Mr. Obie Strickler reports

GROWN ROGUE PROVIDES NEW JERSEY CULTIVATION UPDATE

Grown Rogue International Inc. has provided details on the performance and structure of its New Jersey cultivation affiliate, Abco Garden State LLC.

Management commentary on Abco performance

"I'm excited by the initial progress we have seen in New Jersey across cultivation, postharvest and sales. We are seeing strong cultivation yields, greater than 60 grams of flower per square foot of bench space with preliminary gross margin between 55 and 60 per cent. I'm most pleased about our early progress with yield, quality and cost, as that's what drives our business and is always a challenge with new facilities in new states as we build the team, acclimate to the facility's environment and dial in our efficiencies. We have also been encouraged by our sales ramp as we have sold into over 50 per cent of the dispensaries in New Jersey with our flower and preroll products, including accelerating reorder trends, providing some early validation with respect to our quality, value and brand strength," said Obie Strickler, chief executive officer of Grown Rogue.

"In the first quarter, Abco had approximately $1.8-million (U.S.) in sales with an average selling price in excess of $2,500 per pound for our whole flower and preroll products. We are seeing a wide spread of pricing based mostly on quality and potency, which bodes well for us, as we optimize our practices within the facility by driving improved yield, quality and cost metrics. Our experience in mature markets has taught us that early high prices are a nice bonus to the business, but our long-term success is built around a core of providing maximum consumer value in the craft product tier, with curated genetics and relentless cost control. We anticipate being at full sell-through of our phase 1 production later this summer. Construction of phase 2 is scheduled to start in the second quarter and will double our steady-state production from 500 to 600 pounds per month to 1,000 to 1,2000 pounds per month. Our plan is to balance the additional capacity to coincide with our sell-through, incrementally bringing on additional rooms starting in the second half of the year with full capacity and sell-through anticipated in early 2026. We look forward to providing additional details when we report first quarter earnings," continued Mr. Strickler.

Management commentary on Abco financial reporting

For 2024 and 2025, Grown Rogue expects its investment and operational support in Abco to be reflected in its financial statements in the following ways:

1. Both accrued and paid interest on the principal balance of notes receivables, including the convertible note, of $8,166,667, reflected as interest income on the income statement, which is expected to total approximately $1.4-million for 2025 and was approximately $725,000 in 2024;
2. Consulting fees to reimburse Grown Rogue for time and efforts toward the buildout and continuing operational support will be reflected as service revenue in the corporate segment on the income statement; these fees are expected to be approximately $60,000 per month;
3. A 44-per-cent pro rata share of Abco's net income reflected as a gain/loss using the equity method on the income statement;
4. Payments of principal and interest will be reflected in cash flows from investing activities on the statement of cash flows.

"Just as our company evolves, our financial reporting evolves with it. Our goal is to provide investors insight into the core drivers of our business. With Abco becoming a significant contributor to our company in 2025 and accounting rules that will likely not allow for its full consolidation until our 70-per-cent ownership option is exercised in the fall of 2026, we are committing to showing investors pro forma results for Abco, which should provide investors the same transparency as we provide for our Oregon and Michigan operations," stated Andrew Marchington, chief financial officer of Grown Rogue.

"The majority of the capital Grown Rogue has deployed in Abco has been structured through secured loans. Not including our convertible loans totalling $1.05-million, the current outstanding balance of our term and bridge loans as of March 31, 2025, is $8,109,317, including accrued interest," continued Mr. Marchington. "The repayment of these notes are structured to be paid as a first priority before the distribution of any profits to Abco partners. We believe this is a preferred deal structure for Grown Rogue shareholders despite its complex impact on our financial statements."

About Grown Rogue International Inc.

Grown Rogue is a craft cannabis company operating in Oregon, Michigan, New Jersey and Illinois, focused on delighting customers with premium flower and flower-derived products at fair prices. The company's roots are in southern Oregon, where it has proved its capabilities in the highly competitive and discerning Oregon market. The company's passion for quality product and value, combined with a disciplined approach to growth, prioritizes profitability and return on capital without sacrificing quality. The company's strategy is to pursue capital-efficient methods to expand into new markets, bringing craft-quality product at fair prices to more consumers. The company also continues to make modest investments to improve outdoor craft cultivation capabilities in preparation for eventual interstate commerce.

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