EX-99.1 2 grownrogue_ex1.htm EXHIBIT 1

 

Exhibit 1

 

Grown Rogue Reports First Quarter 2023 Results, Record Operating Cash Flow and Free Cash Flow

 

●Revenue of $4.5M compared to $3.7M in Q1 2022, an increase of 21%

 

●Operating Cash Flow (OCF), before changes in working capital (WC), of $1.3M compared to $0.5M in Q1 2022, an increase of 176%

 

●Free Cash Flow1 (FCF) of $0.8M, after $0.4M spend on WC and capital expenditures

 

●Ended quarter with $3.5M of cash on hand, after $0.4M in debt repayment in the quarter

 

●Closed a $2.0M convertible debenture financing at 9% interest and half warrant coverage

 

Medford, Oregon, March 28, 2023 – Grown Rogue International Inc. (“Grown Rogue” or the “Company”) (CSE: GRIN) (OTC: GRUSF), a craft cannabis company operating in Oregon and Michigan, is pleased to report its fiscal first quarter 2023 results for the three months ended January 31, 2023. All financial information is provided in U.S. dollars unless otherwise indicated.

 

First Quarter 2023 Financial Summary ($USD Millions)

 

First Quarter 2023 Summary  Q1 2023   Q1 2022   +/- % 
Revenue   4.5    3.7    +21% 
aEBITDA   1.3    1.0    +33% 
aEBITDA %   29.5%   26.9%   +2.6% 
OCF (Before Changes in WC)   1.3    0.5    +176% 
OCF %   28.4%   12.5%   +15.9% 

 

Management Commentary

 

“We continue to demonstrate our operating abilities by generating substantial free cash flow margins while operating in extremely competitive markets. Our financial results for Q1 2023 were improved from Q4 2022 due to of our continued pursuit of operating efficiencies, and a modest increase in average wholesale pricing in Oregon,” said Obie Strickler, CEO of Grown Rogue.

 

“As we move forward, we are proactively ramping up our genetics programs in both Oregon and Michigan to make sure we stay on the front line of delivering industry-leading quality to our consumers. We believe that our philosophy and practice of constant iteration and improvement will engender more customer trust and deepen the relationship we have with our existing fans,” Mr. Strickler continued.

 

“Regarding capital allocation, we continue to focus on producing free cash flow to best position ourselves to meet our balance sheet obligations while being prepared for new market opportunities, using only a modest amount on increased working capital. With our internal cash generation and the recent $2M convertible debenture capital raise, we feel confident in our ability to take advantage of high-quality opportunities as they arise.

 

 

 

 

I want to thank the entire Grown Rogue team for their continued efforts and look forward to updating investors on our new market efforts in due course.”

 

Oregon Market Highlights ($USD Millions)

 

Oregon  Q1 2023   Q1 2022   +/- % 
Revenue   2.0    1.4    +41% 
aEBITDA   0.7    0.4    +79% 
aEBITDA Margin %   37.4%   29.4%   +8% 

 

●#1 Flower brand for seven consecutive quarters, according to LeafLink’s MarketScape data

 

●Grown Rogue increased Oregon sungrown capacity with a lease option of 35 additional acres in Oregon’s Rogue Valley, that includes an addition cultivation license

 

●Focusing on increasing market share by launching craft pre-roll products in Q2-Q3 2023

 

Michigan Market Highlights ($USD Millions)

 

Michigan  Q1 2023   Q1 2022   +/- % 
Revenue   2.6    2.3    +10% 
aEBITDA   1.1    1.0    +10% 
aEBITDA Margin %   43.6%   43.5%    +0.1% 

 

●Grown Rogue exercised its option and acquired 87% of Canopy Management, LLC resulting in its controlling interest in Golden Harvests, LLC

 

●Launching strain specific packaging in Q2-Q3 2023 which has garnered significant interest from customers

 

Michigan operations are through Golden Harvests, LLC.

