adhere to such rules and committee compositions and policies.

 Our
Board has affirmatively determined that each of Messrs. Shipley, Etten, Mariathasan, and Tarallo qualify as an independent director,
as defined under the applicable corporate governance standards of Nasdaq.

 Audit
Committee

 Our
Board has established an Audit Committee, which as of the date of this report consists of three independent directors, Mr. Etten (Chairman),
Mr. Shipley and Mr. Tarallo. The committee's primary responsibilities include recommending the selection of our independent registered
public accounting firm; evaluating the appointment, compensation and retention of our registered public accounting firm; receiving formal
written statements from our independent registered public accounting firm regarding its independence, including a delineation of all
relationships between it and the Company; reviewing with such independent registered public accounting firm the planning, scope and results
of their audit of our financial statements; pre-approving the fees for services performed; reviewing with the independent registered
public accounting firm the adequacy of internal control systems; reviewing our annual financial statements and periodic filings, and
receiving our audit reports and financial statements. The Audit Committee also considers the effect on the Company of any changes in
accounting principles or practices proposed by management or the independent registered public accounting firm, any changes in service
providers, such as the accountants, that could impact the Company's internal control over financial reporting, and any changes
in schedules (such as fiscal or tax year-end changes) or structures or transactions that required special accounting activities, services
or resources. The Audit Committee annually will conduct an enterprise fraud risk assessment, and generally will oversee the enterprise
risk assessment, and management process framework to insure monitoring for identification, assessment and mitigation of all significant
enterprise risk. The Audit Committee will oversee compliance with the code of ethics of the Company and assess waivers of the code. At
least annually, the Audit Committee will review and approve all related party transactions that are required to be disclosed publicly
in the Company SEC reports.

 The
Committee may act in reliance on management, the Company's independent auditors, internal auditors, and advisors and experts, as
it deems necessary or appropriate. The Committee has the power, in its discretion, to conduct any investigation it deems necessary or
appropriate to enable it to carry out its duties.

 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 Mr. Etten is an "audit committee financial expert," as that term is defined in the rules promulgated
by 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 as of the date of this report consists of three independent directors, Mr. Shipley
(Chairman), Mr. Etten, and Mr. Mariathasan. The committee's primary responsibilities include approving corporate goals and objectives
relevant to executive officer compensation and evaluate executive officer performance in light of those goals and objectives, determining
and approving executive officer compensation, including base salary and incentive awards, making recommendations to the Board regarding
compensation plans, and administering 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.

 The
Company compensation policies for executive officers has two fundamental objectives: (i) to provide a competitive total compensation
package that enables the Company to attract and retain highly qualified executives with the skills and experience required for the achievement
of business goals; and (ii) to align certain compensation elements with the Company's annual performance goals. With respect to
each of the Company's executive officers, the total compensation that may be awarded, including base salary, discretionary cash
bonuses, annual stock incentive awards, stock options, restricted stock units and other equity awards, and other benefits and perquisites
will be evaluated by the committee. Under certain circumstances, the committee may also award compensation payable upon termination of
the executive officer under an employment agreement or severance agreement (if applicable). The Board recognizes that its overall goal
is to award compensation that is reasonable when all elements of potential compensation are considered. The committee believes that cash
compensation in the form of base salary and discretionary cash bonuses provides our executives with short-term rewards for success in
operations, and that long-term compensation through the award of stock options, restricted stock units and other equity awards aligns
the objectives of management with those of our stockholders with respect to long-term performance and success. The Board also has historically
focused on the Company's financial condition when making compensation decisions and approving performance objectives and compensation
has been weighted more heavily toward equity-based compensation. The committee will continue to periodically reassess the appropriate
weighting of cash and equity compensation in light of the Company's expenditures in connection with commercial operations and its
cash resources and working capital needs.

 Nominating
Committee

 Our
Board has established a Nominating Committee, which as of the date of this report consists of three independent directors, Mr. Mariathasan
(Chairman), Mr. Etten, and Mr. Tarallo. The committee's primary responsibilities include identifying individuals qualified to serve
on the Board as directors and on committees of the Board, establishing procedures for evaluating the suitability of potential director
nominees consistent with the criteria approved by the Board, reviewing the suitability for continued service as a director when his or
her term expires and at such other times as the committee deems necessary or appropriate, and determining whether or not the director
should be re-nominated, and reviewing the membership of the Board and its committees and recommending making changes, if any.

 In
evaluating director nominees, the Nominating Committee will generally consider the following factors:

 the
 appropriate size and composition of our Board of Directors;

 whether
 or not the person is an "independent" director as defined in Rule 5605(a)(2) promulgated by the Nasdaq Stock Market;

 the
 needs of the Company with respect to the particular talents and experience of its directors;

 the
 knowledge, skills and experience of nominees in light of prevailing business conditions and the knowledge, skills and experience
 already possessed by other members of the Board of Directors;

 familiarity
 with national and international business matters and the requirements of the industry in which we operate;

 experience
 with accounting rules and practices;

 the
 desire to balance the considerable benefit of continuity with the periodic injection of the fresh perspective provided by new members;
 and

 all
 applicable laws, rules, regulations and listing standards, if applicable.

 There
are no stated minimum criteria for director nominees, although the committee may consider such factors as it may deem are in the best
interests of the Company and its stockholders. The Nominating Committee also believes it is appropriate for certain key members of our
management to participate as members of the Board of Directors.

 The
Nominating Committee identifies nominees by first evaluating the current members of the Board willing to continue in service. Current
members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered
for re-nomination, balancing the value of continuity of service by existing members of the Board with that of obtaining a new perspective.
If any member of the Board does not wish to continue in service, or if the Nominating Committee decides not to re-nominate a member for
re-election, the committee identifies the desired skills and experience of a prospective director nominee in light of the criteria above
or determines to reduce the size of the Board. Research may also be performed to identify qualified individuals. To date, we have not
engaged third parties to identify or evaluate or assist in identifying potential nominees, nor do we anticipate doing so in the future.

 Stockholder
Communications with Directors

 Stockholders
may communicate with the Board by sending a letter to the Corporate Secretary, CEA Industries Inc., 385 South Pierce Avenue, Suite C,
Louisville, Colorado 80027. Each communication must set forth the name and address of the stockholder on whose behalf the communication
is sent and should indicate in the address whether the communication is intended for the entire Board, the non-employee directors as
a group or an individual director. Each communication will be screened by the Corporate Secretary or his designee to determine whether
it is appropriate for presentation to the Board or any specified director(s). Examples of inappropriate communications include junk mail,
spam, mass mailings, resumes, job inquiries, surveys, business solicitations and advertisements, as well as unduly hostile, threatening,
illegal, unsuitable, frivolous, patently offensive or otherwise inappropriate material. Communications determined to be appropriate for
presentation to the Board, or the director(s) to whom they are specifically addressed, will be submitted to the Board or such director(s)
on a periodic basis. Any communications that concern accounting, internal control or auditing matters will be handled in accordance with
procedures adopted by the Board of Directors.

 Code
of Ethics

 Our
Board has adopted a Code of Ethics, which is available for review on our website at www.ceaindustries.com and is also available
in print, without charge, to any stockholder who requests a copy by writing to us at CEA Industries Inc., 385 South Pierce Avenue, Suite
C, Louisville, Colorado 80027 Attention: Corporate Secretary. Each of our directors, employees and officers, including our Chief Executive
Officer, and all of our other principal executive officers, are required to comply with the Code of Business Conduct and Ethics. There
have not been any waivers of the Code of Ethics relating to any of our executive officers or directors in the past year.

 Insider
Trading Arrangements and Policies

 We
have adopted an insider trading compliance policy governing the purchase, sale, and/or other dispositions of our securities by our directors,
officers, and employees that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations,
and the exchange listing standards applicable to us. The insider trading policy prohibits the use of material non-public information
about the Company when making decisions to purchase, sell, give away or otherwise trade in the Company's securities or to provide
such information to others outside the Company. We have established black-out periods to which covered persons are subject related to
the filing of our regular reports with the Securities and Exchange Commission. The Company may impose additional black-out periods from
time to time as other types of material non-public information occur when material non-public events or disclosures are pending. Covered
persons are permitted to trade in the Company's securities only when there is no black-out period in effect and such trade has
been pre-cleared by the appointed Company officer, or when a qualified 10b5-1 plan has been established in accordance with federal securities
laws. No covered person has adopted or terminated a Rule 10b5-1 trading plan during the last fiscal quarter of the fiscal year to which
this report relates.

 Clawback
Policy

 Our
Board has adopted a written policy to recover "excess" compensation that is granted, earned, or vested based wholly or in
part upon the attainment of a financial reporting measure. The compensation includes both cash-based and equity-based incentives. The
compensation covered includes incentive awards awarded to any individuals (including former employees) who served as an executive officer
during the three most recently completed fiscal years preceding the date on which the preparation of an accounting restatement is required,
provided that the executive officers were awarded more incentive awards than they would have received if the financial statements had
been prepared correctly. The recovery will include an executive incentive award even if the executive was not involved in preparing the
financial statements or did not commit misconduct that led to the restatement. Restatements attributable to an inadvertent error also
will subject executive officers to the recovery of previously received incentive awards.

 Meetings
and Committees of the Board

 Our
Board is responsible for overseeing the management of our business. We keep our directors informed of our business at meetings and through
reports and analyses presented to the Board and the committees of the Board. Regular communications between our directors and management
also occur outside of formal meetings of the Board and committees of the Board.

 Meeting
Attendance

 Our
Board generally holds meetings on a quarterly basis but may hold additional meetings as required. In 2024, the Board held 11 meetings.
Most of our directors attended 100% of the Board meetings that were held during the periods when he was a director and each of our directors
attended 100% of the meetings of each committee of the Board on which he served that were held during the periods that he served on such
committee. The Board also took a number of actions by unanimous consent, pursuant to Nevada corporate law and our by-laws. We do not
have a policy requiring that directors attend our annual meetings of stockholders.

 Board
Leadership Structure

 The
Board may, but is not required to, select a Chairman of the Board who presides over the meetings of the Board and meetings of the stockholders
and performs such other duties as may be assigned to him by the Board. The positions of Chairman of the Board and Chief Executive Officer
may be filled by one individual or two different individuals. Currently the positions of Chairman of the Board and Chief Executive Officer
are held by Mr. McDonald.

 Board's
Role in Risk Oversight

 While
risk management is primarily the responsibility of the Company's management team, the Board is responsible for the overall supervision
of the Company's risk management activities. The Board as a whole has responsibility for risk oversight, and each Board committee
has responsibility for reviewing certain risk areas and reporting to the full Board. The oversight responsibility of the Board and its
committees is enabled by management reporting processes that are designed to provide visibility to the Board about the identification,
assessment, and management of critical risks and management's risk mitigation strategies in certain focus areas. These areas of
focus include strategic, operational, financial and reporting, succession and compensation and other areas.

 The
Board oversees risks associated with their respective areas of responsibility. The Board oversees: (i) risks and exposures associated
with our business strategy and other current matters that may present material risk to our financial performance, operations, prospects
or reputation, (ii) risks and exposures associated with management succession planning and executive compensation programs and arrangements,
including equity incentive plans, and (iii) risks and exposures associated with director succession planning, corporate governance, and
overall board effectiveness.

provides regular updates to the Board regarding the management of the risks they oversee at each regular meeting of the Board. We believe
that the Board's role in risk oversight must be evaluated on a case-by-case basis and that our existing Board's role in risk
oversight is appropriate. However, we continually re-examine the manners in which the Board administers its oversight function on an
ongoing basis to ensure that they continue to meet the Company's needs.

 Section
16(a) Beneficial Ownership Reporting Compliance

 Section
16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") requires our executive officers, directors
and persons who beneficially own more than 10% of our common stock to file initial reports of ownership and reports of changes in ownership
with the SEC. Such persons are required by SEC regulations to furnish us with copies of all Section 16(a) reports filed by such persons.

 Based
solely on our review of the copies of reports furnished to us, other than as noted below, we believe that during the fiscal year ended
December 31, 2024, all executive officers, directors and greater than 10% beneficial owners of our common stock complied with the reporting
requirements of Section 16(a) of the Exchange Act.

Officers

officers are appointed by our Board and serve at its discretion. Set forth below is information regarding our executive officers as of
the date of this report.

 Name

 Age

 Positions

 K. McDonald

 Chief
 Executive Officer and President; Director (Mr. McDonald also serves as the company's principal financial officer but is not
 designated with that or similar title.)

 Mr.
McDonald's biographical information is included with such information for the other members of our Board.

 Item
11. Executive Compensation

 Director
Compensation Program

 On
December 16, 2024 (the "Effective Date"), the Board adopted a revised compensation plan for directors. The Plan was effective
retroactively for the then current independent directors and provided compensation for subsequent directors elected or appointed after
the Effective Date of the plan.

 The
Company will pay its independent directors an annual cash fee of $25,000, payable quarterly in advance on the first business day of each
calendar quarter, prorated for the period of service in the year and which is consideration for their participation in: (i) any regular
or special meetings of the Board or any committee thereof attended in person, (ii) any telephonic meeting of the Board or any committee
thereof in which the director is a member, (iii) written consent actions, (iv) any non-meeting consultations with the Company's
management, and (iv) any other services provided by them in their capacities as directors (other than services as the Chairman of the
Board, the Chairman of the Company's Audit Committee, and the other Committees' Chairman).

 At
the time of initial election or appointment, each independent director will receive an equity retention award in the form of restricted
stock units ("RSUs"). The aggregate value of the RSUs at the time of grant will be $25,000, with the number of shares underlying
the RSUs to be determined based on the closing price of the Company's common stock on the trade date immediately prior to the date
of grant. Vesting of the RSUs will be as follows: (i) 50% at the time of grant, and (ii) 50% on the first anniversary of the grant date.

 In
addition, on the first business day of January each year, each independent director who was not initially appointed or elected in the
previous year will receive an equity retention award in the form of RSUs. The aggregate value of the RSUs at the time of grant will be
$25,000, with the number of shares underlying the RSUs to be determined based on the closing price of the Company's common stock
on the trade date immediately prior to the date of grant. These RSUs will be fully vested at date of grant.

 The
Company will pay the Audit Committee Chairman an additional annual fee of $10,000, payable quarterly in advance on the first business
day of each calendar quarter, prorated for the period of service in the year, for the services as the Audit Committee Chairman.

 The
Company will pay the Chairmen of any other committee of the Board an additional annual fee of $5,000, payable quarterly in advance on
the first business day of each calendar quarter, prorated for the period of service in the year, for services as a Committee Chairman.

 There
is no additional compensation paid to members of any committee of the Board. Interested (i.e. Executive directors) serving on the Board
do not receive compensation for their Board service.

 Each
director is responsible for the payment of any and all income taxes arising with respect to the issuance of common stock and the vesting
and settlement of RSUs.

 The
Company will also reimburse directors for out-of-pocket expenses incurred in attending Board and committee meetings and undertaking certain
matters on the Company's behalf.

 Indemnification;
Insurance

 Under
the Nevada Revised Statutes and pursuant to our charter and bylaws, as currently in effect, the Company may indemnify the Company's
officers and directors for various expenses and damages resulting from their acting in these capacities. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to our officers and directors pursuant to the foregoing provisions, we
have been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.

 The
Company has entered into indemnification agreements with its directors and executive officers. The indemnification agreements are intended
to provide the Company's directors the maximum indemnification permitted under the Nevada Revised Statutes, unless otherwise limited
by the Company's charter and bylaws. Each indemnification agreement provides that the Company shall indemnify the director or executive
officer who is a party to the agreement (an "Indemnitee"), including the advancement of legal expenses, if, by reason of
his corporate status, the Indemnitee is, or is threatened to be, made a party to or a witness in any threatened, pending, or completed
proceeding. Each indemnification agreement further provides that the applicable provisions of the Company's charter and bylaws
regarding indemnification shall control in the event of any conflict with any provisions of such indemnification agreements.

