Grown Rogue International Inc 10-Q for FY2026 Q2
Grown Rogue International Inc. (GRUSF)
About this 10-Q
Grown Rogue International Inc filed this 10-Q on August 5, 2026, covering the quarter ended June 30, 2026 (FY2026 Q2).
Headline figures
Quarter ended June 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $11.27M
- Net loss
- $1.48M
- compared with net income of $1.66M a year earlier
- Diluted EPS
- -$0.01
- compared with $0.01 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| For the quarterly period ended |
| or |
| For the transition period from _________ to _________ |
| Commission file number |
(Exact Name of Registrant as Specified in its charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
|
| ||
| (Address of principal executive offices, Zip Code) | ||
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered under Section 12(g) of the Act:
Subordinate Voting Shares, no par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
| ☒ | Smaller Reporting Company | ||
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of August 4, 2026, the registrant had Subordinate Voting Shares and 0 Multiple Voting Shares outstanding.
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
GROWN ROGUE INTERNATIONAL INC.
Condensed Consolidated Financial Statements
For the three and six months ended June 30, 2026 and 2025
Expressed in United States Dollars
(Unaudited)
1
Grown Rogue International Inc.
Condensed Consolidated Balance Sheets
As at June 30, 2026 and December 31, 2025
(Expressed in United States Dollars) - Unaudited
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | ||||||||
| Accounts receivable, net (Note 4) | ||||||||
| Inventory (Note 5) | ||||||||
| Prepaid expenses | ||||||||
| Derivative asset (Note 12) | ||||||||
| Current portion of notes receivable (Note 8) | ||||||||
| Total current assets | ||||||||
| Other long-term assets | ||||||||
| Warrants asset (Note 6) | ||||||||
| Other investments (Note 7) | ||||||||
| Notes receivable (Note 8) | ||||||||
| Lease receivable | ||||||||
| Property and equipment, net (Note 9) | ||||||||
| Right of use assets (Note 10) | ||||||||
| Deferred tax asset | ||||||||
| Intangible assets | ||||||||
| TOTAL ASSETS | ||||||||
| LIABILITIES | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Current portion of operating lease liabilities (Note 10) | ||||||||
| Current portion of finance lease liabilities (Note 10) | ||||||||
| Current portion of long-term debt (Note 11) | ||||||||
| Current portion of business acquisition consideration payable | ||||||||
| Derivative liability | ||||||||
| Warrant liabilities (Note 12) | ||||||||
| Income tax payable | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities (Note 10) | ||||||||
| Finance lease liabilities (Note 10) | ||||||||
| Long-term debt (Note 11) | ||||||||
| Business acquisition consideration payable | ||||||||
| Other non-current liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies (Note 23) | ||||||||
| Subsequent events (Note 24) | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Subordinate voting common shares, convertible into multiple voting common shares, par value; unlimited shares authorized; and shares issued and outstanding as at June 30, 2026 and December 31, 2025, respectively | ||||||||
| Multiple voting common shares, par value; unlimited shares authorized; nil and nil shares issued and outstanding as at June 30, 2026 and December 31, 2025, respectively | ||||||||
| Accumulated other comprehensive loss | ( |
) | ( |
) | ||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Equity attributable to shareholders | ||||||||
| Non-controlling interests (Note 22) | ||||||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
The accompanying notes form an integral part of these condensed consolidated financial statements.
2
Grown Rogue International Inc.
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
For the three and six months ended June 30, 2026 and 2025
(Expressed in United States Dollars, except share amounts) - Unaudited
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Revenue | ||||||||||||||||
| Product sales | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of goods sold | ||||||||||||||||
| Cost of finished cannabis inventory sold | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total cost of goods sold | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Amortization (Notes 9, 10) | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Share-based compensation (Note 15) | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income (loss) from operations | ( |
) | ||||||||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense (Note 11, 12) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income (expense) | ( |
) | ( |
) | ||||||||||||
| Interest income | ||||||||||||||||
| Unrealized gain (loss) on derivative liability (Note 12) | ( |
) | ( |
) | ||||||||||||
| Realized gain on derivative liability (Note 12) | ||||||||||||||||
| Unrealized loss on warrant asset (Note 6) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Unrealized gain (loss) on warrant liability (Note 12) | ( |
) | ||||||||||||||
| Loss on equity investment in associate (Note 7) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total other income (expense), net | ( |
) | ( |
) | ||||||||||||
| Income (loss) before income tax expense | ( |
) | ( |
) | ||||||||||||
| Income tax expense (Note 17) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net income (loss) | ( |
) | ( |
) | ||||||||||||
| Other comprehensive income | ||||||||||||||||
| Currency translation adjustment | ( |
) | ||||||||||||||
| Total comprehensive income (loss) | ( |
) | ( |
) | ||||||||||||
| Basic income (loss) per share | ( |
) | ( |
) | ||||||||||||
| Basic weighted average number of subordinate voting common shares outstanding | ||||||||||||||||
| Diluted income (loss) per share | ( |
) | ( |
) | ||||||||||||
| Diluted weighted average number of subordinate voting common shares outstanding | ||||||||||||||||
| Net income (loss) for the period attributable to: | ||||||||||||||||
| Shareholders | ( |
) | ( |
) | ||||||||||||
| Non-controlling interest | ||||||||||||||||
| Net income (loss) | ( |
) | ( |
) | ||||||||||||
| Total comprehensive income (loss) for the period attributable to: | ||||||||||||||||
| Shareholders | ( |
) | ( |
) | ||||||||||||
| Non-controlling interest | ||||||||||||||||
| Total comprehensive income (loss) | ( |
) | ( |
) | ||||||||||||
The accompanying notes form an integral part of these condensed consolidated financial statements.