 

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Financial Statements and aEBITDA reconciliation

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 

January 31,

2023

   October 31,
2022		 
   $   $ 
ASSETS          
Current assets          
Cash and cash equivalents   3,488,046    1,582,384 
Accounts receivable (Note 18)   1,276,546    1,643,959 
Biological assets (Note 3)   1,434,080    1,199,519 
Inventory (Note 4)   3,614,247    3,131,877 
Prepaid expenses and other assets   362,345    352,274 
Total current assets   10,175,264    7,910,013 
Property and equipment (Note 8)   7,880,350    7,734,901 
Intangible assets and goodwill (Note 9)   725,668    725,668 
TOTAL ASSETS   18,781,282    16,370,582 
           
LIABILITIES          
Current liabilities          
Accounts payable and accrued liabilities   1,664,264    1,821,875 
Current portion of lease liabilities (Note 7)   1,280,277    1,025,373 
Current portion of long-term debt (Note 10)   1,956,428    1,769,600 
Current portion of convertible debentures (Note 11)   194,426    - 
Business acquisition consideration payable (Note 5)   360,000    360,000 
Unearned revenue   52,318    28,024 
Derivative liability (Note 11.1)   721,849    - 
Income tax   311,032    311,032 
Total current liabilities   6,540,594    5,315,904 
Lease liabilities (Note 7)   1,251,759    1,275,756 
Long-term debt (Note 10)   339,664    839,222 
Convertible debentures (Note 11)   1,062,828    - 
TOTAL LIABILITIES   9,194,845    7,430,882 
           
EQUITY          
Share capital (Note 12)   21,894,633    21,858,827 
Shares issuable (Note 12)   -    35,806 
Contributed surplus (Notes 13, 14)   6,560,714    6,505,092 
Accumulated other comprehensive loss   (111,035)   (109,613)
Accumulated deficit   (19,531,463)   (21,356,891)
Equity attributable to shareholders   8,812,849    6,933,221 
Non-controlling interests (Note 22)   773,588    2,006,479 
TOTAL EQUITY   9,586,437    8,939,700 
TOTAL LIABILITIES AND EQUITY   18,781,282    16,370,582 

 

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  Three months ended
January 31,		 
   2023   2022 
   $   $ 
Revenue          
Product sales   4,530,540    3,732,713 
Total revenue   4,530,540    3,732,713 
           
Cost of goods sold          
Cost of finished cannabis inventory sold (Note 4)   (2,037,281)   (1,699,026)
Gross profit, excluding fair value items   2,493,259    2,033,687 
Realized fair value amounts in inventory sold   (606,715)   (1,010,478)
Unrealized fair value gain on growth of biological assets   630,872    1,289,514 
Gross profit   2,517,416    2,312,723 
Expenses          
Accretion expense   164,108    151,687 
Amortization of property and equipment   115,639    52,010 
General and administrative   1,535,242    1,603,926 
Share-based compensation   55,622    18,487 
Total expenses   1,870,611    1,826,110 
Income from operations   646,805    486,613 
Other income and (expense)          
Interest expense   (99,504)   (114,660)
Other income (expense)   223,774    (5,440)
Unrealized loss on marketable securities   -    (167,804)
Unrealized gain on derivative liability   64,360    - 
Loss on disposal of property and equipment   (168,144)   (6,250)
Gain from operations before income tax   667,291    192,459 
Income tax   (74,754)   (37,018)
Net income   592,537    155,441 
Other comprehensive income (items that may be subsequently reclassified to profit & loss)          
Currency translation loss   (1,422)   (13,658)
Total comprehensive income   591,115    141,783 
Gain per share attributable to owners of the parent – basic and diluted   0.01    0.00 
Weighted average shares outstanding – basic and diluted   169,193,812    164,976,815 
           
Net income (loss) for the period attributable to:          
Non-controlling interest   (339,408)   564,607 
Shareholders   931,945    (409,166)
Net income   592,537    155,441 
           
Comprehensive income (loss) for the period attributable to:          
Non-controlling interest   (339,408)   564,607 
Shareholders   930,523    (422,824)
Total comprehensive income   591,115    141,783 

 