 The
Company may secure insurance on behalf of any person who is or was or has agreed to become a director or officer of the Company for any
liability arising out of his actions, regardless of whether the Nevada Revised Statues would permit indemnification. The Company has
obtained liability insurance for its officers and directors.

 Director
Compensation Table

 The
following table sets forth the compensation earned by or awarded or paid in 2024 and 2023 to the individuals who served as our independent
directors during such period.

 Name

 Year

 Fees
 Earned or Paid in Cash (1)

 Stock
 Awards (2), (3), (4)

 Awards (5)

 Total

 James

 2024

 $

 $
 -

 $
 -

 $

 2023

 $

 $

 $
 -

 $
 55,000

 2024

 $
 30,204

 $

 $
 -

 $
 55,204

 2023

 $

 $

 $
 -

 $
 55,000

 Troy
 Reisner

 2024

 $
 35,000

 $

 $
 -

 $
 60,000

 2023

 $
 35,000

 $

 $
 -

 $
 60,000

 Mariathasan

 2024

 $
 25,204

 $

 $
 -

 $
 50,204

 2023

 $

 $

 $
 -

 $
 50,000

 Tarallo

 2024

 $
 1,019

 $
 12,500

 $
 -

 $
 13,519

 (1)
 Excludes reimbursement of out-of-pocket expenses.

 (2)
 Reflects grants to three independent directors of 3,788 each of restricted stock units on January 2, 2024, in connection with
 the director compensation plan. The shares vested immediately. Mr. Shipley declined this issuance.

 (3)
 Reflects grants to each independent directors of 2,480 of restricted stock units on January 3, 2023, in connection with the
 director compensation plan. The shares vested immediately.

 (4)
 Reflects grant to one independent directors of 3,058 of restricted stock units on December 17, 2024, in connection with his
 appointment. 1,529 shares were immediately vested and 1,529 will vest on December 17, 2025.

 (5)
 Reflects the dollar amount of the grant date fair value of awards, measured in accordance with FASB Accounting Standards Codification
 ("ASC") Topic 718 ("Topic 718") without adjustment for estimated forfeitures. For a discussion of the assumptions
 used to calculate the value of equity awards, refer to Note 13 to our consolidated financial statements for the fiscal year ended
 December 31, 2024 included in this Annual Report.

 The
aggregate number of non-qualified stock options and restricted stock units held as of December 31, 2024, by each independent director
are as follows:

 Name

 Shares
 Underlying Non-Qualified Stock Options (1)

 Shares
 Underlying Restricted Stock Units (2)

 Total

 James

 -

 -

 Tarallo

 -

 1,529

 1,529

 (1)
 Includes grant to each independent director on June 24, 2020 of 555 non-qualified stock options to purchase shares of the Company's
 common stock, a grant to each independent director on August 20, 2021 of non-qualified stock options to purchase 64 shares of the
 Company's common stock, and a grant on January 3, 2022 of non-qualified stock options to purchase 260 shares of the Company's
 common stock.

 (2)
 Includes grant to one independent director on December 17, 2024 of restricted stock units to purchase 3,058 shares of the Company's
 common stock. 1,529 shares vested and issued, 1,529 shares will vest on December 16, 2025. The grant was pursuant to the director's
 initial election to the board.

 Subsequent
to the financial statement date, the following cash fees were paid to directors based on the December 16, 2024 compensation plan.

 Name

 Cash
 Fees Paid

 James

 $
 7,500

 $
 8,750

 Mariathasan

 $
 7,500

 Tarallo

 $
 6,250

 $

 Subsequent
to the financial statement date, the following restricted stock units were issued to directors based on the December 16, 2024 compensation
plan.

 Name

 Shares
 Underlying Restricted Stock Units

 James

 3,079

 3,079

 Mariathasan

 3,079

 9,237

 These
restricted stock units vested upon grant.

Compensation

 Summary
Executive Compensation Table

 The
following table summarizes compensation earned by or awarded or paid to our named executive officers for the years ended December 31,
2024 and 2023.

 Name
 and Principal Position

 Year

 Salary

 Bonus

 Stock
 Awards (1)

 Awards (1)

 Non-equity
 Incentive Plan Compensation

 Non-qualified
 Deferred Compensation Earnings

 All
 Other Compensation

 Total

 K. McDonald - Chief Executive Officer and President (2)

 2024

 $
 350,000

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 21,656

 $
 371,656

 2023

 $
 350,000

 $
 10,938

 $
 -

 $
 32,370

 $
 -

 $
 -

 $
 22,245

 $
 415,552

 Ian
 K. Patel- Chief Financial Officer, Secretary, and Treasurer (3)

 2024

 $
 173,654

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 11,851

 $
 185,505

 2023

 $
 275,000

 $
 6,445

 $
 -

 $
 19,075

 $
 -

 $
 -

 $
 16,583

 $
 317,103

 (1)
 Reflects the dollar amount of the grant date fair value of awards granted in 2023 or 2024, measured in accordance with FASB
 Accounting Standards Codification ("ASC") Topic 718 ("Topic 718") without adjustment for estimated forfeitures.
 For a discussion of the assumptions used to calculate the value of equity awards, refer to Note 13 to our consolidated financial
 statements for the fiscal year ended December 31, 2024, included in this Annual Report.

 (2)
 Mr. McDonald was appointed Chief Executive Officer and President in November 2018. Amounts presented include all compensation
 for Mr. McDonald for the full 2024 and 2022 years. The 2023 bonuses were paid in recognition of services rendered and contributions
 to the Company's performance in the prior year, in respect of the 2021 Annual Incentive Plan. 2023 option awards include non-qualified
 stock options to purchase 3,054 shares of common stock which vested upon grant. Other compensation in 2024 and 2023 includes (i)
 employer-paid portion of health plan benefits ($8,456 and $9,045, respectively), and (ii) employer matching contributions under our
 401(k) plan ($13,200 and $13,200, respectively).

 (3)
 Mr. Patel was appointed Chief Financial Officer, Secretary and Treasurer in March 2022. Amounts presented include all compensation
 for Mr. Patel for 2024 and 2023. The 2023 bonus was paid in recognition of services rendered and contributions to the Company's
 performance in the prior year, in respect of the 2021 Annual Incentive Plan. 2023 option awards include non-qualified stock options
 to purchase 1,800 shares of common stock which vested upon grant. The options were awarded in recognition of services rendered and
 contributions to the Company's performance in the prior year, pursuant to the 2021 Annual Incentive Plan. Other compensation
 in 2024 and 2023 includes (i) employer-paid portion of health plan benefits ($6,055 and $5,325, respectively), and (ii) employer
 matching contributions under our 401(k) plan ($5,796 and $11,258, respectively). Mr. Patel's employment was terminated effective
 June 4, 2024.

Equity Awards

 The
following table sets forth certain information regarding outstanding equity awards held by our named executive officers as of December
31, 2024.

 Awards

 Stock
 Awards

 Name

 of Securities Underlying Unexercised Options Exercisable

 of Securities Underlying Unexercised Options Unexercisable

 Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options

 Exercise Price

 Expiration Date

 of Shares or Units of Stock That Have Not Vested

 Market
 Value of Shares or Units of Stock That Have Not Vested

 Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested

 Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (1)

 K. McDonald (1) (2) (3) (4)

 2,778

 –

 –

 $
 160.20

 11/28/2028

 –

 –

 –

 –

 –

 –

 $
 126.00

 1/2/2030

 –

 –

 –

 –

 –

 –

 $
 234.00

 2/16/2031

 –

 –

 –

 –

 3,772

 –

 –

 $
 88.20

 11/24/2031

 –

 –

 –

 –

 –

 –

 $
 30.12

 4/1/2032

 –

 –

 –

 –

 3,054

 –

 –

 $
 10.80

 3/31/2033

 –

 –

 –

 –

 11,078

 Ian
 K. Patel (6) (7)

 –

 –

 $
 26.40

 3/11/2032

 –

 –

 –

 –

 1,799

 –

 –

 $
 10.80

 3/31/2033

 –

 –

 –

 –

 2,633

 (1)
 On November 28, 2018, we granted to Mr. McDonald non-qualified stock options to purchase 2,778 shares of common stock under
 our 2017 Equity Incentive Plan, of which: (i) 556 options vested and became exercisable on the grant date, (ii) 1,112 options vested
 and became exercisable on December 31, 2019, and (iii) 1,111 options vested and became exercisable on December 31, 2020. On January
 2, 2020, we granted to Mr. McDonald non-qualified stock options to purchase 556 shares of common stock under our 2017 Equity Incentive
 Plan in recognition of his performance during 2019, which options vested and became exercisable on the grant date. On February 16,
 2021, we granted to Mr. McDonald non-qualified stock options to purchase 149 shares of common stock under our 2017 Equity Incentive
 Plan in recognition of his performance during 2020, which options vested and became exercisable on the grant date.

 (2)
 On November 24, 2021, we granted to Mr. McDonald non-qualified stock options to purchase 371 shares of common stock under our
 2021 Equity Incentive Plan, of which: (i) 42 options vested and became exercisable on the grant date, (ii) 41 options vested and
 became exercisable on November 24, 2022, and (iii) 41 options vested and became exercisable on November 24, 2023. Also on November
 24, 2021, we granted to Mr. McDonald incentive stock options to purchase 3,401 shares of common stock under our 2021 Equity Incentive
 Plan of which: (i) 378 options vested and became exercisable on the grant date, (ii) 378 options vested and became exercisable on
 November 24, 2022, and (iii) 378 options vested and became exercisable on November 24, 2023. These grants were in accordance with
 a new Executive Employment Agreement effective November 24, 2021.

 (3)
 On November 24, 2021, we granted Mr. McDonald 567 restricted shares of common stock under our 2021 Equity Incentive Plan, in
 accordance with a new Executive Employment Agreement effective November 24, 2021.

 (4)
 On April 1, 2022, we granted Mr. McDonald non-qualified stock options to purchase 769 shares of common stock under out 2021
 Equity Incentive Plan, in respect to our 2021 Annual Incentive Plan. The options vested and became exercisable upon grant.

 (5)
 On March 31, 2023, we granted Mr. McDonald non-qualified stock options to purchase 3,054 shares of common stock under our 2021
 Equity Incentive Plan, in respect to our 2021 Annual Incentive Plan. The options vested and became exercisable upon grant.

 (6)
 On March 11, 2022, we granted to Mr. Patel non-qualified stock options to purchase 1,250 shares of common stock under our 2021
 Equity Incentive Plan, of which: 167 options vested and became exercisable on the grant date. The balance of the non-qualified options
 vest and become exercisable as follows: (i) 250 on March 11, 2023, (ii) 417 on March 11, 2024, and (iii) 417 on March 11, 2025. These
 options were in accordance with his Employment Agreement effective March 11, 2022. All unvested options were cancelled upon Mr. Patel's
 termination.

 (7)
 On March 31, 2023, we granted Mr. Patel non-qualified stock options to purchase 1,799 shares of common stock under our 2021
 Equity Incentive Plan, in respect to our 2021 Annual Incentive Plan. The options vested and became exercisable upon grant.

 Compensation
Arrangements with Named Executive Officers

K. McDonald

 On
November 24, 2021, the Company entered into an employment agreement with Mr. McDonald, the Company's Chief Executive Officer and
President. The initial term of the employment agreement commenced on November 24, 2021, for a one-year term that is automatically extended
for an additional three years upon completion by the Company of a "qualified offering." After the initial term (as may be
extended), the employment agreement automatically renews for one-year periods unless notice of non-renewal is given 90 days prior to
the end of the then expiring term. A qualified offering is (A) the closing of a sale of the securities of the Company, whether in a private
placement or pursuant to an effective registration statement under the Securities Act of 1933, or (B) the occurrence of an up-listing
event (i.e., having the Company's stock quoted on an alternative trading platform from the Over-the-Counter (OTC) exchange to a
major stock exchange).

 Mr.
McDonald will be paid an annualized base salary of $275,000 per year, which increased to $350,000 per year upon the completion of the
Qualified Offering on February 15, 2022. The base salary will be reviewed at least annually prior to the end of each calendar year to
ascertain whether, in the judgment of the board of directors, it should be increased for the next calendar year. Mr. McDonald is eligible
to receive an annual incentive bonus under the Company's annual incentive compensation plan and policy for each full completed
calendar year of employment during the term as determined by the board of directors in its sole discretion. Mr. McDonald will be eligible
for an annual target bonus of fifty percent of the base salary. Payment of the annual bonus may be made in the form of cash, stock, or
a combination thereof, as determined in the sole discretion of the board of directors. Mr. McDonald will also receive an immediate cash
amount of $50,000, payable promptly after the signing of the employment agreement.

 Mr.
McDonald, at the signing of the employment agreement was issued 5,753 shares of common stock, which has an aggregate fair market value
of $50,000, and was paid a gross up on that amount for federal state and local income tax. Mr. McDonald was awarded a stock option to
purchase 3,772 shares of common stock under the 2021 Stock Award Plan, that was approved by shareholders, with an exercise price of $88.20
per share, the price of a share of common stock on the day immediately prior to the signing of the employment agreement. The vesting
of the options is at the rate of one-third on each of the date of the signing of the employment agreement and the first and second anniversary
of the signing of the employment agreement. The option, once vested, is exercisable for ten years from the date the employment contract
was signed. Vesting will be accelerated upon a change of control of the Company and certain termination events.

 Mr.
McDonald is entitled to participate in the Company employee benefit plans, including any group health and welfare insurance and profit
sharing and 401(k) plans that are sponsored generally by the Company for its employees, as may be offered from time to time. Notwithstanding
the foregoing, the Company may modify or terminate any employee benefit plan at any time. Mr. McDonald will be entitled to vacation,
personal days, sick days and expense reimbursement. If Mr. McDonald's employment is terminated for cause, due to death, due to
disability or voluntary resignation, he will be paid his base salary to the date of termination, any unpaid annual bonus, COBRA benefits
and any unpaid expense reimbursement. If he is terminated without cause or he resigns for good reason, then he will be paid one year's
base salary, and the annual bonus for that year. The employment agreement has typical activity restrictions for non-solicitation of customers
and employees of the Company and covenants for confidentiality, non-competition, inventions and protection of Company intellectual property.

 Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 PRINCIPAL
STOCKHOLDERS

 The
following table sets forth the shares of our common stock beneficially owned by (i) each of our directors, (ii) each of our named executive
officers, (iii) all of our directors and executive officers as a group, and (iv) all persons known by us to beneficially own more than
5% of our outstanding common stock as of the date of the filing of this report.

 The
Company has determined the beneficial ownership shown on this table in accordance with the rules of the SEC. Under these rules, shares
are considered beneficially owned if held by the person indicated, or if such person, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares the power to vote, to direct the voting of and/or to dispose of or to direct
the disposition of such shares. A person is also deemed to be a beneficial owner of shares if that person has the right to acquire such
shares within 60 days through the exercise of any warrant, option or right or through conversion of a security. Except as otherwise indicated
in the accompanying footnotes, the information in the table below is based on information as of March 27, 2025. Unless otherwise indicated
in the footnotes to the following table, each person named in the table has sole voting and investment power with respect to shares of
common and preferred stock and the address for such person is c/o CEA Industries Inc. 385 South Pierce Avenue, Suite C, Louisville, CO
80027.

