Grown Rogue International Inc. has signed a definitive agreement with an option to acquire 70% of ABCO Garden State, LLC, pending regulatory approval from the New Jersey Cannabis Regulatory Commission (CRC). ABCO has a conditional cultivation and manufacturing license already issued by the CRC and anticipates receiving its annual cultivation license shortly.

The key deal terms are as follows:

  • Grown Rogue has the option to acquire 70% of ABCO in two tranches, 49% in the first tranche and 21% in the second, pending regulatory approval.
  • Grown Rogue anticipates exercising its Tranche 1 option upon receiving licensing approval from the CRC with its Tranche 2 option, pending regulatory approval, 2 years after the commencement of operations. Grown Rogue has also secured the right to purchase the remaining 30% of ABCO.
  • Grown Rogue is paying US$10,000 per option. At the exercise of its Tranche 1 option, Grown Rogue has the option to pay US$1,390,000 at closing or execute a 12.5% interest-only note for 2 years, at which time the Tranche 1 Price is due and payable. At the exercise of its Tranche 2 option, Grown Rogue will pay US$590,000 at closing.
  • Except for $100,000 going to the current members of ABCO, the remainder of the Tranche 1 Price and Tranche 2 Price will be used to fund tenant improvements or for general working capital at the ~50,000-square-foot facility leased by ABCO. In addition, pending regulatory approval and construction needs, Grown Rogue has agreed to loan up to US$4,000,000 for improvements at the facility.
  • The exercise of the Tranche 1 and Tranche 2 options and the Drawdown Loan are all subject to regulatory approval.

"We are extremely excited to announce our partnership with ABCO, accelerating our ability to bring the quality and value of Grown Rogue products to the consumers in New Jersey," said Obie Strickler, CEO of Grown Rogue. "Over the past two years, we have analyzed many expansion opportunities, and none had the risk and reward profile that New Jersey, and specifically this Facility, offers. To put this investment in perspective, Grown Rogue invested US$4,000,000 in capital expenditures in a similar size facility in Michigan, and that asset is currently on a run rate of generating nearly $4,000,000 in after-tax operating cash flow. To add, the current average selling price of flower in New Jersey is nearly triple the average price in Michigan. We can't wait to bring Grown Rogue's Oregon-quality flower and top-notch genetics to New Jersey. We believe we can delight NJ cannabis consumers and reward shareholders due to our battle-tested experience competing in Oregon as the #1 flower producer and in Michigan as a top 5 indoor flower wholesaler. All expenditures in New Jersey are expected to be done with cash on hand and cash generated from current operations," continued Mr. Strickler.

The retrofit of the facility is anticipated to start in October 2023 and will likely be constructed in two phases. Construction of Phase 1 is estimated to be completed in Q2 2024, with the first harvest completed in Q3 2024. and will include the construction of ~10,000 square feet of flowering bench space and is estimated to yield ~600 pounds of whole flower per month. The remaining construction is estimated to be completed by the end of 2024, with the first harvest completed in Q1 2025, consisting of a total flowering bench space of ~17,000 square feet and ~1,000 pounds of whole flower per month.

For more information:
Grown Rogue
info@grownrogue.com
www.grownrogue.com