Flash Sports & Media Holdings, Inc. Commitments Disclosure

NOTE 12 – COMMITMENTS AND CONTINGENCIES

 

From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. Other than below, there are no other legal proceedings for which management believes the ultimate outcome would have a material adverse effect on the Company’s results of operations and cash flows.

 

Gemini Loan Agreement Amendment and Default

 

On December 13, 2023, our wholly-owned subsidiary UG Construction, Inc. d/b/a Emerald Construction Management, Inc. (“UG Construction”) entered into (i) an interest only asset based revolving loan agreement (the “Loan Agreement”) with Gemini Finance Corp. (“Gemini”) pursuant to which Gemini extended to UG Construction a secured line of credit in an amount not to exceed $10,000,000, to be used to assist UG Construction and us with cash management, and (ii) a Secured Promissory Note - Revolving issued by UG Construction to Gemini (the “Promissory Note”). Pursuant to the Promissory Note, each draw was due and payable on or before 180 days after such draw is funded to UG Construction, subject to a mandatory pre-payment upon UG Construction’s receipt of payment for any invoice previously submitted and approved for financing by Gemini.

 

On March 18, 2025, UG Construction entered into an amendment to the Loan Agreement and Promissory Note and waiver with Gemini (the “Amendment”). Pursuant to the Amendment, Gemini waived any potential or perceived events of default arising under certain circumstances, which events did not constitute specified events of default under the Promissory Note or the Loan Agreement.

 

Pursuant to the Amendment, the Promissory Note was amended to provide that (i) the term during which Gemini may consider advances under the Loan Agreement has been extended to January 1, 2026, and (ii) the interest applied on the outstanding principal amount of the Promissory Note will accrue interest at an annual rate of 12%, and all accrued and unpaid interest shall be paid to Gemini on the first business day of each month for the prior month. The Amendment also amended the Loan Agreement to require monthly reporting of certain accounts receivable and to include a covenant that such accounts receivable equal or exceed 125% of the sum of the total amount drawn down under the Promissory Note, plus outstanding interest, as of the applicable measurement date. In connection with the execution of the Amendment, we issued to Gemini, as an amendment fee, 150,000 shares of our common stock, or 6,000 shares after giving effect to a 1-for-25 reverse stock split.

 

On July 31, 2025, Gemini issued a notice of default to UG Construction claiming that UG Construction was in default under the line of credit due to a failure to submit receivables calculations and failing to maintain sufficient eligible accounts and to forward accounts receivable. The notice indicated that the remaining outstanding amount due under the line of credit of approximately $1.76 million was immediately due and payable with default of 1% per week accruing from the June 16, 2025 date of default claimed by Gemini, and that Gemini intended to pursue legal action if full payment was not received by August 8, 2025.

 

On August 21, 2025, we received a notification from Gemini stating that Gemini would proceed with a foreclosure and private sale of substantially all of the assets of UG Construction in an Article 9 sale process, pursuant to Section 9601 et seq. of the California Commercial Code (the “Asset Sale”). The Asset Sale consisting of the receivables occurred on September 4, 2025, at which Gemini acquired the assets constituting the collateral under the line of credit for $450,000. The following table summarizes the assets and liabilities of UG Construction transferred in connection with the Asset Sale:

 

		Amount
Gross receivables of Emerald		$	2,923,501
Less:-Notes payable			450,000
Loss on assets foreclosure		$	2,473,501

 

On August 29, 2025, Gemini commenced a lawsuit captioned Gemini Finance Corp. v. UG Construction, Inc. et al., case number 25CV2259 W SBC, in the U.S. District Court for the Southern District of California, which lawsuit (the “Lawsuit”) included us and certain of our officers as defendants and pursuant to which Gemini claimed it was owed $1,486,189 (the “Claim Amount”).