3
Grown Rogue International Inc.
Condensed Consolidated Statements of Changes in Shareholders’ Equity
For the six months ended June 30, 2026 and 2025
(Expressed in United States Dollars, except share amounts) - Unaudited
| Subordinate voting common shares |
Paid in capital |
Accumulated other comprehensive loss |
Accumulated deficit |
Non-controlling interests |
Total shareholders’ equity |
|||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| # | $ | $ | $ | $ | $ | |||||||||||||||||||
| Balance - December 31, 2024 | ( |
) | ( |
) | ||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||
| Settlement of July Convertible Debentures | ||||||||||||||||||||||||
| Settlement of restricted share units | ||||||||||||||||||||||||
| Share-based compensation expense | - | |||||||||||||||||||||||
| Currency translation adjustment | - | |||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Balance - March 31, 2025 | ( | ) | ( | ) | ||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||
| Settlement of July Convertible Debentures | ||||||||||||||||||||||||
| Dividend issued from Golden Harvests, LLC to minority owner | - | ( |
) | ( |
) | |||||||||||||||||||
| Share-based compensation expense | - | |||||||||||||||||||||||
| Currency translation adjustment | - | ( |
) | ( |
) | |||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Balance - June 30, 2025 | ( |
) | ( |
) | ||||||||||||||||||||
| Balance - December 31, 2025 | ( |
) | ( |
) | ||||||||||||||||||||
| Sale of non-controlling interest in GRMA | - | |||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||
| Distributions to non-controlling interests in subsidiaries | - | ( |
) | ( |
) | |||||||||||||||||||
| Reclassification of warrants | - | ( |
) | ( |
) | |||||||||||||||||||
| Share-based compensation expense | - | |||||||||||||||||||||||
| Net income (loss) | - | ( |
) | ( |
) | |||||||||||||||||||
| Balance - March 31, 2026 | ( | ) | ( | ) | ||||||||||||||||||||
| Distributions to non-controlling interests in subsidiaries | - | ( | ) | ( | ) | |||||||||||||||||||
| Share-based compensation expense | - | |||||||||||||||||||||||
| Net income (loss) | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance - June 30, 2026 | ( |
) | ( |
) | ||||||||||||||||||||
The accompanying notes form an integral part of these condensed consolidated financial statements.
4
Grown Rogue International Inc.