 Stock

 Name
 of Beneficial Owner

 of Shares Owned Beneficially (1)

 Percentage
 of Class (2)

 Directors

 K. McDonald (3)

 19,025

 2.4
 %

 J. Etten (4)

 10,227

 1.3
 %

 Mariathasan (5)

 9,627

 1.2
 %

 James
 R. Shipley (6)

 3,959

 *
 %

 Tarallo (7)

 1,529

 *
 %

 Officers and Directors as a Group (8)

 44,367

 5.5
 %

 5%
 or More Stockholders

 Lance
 Finlinson (9)

 67,164

 8.4
 %

 Equity Group LLC, Rochel M. Kassiere and Chaim Herzog (10)

 61,308

 7.6
 %

 *Represents
 less than 0.1%.

 (1)
 Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act.

 (2)
 Based on a total of 802,346 shares of the Company's common stock issued and outstanding as of March 27, 2025.

 (3)
 Includes (i) 7,947 shares of common stock held of record, and (ii) 11,078 shares of common stock issuable upon the exercise of options
 exercisable within 60 days.

 (4)
 Includes (i) 7,947 shares of common stock held of record, and (ii) 880 shares of common stock issuable upon the exercise of options
 exercisable within 60 days.

 (5)
 Includes 9,628 shares of common stock held of record.

 (6)
 Includes (i) 3,079 shares of common stock held of record, and (ii) 880 shares of common stock issuable upon the exercise of options
 exercisable within 60 days.

 (7)
 Includes 1,529 shares of common stock held of record. Does not include 1,529 shares of common stock subject to unvested equity awards.

 (8)
 Includes (i) 30,001 shares of common stock held of record, and (ii) 12,838 shares of common stock issuable upon the exercise of options
 exercisable within 60 days. Does not include 1,529 shares of common stock subject to unvested equity awards.

 (9)
 As reported on Form 13D filed by Lance Finlinson dated November 30, 2023, as adjusted for the reverse stock split effected June 4,
 2024.

 (10)
 As reported on Form 13D, Amendment No. 1, filed jointly by 111 Equity Group LLC, Rochel M. Kassirer, and Chaim Herzog dated June
 26, 2024.

 Item
13. Certain Relationships and Related Transactions, and Director Independence

 Transactions
with Related Parties

 The
Company entered into a manufacturer representative agreement with RSX Enterprises ("RSX") in March 2021 to become a non-exclusive
representative for the Company to assist in marketing and soliciting orders. James R. Shipley, one of our independent directors, has
a significant ownership interest in RSX.

 Under
the manufacturer representative agreement, RSX will act as a non-exclusive representative for the Company within the United States, Canada
and Mexico and may receive a commission for qualified customer leads. The agreement had an initial term through December 31, 2021 with
automatic one-year renewal terms unless notice is given 90 days prior to each annual expiration. During the years ended December 31,
2024, and December 31, 2023, the Company paid $6,763 and $18,273, respectively, in commissions under this agreement.

 On
October 13, 2022, the Company entered into an agreement with Lone Star Bioscience, Inc. (Lone Star) to provide engineering design services.
Nicholas Etten, one of our independent directors, is the Chief Executive Officer of Lone Star. The balance due under this agreement totaled
$2,500, with $1,250 received as a deposit in 2022. Another agreement for engineering services was signed on December 20, 2022, in the
amount of $10,900. We entered into positive change orders in March 2023 of $3,577, increasing the total of the second sales order to
$14,477. No transactions were recorded during the year ended December 31, 2024, in respect of these agreements.

 On
June 19, 2024, the Company engaged Nicholas J. Etten, a director of the Company, to provide services covering transaction sourcing and
evaluation, in the Company's effort to arrange for a merger, acquisition, combination or other strategic transaction. Mr. Etten
has a background in corporate development and investment banking in multiple industries. Mr. Etten will be paid a weekly fee of $2,500.
It is expected that Mr. Etten will provide a minimum of 10 hours per week, up to a maximum of 40 hours a month, as determined by the
Company and Mr. Etten. The consulting agreement will be on a month-to-month basis, and either the Company or Mr. Etten may terminate
the arrangement on five days' notice. The Company has agreed to indemnify Mr. Etten in respect of his services to the Company under
the agreement. During the year ended December 31, 2024, the Company paid Mr. Etten $58,250 in respect of services related to this agreement.

2024, except as discussed above, there have been no transactions in which the Company was or is a participant, and there are no currently
proposed transactions in which the Company is to be a participant, in which the amount involved exceeds the lesser of $120,000 or 1%
of the Company's average assets at year-end for the last two completed fiscal years, and in which any director, executive officer
or beneficial holder of more than 5% of any class of our voting securities or member of such person's immediate family had or will
have a direct or indirect material interest.

 Company
Policy Regarding Related Party Transactions

 The
Company has procedures in place for the review, approval and monitoring of transactions involving the Company and certain persons related
to the Company. The Company has a code of business conduct and ethics that generally prohibits any employee, officer or director from
engaging in any transaction where there is a conflict between such individual's personal interest and the interests of the Company.
Waivers to the code of business conduct and ethics can generally only be obtained from the Audit Committee of the Board and are publicly
disclosed as required by applicable law and regulations.

 In
addition, the Audit Committee of the Board will review all related party transactions for potential conflict of interest situations on
an ongoing basis (if such transactions are not reviewed and overseen by another independent body of the Board). In accordance with that
policy, the Audit Committee's practice is to review and oversee any transactions that are reportable as related party transactions
under the Financial Accounting Standards Board ("FASB") and SEC rules and regulations. Management advises the Board on a
regular basis of any such transaction that is proposed to be entered into or continued and seeks approval.

 Item
14. Principal Accountant Fees and Services

 Sadler,
Gibb & Associates, L.L.C. ("SGA") has acted as the Company's independent registered public accounting firm for
the fiscal years ended December 31, 2024, and December 31, 2023. SGA has advised us that neither the firm nor any present member or associate
of it has any material financial interest, direct or indirect, in the Company or its affiliates.

 The
following table summarizes the fees for SGA for the year ended December 31, 2024 and for the year ended December 31, 2023.

 2024

 2023

 Audit Fees

 $
 108,385

 $
 111,000

 Audit-Related Fees

 16,707

 2,725

 Tax Fees

 10,090
 (1)

 10,943
 (2)

 Total

 $
 135,182

 $
 124,668

 (1)

 Tax
fees in 2024 relate to tax returns for the 2023 year.

 (2)

 Tax
fees in 2023 relate to tax returns for the 2022 year.

 Audit
Fees. Audit fees consist of fees billed by our independent registered public accounting firms for professional services rendered
in connection with the audit of our annual consolidated financial statements, and the review of our consolidated financial statements
included in our quarterly reports.

 Audit-Related
Fees. Audit-related services consist of fees billed by our independent registered public accounting firms for assurance and related
services that are reasonably related to the performance of the audit or review of the Company's financial statements and are not
reported under "Audit Fees." These services include the review of our proxy statement.

 Tax
Fees. Tax fees consist of fees billed by our independent registered public accounting firms for professional services rendered for
tax compliance, tax planning and tax advice. These services include assistance regarding federal, state, and local tax compliance.

 All
Other Fees. All other fees would include fees for products and services other than the services reported above.

 Pre-Approval
Policy

 Our
Audit Committee of the Board pre-approves all services to be provided by our independent registered public accounting firm.

 PART
IV

 Item
15. Exhibits and Financial Statement Schedules

 a.
Documents Filed as Part of this Report

 The
following consolidated financial statements of CEA Industries Inc. are filed as part of this Annual Report on Form 10-K:

 Financial
 Statements

 Page(s)

 Report
 of Independent Registered Public Accounting Firm (PCAOB ID NO: 3627)

 - F-2

 Balance Sheets as of December 31, 2024 and 2023

 Statements of Operations for the Years Ended December 31, 2024 and 2023

 Statements of Changes in Shareholders' Equity (Deficit) for the Years Ended December 31, 2024 and 2023

 Statements of Cash Flows for the Years Ended December 31, 2024 and 2023

 Notes

 b.
Exhibits

 See
"Exhibit Index" on the page following the consolidated financial statements and related footnotes and the signature page
to this Annual Report on Form 10-K.

 c.
Financial Statement Schedules

 No
financial statement schedules are filed herewith because (i) such schedules are not required, or (ii) the information has been presented
in the aforementioned financial statements.

 Item
16. Form 10-K Summary

 The
Company has elected not to provide the summary of information under this item.

 CEA

 Financial
 Statements

 Page(s)

 Report
 of Independent Registered Public Accounting Firm (PCAOB ID NO: 3627)

 Balance Sheets as of December 31, 2024 and 2023

 Statements of Operations for the Years Ended December 31, 2024 and 2023

 Statements of Changes in Shareholders' Equity for the Years Ended December 31, 2024 and 2023

 Statements of Cash Flows for the Years Ended December 31, 2024 and 2023

 Notes

 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 To
the Board of Directors and Shareholders of CEA Industries Inc.:

 Opinion
on the Financial Statements

 We
have audited the accompanying consolidated balance sheets of CEA Industries Inc. ("the Company") as of December 31, 2024
and 2023, the related consolidated statements of operations, changes in shareholders' equity, and cash flows for each of the years
in the two-year period December 31, 2024 and the related notes (collectively referred to as the "financial statements").
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company
as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period December
31, 2024, in conformity with accounting principles generally accepted in the United States of America.

 Basis
for Opinion

 These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.

 Critical
Audit Matters

 The
critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated
or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical matter
below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Recognition – Contracts with Multiple Performance Obligations

 Critical
Audit Matter Description

 As
described in Note 2 to the financial statements, the Company's contracts with customers often include the promise to transfer multiple
goods and services to a customer. Distinct promises within a contract are referred to as performance obligations and are accounted for
as separate units of account. Management assesses whether each promised good or service is distinct for the purpose of identifying the
performance obligations in the contract. This assessment involves subjective determinations and requires management to make judgments
about the individual promised goods or services and whether such goods or services are separable from the other aspects of the contractual
relationship. The Company's performance obligations include various distinct goods and services such as equipment and various engineering
services. When multiple performance obligations are identified within a contract, management exercises judgement in allocating the transaction
price amongst the various performance obligations. In addition, when discounts are provided for a particular contract, the discount is
allocated to each performance obligation proportionally based upon the stand-alone selling price of each performance obligation.

 F- 1

 We
determined that performing procedures related to the identification of performance obligations in revenue contracts and allocation of
the transaction price to the respective performance obligations is a critical audit matter as there was significant judgment by management
in identifying performance obligations in revenue contracts and allocating the consideration, which in turn led to a high degree of auditor
judgment, subjectivity and effort in performing procedures to evaluate whether performance obligations in revenue contracts were appropriately
identified by management and consideration was appropriately allocated.

 How
the Critical Audit Matter Was Addressed in the Audit

 Our
audit procedures related to the following:

 Obtaining
 an understanding and testing management's process for identifying, evaluating, and accounting for contracts with multiple performance
 obligations.

 Examining
 revenue arrangements on a test basis, including assessing the key terms and conditions of the arrangements and testing the identification,
 evaluation, and accounting of the performance obligation for conformity with relevant authoritative guidance.

 Evaluating
 the reasonableness of the approaches used to determine estimated stand-alone selling price and allocation of the transaction price.

 /s/
 Sadler, Gibb & Associates, LLC

 We
have served as the Company's auditor since 2020.

 Draper,
UT

 March
27, 2025

 F- 2

 CEA

Balance Sheets

 31,

 31,

 2024

 2023

 ASSETS

 Current
 Assets

 Cash
 and cash equivalents

 $
 9,452,826

 $
 12,508,251

 receivable, net

 13,041

 18,655

 assets, net

 234,328

 224,414

 Inventory,
 net

 25,980

 296,404

 Prepaid
 expenses and other

 368,068

 313,115

 Total
 Current Assets

 10,094,243

 13,360,839

 Noncurrent
 Assets

 and equipment, net

 5,698

 38,558

 assets, net

 1,830

 1,830

 Deposits

 14,747

 14,747

 lease right-of-use asset

 245,270

 356,109

 Total
 Noncurrent Assets

 267,545

 411,244

 TOTAL
 ASSETS

 $
 10,361,788

 $
 13,772,083

 LIABILITIES
 AND SHAREHOLDERS' EQUITY

 LIABILITIES

 Current
 Liabilities

 payable and accrued liabilities

 $
 550,477

 $
 624,724

 Deferred
 revenue

 343,790

 499,800

 Current
 portion of operating lease liability

 135,651

 126,724

 Total
 Current Liabilities

 1,029,918

 1,251,248

 Noncurrent
 Liabilities

 lease liability, net of current portion

 134,147

 259,627

 Total
 Noncurrent Liabilities

 134,147

 259,627

 TOTAL
 LIABILITIES

 1,164,065

 1,510,875

 and Contingencies (Note 9)

 -

 -

 SHAREHOLDERS'
 EQUITY

 Preferred stock, $ 0.00001 par value; 25,000,000 shares authorized; 0 shares issued and outstanding

 -

 -

 stock, $ 0.00001 par value; 200,000,000 authorized; 793,109 and 673,090 shares issued and outstanding, respectively

 Additional
 paid in capital

 49,533,950

 49,451,493

 Accumulated
 deficit

 ( 40,336,235
)

 ( 37,190,292
)

 Total
 Shareholders' Equity

 9,197,723

 12,261,208

 TOTAL
 LIABILITIES AND SHAREHOLDERS' EQUITY

 $
 10,361,788

 $
 13,772,083

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

 F- 3

 CEA

Statements of Operations

 For the Years Ended December 31,

 2024

 2023

 $
 2,803,470

 $
 6,910,951

 Cost
 of revenue

 3,023,094

 6,368,872

 Gross
 (loss) profit

 ( 219,624
)

 542,079

 expenses:

 Advertising
 and marketing expenses

 16,315

 273,409

 development costs

 -

 76,487

 Selling,
 general and administrative expenses

 2,936,145

 3,145,328

 Total
 operating expenses

 2,952,460

 3,495,224

 loss

 ( 3,172,084
)

 ( 2,953,145
)

 Other
 income:

 Other
 income, net

 -

 7,778

 Interest
 income, net

 26,141

 33,816

 Total
 other income

 26,141

 41,594

 Loss
 before provision for income taxes

)

)

 taxes

 -

 -

 Net
 loss

 $
)

 $
)

 Loss
 per common share – basic and diluted

 $
 ( 4.22
)

 $
 ( 4.33
)

 average number of common shares outstanding, basic and diluted

 745,038

 672,936

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

 F- 4

 CEA

Statements of Changes in Shareholders' Equity

 Stock

 of Shares

 Amount

 Additional
 Paid in Capital

 Accumulated
 Deficit

 Shareholders'

 Balance
 December 31, 2022

 662,890

 $

 $
 49,173,909

 $
 ( 34,278,741
)

 $
 14,895,175

 Fair
 value of vested stock options granted to employees

 -

 -

 176,268

 -

 176,268

 shares issued in settlement of restricted stock units issued to directors

 10,200

 -

 -

 -

 -

 Fair
 value of restricted stock units issued to directors

 -

 -

 101,316

 -

 101,316

 Net
 loss

 -

 -

 -

)

)

 Balance December
 31, 2023

 673,090

 $

 $
 49,451,493

 $
 ( 37,190,292
)

 $
 12,261,208

 Balance

 673,090

 $

 $
 49,451,493

 $
 ( 37,190,292
)

 $
 12,261,208

 Fair
 value of vested stock options granted to employees, net of forfeitures for unvested stock options granted to employees

 -

 -

 ( 5,522
)

