Momentum Public Relations
Press Release: February 25, 2019
Grown Rogue International Inc. (CSE:GRIN | OTC: NVSIF) (“Grown Rogue” or the “Company“), a vertically-integrated, multi-state cannabis company, with licenses and operations in Oregon and California, has signed a binding agreement which provides the Company the right to acquire operational control of certain cannabis licenses and related assets as part of its expansion into the Michigan cannabis market, pending certain regulatory approvals.
“With the second highest total number of medical cannabis card holders in the United StatesMichigan’slegalization of cannabis for adult-use presents a very large cannabis market opportunity. Significant barriers to entry at the local level add meaningful value to the limited number of municipal licenses approved,” explained Obie Strickler, CEO of Grown Rogue. “We are very diligent in our expansion strategy and in finding the right partners to take the proven Grown Rogue platform into the state. Combining our expertise enables us to efficiently navigate and comply with the regional regulatory environment and rapidly expand the Grown Rogue footprint and brand.”
Grown Rogue has entered into a binding agreement (the “Agreement“) with Blue Zebra Community LLC (“Blue Zebra“). The Agreement provides for the option to acquire operational control (the “Option“) of the following cannabis related assets in Michigan pending Municipal and State regulatory approval (the “Michigan Assets“):
- Two strategically located proposed provisioning centers (retail dispensaries) in high demand regions in Midtown Detroit and Hazel Park where limited municipal licenses have been granted.
- A proposed 19,000 sq ft indoor cultivation and processing facility in Detroit, Michigan capable of producing 1,500,000 grams of dried cannabis flower annually at full production; and
- An entity that has received multiple municipal cultivation licenses for a 28-acre parcel located in the northern portion of the lower Michigan peninsula.
Once fully licensed, the provisioning (retail) centers will offer multiple Michigan cannabis brands as well as locally produced Grown Rogue branded products for the Michigan cannabis market. This will launch the Grown Rogue brand into the Midwest region.
Upon exercising the Option by Grown Rogue, Blue Zebra (or affiliates) is required to assign its rights and obligations to the Company pursuant to a binding agreement Blue Zebra (or affiliates) has with Helios Holdings, LLC (“Helios“) which provides the framework for the acquisition of the Michigan Assets as described below (the “Helios Agreement“). As part of its Agreement with Blue Zebra, Grown Rogue will issue 2,212,876 common share purchase warrants to Blue Zebra (or its affiliates) with an exercise price of $0.44 per share (the “Warrants“), which vest according to certain milestones in accordance with the agreement with Blue Zebra.
The Warrants expire on June 20, 2023. Grown Rogue will have the right to accelerate the expiry date of 25% of the Warrants during the term if the shares of the Company close at or above $1.00 per share for a period of twenty (20) consecutive days. An additional 25% of the Warrants will accelerate if the shares of the Company close at or above $1.50 per share for a period of twenty (20) consecutive days, and the remainder of the Warrants will accelerate if the shares of the Company close at or above $2.00 per share for a period of twenty (20) consecutive days.
Pursuant to the terms of the Agreement, Grown Rogue has granted Blue Zebra, together with any affiliates, a pre-emptive right to maintain ownership, should the Warrants be exercised, of up to 5% of Grown Rogue’s common shares. At the time Blue Zebra, or any affiliates, exercises its Warrants to obtain 5% ownership in the Company, Blue Zebra will have the right to nominate one member to Grown Rogue’s board who shall be nominated by management at each annual shareholder meeting of Grown Rogue until such time the Blue Zebra’s ownership in Grown Rogue falls below 4.67%. In addition, Grown Rogue has agreed to pay Blue Zebra between 5% and 7% of top line future revenues generated from its licensed operations in Michigan. Payment on these revenues shall be in a combination of stock and cash.
Helios Agreement
Helios, and its affiliate, intend to contribute real property for a 19,000 sq ft. proposed cultivation and processing facility to a newly formed joint venture to be operated by Grown Rogue, or its designated affiliate, upon receiving all necessary regulatory approvals.
Grown Rogue intends to secure a non-dilutive, real estate financing facility to cause the improvements to the Michigan Assets to be completed.
Helios will contribute the remaining Michigan Assets into one or more newly formed operating company(s) (“OpCo“). It is intended that Grown Rogue will hold a 3.62% convertible debenture for the initial funding of OpCo, with a put/call option to acquire all the issued and outstanding shares of the OpCo. The convertible debenture principal, including any interest, shall be returned to Grown Rogue first from 50% of any cash flow generated by OpCo. Conversion of the debenture by Grown Rogue is subject to State and Municipal regulatory approval.
The State licensing and regulatory process in Michigan requires multiple tiers of approval for any operations (cultivation, retail). Several municipal licenses have successfully been awarded to Helios and its affiliates.
Once licensed by the State, the 19,000 square foot facility will be the first cultivation and manufacturing center for OpCo. Initial plans for this facility will include the ability to produce 1,500,000 grams of cannabis flower per year with the construction of a perpetual harvest facility expected to open in Q4 2019. This facility will also include best-in-class extraction facilities where the OpCo will produce branded derivative products.
The interest in the 28-acre cultivation facility can include either indoor or greenhouse operations which are currently being evaluated. Construction and operation of this facility is expected in 2019 with an anticipated yearly yield of between 1,500,000 and 2,500,000 grams of annual cannabis production based on final design plans.
Both of OpCo’s proposed retail dispensaries are located in desirable high traffic locations and are expected to be licensed and operational by Q4 2019. OpCo aims to further expand to 10 retail dispensaries and 50,000 sq ft of cultivation facilities by the middle of 2020.
“Our partnership with Grown Rogue has accelerated our operations and already we have identified several additional licenses which could make Grown Rogue one of the leading cannabis operations in the entire state of Michigan,” stated Maxim Ermakov, Helios Executive Director.
About Grown Rogue
Grown Rogue International (CSE: GRIN | OTC: NVSIF) is a vertically-integrated, multi-state cannabis company curating innovative products to provide consumers with the right cannabis experience. Each of Grown Rogue’s products and strains are categorized and marketed based on unique effects and designed for the full range of a consumers’ lifestyle. Grown Rogue is scaling the vertically integrated model into multiple states by incorporating best-in-class manufacturing facilities and a proprietary distribution platform based on Microsoft technology. Grown Rogue’s diverse cannabis product suite includes premium flower, patent-pending nitrogen sealed pre-rolls, oil and concentrates, and edibles featuring a partnership with world-renowned chocolatier, Jeff Shepherd.
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