UGRO settles HVAC dispute with $395K note and equity grant

Rhea-AI Filing Summary

urban-gro, Inc. entered a Settlement and Release resolving a dispute over HVAC equipment with J Brrothers LLC and Herb-a-More LLC by issuing a $395,556 promissory note and 150,000 unregistered shares to J Brrothers. The Note accrues simple interest at 12% annually, carries a 17% default interest rate, is payable in monthly installments over eight months with the first seven payments of $50,000 and a final payment of $64,046.95, and has a stated maturity on March 18, 2026. The Note may be prepaid without penalty. The issuance of the Note and Shares was made without registration under Section 4(a)(2) and Regulation D and J Brrothers is identified as an accredited investor. Copies of the Promissory Note and the Settlement Agreement are filed as Exhibits 4.1 and 10.1.

Positive

• Settlement resolved a vendor dispute by replacing the disputed obligation with a documented agreement and a formal promissory note
• Note is prepayable without penalty, providing the company flexibility to reduce interest cost if liquidity permits

Negative

• $395,556 new promissory note creates an additional short-term financial obligation
• 12% annual interest (simple) and a 17% default rate increase financing costs and creditor risk in default
• 150,000 unregistered shares issued result in immediate equity dilution and carry transfer restrictions
• Eight-month repayment schedule with large monthly payments (seven payments of $50,000 and a final $64,046.95) may strain near-term liquidity

Insights

Financial Analyst

TL;DR The company settled vendor claims with a short-term, high-rate note plus equity, creating near-term cash outflows and dilution.

The $395,556 promissory note at 12% simple interest and eight-month amortization imposes meaningful scheduled cash payments: seven monthly installments of $50,000 and a final $64,046.95. These obligations increase near-term liquidity pressure relative to existing cash flows and will need to be managed or prepaid. The 150,000 unregistered shares represent immediate dilution to equity holders. The 17% default rate and customary default provisions increase creditor leverage in the event of nonpayment. Overall, this is a transactional resolution of a vendor dispute that carries clear short-term financing and dilution costs.

Corporate Governance Expert

TL;DR The settlement formalizes obligations with documentary exhibits and uses private-exemption securities treatment.

The Company documented the settlement with a written Settlement Agreement and a Promissory Note filed as Exhibits 10.1 and 4.1, respectively, which supports transparency and disclosure control. The issuance relied on the Section 4(a)(2)/Regulation D exemption and the purchaser is identified as an accredited investor, aligning the transaction with private placement norms. The issuance of unregistered shares creates transfer restrictions and requires proper legending, and the board’s approval process and disclosure of terms are consistent with standard governance practices for settlements.

8-K Event Classification

4 items: 1.01, 2.03, 3.02, 9.01

4 items

Item 1.01 Entry into a Material Definitive Agreement Business

The company signed a significant contract such as a merger agreement, credit facility, or major partnership.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement Financial

The company incurred a new significant debt or off-balance-sheet obligation.

Item 3.02 Unregistered Sales of Equity Securities Securities

The company sold equity securities in a private placement or other unregistered transaction.

Item 9.01 Financial Statements and Exhibits Exhibits

Financial statements, pro forma financial information, and exhibit attachments filed with this report.

Understanding 8-K Material Events →

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 8, 2025

URBAN-GRO, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

001-39933		46-5158469
(Commission File Number)		(IRS Employer Identification No.)

1751 Panorama Point, Unit G

Lafayette, Colorado 80026

(Address and Zip Code of principal executive offices)

(720) 390-3880

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class		Trading Symbol(s)		Name of exchange on which registered
Common stock, par value $0.001 per share		UGRO		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ☐

Item 1.01 Entry into a Material Definitive Agreement.

On August 8, 2025, urban-gro, Inc. (the “Company”) entered into a Settlement and Release Agreement (the “Settlement Agreement”) with J Brrothers LLC (“J Brrothers”) and Herb-a-More LLC relating to a dispute arising from amounts due for certain heating, ventilation and air conditioning equipment. Pursuant to the terms of the Settlement Agreement, among other things, the Company issued a promissory note to J Brrothers with an original principal amount of $395,556.00 (the “Note”) and issued 150,000 unregistered shares of the Company’s common stock to J Brrothers (the “Shares”).

The Note will accrue simple interest at an annual rate of 12% and has a maturity date of March 18, 2026. The Note will be repaid in monthly installments over a period of eight months, with the first seven payments being $50,000 per month and the final monthly payment being $64,046.95. Any remaining principal and accrued but unpaid interest will become due and payable on the maturity date, and the Note may be prepaid without penalty. The Note includes customary representations and warranties, customary events of default and a 17% default interest rate.

The foregoing descriptions of the Settlement Agreement and the Note do not purport to be complete and are qualified in their entirety by reference to the full text of the Settlement Agreement and the Note, copies of which are filed as Exhibit 10.1 and Exhibit 4.1, respectively, to this Current Report on Form 8-K and are incorporated by reference herein.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth above in Item 1.01 relating to the issuance of the Note is incorporated herein by reference.

Item 3.02 Unregistered Sale of Equity Securities.

The information set forth above in Item 1.01 relating to the issuance of the Note and the Shares pursuant to the Settlement Agreement is incorporated by reference herein in its entirety. The issuance of the Note and the Shares was not registered under the Securities Act or the securities laws of any state, and the Note and the Shares issued pursuant to the Settlement Agreement were offered and sold in reliance upon the exemption from registration afforded by Section 4(a)(2) under the Securities Act and Regulation D promulgated thereunder and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering. J Brrothers is an “accredited investor” as such term is defined in Regulation D promulgated under the Securities Act. This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy securities, nor shall such securities be offered or sold in the United States absent registration or an applicable exemption from the registration requirements and certificates evidencing such Shares contain a legend stating the same.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number		Exhibit Description
4.1		Promissory Note, dated August 8, 2025, issued by urban-gro, Inc. to J Brrothers LLC.
10.1		Settlement and Release Agreement, August 8, 2025, by and among urban-gro, Inc., J Brrothers LLC and Herb-a-More LLC.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

1

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	URBAN-GRO, INC.
Date: August 13, 2025	By:	/s/ Bradley Nattrass
		Name:	Bradley Nattrass
		Title:	Chairman and Chief Executive Officer

2

FAQ

What did urban-gro (UGRO) agree to in the settlement?

The Company issued a $395,556 promissory note and 150,000 unregistered shares to J Brrothers as part of a Settlement and Release resolving an HVAC equipment dispute.

What are the key terms of the promissory note issued by UGRO?

The Note accrues 12% simple annual interest, may be prepaid without penalty, has a 17% default interest rate, and is payable over eight months with seven $50,000 payments and a final $64,046.95; it matures March 18, 2026.

How many shares were issued and were they registered?

The Company issued 150,000 unregistered shares to J Brrothers; the securities were offered under the Section 4(a)(2)/Regulation D exemption and include transfer restrictions.

Does this filing create a new financial obligation for UGRO?

Yes. Item 2.03 states the issuance of the Note creates a direct financial obligation for the registrant.

Where can I find the full settlement and note documents for UGRO (UGRO)?

The Promissory Note and the Settlement and Release Agreement are filed as Exhibit 4.1 and Exhibit 10.1, respectively.