 -

 ( 5,522
)

 shares issued in settlement of restricted stock units issued to directors

 12,893

 -

 -

 -

 -

 Fair
 value of restricted stock units issued to directors

 -

 -

 87,980

 87,980

 Issuance
 of common shares to round up partial shares following reverse split

 107,126

 ( 1
)

 -

 -

 Net
 loss

 -

 -

 -

)

)

 Balance

 793,109

 $

 $
 49,533,950

 $
 ( 40,336,235
)

 $
 9,197,723

 Balance

 793,109

 $

 $
 49,533,950

 $
 ( 40,336,235
)

 $
 9,197,723

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

 F- 5

 CEA

Statements of Cash Flows

 2024

 2023

 For
 the Twelve Months Ended December 31,

 2024

 2023

 Cash
 Flows From Operating Activities:

 Net
 loss

 $
)

 $
)

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

 Depreciation
 and intangible asset amortization expense

 20,065

 29,655

 Share-based
 compensation

 82,457

 187,615

 Provision
 for doubtful accounts (bad debt recovery)

 ( 40,217
)

 ( 2,056
)

 Provision
 for excess and obsolete inventory

 26,989

 121,791

 Loss
 on disposal of assets

 12,796

 lease expense

 110,839

 106,765

 Changes
 in operating assets and liabilities:

 receivable

 45,831

 ( 13,950
)

 assets

 ( 9,914
)

 ( 224,414
)

 Inventory

 243,435

 ( 69,784
)

 Prepaid
 expenses and other

 ( 54,953
)

 1,176,806

 payable and accrued liabilities

 ( 74,247
)

 ( 582,534
)

 Deferred
 revenue

 ( 156,010
)

 ( 3,838,771
)

 lease liability, net

 ( 116,553
)

 ( 108,735
)

 Net
 cash used in operating activities

 ( 3,055,425
)

 ( 6,129,063
)

 Cash
 Flows From Investing Activities

 Proceeds
 from the sale of property and equipment

 -

 Net
 cash provided by investing activities

 -

 Cash
 Flows From Financing Activities

 Net
 cash provided by financing activities

 -

 -

 Net
 change in cash and cash equivalents

 ( 3,055,425
)

 ( 6,128,863
)

 Cash
 and cash equivalents, beginning of period

 12,508,251

 18,637,114

 Cash
 and cash equivalents, end of period

 $
 9,452,826

 $
 12,508,251

 Supplemental
 cash flow information:

 Interest
 paid

 $
 -

 $
 -

 taxes paid

 $
 -

 $
 -

 Non-cash
 investing and financing activities:

 Options
 issued for accrued equity compensation liability

 $
 -

 $
 89,970

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

 F- 6

 CEA

 Notes

 (in

 Note
1 – Organization and Description of Business

 CEA
Industries Inc., formerly Surna Inc. (the "Company"), was incorporated in Nevada on October 15, 2009. We design, engineer
and sell environmental control and other technologies for the Controlled Environment Agriculture ("CEA") industry. From leafy greens (kale, Swiss chard, mustard, cress),
microgreens (leafy greens harvested at the first true leaf stage), ethnic vegetables, ornamentals, and small fruits (such as strawberries,
blackberries and raspberries) to bell peppers, cucumbers, tomatoes and cannabis and hemp, more and more producers consider or act to
grow crops indoors in response to market dynamics or as part of their preferred farming practice. In service of the CEA industry, we
provide: (i) architectural design and licensed engineering of commercial scale thermodynamic systems specific to cultivation facilities,
(ii) liquid-based process cooling systems and other climate control systems, (iii) air handling equipment and systems, (iv) air sanitation
products, (v) LED lighting, (vi) benching and racking solutions for indoor cultivation, (vii) proprietary and third party controls systems
and technologies used for environmental, lighting, and climate control, and (viii) preventive maintenance services, through our partnership
with a certified service contractor network, for CEA facilities. Our customers include commercial, state- and provincial-regulated CEA
growers in the U.S. and Canada. Customers are those growers building new facilities and those expanding or retrofitting existing facilities.
Currently, our revenue stream is derived primarily from supplying our products, services, and technologies to commercial indoor facilities
ranging from several thousand to more than 100,000 square feet. Headquartered in Louisville, Colorado, we leverage our experience in
this space to bring value-added climate control solutions to our customers that help improve their overall crop quality and yield, optimize
energy and water efficiency, and satisfy the evolving state and local codes, permitting and regulatory requirements. Although most of
our customers do, we neither produce nor sell cannabis or its related products.

 Impact
of the COVID-19 Pandemic on Our Business

 The
impact of the government and the business economic response to the COVID-19 pandemic affected demand across the majority of our markets
and disrupted workflow and completion schedules on projects. We believe we continue to have adverse effects on our sales, project implementation,
supply chain infrastructure, operating margins, costs, and working capital, as a result of the pandemic. Due to this uncertainty, we
continue to monitor costs and continue to take actions to reduce costs in order to mitigate the long-term impact of the COVID-19 pandemic
to the best of our ability. However, these actions may not be sufficient in the long run to avoid reduced sales, increased losses, and
reduced operating cash flows in our business. During the years ended December 31, 2023, and December 31, 2024, the Company experienced
delays in the receipt of equipment it had ordered to meet its customer orders due to disruption and delays in its supply chain. Consequently,
our revenue recognition of some customer sales has been delayed until future periods when the shipment of orders can be completed.

 Impact
of Ukrainian and Israeli Conflicts

 We
believe that the conflicts involving Ukraine and Israel do not have any direct impact on our operations, financial condition, or financial
reporting. We believe the conflicts will have only a general impact on our operations in the same manner as it is having a general impact
on all businesses that have their operations limited to North America resulting from international sanction and embargo regulations,
possible shortages of goods and goods incorporating parts that may be supplied from countries involved in the conflicts, supply chain
challenges, and the international and US domestic inflation resulting from the conflict and government spending in relation to the conflicts.
As our operations are related only to the North American controlled agricultural industry, largely within the cannabis space, we do not
believe we will be specifically targeted for cyber-attacks related to the conflicts. We have no operations in the countries directly
involved in the conflict or are specifically impacted by any of the sanctions and embargoes specifically related to those conflicts,
as we principally operate in the United States and Canada. We do not believe that the conflicts will have any impact on our internal
control over financial reporting. Other than general securities market trends, we do not have reason to believe that investors will evaluate
the company as having special risks or exposures related to the conflicts.

 F- 7

 CEA

 Notes

 (in

 Note
2 – Basis of Presentation; Summary of Significant Accounting Policies

 Financial
Statement Presentation

 The
preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America ("GAAP") requires management to make estimates and assumptions that affect reported amounts and related disclosures.

 Liquidity

 The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business within one year after the date the consolidated
financial statements are available to be issued. The Company continues to experience recurring losses since its inception. As a
result, in order to continue as a going concern, the Company has historically been reliant on the ability to obtain additional
sources of financing to fund operations. On February 15, 2022, the Company received approximately $ 21,711,000
in net proceeds from completion of an equity offering. Based on management's evaluation, the proceeds from the Offering will
be more than sufficient to fund any deficiencies in working capital or cash flow from operations, and the Company is confident that
it will be able to meet its obligations as they come due, and fund operations for at least 12 months after the issuance of these
consolidated financial statements. Accordingly, the conditions around liquidity and limited working capital necessary to fund
operations have been addressed.

 In
the event that the Company was to decide to enter into an acquisition for which it had insufficient funding on hand to complete the transaction,
the Company would be required to raise additional debt and or equity funding to complete the acquisition. There can be no assurance that
the Company would be successful in raising the necessary debt and or equity funding to successfully complete the acquisition.

 Reverse
Stock Split

 On
May 7, 2024, the Company's Board of Directors approved a reverse stock split at a ratio of one-for-twelve. The reverse stock split
was effective June 7, 2024. The par value for the Common Stock was not affected.

 As
a result of the reverse stock split, all outstanding options, restricted stock units, and common stock purchase warrants were proportionately
adjusted as to number of securities and exercise prices.

 All
Common Stock, warrants, options and per share amounts set forth herein are presented to give retroactive effect to the Reverse Split
for all periods presented.

 Principles
of Consolidation

 The
consolidated financial statements include the accounts of the Company and its controlled and wholly owned subsidiary, Hydro Innovations,
LLC ("Hydro"). Intercompany transactions, profit, and balances are eliminated in consolidation.

 Use
of Estimates

makes estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and that affect the reported amounts of revenue and expenses during the reporting
period. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results could differ from those estimates. Key estimates include: allocation of transaction
prices to performance obligations under contracts with customers, standalone selling prices, timing of expected revenue recognition on
remaining performance obligations under contracts with customers, valuation of intangible assets as it applies to impairment analysis,
valuation of equity-based compensation, valuation of deferred tax assets and liabilities, warranty accruals, inventory allowances, and
legal contingencies.

 F- 8

 CEA

 Notes

 (in

 Cash
and Cash Equivalents

 All
highly liquid investments with original maturities of three months or less at the date of purchase are considered to be cash equivalents.
The Company maintains deposits in financial institutions that exceed the federally insured amount of $ 250,000. As of December 31, 2024,
the Company held cash in bank depository accounts of approximately $ 9,453,000, consequently $ 9,203,000 of this balance was not insured
by the FDIC. The Company has not experienced any losses to date on depository accounts.

Receivable and Allowance for Doubtful Accounts

receivables are recorded at the invoiced amount, and generally do not bear interest. In accordance with ASU No. 2016-13 (as amended),
 Measurement of Credit Losses on Financial Instruments, which the Company adopted on a prospective basis effective January 1, 2023,
 an allowance for doubtful accounts is recorded against the Company's receivables by
applying an expected credit loss model. Each period, management assesses the appropriateness of the level of allowance for credit losses
by considering credit risk inherent within its receivables as of the end of the period. The Company considers a receivable past due when
a debtor has not paid us by the contractually specified payment due date. Account balances are written off against the allowance for
credit losses if collection efforts are unsuccessful and the receivable balance is deemed uncollectible (debtor default), based on factors
such as the debtor's credit rating as well as the length of time the amounts are past due. As of December 31, 2024, and December
31, 2023, the allowance for doubtful accounts was $ 84,961 and $ 125,177, respectively. If the financial condition of our customers were
to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

 Inventory

 Inventory
is stated at the lower of cost or net realizable value. The inventory is valued based on a first-in, first-out ("FIFO") basis.
Lower of cost or net realizable value is evaluated by considering obsolescence, excessive levels of inventory, deterioration and other
factors. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolescence
or impaired inventory. Excess and obsolete inventory is charged to cost of revenue and a new lower-cost basis for that inventory is established
and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
As of December 31, 2024, and December 31, 2023, the allowance for excess and obsolete inventory was $ 219,687 and $ 192,698, respectively.

and Equipment

and equipment are stated at cost. For financial statement purposes, property and equipment are recorded at cost and depreciated using
the straight-line method over their estimated useful lives as disclosed in the table below. Leasehold improvements are amortized on a
straight-line basis over the lesser of their useful lives or the life of the lease. Upon sale or retirement of assets, the cost and related
accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is reflected in operations.
Maintenance and repairs are charged to operations as incurred.

of Property and Equipment Estimated Useful Life

 Asset
 Type

 Estimated
 Useful Life

 Furniture
 and fixtures

 Computers

 Equipment

 Vehicles

 Long-lived
Assets

 Long-lived
assets, including property and equipment and intangible assets, are reviewed for impairment whenever events or changes in business circumstances
indicate the carrying value of the assets may not be recoverable. When such an event occurs, management determines whether there has
been impairment by comparing the anticipated undiscounted future net cash flows to the related asset's carrying value. If an asset
is considered impaired, the asset is written down to fair value, which is determined based either on discounted cash flows or appraised
value, depending on the nature of the asset. The Company has not identified any indicators of impairment during the years ended December
31, 2024 and 2023.

 F- 9

 CEA

 Notes

 (in

Assets

assets consist of website development costs and trademarks. Website development costs are amortized over five years. Trademarks are not
amortized since they have an indefinite life.

 Fair
Value Measurement

 The
Company records its financial assets and liabilities at fair value. The accounting standard for fair value provides a framework for measuring
fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined
as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between
market participants at the reporting date. The accounting standard establishes a three-tier hierarchy, which prioritizes the inputs used
in the valuation methodologies in measuring fair value:

 Level
1 - inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

 Level
2 - inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability,
either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

 Level
3 - inputs are unobservable inputs based on the Company's assumptions used to measure assets and liabilities at fair value.

 A
financial asset or liability's classification within the hierarchy is determined based on the lowest level of input that is significant
to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement
in its entirety requires management to make judgments and consider factors specific to the asset or liability.

 Due
to their short-term nature, the carrying values of accounts receivable, contract assets, accounts payable, and accrued expenses, approximate
fair value.

 Leases

 The
Company accounts for leases in accordance with ASC 842. The Company determines whether a contract is a lease at contract inception or
for a modified contract at the modification date. At inception or modification, the Company recognizes right-of-use ("ROU")
assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. Lease liabilities and their
corresponding ROU assets are initially measured at the present value of the unpaid lease payments as of the lease commencement date.
If the lease contains a renewal and/or termination option, the exercise of the option is included in the term of the lease if the Company
is reasonably certain that a renewal or termination option will be exercised. As the Company's leases do not provide an implicit
rate, the Company uses an estimated incremental borrowing rate ("IBR") based on the information available at the commencement
date of the respective lease to determine the present value of future payments. The IBR is determined by estimating what it would cost
the Company to borrow a collateralized amount equal to the total lease payments over the lease term based on the contractual terms of
the lease and the location of the leased asset.

lease payments are recognized as an expense on a straight-line basis over the lease term in equal amounts of rent expense attributed
to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess
of cash payments during the early years of a lease and rent expense less than cash payments in later years. The difference between rent
expense recognized and actual rental payments is typically represented as the spread between the ROU asset and lease liability.

 The
Company's facilities operating leases have lease and non-lease fixed cost components, which we account for as one single lease
component in calculating the present value of minimum lease payments. Variable lease and non-lease cost components are expensed as incurred.

 F- 10

 CEA

 Notes

 (in

 The
Company does not recognize ROU assets and lease liabilities for short-term leases that have an initial lease term of 12 months or less.
The Company recognizes the lease payments associated with short-term leases as an expense on a straight-line basis over the lease term.

Recognition

 On
January 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2014-09 (Topic 606), Revenue from Contracts with
Customers and all the related amendments ("ASC 606" or the "revenue standard") to all contracts and elected
the modified retrospective method.

Recognition Accounting Policy Summary

 The
Company accounts for revenue in accordance with ASC 606. Under the revenue standard, a performance obligation is a promise in a contract
with a customer to transfer a distinct good or service to the customer. Most of the Company's contracts contain multiple performance
obligations that include engineering and technical services as well as the delivery of a diverse range of climate control system equipment
and components, which can span multiple phases of a customer's project life cycle from facility design and construction to equipment
delivery and system installation and start-up. The Company does not provide construction services or system installation services. Some
of the Company's contracts with customers contain a single performance obligation, typically engineering only services contracts.

 A
contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance
obligation is satisfied. When there are multiple performance obligations within a contract, the Company allocates the transaction price
to each performance obligation based on standalone selling price. When estimating the selling price, the Company uses various observable
inputs. The best observable input is the Company's actual selling price for the same good or service, however, this input is generally
not available for the Company's contracts containing multiple performance obligations. For engineering services, the Company estimates
the standalone selling price by reference to certain physical characteristics of the project, such as facility size and mechanical systems
involved, which are indicative of the scope and complexity of the mechanical engineering services to be provided. For equipment sales,
the standalone selling price is determined by forecasting the expected costs of the equipment and components and then adding an appropriate
margin, based on a range of acceptable margins established by management. Depending on the nature of the performance obligations, the
Company may use a combination of different methods and observable inputs if certain performance obligations have highly variable or uncertain
standalone selling prices. Once the selling prices are determined, the Company applies the relative values to the total contract consideration
and estimates the amount of the transaction price to be recognized as each promise is fulfilled.

