1933 Industries Moves into New Cannabis Cultivation Facility with Receipt of Occupancy Permit
Marijuana Industry News July 3, 2019 MJ Shareholders
MEDFORD, OR, July 3, 2019 /CNW/ – PRESS RELEASE – Grown Rogue International Inc., a vertically-integrated, multi-state cannabis company with licenses and operations in Oregon, California, and now entering Michigan, has released its financial and operating results for its fiscal second quarter ended April 30, 2019. The company’s financial statements and management’s discussion and analysis for the period are available on the company’s SEDAR profile at www.sedar.com or through the company’s website at www.grownrogue.com. All amounts are expressed in United States Dollars unless otherwise indicated. Certain metrics, including those expressed on an adjusted basis, are non-IFRS measures.
- Second quarter 2019 revenues increased more than six-fold year-over-year, from $0.3 million to $1.9 million. Quarter-over-quarter revenues increased 125 percent from $0.8 million in Q1.
- Adjusted Gross Margin was ($0.02) million for the quarter and $0.2 million for the year-to-date. Adjusted Gross Margin was $0.4 million for the second quarter (20 percent) and $0.8 million for the year-to-date (28 percent)
- Adjusted EBITDA3 was ($1.0) million for the second quarter.
“Our second quarter revenue results are indicative of the brand strength and distribution reach we have achieved in Oregon and we are taking the same platform to California and Michigan,” said Obie Strickler, CEO of Grown Rogue. “The proposed acquisition of Decibel Farms announced in April is expected to increase our manufacturing capacity in Oregon where we continue to enjoy record demand for our products. Our California distribution license went into effect during the second quarter with revenues expected to commence this month.”
Grown Rogue expects to increase its combined annual flower production capacity in Oregon and Michigan from approximately 5,000 lbs (2,300 kgs) currently, to approximately 12,000 lbs (5,400 kgs) by the end of fiscal year 2019 following the anticipated incorporation of Decibel Farms and scaling of its cultivation operations in Michigan. The increased capacity is inclusive of the 40,000 square feet of greenhouse production capacity in Oregon in the proposed Decibel Farm transaction announced in April 2019. Grown Rogue’s anticipated acquisition of the Decibel brand includes Decibel’s “Loud” branded pre-roll which features a unique “painted on” rosin. Grown Rogue plans to introduce this innovative product in the California market in the third calendar quarter of 2019.
Qualitative Performance Factors
“We believe that licenses, assets, and operations are of little value without an experienced team that knows how to cultivate quality cannabis products at scale and build meaningful brands. Our team has been building these core competencies for the past three years,” added Jacques Habra, chief strategy officer.
Grown Rogue has received recognition at regional cannabis competitions for “Highest Percentage THC,” “Highest Percentage Terpenes,” as previously announced in a press release on Jan. 8, 2019. This recognition for cultivation excellence are the foundation of the Grown Rogue products that the company intends to bring to California and Michigan.
Grown Rogue Current Multi-State Presence
Well-established in Oregon, Grown Rogue has expanded into California and its third state, the highly populated, limited-license state of Michigan through a partnership agreement.
- Cultivating 130,000 sq. ft. of canopy in Oregon (including Decibel Farms) including three outdoor and greenhouse farms and a state-of-the-art indoor facility
- Increased outdoor yield from 2018 to 2019 by over 50 percent
- Increasing market penetration and sales revenue
- Expanded into California with a 16,000-square-foot microbusiness facility in Eureka with retail, processing and distribution licensing partnership spanning San Francisco to Los Angeles.
- Secured state and local approval for distribution license and type 6 manufacturing (non-volatile), and local approval for type 7 manufacturing (volatile).
- Subsequent to the close of the second quarter a binding LOI was signed to acquire Michigan operator “Inferno Gardens Inc.” which includes one retail dispensary (referred to as provisional centers in Michigan), a 24,000-square-foot indoor cultivation facility, and a processing/manufacturing center. First sales are anticipated to begin in early 2020.
- As a result of this new agreement with Inferno Gardens originally disclosed in a press release on July 2, 2019, Grown Rogue has elected not to move forward with a previously announced option to acquire alternative Michigan operations as previously announced in a press release on Feb. 25, 2019.
Second Quarter 2019 Financial Overview
Grown Rogue revenue grew to $1.9 million, a 548-percent increase from revenue of $0.3 million in its second fiscal quarter ended April 30, 2018, and a 125-percent increase on a consecutive quarterly basis from $0.8 million in Grown Rogue’s first quarter of fiscal 2019. Organic sales growth are driven through the internal sales force, third party distribution, and strengthening of the Grown Rogue brand.
F2019 Q2 Adjusted Gross Margin was $0.4 million, or 20 percent of revenues, a substantial improvement from Adjusted Gross Margin of ($0.04) million for the same period last year. Adjusted Gross Margin improved as a result of the efforts of the company over the past year to refine its cultivation processes to be more efficient, resulting in lower cost of sales, while also increasing revenue.
General and administrative expenses were $1.3 million for the second quarter of fiscal 2019, compared to similar expenses of $0.6 million for the second quarter of fiscal 2018. The increase in expenses was primarily related to the expanded scope of operations and associated sales, general and administrative support. Grown Rogue’s Adjusted EBITDA amounted to ($1.0) million for the three months ended April 30 2019, compared to ($0.6) million for the three months ended April 30, 2018. The increased loss was primarily attributable to infrastructure investments required to support the company’s growth plans.
The company’s cash and cash equivalents position was $0.3 million as at April 30, 2019. Subsequent the second quarter the company completed a CAD $1.5 million debenture financing.
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