Grown Rogue Extends $3M in Credit to ABCO Garden State in Related-Party Transaction

Grown Rogue logo

MEDFORD, Ore. – Grown Rogue International Inc., a craft cannabis company in Oregon’s Rogue Valley, has entered secured drawdown promissory note agreement dated June 25, 2024 with ABCO Garden State, LLC, a New Jersey Class 1 licensed cultivator. As of today, Grown Rogue owns 44% of ABCO, with an option to acquire an additional 26% of ABCO, subject to regulatory approval.

The key deal terms are as follows:

  • Grown Rogue will lend up to US$3,000,000 to ABCO under the Note to support ongoing construction and working capital as ABCO ramps its operations. On June 25, 2024, Grown Rogue advanced $500,000 to ABCO, representing the first drawdown under the Note.
  • The Note has preferential repayment, and interest on the outstanding principal will accrue at 10.5% per annum.
  • The Note, including all accrued and unpaid interest, shall be due and payable on June 25, 2025.

“As we reach the final stages of Phase I construction, this additional capital will be used to finish construction and provide the necessary working capital to become operational. Our Phase I work has included many of the necessary improvements required to accelerate Phase II completion such as full panel installation, the purchase of on-site HVAC equipment, and the fulfillment of fire safety requirements.” said Obie Strickler, CEO of Grown Rogue.

“Phase I remains substantially on schedule and on budget, with final occupancy approvals expected later this month and sales anticipated to commence in the fourth quarter. Phase II construction is expected to be completed in the first quarter of 2025, with sales anticipated to commence in the second quarter of 2025. With both Phases complete and a total flowering canopy of ~16,000 square feet, we expect to be producing in excess of 1,000 pounds of whole flower per month in New Jersey.”

According to the New Jersey CRC1, the state reported over $800 million in cannabis sales in 2023, growing more than 44% year-over-year. 4th quarter sales were a new quarterly record, reporting over $220 million in cannabis sales, growing 7% quarter over quarter.

Related Party Transaction Disclosure

ABCO is a related party to the Company as defined under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”) and the Note constitutes a “related party transaction” as defined in MI 61-101. The Company relied on exemptions from the formal valuation and minority approval requirements in sections 5.5(b) and 5.7(1)(a) of MI 61-101 on the basis that the Company is not listed on a specified market and the fair market value of the Note is less than 25 per cent of the Company’s market capitalization, as determined in accordance with MI 61-101. The Company did not file a material change report more than 21 days before the issuance of the Note as the details of the Note were not settled until shortly prior to the its issuance.

About Grown Rogue

Grown Rogue International Inc. is a craft cannabis company operating in Oregon, Michigan, Minnesota, Maryland, and New Jersey, focused on delighting customers with premium flower and flower-derived products at fair prices. The Company’s roots are in Southern Oregon, where it has proven its capabilities in the highly competitive and discerning Oregon market. The Company’s passion for quality product and value, combined with a disciplined approach to growth, prioritizes profitability and return on capital without sacrificing quality. The Company’s strategy is to pursue capital efficient methods to expand into new markets, bringing craft-quality product at fair prices to more consumers. The Company also continues to make modest investments to improve outdoor craft cultivation capabilities in preparation for eventual interstate commerce.