 Generally,
satisfaction occurs when control of the promised goods is transferred to the customer or as services are rendered or completed in exchange
for consideration in an amount for which the Company expects to be entitled. The Company recognizes revenue for the sale of goods when
control transfers to the customer, which primarily occurs at the time of shipment. The Company has elected to exclude from the measurement
of the transaction price all taxes (e.g., sales, use, value added, and certain excise taxes) that are assessed by a governmental authority
in connection with a specific revenue-producing transaction and collected by the Company from the customer. Accordingly, the Company
recognizes revenue net of sales taxes. The revenue and cost for freight and shipping is recorded when control over the sale of goods
passes to the Company's customers.

 The
Company also has performance obligations to perform certain engineering services that are satisfied over a period of time. Revenue is
recognized from this type of performance obligation as services are rendered based on the percentage completion towards certain specified
milestones.

 The
Company offers assurance-type warranties for its products and products manufactured by others to meet specifications defined by the contracts
with customers and does not have any material separate performance obligations related to these warranties. The Company maintains a warranty
reserve based on historical warranty costs.

 F- 11

 CEA

 Notes

 (in

 Disaggregation
of Revenue

 In
accordance with ASC 606-10-50-5 through 6, the Company considered the appropriate level of disaggregated revenue information that depicts
how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Additionally, per the implementation
guidance in ASC 606-10-55-90 through 91, the Company also considered (a) disclosures presented outside of the financial statements such
as earnings releases and investor presentations, (b) information regularly reviewed by the Chief Operating Decision Maker for evaluating
the financial performance of operating segments and (c) other information that is similar to the types of information identified in (a)
and (b) and that is used by the Company or users of the Company's financial statements to evaluate financial performance or make
resource allocation decisions. Finally, we considered the examples of categories found in the guidance that might be appropriate, including:
(a) type of good or service (major product lines), (b) geographical region (country or region), (c) market or type of customer (government
or non-government customers), (d) type of contract (fixed-price or time-and-materials), (e) contract duration (short- or long-term),
(f) timing of transfer of goods or services (point-in-time or over time) and (g) sales channels (direct to customers or through intermediaries).

 Based
on the aforementioned guidance and considerations, the Company determined that disaggregation of revenue by equipment sales, engineering
and other services, shipping and handling, and forfeited non-refundable customer deposits was required.

 The
following table sets forth the Company's revenue by source:

of Revenue by Source

 2024

 2023

 For
 the Years Ended December 31,

 2024

 2023

 Equipment
 and systems sales

 $
 2,386,112

 $
 6,153,322

 Engineering
 and other services

 317,443

 501,921

 Shipping
 and handling

 10,429

 21,573

 non-refundable customer deposits

 89,486

 234,135

 Total
 revenue

 $
 2,803,470

 $
 6,910,951

 Other
Judgments and Assumptions

 The
Company typically receives customer payments in advance of its performance of services or transfers of goods. Applying the practical
expedient in ASC 606-10-32-18, which the Company has elected, the Company does not adjust the promised amount of consideration for the
effects of a significant financing component since the Company expects, at contract inception, that the period between when the Company
transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Accordingly,
the remaining performance obligations related to customer contracts does not consider the effects of the time value of money.

 Applying
the practical expedient in ASC 340-40-25-4, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred
since the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs include
certain sales commissions and incentives, which are included in selling, general and administrative expenses, and are payable only when
associated revenue has been collected and earned by the Company.

Assets and Contract Liabilities

assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities relate to
payments received in advance of the satisfaction of performance under the contract. The Company receives payments from customers based
on the terms established in its contracts.

 F- 12

 CEA

 Notes

 (in

assets include unbilled amounts where revenue recognized exceeds the amount billed to the customer and the right of payment is conditional,
subject to completing a milestone, such as a phase of a project. The Company typically does not have material amounts of contract assets
since revenue is recognized as control of goods are transferred or as services are performed. In accordance with ASU No. 2016-13 (as
amended), Measurement of Credit Losses on Financial Instruments, which the Company adopted on a prospective basis effective January
1, 2023, an allowance for doubtful accounts is recorded against the Company's contract assets
 by applying an expected credit loss model. Each period, management assesses the appropriateness of the level of allowance for
credit losses by considering credit risk inherent within its contract assets as of the end of the period. As of December 31, 2024, and
December 31, 2023, the allowance for doubtful accounts was $ 1,500 and $ 1,436,
respectively. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. We expect to complete our performance obligations and bill the customer for this contract asset
during 2024. As of December 31, 2024, and 2023, the Company had contract assets of $ 234,328 and $ 224,414,
respectively.

liabilities consist of advance payments in excess of revenue recognized. The Company's contract liabilities are recorded as a current
liability in deferred revenue in the consolidated balance sheets since the timing of when the Company expects to recognize revenue is
generally less than one year. As of December 31, 2024, and December 31, 2023, deferred revenue, which was classified as a current liability,
was $ 343,790 and $ 499,800, respectively.

 For
the year ended December 31, 2024, the Company recognized revenue of $ 162,461 related to the deferred revenue at January 1, 2024, or 33 %.
For the year ended December 31, 2023, the Company recognized revenue of $ 3,911,083 related to the deferred revenue at January 1, 2023,
or 90 %.

Performance Obligations

performance obligations, or backlog, represents the aggregate amount of the transaction price allocated to the remaining obligations
that the Company has not performed under its customer contracts. The Company has elected not to use the optional exemption in ASC 606-10-50-14,
which exempts an entity from such disclosures if a performance obligation is part of a contract with an original expected duration of
one year or less. Accordingly, the information disclosed about remaining performance obligations includes all customer contracts, including
those with an expected duration of one year or less.

 Industry
uncertainty, project financing concerns, and the licensing and qualification of our prospective customers, which are out of the Company's
control, make it difficult for the Company to predict when it will recognize revenue on its remaining performance obligations. There
are risks that the Company may not realize the full contract value on customer projects in a timely manner or at all, and completion
of a customer's cultivation facility project is dependent upon the customer's ability to secure funding and real estate,
obtain a license and then build their cultivation facility so they can take possession of the equipment. Accordingly, the time it takes
for customers to complete a project, which corresponds to when the Company is able to recognize revenue, is driven by numerous factors
including: (i) the large number of first-time participants interested in the indoor cannabis cultivation business; (ii) the complexities
and uncertainties involved in obtaining state and local licensure and permitting; (iii) local and state government delays in approving
licenses and permits due to lack of staff or the large number of pending applications, especially in states where there is no cap on
the number of cultivators; (iv) the customer's need to obtain cultivation facility financing; (v) the time needed, and coordination
required, for our customers to acquire real estate and properly design and build the facility (to the stage when climate control systems
can be installed); (vi) the large price tag and technical complexities of the climate control and air sanitation system; (vii) the availability
of power; and (viii) delays that are typical in completing any construction project. Further, based on the current economic climate,
the uncertainty regarding the COVID-19 virus, and the Company's recent cost cutting measures, there is no assurance that the Company
will be able to fulfil its backlog, and the Company may experience contract cancellations, project scope reductions and project delays.

 As
of December 31, 2024, the Company's remaining performance obligations, or backlog, was $ 490,000. There is significant uncertainty
regarding the timing of the Company's recognition of revenue on its remaining performance obligations, and there is no certainty
that these will result in actual revenues. The backlog at December 31, 2024, contains a booked sales order of $ 3,600 ( 1 % of the total
backlog) from one customer that we believe is at risk of cancellation based on conversations with this customer.

 F- 13

 CEA

 Notes

 (in

 The
remaining performance obligations expected to be recognized through 2025 are as follows:

of Remaining Performance Obligations Expected to be Recognized

 2025

 Total

 performance obligations related to partial equipment & engineering paid contracts

 Total
 remaining performance obligations

 $

 $

Warranty

 The
Company warrants the products that it manufactures for a warranty period equal to the lesser of 12 months from start-up or 18 months
from shipment. The Company's warranty provides for the repair, rework, or replacement of products (at the Company's option)
that fail to perform within stated specification. The Company's third-party suppliers also warrant their products under similar
terms, which are passed through to the Company's customers.

 The
Company assesses the historical warranty claims on its manufactured products and, since 2016, warranty claims have been approximately
1% of annual revenue generated on these products. Based on the Company's warranty policy, an accrual is established at 1% of the
trailing 18 months revenue. The Company continues to assess the need to record a warranty reserve at the time of sale based on historical
claims and other factors. As of December 31, 2024, and December 31, 2023, the Company had an accrued warranty reserve amount of $ 53,148
and $ 191,338, respectively, which are included in accounts payable and accrued liabilities on the Company's consolidated balance
sheets.

 Cost
of Revenue

 Cost
of revenue includes product costs (material, direct labor and overhead costs), shipping and handling expense, outside engineering costs,
engineering, project management and service salaries and benefits, client visits and warranty.

 Concentrations

 Two
customers accounted for 45 %, and 10 % of the Company's revenue for the year ended December 31, 2024. Three customers accounted for
 37 %, 21 % and 12 % of the Company's revenue for the year ended December 31, 2023.

 The
Company's accounts receivable from two customers made up 61 %, and 36 %, respectively, of the total balance as of December 31, 2024.
The Company's accounts receivable from three customers made up 59 %, 29 %, and 12 %, respectively, of the total balance as of December
31, 2023.

 One
supplier accounted for 80 % of the Company's purchases of inventory for the year ended December 31, 2024, and three suppliers accounted
for 34 %, 17 %, 16 %, of the Company's purchases of inventory for the year ended December 31, 2023.

Development

 The
Company expenses product development costs as incurred. Internal product development costs are expensed as incurred, and third-party
product developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. For the
years ended December 31, 2024 and December 31, 2023, the Company incurred $ 0 and $ 76,487, respectively, on product development.

 Share-Based Compensation

 The
Company recognizes the cost resulting from all share-based compensation arrangements, including stock options, restricted stock awards
and restricted stock units that the Company grants under its equity incentive plan in its consolidated financial statements based on
their grant date fair value. For awards subject to service conditions, compensation expense is recognized over the vesting period on
a straight-line basis. Awards subject to performance conditions are attributed separately for each vesting tranche of the award and are
recognized rateably from the service inception date to the vesting date for each tranche, based on the probability of vesting. The probability
of awards with future performance conditions is evaluated each reporting period and compensation expense is adjusted based on the probability
assessment.

 F- 14

 CEA

 Notes

 (in

 Awards
are considered granted, and the service inception date begins, when mutual understanding of the key terms and conditions of the award
between the Company and the recipient has been established. For awards that provide discretion to adjust the amount of the award, the
service inception date for such awards could precede the grant date as a mutual understanding of the key terms and conditions of the
award between the Company and the recipient has not yet been established. For awards in which the service inception date precedes the
grant date, compensation cost is accrued beginning on the service inception date.

 The
grant date fair value of stock options is based on the Black-Scholes Model. The Black-Scholes Model requires judgmental assumptions including
volatility and expected term, both based on historical experience. The risk-free interest rate is based on U.S. Treasury interest rates
whose term is consistent with the expected term of the option.

 The
grant date fair value of restricted stock and restricted stock units is based on the closing price of the underlying stock on the date
of the grant.

 The
Company has elected to reduce share-based compensation expense for forfeitures as the forfeitures occur since the Company does not have
historical data or other factors to appropriately estimate the expected employee terminations and to evaluate whether particular groups
of employees have significantly different forfeiture expectations.

Taxes

 The
Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company
determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets
and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change
in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

 The
Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized.
In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing
taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company
determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company
would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

 The
Company records uncertain tax positions on the basis of a two-step process in which: (i) the Company determines whether it is more likely
than not that the tax positions will be sustained on the basis of the technical merits of the position, and (ii) for those tax positions
that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more likely
than not to be realized upon ultimate settlement with the related tax authority.

 Basic
and Diluted Net Loss per Common Share

 Basic
income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average
number of common shares outstanding during the period without consideration of common stock equivalents. Diluted net income (loss) per
common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding and potentially dilutive
common stock equivalents, including stock options, warrants and restricted stock units and other equity-based awards, except in periods
when losses are reported where the effect of the common stock equivalents would be antidilutive. Potential common stock equivalents consist
of common stock issuable upon exercise of stock options and warrants and the vesting of restricted stock units using the treasury method.
As of December 31, 2024, and December 31, 2023, 643,998 and 665,243 potential common share equivalents from warrants, options, and restricted
stock units, respectively, were excluded from the diluted EPS calculations as their effect is anti-dilutive.

 F- 15

 CEA

 Notes

 (in

and Contingencies

 In
the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its
business, that cover a wide range of matters, including, among others, customer disputes, government investigations and tax matters.
An accrual for a loss contingency is recognized when it is probable that an asset had been impaired, or a liability had been incurred
and the amount of loss can be reasonably estimated.

 Other
Risks and Uncertainties

 To
achieve profitable operations, the Company must successfully develop, manufacture and market its products. There can be no assurance
that any such products can be developed or manufactured at an acceptable cost and with appropriate performance characteristics, or that
such products will be successfully marketed. These factors could have a material adverse effect upon the Company's financial results,
financial position, and future cash flows.

 The
Company is subject to risks common to similarly-situated companies including, but not limited to, general economic conditions, its customers'
operations and access to capital, and market and business disruptions including severe weather conditions, natural disasters, health
hazards, terrorist activities, financial crises, political crises or other major events, or the prospect of these events, new technological
innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, uncertainty of
market acceptance of products, product liability, and the need to obtain additional financing. As a supplier of services and equipment
to cannabis cultivators, the Company is also subject to risks related to the cannabis industry. Although certain states have legalized
medical and/or recreational cannabis, U.S. federal laws continue to prohibit marijuana in all its forms as well as its derivatives. Any
changes in the enforcement of U.S. federal laws may adversely affect the implementation of state and local cannabis laws and regulations
that permit medical or recreational cannabis and, correspondingly, may adversely impact the Company's customers. The Company's
success is also dependent upon its ability to raise additional capital and to successfully develop and market its products.

 Segment
Information

segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly
by the Company's senior management team in deciding how to allocate resources and in assessing performance. The Company has one
operating segment that is dedicated to the manufacture and sale of its products.

 Recently
Issued Accounting Pronouncements

 In
November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-04
– Debt – Debt with Conversion and Other Options: Induced Conversions of Convertible Debt Instruments, which improves the
relevance and consistency in application of the induced conversion guidance in Subtopic 470-20, Debt-Debt with Conversion and Other Options.
Specifically, the guidance is intended to clarify how to determine whether a settlement of convertible debt (particularly cash convertible
instruments) at terms that differ from the original conversion terms should be accounted for under the induced conversion or extinguishment
guidance. The amendments in this update are effective for all entities for annual reporting periods beginning after December 15, 2025,
and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the
amendments in Update 2020-06. The Company is currently evaluating the impact this guidance will have on the Company's financial
statements and related disclosures.

 In
November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures
(Subtopic 22-40): Disaggregation of Income Statement Expenses. The ASU requires entities to provide enhanced disclosures related to certain
costs and expenses in the notes to the financial statements. The guidance is effective for annual reporting periods beginning after December
15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating
the impact this guidance will have on the Company's financial statements and related disclosures.