Condensed Consolidated Statements of Changes in Cash Flows
For the six months ended June 30, 2026 and 2025
(Expressed in United States Dollars, unless otherwise indicated) - Unaudited
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Operating activities | ||||||||
| Net income (loss) | ( |
) | ||||||
| Adjustments for non-cash items in net income (loss) and earnings impact of warrant liability reclassification: | ||||||||
| Depreciation of property and equipment | ||||||||
| Depreciation of property and equipment included in costs of finished cannabis inventory sold | ||||||||
| Lease costs included in costs of finished cannabis inventory sold | ||||||||
| Share-based compensation | ||||||||
| Interest and accretion expense | ||||||||
| Other income | ( |
) | ||||||
| Interest income | ( |
) | ( |
) | ||||
| Unrealized (gain) loss on derivative liability | ( |
) | ||||||
| Realized (gain) loss on derivative liability | ( |
) | ||||||
| Unrealized loss on warrant asset | ||||||||
| Unrealized gain on warrant liability | ( |
) | ||||||
| Loss on equity investment in associate | ||||||||
| Deferred income taxes | ( |
) | ( |
) | ||||
| Changes in operating assets and liabilities (Note 18) | ( |
) | ||||||
| Net cash provided by (used in) operating activities | ( |
) | ||||||
| Investing activities | ||||||||
| Purchase of property and equipment | ( |
) | ( |
) | ||||
| Payments of business acquisition consideration payable | ( |
) | ( |
) | ||||
| Investment in Rogue EBC, LLC equity interest | ( |
) | ( |
) | ||||
| Net cash used in investing activities | ( |
) | ( |
) | ||||
| Financing activities | ||||||||
| Sale of non-controlling interest in GRMA, net of issuance costs | ||||||||
| Proceeds from exercise of stock options | ||||||||
| Proceeds from long-term debt | ||||||||
| Distributions to non-controlling interests in subsidiaries | ( |
) | ( |
) | ||||
| Debt issuance costs | ( |
) | ||||||
| Repayment of long-term debt | ( |
) | ( |
) | ||||
| Payment of interest on convertible debentures | ( |
) | ||||||
| Repayment of finance lease | ( |
) | ( |
) | ||||
| Net cash provided by financing activities | ||||||||
| Effect of foreign exchange on cash and cash equivalents | ||||||||
| Change in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | ||||||||
The accompanying notes form an integral part of these condensed consolidated financial statements.
5
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 1. | NATURE OF THE ORGANIZATION AND BUSINESS |
Grown Rogue International Inc. (the “Company”) was incorporated under the Business Corporations Act (Ontario) on November 1, 2018. The primary cannabis product produced and sold is cannabis flower. The registered office is located at 40 King St W Suite 5800, Toronto, ON M5H 3S1.
The Company is a cannabis operator in Oregon, Michigan, New Jersey and with operations being provisioned in Illinois and Minnesota, USA and is engaged in the cultivation of and manufacturing of cannabis flower and extract products for wholesale and retail sales.
At the federal level, cannabis currently remains a Schedule I controlled substance under the Federal Controlled Substances Act of 1970. Under U.S. federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of accepted safety for the use of the drug under medical supervision. As such, even in those states in which marijuana is legalized under state law, the manufacture, importation, possession, use or distribution of cannabis remains illegal under U.S. federal law. This has created a dichotomy between state and federal law, whereby many states have elected to regulate and remove state-level penalties regarding a substance which is still illegal at the federal level. There remains uncertainty about the US federal government’s position on cannabis with respect to cannabis-legal status. A change in its enforcement policies could impact the ability of the Company to continue as a going concern.
| 2. | BASIS OF PRESENTATION |
These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC. In the opinion of management, all adjustments considered necessary for a fair presentation of the results for the interim periods have been made. All such adjustments are of a normal recurring nature. The results for the three and six months ended June 30, 2026, are not necessarily indicative of the results to be expected for the full fiscal year.
During 2025, the Company determined that more than 50% of its outstanding common shares were held by U.S. stockholders and, as a result, no longer met the definition of a foreign private issuer under U.S. securities laws. Accordingly, commencing with the year ended December 31, 2025, the Company is required to present its financial statements in accordance with U.S. GAAP rather than IFRS® Accounting Standards as issued by the International Accounting Standards Board.
The Company has prepared audited consolidated financial statements in accordance with U.S. GAAP for the year ended December 31, 2025. These condensed consolidated financial statements and the accompanying note disclosures have been prepared on a basis consistent with the Company’s audited consolidated financial statements and reflect only those adjustments necessary, in the opinion of management, for fair presentation of the results for the interim periods.
6
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 2. | BASIS OF PRESENTATION (CONTINUED) |
| 2.1 | Functional and presentation currency |
The Company’s reporting currency is the United States Dollar (“USD”). Effective January 1, 2026, the Company changed its functional currency from the Canadian Dollar (“CAD”) to the USD based on management’s determination that the USD had become the Company’s primary economic environment due to changes in underlying transactions, events, and operating conditions. All subsidiaries have a functional currency of USD.
The change in functional currency was applied prospectively from January 1, 2026 in accordance with ASC 830, Foreign Currency Matters. Translated amounts of non-monetary assets and liabilities at December 31, 2025 became the historical accounting basis for those assets and liabilities at January 1, 2026. The cumulative translation adjustment recognized in accumulated other comprehensive loss prior to the change has not been reversed and continues to be reported in equity.
