MEDFORD, Oregon — Grown Rogue International Inc. has taken the first steps toward its planned acquisition of PharmaCann of New York LLC’s (PCNY) license and assets through the formation of Grown Rogue New York LLC (GRNY) with a capital partner. The initial transactions include the execution of an exclusivity agreement, along with consulting, lease, and funding agreements to support the company’s entry into New York and prevent the significant job losses and operational shutdown of PCNY’s vertical operations.
The arrangements establish an immediate operating and capital structure intended to preserve and transition the business while the parties finalize definitive acquisition documentation and pursue required regulatory approvals.
Transaction highlights
Grown Rogue is entering the New York market through the restart and planned acquisition of PharmaCann’s New York assets, including its Hamptonburgh cultivation and manufacturing facility, with approximately 24,000 square feet of indoor flower canopy, 16,000 square feet of light-deprivation greenhouse flower canopy, substantial post-harvest and manufacturing space, and four dispensaries under the Verilife brand, two serving both medical and adult-use customers and two operating as medical-only locations.
Grown Rogue New York is a 51/49 joint venture with a capital partner. The capital partner provided an initial $10 million in exchange for a 49-percent preferred equity interest in GRNY, with Grown Rogue retaining a 51-percent interest. The preferred equity is convertible at the capital partner’s option into Grown Rogue shares at escalating conversion prices during the next five years, starting at $0.55. If converted today, this would equate to approximately 18.2 million shares, representing approximately 7 percent dilution. In addition, the capital partner has committed another $5 million with a drawable, 15-percent term loan. Grown Rogue estimates total project costs, including the acquisition, capital expenditures and working capital, of approximately $12 million, with the loan commitment providing excess capacity for contingency.
GRNY will initially manage and fund the transition of the assets, including the day-to-day operations of PCNY’s four dispensaries and the revitalization of the Hamptonburgh facility, through a goods-and-services agreement (GSA) and a secured loan of up to $9 million to PCNY while the parties finalize definitive purchase agreements, expected within the next four weeks, and pursue required regulatory approvals. GRNY is also working to retain current PCNY team members and rehire former employees.
Planned acquisition and interim structure
In advance of the planned acquisition, GRNY has put in place the consulting, lease, and funding arrangements necessary to preserve the platform and begin the operational transition. Under the GSA, GRNY is managing PCNY’s day-to-day operations during the interim period, including responsibility for allocating capital and funding current operating losses. A secured loan from GRNY to PCNY provides up to $9 million of available capital to ramp Hamptonburgh production, including funding modest capital expenditures, replenishing retail inventory, and meeting working capital needs during the transition. As a result of the interim arrangements, GRNY will be disclosed to New York’s Office of Cannabis Management (OCM) as a true party of Interest for regulatory purposes.
GRNY and PCNY anticipate executing the purchase agreements under which GRNY would acquire PCNY’s license and assets within the next four weeks. Including an inventory adjustment at GSA execution, the purchase price is anticipated to be approximately $4.5 million, with $3 million payable upon regulatory approval of the change of control contemplated by the purchase agreements. The proposed acquisition remains subject to execution of the definitive purchase agreements, regulatory approval of the change of control transactions, and other customary closing conditions.
PCNY operating platform
The Hamptonburgh production facility includes approximately 24,000 square feet of indoor flower canopy, 16,000 square feet of light-deprivation greenhouse flower canopy, and significant manufacturing and post-harvest infrastructure, including ethanol and hydrocarbon extraction capabilities and a commercial kitchen. PCNY’s dispensaries include two combination adult-use and medical locations in metropolitan Albany and Syracuse and two medical-only locations in metropolitan Buffalo and New York City (Bronx).
Before substantially slowing production in early 2026, the Hamptonburgh facility was producing more than 2,000 lbs of flower a month on average. The four dispensaries have been averaging aggregate monthly sales of $1.7—$2.0 million over the past eighteen months. Historical revenue for PCNY was disproportionately through the medical channel, with dispensary revenue skewed to first-party products. Approximately 80 percent of PCNY’s wholesale revenue was attributable to flower and pre-roll products.
In addition to ramping production in Hamptonburgh, GRNY will immediately begin managing PCNY’s four dispensaries under the GSA during the interim period. The dispensaries may experience modest disruption as the production slowdown in Hamptonburgh translates to less first-party product availability and less brand continuity.Grown Rogue anticipates a six- to nine-month ramp in production at Hamptonburgh.
Capital structure and value creation
To fund the transaction, Grown Rogue has closed a project-based financing for up to $15 million with a capital partner, which the company believes provides sufficient reserves above the anticipated aggregate capital needs of the acquisition. The capital partner invested $10 million for a 49-percent preferred equity interest in GRNY, with Grown Rogue retaining a 51-percent interest. The preferred equity earns a priority annual distribution of $1 million in the first year and $2 million in each year thereafter. Grown Rogue receives a matching annual distribution as a second priority, with any remaining cash flow split 49/51 between the capital partner and Grown Rogue, respectively.
Grown Rogue may repurchase the entire preferred position before the fifth anniversary of the closing of the financing, once the capital partner has received an after-tax return of capital of $10 million with a formulaic combination of cash and equity; alternatively, the capital partner may convert its investment into Grown Rogue subordinate voting shares (SVS) at $0.55 through the third anniversary and at $0.65 and $0.76, respectively, in the two years following.
The same capital partner has also committed an additional $5 million through a drawable term loan, although Grown Rogue may pursue alternative debt financing. The capital partner will receive 300,000 Grown Rogue SVS as a commitment fee, plus 0.901 warrants for each dollar drawn, exercisable at $0.55 per share.
Mindset Capital, Grown Rogue’s largest shareholder, introduced the company to the capital partner and is serving as a strategic advisor for the planned acquisition.
Based on these anticipated savings and the implementation of Grown Rogue’s operating practices, the company anticipates that these New York operations will become after-tax operating cash flow positive within nine months and generate monthly cash flow from operations of approximately $600,000 within 18 months.
Management’s expectations are based on its current operating plan for PCNY’s license and restructured assets, including identified cost reductions expected to be implemented over the first six months of oversight and the application of Grown Rogue’s operating practices. Material assumptions include the continued effectiveness of the new and adjusted lease arrangements, which account for more than 80 percent of the anticipated savings and contribute substantially to the after-tax cash flow expectations; the assumption that Section 280E will no longer be applicable to the operations by 2027; execution of definitive agreements and receipt of required regulatory approvals; availability of sufficient financing; facility readiness and successful revitalization and ramp of cultivation operations; staffing and supply-chain availability; market conditions, product demand and pricing; anticipated capital requirements; realization and timing of identified cost reductions; and Grown Rogue’s ability to execute its operating plan while maintaining product quality and consistency. Actual results may differ materially.