 

On September 26, 2025, we entered into a Settlement and Mutual General Release (the “Gemini Settlement Agreement”) with Gemini. Pursuant to the terms of the Gemini Settlement Agreement, among other things, we agreed to file a joint motion requesting an expedited fairness hearing under Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), which motion was filed on September 30, 2025. Following such fairness hearing, and subject to the satisfaction of all applicable conditions and requirements of Section 3(a)(10) of the Securities Act, we agreed to issue to Gemini shares of our common stock that, upon sale by Gemini, would result in net proceeds to Gemini equal to the Claim Amount, provided that Gemini shall at no time be issued shares if it would beneficially own more than 4.99% of our common stock, and the aggregate number of shares issued to Gemini may not exceed 19.99% of our outstanding common stock as of immediately prior to the signing of the Gemini Settlement Agreement to the extent required by Nasdaq Listing Rule 5635. Additionally, Gemini agreed to use its best efforts to not sell common stock exceeding 10% of our daily volume on any given trading day. Upon the issuance of the last tranche of shares under the Gemini Settlement Agreement, Gemini will dismiss the Lawsuit with prejudice. The Gemini Settlement Agreement also included a customary mutual release of claims by the parties. The fairness hearing occurred on October 14, 2025. 

Grow Hill Default

 

On October 1, 2024, we entered into an asset-based term Loan Agreement with Grow Hill, LLC (“Grow Hill”) pursuant to which Grow Hill extended to us a secured loan of $2,100,000 with an origination fee of $100,000, which was added to the amount of the loan. The loan is evidenced by a Secured Promissory Note issued by us to Grow Hill. Grow Hill received a security interest in certain of our assets pursuant to a security agreement between us and Grow Hill (the “Security Agreement”), which does not include any assets of our subsidiaries.

 

On October 14, 2025, we received service of process for a lawsuit filed by Grow Hill against us in the District Court for the City and County of Denver, Colorado (Case No. 2025CV33546) alleging breach of contract and fraud. Pursuant to the complaint, Grow Hill stated that we were in default under the Secured Promissory Note due to a failure to timely make payments, and elected to accelerate all amounts due under the Secured Promissory Note, including a default fee equal to 1% of the outstanding principal amount. We are currently investigating available options to resolve the complaint and intend to vigorously defend the allegation of fraud.

 

The Company has accrued the outstanding note balance of $1,370,531 (net of warrant discount) as of December 31, 2025. The Company believes additional losses beyond the accrued amount are reasonably possible but not probable under ASC 450-20. No additional accrual has been recorded for the fraud allegation. Subsequent to year-end, the Company is in discussions for the Grow Hill debt to be acquired by a third party, which is expected to resolve the litigation.

 

J Brrothers Settlement

 

On August 8, 2025, we 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, we issued a promissory note to J Brrothers with an original principal amount of $395,556 and agreed to issued 150,000 unregistered shares of our common stock, or 6,000 shares after giving effect to a 1-for-25 reverse stock split to J Brrothers. The note accrues simple interest at an annual rate of 12% and has a maturity date of March 18, 2026. The note must 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 $64,047. 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.

 

MJ’s Market, Inc

 

MJ’s Market, Inc. v. Urban-Gro, Inc. et al, pending in the Suffolk County Superior Court in Massachusetts as Civil Action No. 2384-cv-02794. The original complaint, filed by MJ’s Market, Inc, alleged that the Corporation prepared deign drawings for the plaintiff and subsequently sold those drawings to a competitor. The original complaint asserted claims for Breach of Contract; violation of M.G.L. c. 93A; Breach of the Covenant of Good Faith and Fair Dealing; Trademark Infringement; and Interference with Contractual Relations against the Corporation. An amended complaint has been filed which names 2WR of Colorado, Inc., which is characterized as a subsidiary or affiliate of the Corporation, in place of the Corporation. The lawsuit is ongoing.

 

The Company believes the underlying liability transferred with the divested subsidiary pursuant to the Stock and Asset Purchase Agreement and is pursuing dismissal from the case. No accrual has been recorded as any remaining loss to the Company is assessed as remote.