 F- 16

 CEA

 Notes

 (in

 In
December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2023-09, Improvements to Income Tax
Disclosures (ASU 2023-09). ASU 2023-09 includes requirements that an entity disclose specific categories in the rate reconciliation and
provide additional information for reconciling items that are greater than five percent of the amount computed by multiplying pretax
income (or loss) by the applicable statutory income tax rate. The standard also requires that entities disclose income (or loss) from
continuing operations before income tax expense (or benefit) and income tax expense (or benefit) each disaggregated between domestic
and foreign. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The Company is currently assessing the impact
of ASU 2023-09 on its disclosures.

 In
November 2023, the FASB issued Accounting Standards Update 2023-07, Improvements to Reportable Segment Disclosures (ASU 2023-07). ASU
2023-07 includes requirements that an entity disclose the title of the chief operating decision maker (CODM) and on an interim and annual
basis, significant segment expenses and the composition of other segment items for each segment's reported profit. The standard
also permits disclosure of additional measures of segment profit. ASU 2023-07 is effective for fiscal years beginning after December
15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of
ASU 2023-07 has not had a material impact on the Company's financial statements
and related disclosures.

 In
December 2022, the FASB issued ASU No. 2022-06, which defers the sunset date of Reference Rate Reform (Topic 848): Facilitation of
the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04") from December 31, 2022 to December 31, 2024.
ASU No. 2022-06 was effective upon issuance. Topic 848 provides temporary optional guidance for a limited period of time to ease the
potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting, providing optional expedients
and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain
criteria are met. The Company does not expect this ASU to have a material impact on its consolidated results of operations, cash flows
and financial position.

 Other
accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have
a material impact on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated
to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

 Note
3 – Leases

 The
Louisville Facility Lease

 On
July 28, 2021, the Company entered into an agreement to lease 11,491 square feet of office and manufacturing space (the "New Facility
Lease"), in Louisville, CO. The New Facility lease commenced on November 1, 2021 and continues through January 31, 2027. From November
2021 through January 2022, the monthly rent was abated. Beginning February 2022, the monthly rent is $ 10,055 and will increase by 3 %
annually every November through the end of the New Facility Lease term. Pursuant to the New Facility Lease, the Company made a security
deposit of $ 14,747. The Company has the option to renew the New Facility Lease for an additional five years. Additionally, the Company
pays the actual amounts for property taxes, insurance, and common area maintenance. The New Facility Lease agreement contains customary
events of default, representations, warranties, and covenants.

 Upon
commencement of the New Facility Lease, the Company recognized on the balance sheet an operating lease right-of-use asset and lease liability
in the amount of $ 582,838. The lease liability was initially measured as the present value of the unpaid lease payments at commencement
and the ROU asset was initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments
made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. The renewal
option to extend the New Facility Lease is not included in the right-of-use asset or lease liability, as the option is not reasonably
certain to be exercised. The Company regularly evaluates the renewal option and when it is reasonably certain of exercise, the Company
will include the renewal period in its lease term.

 F- 17

 CEA

 Notes

 (in

 The
Company's operating and finance right-of-use assets and lease liabilities are as follows:

of Lease Cost

 As
 of December 31, 2024

 lease right-of-use asset

 $
 245,270

 lease liability, current

 $
 135,651

 lease liability, long-term

 $
 134,147

 lease term

 2.1
 years

 Discount
 rate

 3.63
 %

 Cash
paid during the year for amounts included in the measurement of lease liabilities is as follows:

 For the Year Ended

 For the Year Ended

 Cash
 paid for operating lease

 $
 128,643

 $
 124,897

 Future
annual minimum under non-cancellable operating leases as of December 31, 2024 were as follows:

 Schedule of Future Annual Minimum Lease Payments

 Years
 ended December 31,

 2025

 132,503

 2026

 136,473

 Thereafter

 11,654

 Total
 minimum lease payments

 280,630

 Less
 imputed interest

 ( 10,832
)

 Present
 value of minimum lease payments

 $
 269,798

 Note
4 – Inventory

 Inventory
consisted of the following:

 Schedule of Inventory

 31,

 31,

 2024

 2023

 Finished
 goods

 $
 132,289

 $
 366,844

 Raw
 materials

 113,378

 122,258

 Allowance
 for excess & obsolete inventory

 ( 219,687
)

 ( 192,698
)

 Inventory,
 net

 $
 25,980

 $
 296,404

 Overhead
expenses of $ 10,571 and $ 13,679 were included in the inventory balance as of December 31, 2024 and 2023, respectively.

 F- 18

 CEA

 Notes

 (in

 Note
5 – Property and Equipment

and equipment consisted of the following:

 Schedule of Property and Equipment

 31,

 31,

 2024

 2023

 Furniture
 and equipment

 $
 105,653

 $
 275,994

 Vehicles

 15,000

 15,000

 and equipment, gross

 120,653

 290,994

 Accumulated
 depreciation

 ( 114,955
)

 ( 252,436
)

 and equipment, net

 $
 5,698

 $
 38,558

 Depreciation
expense amounted to $ 20,065 for the year ended December 31, 2024, of which $ 2,139 was allocated to cost of revenue, $ 535 was allocated
to inventory, with the remainder recorded as selling, general and administrative expense. Depreciation expense amounted to $ 29,655 for
the year ended December 31, 2023, of which $ 2,818 was allocated to cost of revenue, $ 705 was allocated to inventory, with the remainder
recorded as selling, general and administrative expense.

 Note
6 – Intangible Assets

assets consisted of the following:

of Intangible Assets

 2024

 2023

 As
 of December 31,

 2024

 2023

 Website
 development costs

 $
 22,713

 $
 22,713

 Trademarks

 1,830

 1,830

 assets, gross

 24,543

 24,543

 Accumulated
 amortization

 ( 22,713
)

 ( 22,713
)

 assets, net

 $
 1,830

 $
 1,830

 Website
development costs are amortized over five years. Trademarks are not amortized since they have an indefinite life. No amortization expense
was recorded during the years ended December 31, 2024 and December 31, 2023 as the website development costs have been fully amortized.

 Note
7 – Accounts Payable and Accrued Liabilities

payable and accrued liabilities consisted of the following:

 Schedule of Accounts Payable and Accrued Liabilities

 31,

 31,

 2024

 2023

 payable

 $
 165,352

 $
 183,359

 Sales
 commissions payable

 1,765

 1,710

 Accrued
 payroll liabilities

 263,367

 189,829

 warranty accrual

 53,148

 191,338

 Other
 accrued expenses

 66,845

 58,488

 Total

 $
 550,477

 $
 624,724

 F- 19

 CEA

 Notes

 (in

 Note
8 – Related Party Agreements and Transactions

 Agreements
and Transaction with a Company Director

 The
Company entered into a manufacturer representative agreement with RSX Enterprises ("RSX") in March 2021 to become a non-exclusive
representative for the Company to assist in marketing and soliciting orders. James R. Shipley, one of our independent directors, has
a significant ownership interest in RSX.

 Under
the manufacturer representative agreement, RSX will act as a non-exclusive representative for the Company within the United States, Canada
and Mexico and may receive a commission for qualified customer leads. The agreement had an initial term through December 31, 2021 with
automatic one-year renewal terms unless notice is given 90 days prior to each annual expiration. During the years ended December 31,
2024 and December 31, 2023, the Company paid $ 6,763 and $ 18,273, respectively, in commissions under this agreement.

 On
October 13, 2022, the Company entered into an agreement with Lone Star Bioscience, Inc. (Lone Star) to provide engineering design services.
Nicholas Etten, one of our independent directors, is the Chief Executive Officer of Lone Star. The balance due under this agreement totaled
$ 2,500 with $ 1,250 received as a deposit in 2022. Another agreement for engineering services was signed on December 20, 2022, in the
amount of $ 10,900. We entered into positive change orders in March 2023 of $ 3,577 increasing the total of the second sales order to $ 14,477.
Revenue and cash of $ 16,977 was recorded in the year ended December 31, 2023 in respect of these agreements. No transactions were recorded
during the year ended December 31, 2024, in respect of these agreements.

 On
June 19, 2024, the Company engaged Nicholas J. Etten, a director of the Company, to provide services covering transaction sourcing and
evaluation, in the Company's effort to arrange for a merger, acquisition, combination or other strategic transaction. Mr. Etten
has a background in corporate development and investment banking in multiple industries. Mr. Etten will be paid a weekly fee of $ 2,500.
It is expected that Mr. Etten will provide a minimum of 10 hours per week, up to a maximum of 40 hours a month, as determined by the
Company and Mr. Etten. The consulting agreement will be on a month-to-month basis, and either the Company or Mr. Etten may terminate
the arrangement on five days' notice. The Company has agreed to indemnify Mr. Etten in respect of his services to the Company under
the agreement. During the year ended December 31, 2024, the Company paid Mr. Etten $ 58,250 in respect of services related to this agreement.

 Note
9 – Commitments and Contingencies

 Litigation

 On
October 20, 2023, Sweet Cut Grow, LLC and Green Ice, LLC (collectively, "Claimant") a client of the Company with which it
had an equipment contract and engineering contract, filed a demand for arbitration asserting claims for breach of contract, breach of
warranty, and unjust enrichment, and a demand for $ 1,049,280 in damages, plus interest ("Claims"). The Company continues
to deny all the Claims and has asserted a counterclaim. The Company believes Claimant is owed nothing as the Company fulfilled all its
obligations under the contracts to Claimant, and further, that the negligence of a third-party supplier is the basis of the Claims. We
intend to generally defend the claims on the basis that we promptly addressed all problems, and that any issues with defective HVAC equipment
are the responsibility of the third-party equipment manufacturer. The Company's equipment contract with Claimant requires the parties
to arbitrate their disputes under the rules of the American Arbitration Association ("AAA"). The arbitration will be heard
in Denver, Colorado. The matter is in the discovery phase. The parties will pay their own legal fees and expenses. The Company intends
to defend itself vigorously, believing there are no merits to the Claims as currently presented.

 On
or about April 17, 2024, Optima Consulting Services, LLC (the "Claimant"), a client of the Company with which it had an equipment
contract and engineering contract, advised the Company of a potential claim related to work performed by the Company for Claimant and
demanded mediation under the parties' contract. On or about October 28, 2024, Claimant informed the Company it was asserting claims
for negligent/defective design and breach of warranty, and alleges its damages exceed $ 2,000,000 (Claims"). The Company denies
all the Claims and that Claimant is entitled to any damages. The Company believes Claimant is owed nothing as the Company fulfilled all
its obligations under the contracts to Claimant and performed all work in line with all applicable standards. We intend to generally
defend the Claims on the basis that all work was performed pursuant to the contract and any alleged issues that may have occurred were
the result of actions by Claimant and/or third parties. If Claimant moves forward with its Claims, the Company's equipment contract
with Claimant requires the parties to arbitrate their dispute with the American Arbitration Association ("AAA"). The arbitration
will be heard in Denver, Colorado. The matter is in the preliminary phase. The parties will pay their own legal fees and expenses. The
Company intends to defend itself vigorously, believing there are no merits to the Claims as currently presented.

 F- 20

 CEA

 Notes

 (in

 Given
the current uncertainty around the ability to estimate the amount and success of the Claims, we have not recorded an accrual for any
potential loss related to these matters.

 From
time to time, in the normal course of its operations, the Company is subject to litigation matters and claims. Litigation can be expensive
and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict, and the Company's
view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as
incurred. The Company records a liability for contingent losses when it is both probable that a liability has been incurred and the amount
of the loss is known. An unfavorable outcome to any legal matter, if material, could have an adverse effect on the Company's operations
or its financial position, liquidity or results of operations.

 Leases

 The
Company has a lease agreement for its manufacturing and office space. Refer to Note 3 Leases above.

 Other

 In
the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors,
business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company's
breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties.
In addition, the Company has entered into indemnification agreements with its directors and certain of its officers and employees that
will require the Company to, among other things, indemnify them against certain liabilities that may arise by reason of their status
or service as directors, officers, or employees. The Company maintains director and officer insurance, which may cover certain liabilities
arising from its obligation to indemnify its directors and certain of its officers and employees, and former officers, directors, and
employees of acquired companies, in certain circumstances.

 Note
10 – Preferred and Common Stock

 Preferred
Stock

 Authorized
Preferred Stock

 As
of December 31, 2024, and December 31, 2023, the Company was authorized to issue 25,000,000 shares of preferred stock, with a par value
of $ 0.00001 per share.

 No
shares of preferred stock were issued or outstanding as of December 31, 2024 and December 31, 2023.

Stock

 Authorized
Common Stock

 As
of December 31, 2024, and December 31, 2023, the Company was authorized to issue 200,000,000 shares of common stock with a par value
of $ 0.00001 per share.

 Reverse
Split

 On
May 7, 2024, the Company's Board of Directors approved a reverse stock split at a ratio of one-for-twelve. The reverse stock split
was effective June 7, 2024. The par value for the Common Stock was not affected.

 As
a result of the reverse stock split, all outstanding options, restricted stock units, and common stock purchase warrants were proportionately
adjusted as to number of securities and exercise prices.

 All Common Stock, warrants, options
and per share amounts set forth herein are presented to give retroactive effect to the Reverse Split for all periods presented.

 F- 21

 CEA

 Notes

 (in

 An
additional 107,126 shares of common stock were issued to round up partial shares following the reverse split. As a result of the stock
split, immediately thereafter there were 791,580 shares of common stock issued and outstanding.

 Also,
as a result of this reverse stock split, the number of the Company's shares of common stock issued and outstanding at December
31, 2023 was reduced from 8,076,372 to 673,090.

 Issued
Common Stock

 As
of December 31, 2024, and December 31, 2023, the Company had 793,109 and 673,090 shares of common stock issued and outstanding, respectively.

the year ended December 31, 2024, the Company issued shares of its common stock as follows:

 12,893
 shares of common stock were issued in settlement of restricted stock units issued to three of its independent directors under the
 2021 Equity Incentive Plan, pursuant to the Director Compensation plan adopted on January 17, 2022.

 107,126
 shares of common stock were issued to round up partial shares following the one-for-twelve reverse stock split effective June 7,
 2024.

 Consequently,
effective December 31, 2024, 793,109 shares of common stock were issued and outstanding.

the year ended December 31, 2023, the Company issued shares of its common stock as follows:

 10,200
 shares common stock were issued in settlement of restricted stock units issued to three of its independent directors under the 2021
 Equity Incentive Plan, pursuant to the Director Compensation plan adopted on January 17, 2022.

 Consequently,
effective December 31, 2023, 673,090 shares of common stock were issued and outstanding.

 F- 22

 CEA

 Notes

 (in

 Note
11 – Outstanding Warrants

 The
following table summarizes information with respect to outstanding warrants to purchase common stock during the years ended December
31, 2024 and 2023:

of Outstanding Warrants to Purchase Common Stock

 Average

 Average

 Warrants

 Exercise

 Life

 Intrinsic

 Exercisable

 Price

 In
 Months

 Value

 at December 31, 2022

 635,314

 635,314

 $
 61.72

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 at December 31, 2023

 635,314

 635,314

 $
 61.72

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 ( 18,976
)

 ( 18,976
)

 $
 115.13

 -

 -

 at December 31, 2024

 616,338

 616,338

 $
 60.08

 -

 The
following table summarizes information about warrants outstanding at December 31, 2024.

of Warrants Outstanding

 Warrants

 Average

 Exercise
 price

 Exercisable

 Months

 $
 60.00

 592,125

 592,125

 $
 61.95

 24,213

 24,213

 616,338

 616,338

 Q1
2022 Investor Warrants

 On
February 15, 2022, the Company issued 484,262 investment units for aggregate gross proceeds of $ 24,000,000, or $ 49.56 per unit. Each
unit consisted of one share of the Company's common stock and one warrant for the purchase of one share of the Company's
common stock. The warrants vested immediately, have a term of 5 years and an exercise price of $ 60.00.

