Urban-gro Faces Lawsuit Over Loan Default Amid Merger Plans

Urban-gro Inc. (Nasdaq: UGRO) is facing significant challenges as it contends with a lawsuit over an unpaid loan while simultaneously planning a merger. On October 2, 2024, Grow Hill LLC, based in Seattle, filed a suit in the Denver District Court, alleging that Urban-gro defaulted on a $2.1 million promissory note. The loan, secured by a lien on all of Urban-gro’s tangible and intangible assets, has raised concerns about the company’s financial stability.

The lawsuit claims that Urban-gro did not own all of the receivables pledged as collateral for the loan, which Grow Hill characterizes as fraudulent. The lender seeks damages for breach of the promissory note, including unpaid interest, attorney fees, and additional compensation for alleged fraud. The total damages will be determined at trial.

In response to the lawsuit, Urban-gro’s chairman and CEO, Bradley Nattrass, filed a notice with the U.S. Securities and Exchange Commission. In the notice, Nattrass acknowledged the allegations of default under the promissory note and stated that the lender has accelerated the payment of all amounts due, including a default fee of 1% of the outstanding principal. Nattrass emphasized that Urban-gro is investigating options to resolve the complaint and intends to vigorously defend against the fraud allegations.

Settlement of Previous Lawsuit and Merger Intentions

Urban-gro recently settled another legal issue on September 26, 2025. In this case, Gemini Finance Corp. had sued Urban-gro’s subsidiary, UG Construction Inc., for defaulting on a $10 million line of credit. Gemini had already foreclosed on most of UG Construction’s assets, which were sold for $450,000 in a September 4 transaction. The settlement allowed Gemini to receive common stock in Urban-gro, while the company still owed almost $1.49 million to Gemini.

As Urban-gro navigates these financial disputes, it is also pursuing a merger. On October 14, the company entered into a binding letter of intent to merge with Flash Sports & Media Inc. Following the merger, Flash plans to change its name to Flash Sports & Media Holdings Inc. Under the agreement, Flash would provide Urban-gro with $200,000 within 15 days of signing a definitive merger agreement, with former shareholders of Flash expected to hold approximately 90% of the new entity.

Urban-gro has encountered additional hurdles, as Nasdaq has indicated that the company failed to meet listing requirements due to its stock price dropping below $1 per share for 30 consecutive business days. The company received a notice from Nasdaq in February 2025 and was informed in August that it had not met the minimum bid requirement or submitted necessary annual and quarterly reports. Although Urban-gro requested a hearing regarding its delisting, originally scheduled for October 7, the hearing was rescheduled to October 14, and it remains unclear whether it took place.

Urban-gro specializes in controlled-environment agriculture systems, with a focus on the cannabis sector. As the company grapples with these financial challenges, its stock closed at 37 cents on Monday.

The case of Grow Hill LLC v. Urban-gro Inc. is registered as Case No. 25CV33056 in the Denver District Court. This article was first published by BizWest, an independent news organization, and is published under a license agreement. © 2025 BizWest Media LLC.