US: Grown Rogue provides details on New Jersey cultivation affiliate

Grown Rogue International has provided details on the performance and structure of its New Jersey cultivation affiliate, ABCO Garden State.

"I'm excited by the initial progress we have seen in New Jersey across cultivation, post-harvest, and sales. We are seeing strong cultivation yields, greater than 60g of flower per square foot of bench space with preliminary gross margin between 55-60%. I'm most pleased about our early progress with yield, quality and cost, as that's what drives our business and is always a challenge with new facilities in new states as we build the team, acclimate to the facility's environment and dial in our efficiencies. We have also been encouraged by our sales ramp as we have sold into over 50% of the dispensaries in New Jersey with our flower and pre-roll products, including accelerating re-order trends, providing some early validation with respect to our quality, value, and brand strength," said Obie Strickler, CEO of Grown Rogue.

© Grown Rogue

"In the first quarter, ABCO had approximately US$1.8M in sales with an average selling price in excess of $2,500 per pound for our whole flower and pre-roll products. We are seeing a wide spread of pricing based mostly on quality and potency, which bodes well for us as we optimize our practices within the facility by driving improved yield, quality, and cost metrics. Our experience in mature markets has taught us that early high prices are a nice bonus to the business, but our long-term success is built around a core of providing maximum consumer value in the craft product tier, with curated genetics and relentless cost control. We anticipate being at full sell through of our Phase I production later this summer. Construction of Phase II is scheduled to start in the second quarter and will double our steady-state production from 500 to 600 pounds per month to 1,000 to 1,2000 pounds per month. Our plan is to balance the additional capacity to coincide with our sell through, incrementally bringing on additional rooms starting in the second half of the year with full capacity and sell through anticipated in early 2026. We look forward to providing additional details when we report first quarter earnings," continued Mr. Strickler.

For 2024 and 2025, Grown Rogue expects its investment and operational support in ABCO to be reflected in its financial statements in the below ways.

Both accrued and paid interest on the principal balance of notes receivables, including the convertible note, of $8,166,667 reflected as interest income on the income statement, which is expected to total approximately $1,400,000 for 2025 and was approximately $725,000 in 2024

Consulting fees to reimburse Grown Rogue for time and efforts towards the build out and ongoing operational support will be reflected as services revenue in the Corporate segment on the income statement. These fees are expected to be approximately $60,000 per month

A 44% pro-rata share of ABCO's net income is reflected as a gain/loss using the equity method on the income statement

Payments of principal and interest will be reflected in cash flows from investing activities on the statement of cash flows.

"Just as our company evolves, our financial reporting evolves with it. Our goal is to provide investors insight into the core drivers of our business. With ABCO becoming a significant contributor to our company in 2025 and accounting rules that will likely not allow for its full consolidation until our 70% ownership option is exercised in the fall of 2026, we are committing to showing investors pro forma results for ABCO, which should provide investors the same transparency as we provide for our Oregon and Michigan operations," stated Andrew Marchington, CFO of Grown Rogue.