SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2024

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

Term Loan

On October 1, 2024, urban-gro, Inc. (the “Company”) entered into an asset based term Loan Agreement (the “Loan”) with Grow Hill, LLC, a Washington limited liability company (the “Lender”) pursuant to which the Lender extended to the Company a secured loan of $2,100,000, to be used to assist the Company with cash management, including to support the Company’s growth in the cannabis industry. The Loan is for a term of 24 months and has an origination fee of $100,000, which was added to the amount of the Loan. There is no penalty to prepayment, except the Lender will receive at least $150,000 in minimum interest (represents approximately 6 months of interest) if Company chooses to prepay the Loan early. The Loan contains standard events of default and representations and warranties by the Company and the Lender.

The Loan is evidenced by a Secured Promissory Note issued by the Company to the Lender (the “Grow Hill Promissory Note”). The Lender received a security interest in certain of the Company’s assets pursuant to a security agreement between the Company and the Lender (the “Security Agreement”), which does not include any assets of the Company’s subsidiaries, including those securing the Company’s existing line of credit. The Grow Hill Promissory Note accrues simple interest at an annual rate of fifteen percent (15%).

In connection with entering in the Loan, the Company issued to Lender a warrant (the “Warrant”) to purchase up to an aggregate of 160,000 shares of the Company’s common stock at an exercise price of $2.50 per share. The Warrant is exercisable immediately, will expire on the five (5) year anniversary of issuance, and is exercisable on a cashless basis at the election of the holder.

Modification of Agreement with Bancroft Related to Line of Credit

On October 2, 2024, the Company amended its agreement with the Placement Agent to modify the terms of the cash and warrant compensation associated with the Line of Credit. Under this amendment, the thresholds at which the cash fee are to be paid changed as follows: 50% at placement of the line of credit; 11.23% when 45% or more of the line of credit is drawn; and the remainder of the cash fee when 60% or more of the line of credit is drawn. In addition, the thresholds at which the warrant fee are to be paid changed as follows: 50% at placement of the line of credit; and the remainder when 60% or more is drawn on the line of credit.

Equity Issuances After September 30, 2024

Subsequent to the period ended September 30, 2024, 170,000 RSUs were granted to employees, directors, and consultants with various vesting periods.

Settlement of Pullar Lawsuit

On May 5, 2022, Robert Pullar (“Pullar”) filed a lawsuit against urban-gro and Bradley Nattrass, in his capacity as the Company’s CEO, relating to a prior settlement agreement the Company had entered into with Pullar. On Friday, January 31, 2025, the parties entered a settlement agreement, without any admission of liability or wrongdoing, to settle all claims associated with the litigation in exchange for a cash payment by the Company to Pullar of $250,000 and an issuance of a warrant to purchase up to 75,000 shares of common stock with an exercise price per share of $1.00.