Grown Rogue International Inc. (“Grown Rogue” or the “Company”) (CSE: GRIN) (OTC: GRUSF), a multi-state cannabis company with operations and assets in Oregon and Michigan, announced today the closing of the acquisition, previously announced on February 8 , 2021, with HSCP, LLC, (“HSCP”) a subsidiary of Acreage Holdings Inc. (CSE: ACRG.A.U, ACRG.B.U)(OTC: ACRHF, ACRDF) for a state-of-the-art 30,000 Sq Ft indoor facility located in Medford, Oregon. The acquisition, which closed on April 14, 2022, brings Grown Rogue’s total indoor production capacity, including the Golden Harvests, LLC assets in Michigan, to 127,000 Sq Ft. All financial information is provided in U.S. dollars unless otherwise indicated.
Transaction Highlights:
- Added 30,000 Sq Ft state-of-the-art indoor facility, currently producing 800 lbs/month
- Will result in additional reduction of one of the industry’s lowest cash cost of production and profitability breakeven metrics with additional production capacity at this facility coming online in Q1 2022
- Total consideration for the acquisition is $2.0M in cash. $0.75M was paid in February 2021 with $0.5M due August 1, 2022, and the balance of $0.75M due May 1, 2023
- The previously announced purchase of the retail dispensary, located in Portland, Oregon, has been mutually terminated and HSCP, LLC will retain ownership with no further obligation by Grown Rogue
- Total consideration for this acquisition is approximately 1.0x estimated 2022 aEBITDA1
“We are pleased to complete the closing of this strategic asset which has allowed us to solidify our position as the #1 flower producer in Oregon1” said Obie Strickler, Chief Executive Officer of Grown Rogue. “This indoor facility resulted in us tripling our indoor production in Oregon during 2021, as we operated under a management services contract, and with a full year of operations positions us to hit our $20M revenue run-rate target in 2022 with a 30 to 40% EBITDA margin. The facility is located within five minutes of our existing Grown Rogue facility and the proximity has allowed us significant economies of scale, resulting in our industry leading cost structure. With all retrofits completed and implementation of our proprietary operating procedures, we have seen flower yields and quality consistently exceed our forecasts.
Indoor Assets:
- Oregon
- 17,000 Sq Ft (Existing facility)
- 30,000 Sq Ft (New facility)
- Total annual production: 11,000lbs of whole flower
- Michigan
- 80,000 Sq Ft (partnership with Golden Harvests, LLC) (40,000 Sq Ft constructed)
- Total current annual production: 9,000lbs
- Total fully constructed annual production: 18,000lbs of whole flower
The Company also announced that it has issued a total of 217,500 common shares to certain directors, consultants, and employees of the Company relating to services rendered at an issue price of $0.10 per share.
The Company has also granted options to purchase an aggregate of 485,000 common shares of the Company (the “Stock Options”) to certain employees. The Stock Options are exercisable at a price of $0.15 per share for a period of 4 years and will vest over 2 years.
The common shares described above and the common shares underlying the Stock Options are subject to a four month and one day hold period expiring on August 20, 2022.
The aforementioned issuances of common shares resulted in certain directors and officers of the Company receiving an aggregate of 150,000 common shares of the Company. The Company has relied on the exemptions from the valuation and minority shareholder approval requirements of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”), contained in section 5.5(b) and 5.7(a) of MI 61-101 in respect of such insider participation.