 Q1
2022 Overallotment Warrants

 Further
on February 15, 2022, in connection with the Company's issuance of 484,262 investment units for aggregate gross proceeds of $ 24,000,000,
or $ 49.56 per unit as described above, a further 63,473 warrants were issued in connection with the subscription for substantially all
of the available 15% overallotment warrants. The warrants were acquired for consideration of $ 0.12 per warrant, vested immediately, have
a term of 5 years and an exercise price of $ 60.00.

 F- 23

 CEA

 Notes

 (in

 Q1
2022 Underwriter Warrants

 Further
on February 15, 2022, in connection with the Company's issuance of 484,262 investment units for aggregate gross proceeds of $ 24,000,000,
or $ 49.56 per unit described above, the Company also issued representatives of the underwriters 24,213 warrants. Each warrant entitles
the holder to purchase one share of common stock at an exercise price of $ 61.95, during the period commencing August 9, 2022, and expiring
on February 10, 2027.

 Q1
2022 Series B Preferred Shares Conversion Warrants

 Further
on February 16, 2022, in connection with the conversion of 1,650 shares of Series B Preferred Stock into 30,193 shares of the Company's
common stock, the Series B Preferred Shareholder was also issued with 44,391 Series B Preferred shares conversion warrants. Each warrant
entitled the holder to purchase one share of common stock at an exercise price of $ 60.00, vested immediately and had a term of 5 years.

 Q3
2021 Warrants Issued to Series B Preferred Stockholder

 On
September 28, 2021, the Company entered into a Securities Purchase Agreement with an institutional investor, pursuant to which the investor
purchased from the Company 3,300 shares of convertible Series B Preferred Stock with a stated value of $ 1,000 per share, or $ 3,300,000
of stated value in the aggregate, and a warrant to purchase up to 16,082 shares of common stock of the Company for an aggregate purchase
price of $ 3,000,000. The warrant was exercisable until September 28, 2024, at an exercise price of $ 113.40, subject to adjustment for
stock splits, stock dividends and other typical adjustments and changes in capitalization, including mergers and acquisitions and distribution
of rights.

 These
warrants expired, unexercised on September 29, 2024.

 Q3
2021 Warrants Issued to Series B Preferred Placement Agent

 In
connection with the sale of the shares of convertible Series B Preferred Stock described above, the Company issued 2,894 warrants to
the placement agent and its designees. Half of the warrants were issued on September 28, 2021, and the second half were issued on November
3, 2021, and are exercisable commencing February 28, 2022 and May 3, 2022, respectively, until September 28, 2024 and November 3, 2024,
respectively. The exercise price per share of the warrants is $ 124.80, subject to adjustment for stock splits, stock dividends and other
typical adjustments and changes in capitalization, including mergers and acquisitions and distribution of rights.

 These
warrants expired, unexercised, 1,447 on September 28, 2024 and the balance of 1,447 on November 3, 2024.

 Note
12 – Equity Incentive Plans

 Directors
Remuneration

the year ended December 31, 2024

 On
December 17,2024, the Company issued an RSU grant of 3,058 shares of common stock under the 2021 Equity Incentive Plan to newly elected
independent director. The RSUs were granted as an equity retention award pursuant to the Company's compensation plan for independent
directors. The award was issued such that 50% of the RSUs vested upon grant and the remaining 50% vested on the one-year anniversary
of the award. A total of 1,529 shares of the Company's common stock were issued in settlement of the RSUs effective December 17,
2024, the date of the grant.

 On
January 2, 2024, the Company issued an RSU grant of 3,788 shares of common stock under the 2021 Equity Incentive Plan to three of its
four independent directors. Mr. Shipley declined to receive the RSUs which he was entitled to receive. The RSUs were granted as an equity
retention award pursuant to the Company's compensation plan for independent directors effective January 17, 2022 and vested immediately
on the grant date. A total of 11,364 shares of the Company's common stock were issued in settlement of the RSUs.

 F- 24

 CEA

 Notes

 (in

the year ended December 31, 2023

 On
January 3, 2023, the Company issued an RSU grant of 2,480 shares of common stock under the 2021 Equity Incentive Plan to each of its
four independent directors. The RSUs were granted as an equity retention award pursuant to the Company's compensation plan for
independent directors effective January 17, 2022 and vested immediately on the grant date. A total of 10,200 shares of the Company's
common stock were issued in settlement of the RSUs.

 Subsequent
Events

 As
further discussed in Note 14 Subsequent Events below, on January 2, 2025, the Company issued an RSU grant of 3,079 shares of common
stock under the 2021 Equity Incentive Plan to each of its three independent directors who served the entire year of 2024. The RSUs were
granted as an equity retention award pursuant to the Company's compensation plan for independent directors effective January 2,
2025 and vested immediately on the grant date. A total of 9,237 shares of the Company's common stock were issued in settlement
of the RSUs.

 Revised
Compensation Plan for Directors

 On
December 16, 2024, the Board of Directors revised the previously adopted compensation plan. This plan supersedes the plan adopted on
January 17, 2022. The Plan is effective retroactively for the current independent directors and for independent directors elected or
appointed after the Effective Date.

 At
the time of initial election or appointment, each independent director will receive an equity retention award in the form of restricted
stock units ("RSUs"). The aggregate value of the RSUs at the time of grant will be $ 25,000, with the number of shares underlying
the RSUs to be determined based on the closing price of the Company's common stock on the trade date immediately prior to the date
of grant. Vesting of the RSUs will be as follows: (i) 50% at the time of grant, and (ii) 50% on the first anniversary of the grant date.

 In
addition, on the first business day of January each year, each independent director who was not initially appointed or elected in the
previous year will receive an equity retention award in the form of RSUs. The aggregate value of the RSUs at the time of grant will be
$ 25,000, with the number of shares underlying the RSUs to be determined based on the closing price of the Company's common stock
on the trade date immediately prior to the date of grant. These RSUs will be fully vested at date of grant.

 There
is no additional compensation paid to members of any committee of the Board. Directors who are also executives of the Company, serving
on the Board, do not receive compensation for their Board service.

 All
the independent directors, Messrs. Shipley, Etten, Mariathasan, and Tarallo are subject to the Plan.

 Each
independent director is responsible for the payment of any and all income taxes arising with respect to the issuance of any equity awarded
under the plan, including the exercise of any non-qualified stock options.

 2017
Equity Incentive Plan

 Under
the Company's 2017 Equity Incentive Plan, as may be modified and amended by the Company from time to time (the "2017 Equity
Plan"), the Board of Directors (the "Board") (or the compensation committee of the Board, if one is established) may
award stock options, stock appreciation rights ("SARs"), restricted stock awards ("RSAs"), restricted stock unit
awards ("RSUs"), shares granted as a bonus or in lieu of another award, and other stock-based performance awards. The 2017
Equity Plan allocates 27,778 shares of the Company's common stock ("Plan Shares") for issuance of equity awards under
the 2017 Equity Plan. If any shares subject to an award are forfeited, expire, or otherwise terminate without issuance of such shares,
the shares will, to the extent of such forfeiture, expiration, or termination, again be available for awards under the 2017 Equity Plan.

 As
of December 31, 2024, of the 27,778 shares authorized under the 2017 Equity Plan, 13,641 relate to restricted shares issued, 11,615 relate
to outstanding non-qualified stock options and 2,522 shares remain available for future equity awards.

 F- 25

 CEA

 Notes

 (in

 2021
Equity Incentive Plan

 On
March 22, 2021, the Board approved the 2021 Equity Incentive Plan (the "2021 Equity Plan"), which was approved by the stockholders
on July 22, 2021. The 2021 Equity Plan permits the Board to grant awards of up to 55,556 shares of common stock. The 2021 Plan provides
for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), non-qualified stock options, stock appreciation rights ("SARs"), restricted stock awards and restricted
stock unit awards and other equity linked awards to our employees, consultants and directors. If an equity award (i) expires or otherwise
terminates without having been exercised in full or (ii) is settled in cash ( i.e., the holder of the award receives cash rather
than stock), such expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of common stock that
may be issued pursuant to this Plan.

Incentive Plan Issuances During 2024

 -

 Issued
 1,529 shares of common stock in settlement of restricted stock units issued to a newly elected independent director. The grant was
 for a total of 3,058 shares, 50% of which vested immediately and the remaining units will vest in one year.

 -

 Issued
 11,364 shares of its common stock in settlement of restricted stock units issued to three of its independent directors under the
 2021 Equity Incentive Plan, pursuant to the Director Compensation plan adopted on January 17, 2022.

 -

 3,297
 non-qualified stock options were forfeited that had previously been issued under the 2021 Equity Incentive Plan.

 Share-based
compensation costs (including expenses from the accrued compensation liabilities related to the annual incentive awards subsequently
settled in non-qualified stock options) totaled $ 82,457 and $ 187,615 for the years ended December 31, 2024 and 2023, respectively. Such
share-based compensation costs are classified in the Company's consolidated financial statements in the same manner as if such
compensation was paid in cash.

 The
following is a summary of such share-based compensation costs included in the Company's consolidated statements of operations for
the years ended December 31, 2024 and 2023:

of Share-based Compensation Costs

 2024

 2023

 For
 the Years Ended December 31,

 2024

 2023

 Share-based
 compensation expense included in:

 Cost
 of revenue

 $
 -

 $
 4,898

 Advertising
 and marketing expenses

 -

 1,113

 development costs

 -

 3,570

 Selling,
 general and administrative expenses

 82,457

 178,033

 Total
 share-based compensation expense included in consolidated statement of operations

 $
 82,457

 $
 187,615

 As
of December 31, 2024, of the 55,556 shares authorized under the 2021 Equity Plan, 23,940 relate to restricted shares issued, 11,104 relate
to outstanding non-qualified stock options, 3,401 relate to outstanding incentive stock options, 1,529 related to outstanding restrictive
stock units, and 15,581 shares remain available for future equity awards.

 There
was $ 12,021 in unrecognized compensation expense for unvested restricted stock units at December 31, 2024 which will be recognized over
approximately 1 year.

 As
further discussed in Note 14 Subsequent Events below, effective January 2, 2025, the Company issued 9,237 shares of common stock
 in settlement of restricted stock units issued to three directors that vested immediately.

 F- 26

 CEA

 Notes

 (in

 Restricted
Stock Awards

 No
shares of restricted stock were issued during the year ended December 31, 2024 or the year ended December 31, 2023.

 Stock
Options

 The
Company uses the Black-Scholes Model to determine the fair value of options granted. Option-pricing models require the input of highly
subjective assumptions, particularly for the expected stock price volatility and the expected term of options. Changes in the subjective
input assumptions can materially affect the fair value estimate. The expected stock price volatility assumptions are based on the historical
volatility of the Company's common stock over periods that are similar to the expected terms of grants and other relevant factors.
The Company derives the expected term based on an average of the contract term and the vesting period taking into consideration the vesting
schedules and future employee behavior with regard to option exercise. The risk-free interest rate is based on U.S. Treasury yields for
a maturity approximating the expected term calculated at the date of grant. The Company has never paid any cash dividends on its common
stock and the Company has no intention to pay a dividend at this time; therefore, the Company assumes that no dividends will be paid
over the expected terms of option awards.

 The
Company determines the assumptions used in the valuation of option awards as of the date of grant. Differences in the expected stock
price volatility, expected term or risk-free interest rate may necessitate distinct valuation assumptions at those grant dates. As such,
the Company may use different assumptions for options granted throughout the year. No stock options were issued during the year ended
December 31, 2024. During the year ended December 31, 2023, the valuation assumptions used to determine the fair value of each option
award on the date of grant were: expected stock price volatility 152.23 %; expected term of 10 years and risk-free interest rate 3.48 %.

 Employee
and Consultant Options

 A
summary of the stock options granted to employees and consultants under the 2017 Equity Plan and the 2021 Equity Incentive Plan during
the years ended December 31, 2024 and 2023 are presented in the table below:

 Schedule of Stock Option Activity

 of Options

 Average Exercise Price

 Average Remaining Contractual Term

 Intrinsic Value

 December 31, 2022

 16,006

 $
 107.28

 7.6

 $
 -

 11,541

 $
 10.80

 6.9

 $
 -

 -

 $
 -

 -

 $
 -

 ( 1,691
)

 $
 35.76

 9.1

 $
 -

 ( 687
)

 $
 10.68

 -

 $
 -

 25,169

 $
 70.44

 6.6

 $
 -

 -

 $
 -

 -

 $
 -

 -

 $
 -

 -

 $
 -

 ( 3,808
)

 $
 38.77

 -

 $
 -

 -

 $
 -

 -

 $
 -

 21,361

 $
 76.04

 4.9

 $
 -

 Exercisable,

 21,361

 $
 76.04

 4.9

 $
 -

 F- 27

 CEA

 Notes

 (in

 A
summary of non-vested stock options activity for employees and consultants under the 2017 Equity Plan and the 2021 Equity Plan for the
years ended December 31, 2024 and 2023 are presented in the table below:

 Summary of Non-vested Non-qualified Stock Option Activity

 of Options

 Average Grant-Date Fair Value

 Intrinsic Value

 Grant-Date
 Fair Value

 Nonvested,
 December 31, 2022

 2,396

 $
 60.36

 $
 -

 $
 144,643

 11,541

 $
 10.56

 $
 -

 $
 121,870

 Vested

 ( 13,076
)

 $
 11.04

 $
 -

 $
 ( 144,359
)

 ( 28
)

 $
 80.04

 $
 -

 $
 ( 2,223
)

 -

 $
 -

 $
 -

 $
 -

 Nonvested,

 $
 80.04

 $
 ( 21,344
)

 $
 21,800

 -

 $
 -

 $
 -

 $
 -

 Vested

 ( 417
)

 $
 26.16

 $
 10,672

 $
 ( 10,900
)

 ( 417
)

 $
 26.16

 $
 10,672

 $
 ( 10,900
)

 -

 $
 -

 $
 -

 $
 -

 Nonvested,

 -

 $
 -

 $
 -

 $
 -

 For
the years ended December 31, 2024 and 2023, the Company recorded $ ( 5,522) and $ 86,298 as compensation expense related to vested options
issued to employees and consultants, net of forfeitures, respectively. As of December 31, 2024, there was no unrecognized share-based
compensation related to unvested options.

 Director
Options

 A
summary of the non-qualified stock options granted to directors under the 2017 Equity Plan and 2021 Equity Plan during the years ended
December 31, 2024 and 2023 are presented in the table below:

 Schedule of Stock Option Activity

 of Options

 Average Exercise Price

 Average Remaining Contractual Term

 Intrinsic Value ($000)

 4,760

 $
 113.34

 6.0

 $
 -

 -

 $
 -

 -

 $
 -

 -

 $
 -

 -

 $
 -

 Forfeited/Cancelled

 -

 $
 -

 -

 $
 -

 -

 $
 -

 -

 $
 -

 4,760

 $
 113.34

 5.0

 $
 -

 -

 $
 -

 -

 $
 -

 -

 $
 -

 -

 $
 -

 Forfeited/Cancelled

 -

 $
 -

 -

 $
 -

 -

 $
 -

 -

 $
 -

 4,760

 $
 113.34

 4.0

 $
 -

 Exercisable,

 4,760

 $
 113.34

 4.0

 $
 -

 There
was no non-vested non-qualified stock option activity for directors for the years ended December 31, 2023 and December 31, 2024.

