Grown Rogue International Inc.

Grown Rogue International Inc. Material Event Summary

Grown Rogue International Inc. (CSE: GRIN; OTC: GRUSF), a well-established multi-state cannabis operator, is making a significant strategic move: expanding into the Illinois adult-use cannabis market. This expansion will substantially broaden the company's operational footprint and revenue potential, though it also introduces new financial commitments and risks.

Event Description (what happened)

Grown Rogue, through a subsidiary, has agreed to acquire a 49% ownership stake in Sea Craft, LLC, an Illinois-based company holding a valuable Illinois Adult Use Cannabis Craft Grower License. The initial cash payment for this 49% stake is $1 million. Concurrently, Grown Rogue secured an exclusive option to acquire the remaining majority interest in Sea Craft later, based on specific valuation metrics and regulatory approvals.

To fund this expansion and Sea Craft's operations, Grown Rogue secured $3 million in new preferred equity financing. This financing promises investors a 15% cumulative annual return and includes a three-year period for conversion into common shares. Additionally, Grown Rogue will provide Sea Craft with a secured loan facility ranging from $1 million to $2 million for startup costs and working capital. The company hasn't shared the exact interest rates or repayment terms for this loan yet, so that's something to keep an eye out for.

This acquisition is a cornerstone of Grown Rogue's strategy to become a stronger, more diversified multi-state operator (MSO) by entering Illinois's rapidly growing adult-use cannabis market, which generated over $1.6 billion in sales in 2023. The Illinois Craft Grower License is highly valuable because it permits cultivation, processing, and limited distribution, offering significant control over the supply chain. Grown Rogue aims to use its proven cultivation and operational expertise to build a new, state-of-the-art production facility in Dwight, Illinois, under the Sea Craft banner. This strategic entry allows Grown Rogue to introduce its established brands and high-quality cannabis products to a new, high-demand market, driving future revenue growth and expanding its market share.

Event Date/Timeline

The definitive agreement for the Sea Craft acquisition was signed on March 11, 2026. The associated financing was completed on March 9, 2026. Grown Rogue publicly announced these developments via a press release on March 12, 2026.

Impact Assessment (who/what is affected)

This transaction will significantly change Grown Rogue's financial and operational landscape. Positively, it provides direct access to a lucrative new market, potentially boosting sales and profitability.

• Employees: Sea Craft employees will join Grown Rogue's Illinois operations, gaining new resources and growth opportunities. Grown Rogue expects to hire new staff for the Dwight facility, creating jobs in the region, which is a good sign for scaling operations.
• Customers: Illinois adult-use cannabis consumers will access Grown Rogue's established portfolio of cannabis products, expanding their choices and potentially enhancing product quality in the market. This means new revenue streams for Grown Rogue.
• Investors: For investors, this event presents a mixed outlook. It offers significant long-term growth potential from a new, high-value market, which could positively impact stock performance. However, investors must consider the increased debt, the high cost of preferred equity financing (a 15% cumulative return), and potential future dilution of common shareholders if the preferred shares convert.
• Competitors: Existing cannabis operators in Illinois will face a new, well-capitalized competitor with established brands and operational expertise, potentially intensifying market competition.

Immediate and Future Implications:

• Immediately: The primary next step is securing approval from the Illinois Department of Agriculture (IDOA) to transfer Sea Craft's Craft Grower License. This approval is critical for the initial 49% acquisition to close, and Grown Rogue anticipates it in the second quarter of 2026.
• Near-term: Once approved, Grown Rogue will rapidly build out and operationalize Sea Craft's new 20,000 sq. ft. cultivation and processing facility in Dwight, Illinois. The $1 million to $2 million loan facility will fund startup costs, equipment, and initial working capital. The goal is to start cultivation and processing quickly to bring products to market.
• Longer-term: Grown Rogue holds an exclusive option to acquire the remaining majority interest in Sea Craft, potentially leading to full ownership and deeper integration into its MSO structure. The $3 million preferred equity financing has a three-year conversion period; after this, it may convert into common shares, affecting the company's capital structure and potentially diluting existing shareholders.

Financial Impact (if applicable)

This move creates substantial financial obligations and affects Grown Rogue's financial leverage and operational complexity:

• Initial Investment: $1 million cash for the 49% equity stake in Sea Craft, LLC.
• Loan Facility: Up to $2 million in a secured loan to Sea Craft for startup costs and working capital, increasing Grown Rogue's debt. The company hasn't shared the exact interest rates or repayment terms for this loan yet, so we'll need to watch for those details.
• Preferred Equity: $3 million in new preferred equity financing, which promises investors a 15% cumulative annual return. This financing has a three-year conversion period, after which it could convert into common shares, impacting earnings and potentially diluting common shareholders.
• Contingent Liability: Grown Rogue is guaranteeing the lease for Sea Craft's new production facility, creating a significant contingent financial risk. These obligations will affect Grown Rogue's balance sheet and profitability.

Key Takeaways for Investors

• Key Catalysts: Watch for the IDOA's approval of the license transfer, which is essential for the deal's initial closing. Key milestones to follow include progress on the Dwight facility's construction, the first harvest, and initial sales figures from Illinois. These will be important indicators of success.
• Financial Impact: Understand the total financial commitment: $1 million cash for the equity stake, up to $2 million for the secured loan, and $3 million in preferred equity with a 15% cumulative return. These obligations will affect Grown Rogue's balance sheet and profitability, so keep an eye on their financial statements.
• Risks:
  • Regulatory Risk: Delays or denial of IDOA approval could jeopardize the initial acquisition.
  • Operational Risk: Inherent risks include construction delays or cost overruns for the new facility, challenges in scaling cultivation/processing, and market acceptance of new products.
  • Financial Risk: Increased debt, the high cost of preferred equity financing, potential dilution from future conversions, and the contingent liability from the lease guarantee.
  • Integration Risk: Challenges in integrating Sea Craft's operations and personnel into Grown Rogue's existing framework.
• Strategic Alignment: This move aligns with Grown Rogue's goal of expanding into high-growth, regulated cannabis markets, potentially positioning it for significant long-term growth. It's a bold move into a promising market.
• Due Diligence: Always review the official SEC 8-K filing and related press releases for full details on the acquisition terms, financing, and associated risks. This summary is a great starting point, but the official documents provide all the nitty-gritty details you'll need.