For the comparative period (six months ended June 30, 2025), when the Company’s functional currency was CAD, assets and liabilities were translated to USD at exchange rates prevailing at the end of the reporting period, and income and expense items were translated at the average exchange rates for the period. Exchange differences arising from translation were recognized in other comprehensive income (loss) and reported as currency translation reserve in shareholders’ equity.
| 2.2 | Use of estimates |
The preparation of the Company’s financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenue, and expenses as well as the related disclosures. The Company must often make estimates about effects of matters that are inherently uncertain and will likely change in subsequent periods. Actual results could differ materially from those estimates.
Areas requiring a significant degree of estimation and judgment relate to the assessment of transactions as business combinations or asset acquisitions, estimates used in valuation and costing of inventory, impairment of long-lived assets and indefinite lived intangible assets, fair value measurements, the recoverability and measurement of deferred tax assets and liabilities, share-based compensation, fair value of derivative assets and liabilities, and consolidation of entities in which the Company holds less than a majority of voting rights.
| 2.3 | Basis of consolidation |
These financial statements incorporate the accounts of the Company and all the entities in which the Company has a controlling voting interest and is deemed to be the primary beneficiary. All consolidated entities were under common control during the entirety of the periods for which their respective results of operations were included in the consolidated statements from the date of acquisition. All intercompany balances and transactions are eliminated upon consolidation.
7
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 2. | BASIS OF PRESENTATION (CONTINUED) |
| 2.3 | Basis of consolidation (CONTINUED) |
A summary of the Company’s subsidiaries included in these financial statements as at June 30, 2026 is as follows:
| Schedule of consolidated financial statements | ||||||||||
| Entity | Defined term | Location | Purpose | Percentage held |
||||||
|---|---|---|---|---|---|---|---|---|---|---|
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| %* | ||||||||||
| %** | ||||||||||
| % | ||||||||||
| % | ||||||||||
| %*** | ||||||||||
| % | ||||||||||
| %**** | ||||||||||
| * |
|
| ** |
|
| *** |
|
| **** |
|
All subsidiaries of the Company were incorporated in the United States of America and have USD as their functional currency.
8
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 3. | SIGNIFICANT ACCOUNTING POLICIES |
The accounting policies used in the preparation of these financial statements are consistent with those described in the Company’s audited consolidated financial statements for the year ended December 31, 2025. Material accounting policies applied in these condensed consolidated financial statements as follows:
Revenue
Revenue is recognized in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”) when goods or services are transferred to the customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
In order to recognize revenue under ASC 606, the Company applies the following five steps:
| 1. | Identify a customer along with a corresponding contract |
| 2. | Identify the performance obligation(s) in the contract to transfer goods or provide distinct services to a customer |
| 3. | Determine the transaction price that the Company expects to be entitled to in exchange for transferring promised goods or services to a customer |
| 4. | Allocate the transaction price to the performance obligation(s) in the contract |
| 5. | Recognize revenue when or as the Company satisfies the performance obligation(s) in the contract |
Revenue from the sale of goods is generally recognized when control over the goods has been transferred to the customer. Payment for sales is typically due prior to shipment. The Company has elected to treat shipping and handling activities as a fulfillment activity, meaning these activities are not considered a separate performance obligation. Shipping and handling fees billed to customers are recognized as revenue at the time control of the goods passes to the customer. Costs incurred by the Company for shipping and handling are classified as cost of sales in the consolidated statements of income (loss) and comprehensive income (loss). Payment for wholesale transactions is due within a specified time period as permitted by the underlying agreement and the Company’s credit policy upon the transfer of goods to the customer. The Company generally satisfies its performance obligation and transfers control to the customer upon delivery and acceptance by the customer. Revenue is recorded at the estimated amount of consideration to which the Company expects to be entitled.
Inventory
Inventory consists of (i) raw materials, consumables and packaging supplies used in the process to prepare inventory for sale, (ii) work in process consisting of pre-harvested cannabis plants, and (iii) finished goods.
Inventory is valued at the lower of cost and net realizable value, with cost determined using the weighted average cost method. Net realizable value is calculated as the estimated selling price in the ordinary course of business, less any estimated costs to complete and sell the goods. Costs are capitalized to inventory, until substantially ready for sale. Costs include direct and indirect labor, raw materials, consumables, packaging supplies, utilities, facility costs, quality and testing costs, production related depreciation and other overhead costs including operating lease costs.
The Company records inventory reserves for obsolete and slow-moving inventory. Inventory reserves are based on inventory obsolescence trends, and the historical and professional experience of management. The Company classifies cannabis inventory as a current asset, although, due to the duration of the cultivation, drying, and conversion process, certain inventory items may not be realized in cost of sales within one year.