 F- 28

 CEA

 Notes

 (in

 Restricted
Stock Units

 A
summary of the RSUs awarded to employees, directors and consultants under the 2021 Equity Plan during the years ended December 31, 2024
and 2023 are presented in the table below:

 Schedule of Restricted Units Activity

 of Units

 Average Grant-Date Fair Value

 Intrinsic Value

 December 31, 2022

 $
 89.04

 $
 -

 9,919

 $
 10.08

 $
 -

 Vested
 and settled with share issuance

 ( 10,200
)

 $
 12.24

 $
 -

 Forfeited/canceled

 -

 $
 -

 $
 -

 -

 $
 8.18

 $
 -

 14,422

 $
 6.93

 $
 17,104

 Vested
 and settled with share issuance

 ( 12,893
)

 $
 6.79

 $
 ( 17,189
)

 Forfeited/canceled

 -

 $
 -

 $
 -

 1,529

 $
 8.18

 $
 -

 For
the years ended December 31, 2024 and 2023, the Company recorded $ 87,980 and $ 101,316 as compensation expense related to vested RSUs
issued to employees, directors and consultants. As of December 31, 2024, there was $ 12,021 in unrecognized share-based compensation related
to unvested RSUs.

 As
further discussed in Note 14 Subsequent Events below, effective January 2, 2025, the Company issued 9,237 shares of common stock
 in settlement of restricted stock units issued to three directors that vested immediately.

 Note
13 – Income Taxes

 For
financial reporting purposes, there were no provisions for U.S. federal, state or international income taxes for the years ended December
31, 2024 or 2023 due to the Company's net operating losses ("NOLs") in such periods and full valuation allowance recorded
against the net deferred tax assets.

 The
differences between income taxes expected at the U.S. federal statutory income tax rate and the reported provision for income taxes are
summarized as follows:

 Schedule of U.S Federal Statutory Income Tax Rate and Reported Provision for Income Taxes

 2024

 2023

 taxes computed at the federal statutory rate

 $
 ( 671,000
)

 $
 ( 611,000
)

 States
 taxes, net of federal benefits

 ( 160,000
)

 ( 115,000
)

 Permanent
 differences

 ( 38,000
)

 2,000

 True-up
 adjustments

 47,000

 ( 89,000
)

 Adjustment
 to net operating loss

 63,000

 ( 45,000
)

 Change
 in valuation allowance

 759,000

 858,000

 Reported
 income tax (benefit) expense

 $
 -

 $
 -

 F- 29

 CEA

 Notes

 (in

 The
components of the net deferred tax assets as of December 31, 2024 and 2023 are as follows:

 Schedule of Deferred Tax Assets

 2024

 2023

 Deferred
 tax assets:

 Net
 operating losses

 $
 7,980,000

 $
 7,195,000

 compensation

 280,000

 268,000

 Other
 deferred tax assets

 89,000

 127,000

 Total
 deferred tax assets

 8,349,000

 7,590,000

 Deferred
 tax liabilities:

 Other
 deferred tax liabilities

 -

 -

 Total
 deferred tax liabilities

 -

 -

 Net
 deferred tax assets before valuation allowance

 8,349,000

 7,590,000

 Less
 valuation allowance

 ( 8,349,000
)

 ( 7,590,000
)

 Net
 deferred tax assets

 $
 -

 $
 -

 As
of December 31, 2024, the Company has U.S. federal and state net operating losses ("NOLs") of approximately $ 31,985,000,
of which $ 11,196,000 will expire, if not utilized, in the years 2034 through 2037. The balance of $ 20,789,000 NOLs generated subsequent
to December 31, 2017 do not expire but may only be used against taxable income to 80 %. In addition, pursuant to Section 382 of the Internal
Revenue Code of 1986, as amended, use of the Company's NOLs carryforwards may be limited in the event of cumulative changes in
ownership of more than 50 % within a three-year period. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended
(the "Code"), and corresponding provisions of state law, if a corporation undergoes an "ownership change," which
is generally defined as a greater than 50 % change, by value, in its equity ownership over a three-year period, the corporation's
ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or
taxes may be limited.

 The
securities sales we completed in September 2021 and February 2022, as described in Note 10 Preferred
and Common Stock above will need to be evaluated for determination of any "ownership change" that we may have undergone
during a determination period. If an ownership change has occurred, our ability to use our net operating loss carryforwards is materially
limited and it would harm our future post tax results by effectively increasing our future tax obligations.

 The
Company must assess the likelihood that its net deferred tax assets will be recovered from future taxable income, and to the extent the
Company believes that recovery is not likely, the Company establishes a valuation allowance. Management's judgment is required
in determining the Company's provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded
against the net deferred tax assets. The Company recorded a full valuation allowance as of December 31, 2024 and 2023. Based on the available
evidence, the Company believes it is more likely than not that it will not be able to utilize its net deferred tax assets in the foreseeable
future. The Company intends to maintain valuation allowances until sufficient evidence exists to support the reversal of such valuation
allowances. The Company makes estimates and judgments about its future taxable income that are based on assumptions that are consistent
with the Company's plans. Should the actual amounts differ from the Company's estimates, the carrying value of the Company's
deferred tax assets could be materially impacted.

 The
Company is subject to examination by the IRS for the calendar year 2019 and thereafter. These examinations may lead to ordinary course
adjustments or proposed adjustments to the Company's taxes or the Company's net operating losses with respect to years under
examination as well as subsequent periods.

 The
Company recognizes in its consolidated financial statements the impact of a tax position, if that position is more likely than not of
being sustained on audit, based on the technical merits of the position. The Company's policy is to recognize interest and penalties
accrued on any unrecognized tax benefits as a component of operating expense. The Company does not believe there are any tax positions
for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within
twelve months of the reporting date. There were no penalties or interest liabilities accrued as of December 31, 2024 or 2023, nor were
any penalties or interest costs included in expense for the years ended December 31, 2024 and 2023.

 F- 30

 CEA

 Notes

 (in

 Note
14 – Subsequent Events

 In
accordance with ASC 855, Subsequent Events, the Company has evaluated all subsequent events through the date the financial statements
were available to be issued. The following events occurred after December 31, 2024.

 Issuance
of Common Stock

 Effective
January 5, 2025, the Company issued 9,237 shares of common stock in settlement of restricted stocks units issued to three directors that
vested immediately, pursuant to the 2021 director compensation plan.

 Entry
into Acquisition Agreement

 On
February 7, 2025, CEA Industries Inc., a Nevada corporation, entered into a purchase agreement with the several owners of all the equity
of a group of Manitoba corporations that own all the assets used in the business of Fat Panda Ltd. ("Fat Panda"). Fat Panda
is engaged in the manufacture, distribution and retail sale of e-cigarettes, vape devices and e-liquids and related products through
multiple retail locations in the provinces of Manitoba, Ontario, and Saskatchewan, Canada, as well as through its online e-commerce site.

 The
acquisition will include all the assets of Fat Panda, including among other things, the leases for the retail outlets, intellectual property,
inventory, government licenses and permits, franchise agreements, manufacturing facilities and supply agreements, which are necessary
for the ongoing manufacturing and retail operations of Fat Panda. The acquisition will continue the employment of the current management
and of the production and retail staff, for the uninterrupted, continuous operations of the business. The sellers will enter into non-competition
agreements at closing. Certain of the senior management persons will enter into employment agreements for their continued employment
after the closing of the acquisition.

 The
purchase price is CAD$ 18,000,000 (approximately US$ 12,600,000), payable in cash, securities and seller loans. The Company also expects
to borrow part of the cash portion of the purchase price, in an amount yet to be determined, which will be secured by the assets of Fat
Panda. The purchase price includes an initial cash payment of CAD$ 13,900,000, issuance of 39,000 shares of the common stock of the Company
with an agreed aggregate value of CAD$ 700,000 (approximately CAD$ 18.00 per share), and issuance of notes to the sellers in the aggregate
principal amount of CAD$ 2,060,000, and release of a CAD$ 100,000 due diligence deposit. The Company is also agreeing to pay certain financial
statement audit expenses of the selling parties. Of the notes to be issued by Fat Panda to the selling parties, one of the notes in the
principal amount of CAD$ 1,030,000, is convertible into the common stock of the Company at a conversion rate of USD$ 19.00 per share. At
closing the following will occur: first, a portion of the cash purchase price in the amount of CAD$ 1,375,000 will be held in a joint
escrow account for 120 days after closing as a working capital adjustment escrow; second, the sum of CAD$ 1,240,000, will be paid into
escrow for possible indemnity claims to be held for 18 months; and third, the purchase price will be reduced by CAD$ 112,500 and the sum
of CAD$ 112,500 will be paid into escrow to be held for 18 months, both in relation to employee obligation claims under Canadian employment
law.

 Completion
of the acquisition is subject to a number of conditions, which include the preparation and delivery of the Fat Panda companies
audited consolidated financial statements and unaudited interim consolidated financial statements, satisfaction of the financial
condition of Fat Panda, completion of due diligence by the Company, receipt of all necessary government approvals and licenses, and
continuation and reformation of the various retail location leases. Completion is also subject to the Company obtaining financing
for a portion of the cash purchase price. The acquisition agreement also provides for the selling persons to make representations
and warranties and undertake certain covenants about many aspects of the business of Fat Panda that shall be true and correct and
performed at or prior to closing. The representations, warranties and covenants are those that are typical in relation to the
acquisition of an operating business. The Company has also made certain representations, warranties and covenants, the principal one
of which is to obtain financing for a part of the purchase price, which if not obtained will permit the Company to terminate the
purchase agreement.

 The
Company anticipates that it will complete the acquisition in the first half of fiscal year 2025.

 F- 31

 SIGNATURES

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

 CEA
 INDUSTRIES INC.

 (the
 "Registrant")

 By:

 /s/
 Anthony K. McDonald

 K. McDonald

 Chief
 Executive Officer and President

 (Principal
 Executive Officer and acting Chief Financial Officer)

 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

 By:

 /s/
 Anthony K. McDonald

 K. McDonald, Chairman of the Board (Principal Executive Officer and Principal Financial Officer)

 By:

 /s/
 James R. Shipley

 James
 R. Shipley, Director

 By:

 /s/
 Nicholas J. Etten

 J. Etten, Director

 By:

 /s/
 Marion Mariathasan

 Mariathasan, Director

 By:

 /s/
 Mattthew Tarallo

 Tarallo, Director

 EXHIBITS

 Exhibit

 Description
 of Exhibit

 1.1

 Form of Underwriting Agreement, dated as of 2022 (Incorporated herein by reference to Exhibit 1.1 to the Registration Statement on form S-1 as filed on February 4, 2022).

 3.1(a)

 Articles of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Registration Statement on Form S-1 as filed on January 28, 2010).

 3.1(b)

 Amendment to Articles of Incorporation (incorporated herein by reference to Exhibit 3.1(b) to the Annual Report on Form 10-K filed April 2, 2018).

 3.1(c)

 Certificate of Designations of Preferences, Rights, and Limitations of Preferred Stock (incorporated herein by reference to Exhibit 3.2 to the Current Report on Form 8-K as filed on May 12, 2014).

 3.1(d)

 Certificate of Designations of Preferences, Rights, and Limitations of Series B Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K as filed on September 30, 2021).

 3.1(e)

 Amendment to Articles of Incorporation to increase capitalization and redeem Class A Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K filed November 4, 2021).

 3.1(f)

 Amendment to Articles of Incorporation to change corporate name (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K filed November 18, 2021).

 3.1(g)

 Amendment
 to Articles of Incorporation to affect a reverse split and fix the new capitalization of the Company (incorporated herein by
 reference to Exhibit 3.1 to the Current Report filed on February 1, 2022).

 3.2

 Bylaws, as amended (incorporated herein by reference to Exhibit 3.2 to the Annual Report on Form 10-K filed April 2, 2018).

 4.1

 Specimen Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form S-1 filed on January 28, 2010).

 4.2

 Form of the Underwriter Representative Warrant (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-1 filed on February 4, 2022).

 4.3

 Form of Investor Warrant Agreement, dated as of September 28, 2021 (incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K filed September 30, 2021).

 4.4

 Form of Placement Agent Warrant Agreement, dated as of September 30, 2021, by and between Registrant and ThinkEquity and designees (incorporated herein by reference to Exhibit 10.6 to the Current Report on Form 8-K filed September 30, 2021).

 4.5

 Form of Warrant Agency Agreement for the Public Warrants between the Company and Continental Stock Transfer and Trust Company, dated February 10, 2022 (incorporated herein by reference to Exhibit 4.6 to the Registration Statement on Form S-1 filed January 31, 2022).

 4.6

 Form of Public Warrant, issued February 10, 2022, with Continental Stock Transfer and Trust Company, as warrant agent (incorporated herein by reference to Exhibit 4.6 to the Registration Statement on Form S-1 filed January 31, 2022).

 4.8

 Description of Capital Stock (incorporated herein by reference to Exhibit 4.8 to the Annual Report on Form 10-K filed March 28, 2023).

 10.1+

 Executive Employment Agreement between the Registrant and Anthony K. McDonald dated effective November 24, 2021 (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed November 26, 2021).

 10.2+

 CEA Industries Inc, formerly Surna Inc., 2017 Equity Incentive Plan (incorporated herein by reference to Exhibit 99.1 to the Registration Statement on Form S-8 filed on August 3, 2017).

 10.3

 Stock Repurchase Agreement by and among the Company, Brandy M. Keen and Stephen B. Keen dated May 29, 2018 (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K filed May 31, 2018).

 10.4

 Preferred Stock Option Agreement by and among the Company, Brandy M. Keen and Stephen B. Keen dated May 29, 2018 (incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K filed May 31, 2018).

 10.5

 CEA Industries Inc,, formerly Surna Inc., 2021 Equity Incentive Plan (incorporated herein by reference to Exhibit B to the Proxy Statement of the Registrant, for the annual meeting to be held May 28, 2021 filed on April 7, 2021).

 10.6

 Form of Placement Agent Agreement, dated as of September 28, 2021, by and between Registrant and ThinkEquity (incorporated herein by reference to Exhibit 10.5 to the Current Report on Form 8-K filed September 30, 2021).

 10.7

 Purchase Agreement dated February 7, 2025, for the acquisition of Fat Panda Ltd. Et.al. (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 12, 2025, for the event of February 7, 2025.)

 14.1

 Code of Business Code and Ethics adopted February 13, 2018 (incorporated herein by reference to Exhibit 14 to the Current Report on Form 8-K filed February 14, 2018).

 19.1*

 Form
 of CEA Industries Statement of Policy on Insider Trading (adopted by the Board of Directors
 on November 24, 2021).

 21.1*

 Subsidiaries

 23.1*

 Consent
 of Sadler, Gibb & Associates, L.L.C., Independent Registered Public Accounting Firm, relating to Registration Statement on Form
 S-8.

 31.1
 *

 Certification
 of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
 2002.

 31.2
 *

 Certification
 of Principal Financial and Accounting Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley
 Act of 2002.

 32.1**

 Certification
 of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
 Section 906 of the Sarbanes-Oxley Act of 2002.

 32.2**

 Certification
 of Principal Financial and Accounting, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
 Act of 2002.

 99.1*

 CEA
 Industries Policy for the Recovery of Erroneously Awarded Compensation adopted March 1, 2023.

 101.INS*

 101.SCH*

 101.CAL*

 101.DEF*

 101.LAB*

 101.PRE*

 Cover

 +

 Indicates
 a management contract or compensatory plan.

 *

 Filed
 herewith.

 **

 Furnished
 herewith.