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   Three months ended
January 31,		 
CONSOLIDATED CASH FLOW STATEMENTS  2023   2022 
   $   $ 
Operating activities          
Net income   592,537    155,441 
Adjustments for non-cash items in net income:          
Amortization of property and equipment   115,639    52,010 
Amortization of property and equipment included in costs of inventory sold   276,562    147,463 
Unrealized gain on changes in fair value of biological assets   (630,872)   (1,289,514)
Changes in fair value of inventory sold   606,715    1,010,478 
Share-based compensation   -    7,499 
Stock option expense   55,622    54,797 
Accretion expense   164,108    151,685 
Loss on disposal of property & equipment   168,144    6,250 
Unrealized loss on marketable securities   -    167,804 
Gain on fair value of derivative liability   (64,360)   - 
Effects of foreign exchange   933    1,807 
    1,285,028    465,720 
Changes in non-cash working capital (Note 15)   (419,285)   (389,648)
Net cash provided by operating activities   865,743    76,072 
           
Investing activities          
Purchase of property and equipment and intangibles   (36,378)   (574,595)
Payments of acquisition payable   -    (2,000)
Net cash used in investing activities   (36,378)   (576,595)
           
Financing activities          
Proceeds from convertible debentures   2,000,000    - 
Proceeds from long-term debt   -    100,000 
Proceeds from private placement   -    1,300,000 
Repayment of long-term debt   (420,730)   (218,710)
Repayment of convertible debentures   (15,000)   - 
Payments of lease principal   (487,973)   (186,922)
Net cash provided by financing activities   1,076,297    944,368 
           
Change in cash   1,905,662    493,845 
Cash balance, beginning   1,582,384    1,114,033 
Cash balance, ending   3,488,046    1,607,878 

 

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SEGMENTED aEBITDA – THREE MONTHS ENDED JANUARY 31, 2023  Oregon   Michigan   Corporate   Consolidated 
Sales revenues   1,955,720    2,574,820    -    4,530,540 
Costs of goods sold, excluding fair value (“FV”) adjustments   (936,086)   (1,101,195)   -    (2,037,281)
Gross profit before fair value adjustments   1,019,634    1,473,625    -    2,493,259 
Net fair value adjustments   (78,012)   102,169    -    24,157 
Gross profit   941,622    1,575,794    -    2,517,416 
                     
Operating expenses:                    
General and administration   494,918    474,928    565,396    1,535,242 
Depreciation and amortization   30,939    60,839    23,861    115,639 
Share based compensation   -    -    55,622    55,622 
                     
Other income and expense:                    
Loss on sale of assets   (168,144)   -    -    (168,144)
Interest and accretion   (75,187)   (60,685)   (127,740)   (263,612)
Unrealized loss on derivative liability   -    -    64,360    64,360 
Other income and expense   222,220    -    1,554    223,774 
Net income (loss) before income tax   394,654    979,342    (706,705)   667,291 
Income tax   24,754    50,000    -    74,754 
Net income after tax   369,900    929,342    (706,705)   592,537 
                     
Add back (deduct) from net income after tax:                    
Net FV adjustments in costs of goods sold   78,012    (102,169)   -    (24,157)
Amortization of property & equipment included in cost of sales   152,443    124,119    -    276,562 
Interest and accretion expense   75,187    60,685    127,740    263,612 
Amortization of property and equipment   30,939    60,839    23,861    115,639 
Share-based compensation   -    -    55,622    55,622 
Unrealized gain on derivative liability   -    -    (64,360)   (64,360)
Income tax expense   24,754    50,000    -    74,754 
EBITDA   731,235    1,122,816    (563,842)   1,290,209 
                     
Add back to EBITDA:                    
Compliance costs   -    -    17,997    17,997 
Costs associated with acquisition of Golden Harvests   -    -    30,000    30,000 
aEBITDA   731,235    1,122,816    (515,845)   1,338,206 
aEBITDA margin %   37.4%   43.6%   -    29.5%

 

NOTES:

 

1.The Company’s “Free cash flow” metric is defined by cash flow from operations minus capital expenditures.