 

RK Mechanical- complaint filed

 

On June 27, 2025, RK Mechanical LLC (“RK”) filed a complaint against UG Construction and certain other defendants, with SVC Manufacturing Inc. as cross-claimant and UG Construction as cross-defendant, in the Superior Court of Arizona for Maricopa County (Case No. CV2025-022680). The complaint alleged that UG Construction served as general contractor for the construction of a PepsiCo plant in Tolleson, Arizona, and that as a result of work completed by RK, UG Construction owed $1,522,716 to RK as a result of alleged breach of contract, breach of implied covenant of good faith and fair dealing, violation of the Arizona Prompt Payment Act, and lien foreclosure. On or about October 2025, a default judgment was entered against UG Construction for $1,511,716, plus prejudgment interest of $288,346 and post-judgment interest at 8.25% plus $10,057 in attorney fees.

 

The Company assesses the outcome as reasonably possible but not probable under ASC 450-20. The range of potential loss is not estimable at this time. No accrual has been recorded.

Action Equipment- complaint filed

 

On April 21, 2025, Action Equip. & Scaffold Co. (“Action”) filed a complaint against UG Construction in the Superior Court of Arizona for Maricopa County (Case No. CV2025-014165). The complaint alleged that UG Construction owed Action $380,932 plus interest and attorneys’ fees in connection with a contract pursuant to which Action leased equipment to UG Construction, and alleged breach of contract, breach of covenant of good faith and fair dealing, and unjust enrichment. The Company assesses the outcome as reasonably possible but not probable under ASC 450-20. No accrual has been recorded.

 

Cullens - Complaint Filed & Company Filed Answer and Counter Suit

 

On December 25, 2025, Christopher W. Cullens (“Mr. Cullens”) filed a complaint against urban-gro, Inc. (“UG”) and Bradley Nattrass (“Mr. Nattrass”), an individual, in District Court, Boulder County, State of CO (Case 2025CV031164).   The complaint alleged that UG Mr. Cullens had earned and was vested in commissions totaling $650,000 which, pursuant to the Colorado Wage Claim Act ("CWA"), were earned, vested, and determinable wages that were due and payable immediately upon his discharge.  Further, the complaint alleged that Mr. Cullens is entitled to a severance package that includes nine (9) months of his base salary and nine (9) months of COBRA premium payments.  

 

On March 30, 2026, the Defendants filed an answer to the complaint, responding that they either deny the allegations in the complaint, or lack sufficient information or knowledge to admit or deny the allegations as “the Agreement” is vague and undefined in the Complaint.  

 

On March 30, 2026, UG filed a counter suit against Mr. Cullens (“Counterclaim Defendant”) alleging Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair Dealing, and (Unjust Enrichment).   On or about March 13, 2022, UG entered into the Acquisition Agreement and Plan of Merger with Emerald Merger Sub, Inc., Emerald Construction Management, Inc., Christopher Cullens, Charles Cullens, and Green Stone Property LLC (the “Acquisition Agreement”).  The Acquisition Agreement sets forth the terms and conditions of urban gro’s business relationship with Emerald Merger Sub, Inc., Emerald Construction Management, Inc., Christopher Cullens, Charles Cullens, and Green Stone Property LLC.  Under Article VIII of the Acquisition Agreement Indemnification, Emerald Merger Sub, Inc., Emerald Construction Management, Inc., Christopher Cullens, Charles Cullens, and Green Stone Property LLC will indemnify and hold urban gro harmless under prescribed.  On or about August 10, 2023, UG and Counterclaim Defendant entered into the Amended and Restated Indemnification Claim Agreement, and effective the date of this counter suit, the Defendant failed to pay UG as required under the Amended Indemnification Agreement and the Acquisition Agreement.  UG has requested that the court award urban gro its losses and damages, costs, pre- and post-judgment interest, and attorneys’ fees and costs pursuant to the Lease and otherwise allowed under Colorado law, in addition to any other relief this Court deems proper.

 

Other – Trade Vendors

 

Due to cash flow constraints and working capital issues, the Company has been delinquent in paying vendors, some of which have filed lawsuits seeking judgment for payment. The amounts due to these vendors are included in accounts payable in the consolidated balance sheet as of December 31, 2025.