The company decided to terminate the agreement in order to proceed with an alternative operator which will be materially less resource intensive as the company initially enters the new Michigan market.
Grown Rogue will focus energy and resources relating to expansion into Michigan on the recently announced proposed acquisition of Inferno Gardens, a cannabis operator in Muskegon, Mich.
The proposed acquisition of Inferno will provide Grown Rogue with an expedient and cost-effective entry into the Michigan cannabis market.
“After careful consideration of the very exciting Michigan market, we chose a direction that gives us the opportunity to produce our first harvest in late 2019 and be fully vertically Integrated by 2nd quarter 2020,” Grown Rogue Co-Founder and CEO Obie Strickler stated.
“We understand the value and timing of the Michigan market. Our management team has the experience to expeditiously enter the market with the Muskegon assets and the timing made all the difference in electing to not exercise options with Blue Zebra and instead focus on the Inferno Gardens partnership,” Strickler added.
In connection with the termination agreement, Grown Rogue has issued to Blue Zebra 2,148,117 common share purchase warrants with an exercise price of $0.44 per share. The warrants will expire on June 28, 2023.
Grown Rogue will have the right to accelerate the expiry date of 25% of the warrants during the term if the shares of Grown Rogue close at or above $1.00 per share for a period of 20 consecutive days. An additional 25% of the warrants will accelerate if the shares of Grown Rogue close at or above $1.50 per share for a period of 20 consecutive days, and the remainder of the warrants will accelerate if the shares of the Grown Rogue close at or above $2.00 per share for a period of 20 consecutive days.
Further, Grown Rogue has granted to Blue Zebra a pre-emptive right to maintain ownership of up to 5% of the company’s common shares. The warrants vest 40% on the issuance date with the remaining warrants vesting upon certain events relating to the activities of Helios Holdings in the Michigan cannabis industry.