MEDFORD, OR, July 2, 2019 /CNW/ - PRESS RELEASE - Grown Rogue International Inc., a vertically-integrated, multi-state cannabis company with licenses and assets in Oregon, California, and now entering Michigan, has announced a binding agreement to expand further into Michigan through a new strategic acquisition and partnership with experienced cannabis operators in Muskegon. The partnership is with Inferno Gardens, Inc., whose assets include the local approval for one retail dispensary (referred to as provisional centers in Michigan) and a 24,000-square-foot indoor manufacturing facility that will include both cultivation and processing when fully constructed. State licensing is in progress and expected to be completed in the coming months. The facility is approximately 40 percent constructed and expected to be fully operational within 120 days. Final acquisition and partnership is subject to Michigan regulatory approval and full licensing of Grown Rogue at the state level.
The terms of the agreement include the following provisions:
1. Grown Rogue obtains the option to acquire a 51-percent ownership of Inferno Gardens, subject to state regulatory approval, for a one-time payment of $250,000 due upon the signing of the definitive agreement with a deposit of $50,000 submitted in conjunction with the execution of the agreement;
2. Grown Rogue will provide up to $2MM in financing as a loan for development and operational build-out of the cultivation, processing and dispensary centers of which Grown Rogue will be paid back under an established schedule;
3. Grown Rogue will have the right to purchase the remaining 49 percent of Inferno Gardens for either stock or cash or a combination of both at the earlier of Grown Rogue stock reaching $1.00 / share on the Canadian Securities Exchange for a period of 10 consecutive days or 24 months from signing the definitive agreement. Unless Inferno Gardens permits, Grown Rogue may not exercise this option for a period of 12 months following the signing of the definitive agreement.
4. Grown Rogue will also issue 900,000 common shares to Inferno Gardens based on milestones including signing of definitive agreement, production of 500 lbs of dried cannabis flower and achieving $3,000,000.00 in top line revenue.
"The cultivation facility, pending all regulatory approval, is targeted to be fully operational by the end of the fourth quarter of this year with first revenue anticipated in early first quarter of 2020," explained Obie Strickler, Grown Rogue CEO. "Given that current Michigan market rates for quality cannabis flower fetches around $3000/lb, this new revenue source bodes well for our company's revenue targets. We are excited to partner with Jesse and the rest of his team at Inferno Gardens and bring our proven business model and brand to the Michigan market. "
The binding agreement also considers the appointment of Inferno Gardens leadership to a management role for oversight of the development and operation of the Michigan facilities. Plans for the dispensary and processing facility are slated for launching in early 2020.
The company believes the Muskegon location is ideal with the facilities positioned on a popular corridor that see millions of locals and visitors passing through each year en route to Lake Michigan.
"Our positive relationship with the City of Muskegon and local community has been very helpful in advancing our licensing and development initiatives," shared Jesse Sproat, CEO of Inferno Gardens. "The partnership with Grown Rogue adds tremendous credibility and allows us to accelerate our go to market plans."
According to the Detroit Free Press, A significant portion of Muskegon County as well as several neighboring Counties have opted out of the cannabis program in Michigan. "Since Muskegon is such a popular destination for locals and tourists, our vertically integrated operation will soon be online to cater to the growing consumer base enjoying Michigan State Parks," added Sproat.
Michigan is the second largest medical cannabis population in the United States with the highest per capita medical patient registrations. The state passed the recreational vote in November 2018, and expects a minimum of two years to fully convert the regulations to be in compliance for recreational adult use.
"Our facility in Muskegon will have the capacity to produce approximately 4,000 lbs (~1814 kg) yearly of premium cannabis. This translates to $13-14 million in yearly revenue using today's average market prices in Michigan," stated Jacques Habra, chief strategy officer of Grown Rogue. "We expect demand for high quality cannabis products in Michigan to continue to outstrip supply for many years."