2.The Company’s “aEBITDA,” or “Adjusted EBITDA,” is a non-IFRS measure used by management that does not have any prescribed meaning by IFRS and that may not be comparable to similar measures presented by other companies. The Company defines “EBITDA” as the Company’s net income or loss for a period, as reported, before interest, taxes, depreciation and amortization, and is further adjusted to remove transaction costs, stock-based compensation expense, accretion expense, gain (loss) on derecognition of derivative liabilities, the effects of fair-value accounting for biological assets and inventory, as well as other non-cash items and items not representative of operational performance as reported in net income (loss). Adjusted EBITDA is defined as EBITDA adjusted for the impact of various significant or unusual transactions. The Company believes that this is a useful metric to evaluate its operating performance.

 

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NON-IFRS FINANCIAL MEASURES

 

EBITDA and aEBITDA are non-IFRS measures and do not have standardized definitions under IFRS. The Company has provided the non-IFRS financial measures, which are not calculated or presented in accordance with IFRS, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with IFRS. These supplemental non-IFRS financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believe that the supplemental non-IFRS financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. These supplemental non-IFRS financial measures should not be considered superior to, as a substitute for or as an alternative to, and should only be considered in conjunction with, the IFRS financial measures presented herein. Accordingly, the following information provides reconciliations of the supplemental non-IFRS financial measures, presented herein to the most directly comparable financial measures calculated and presented in accordance with IFRS.

 

About Grown Rogue

 

Grown Rogue International (CSE: GRIN | OTC: GRUSF) is a craft cannabis company focused on delighting customers with premium flower and flower-derived products at fair prices. Our roots are in Southern Oregon where we have demonstrated our capabilities in the highly competitive and discerning Oregon market and, more recently, we successfully expanded our platform to Michigan. We combine our passion for product and value with a disciplined approach to growth, prioritizing profitability and return on capital. Our strategy is to pursue capital efficient methods to expand into new markets, bringing our craft quality and value to more consumers. We also continue to make modest investments to improve our outdoor craft cultivation capabilities in preparation for eventual interstate commerce.

 

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FORWARD-LOOKING STATEMENTS

 

This press release contains statements which constitute “forward-looking information” within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of the Company with respect to future business activities. Forward-looking information is often identified by the words “may,” “would,” “could,” “should,” “will,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “expect” or similar expressions and include information regarding: (i) statements regarding the future direction of the Company (ii) the ability of the Company to successfully achieve its business and financial objectives, (iii) plans for expansion of the Company and securing applicable regulatory approvals, and (iv) expectations for other economic, business, and/or competitive factors. Investors are cautioned that forward-looking information is not based on historical facts but instead reflect the Company’s management’s expectations, estimates or projections concerning the business of the Company’s future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although the Company believes that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the combined company. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: changes in general economic, business and political conditions, including changes in the financial markets; and in particular in the ability of the Company to raise debt and equity capital in the amounts and at the costs that it expects; adverse changes in the public perception of cannabis; decreases in the prevailing prices for cannabis and cannabis products in the markets that the Company operates in; adverse changes in applicable laws; or adverse changes in the application or enforcement of current laws; compliance with extensive government regulation and related costs, and other risks described in the Company’s public disclosure documents filed on Sedar.

 

Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.

 

The Company is indirectly involved in the manufacture, possession, use, sale and distribution of cannabis in the recreational cannabis marketplace in the United States through its indirect operating subsidiaries. Local state laws where its subsidiaries operate permit such activities however, these activities are currently illegal under United States federal law. Additional information regarding this and other risks and uncertainties relating to the Company’s business are disclosed in the Company’s Listing Statement filed on its issuer profile on SEDAR at www.sedar.com. Should one or more of these risks, uncertainties or other factors materialize, or should assumptions underlying the forward-looking information or forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected.

 

No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.

 

For further information on Grown Rogue International please visit www.grownrogue.com or contact:

 

Obie Strickler

Chief Executive Officer

 

Obie@grownrogue.com

 

Jakob Iotte

Director of Business

Development and IR

 

Jakeiotte@grownrogue.com

 

(458) 226-2100

 

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