9
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 3. | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Financial instruments
Financial instruments are contracts that give rise to a financial asset of one party and a financial liability or equity instrument of another party. Financial instruments are recorded initially at fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Subsequent measurement depends on how the financial instrument has been classified and may be at fair value or amortized cost. For financial instruments subsequently measured at fair value, the Company calculates the estimated fair value of financial instruments using quoted market prices whenever available. When quoted market prices are not available, the Company uses standard pricing models including the Black-Scholes option pricing model.
Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 - Inputs that are not based on observable market data.
There have been no transfers between fair value hierarchy levels during the three and six months ended June 30, 2026 and 2025.
The Company’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are recorded at cost. The carrying values of these financial instruments approximate their fair value due to their short-term maturities. The Company’s note receivable, long-term debt, business acquisition consideration payable, and convertible debentures are valued at amortized cost using the effective interest rate method. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest risks arising from these financial instruments. The Company’s warrant asset and derivative liability are measured using the Black-Scholes option pricing model (Notes 6 and 12, respectively).
Share-based compensation expense consists of the Company’s stock option and restricted share unit expense.
Stock options and restricted share units granted to employees and consultants are measured based on the grant-date fair value. Share-based compensation expense for stock options is generally recognized based on the straight-line basis over the requisite service period. The Company has elected to account for forfeitures of share-based awards as they occur rather than estimating forfeitures at the grant date. Accordingly, stock-based compensation expense is recognized assuming all awards will vest, and previously recognized compensation cost is reversed in the period in which an award is forfeited due to an employee’s failure to satisfy the applicable service conditions.
Share-based compensation for restricted share units is recognized at the time of grant by multiplying the share price on the date of grant by the number of restricted share units granted. Share-based compensation expense is included in share-based compensation expense or cost of finished cannabis inventory sold based on the employee’s function classification.
Consideration paid to the Company on the exercise of stock options is recorded as subordinate voting common shares (“SV Shares”).
10
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 3. | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Income taxes
The Company uses the asset and liability method to account for income taxes. Deferred income tax assets and liabilities are determined based on enacted tax rates and laws for the years in which the differences are expected to reverse.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
As the Company operates in the cannabis industry, it is subject to the limits of IRC Section 280E, under which the Company is only allowed to deduct expenses directly related to the cost of producing the products or cost of production.
The Company recognizes uncertain income tax positions at the largest amount that is more-likely-than-not to be sustained upon examination by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than 50% likelihood of being sustained. Recognition or measurement is reflected in the period in which the likelihood changes. Any interest and penalties related to unrecognized tax liabilities are presented within income tax expense in the consolidated statements of loss and comprehensive loss.
For interim reporting purposes, the Company computes its income tax provision using an estimated annual effective tax rate method, as required under ASC 740, Income Taxes. Under this method, the Company estimates its annual effective income tax rate and applies that rate to year-to-date ordinary income or loss to determine the interim tax provision. The estimated annual effective tax rate reflects expected annual taxable income or loss, permanent items and discrete items identifiable to specific periods, which are recognized in the period in which they occur. The estimated annual effective tax rate is reviewed and updated at each interim reporting date, with any adjustment recognized in the period of change.
Recently adopted accounting pronouncements
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires enhanced disclosures regarding the nature and composition of certain expense captions presented on the income statement. The guidance is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. Because the standard only affects disclosures, the Company does not expect adoption to have a material impact on its consolidated financial position, results of operations, or cash flows; however, it expects additional footnote disclosures will be required upon adoption. The Company is currently evaluating the disclosure requirements of the standard.
In July 2025, the Financial Accounting Standards Board issued Accounting Standards Update 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets. The objective of this update is to reduce the cost and complexity of applying the current expected credit loss model to short-term accounts receivable and contract assets. ASU 2025-05 addresses these challenges by introducing a practical expedient that allows entities to assume that current conditions as of the balance sheet date do not change over the remaining life of the asset. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025, including interim periods within those fiscal years. The Company adopted ASU 2025-05 as of January 1, 2026.
| 4. | ACCOUNTS RECEIVABLE |
The Company’s accounts receivable composition is as follows:
| Schedule of accounts receivable composition | ||||||||
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| Trade receivables, net of provision for expected credit losses | ||||||||
| Taxes receivable | ||||||||
| Total accounts receivable, net | ||||||||
As at June 30, 2026, trade receivables was presented net of an allowance for expected credit losses of $
11
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 5. | INVENTORY |
The Company’s inventory composition is as follows:
| Schedule of inventory | ||||||||
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| Raw materials | ||||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Total Inventory | ||||||||
| 6. | WARRANTS ASSET |
The Vireo Warrants are remeasured at fair value through profit and loss at each reporting period using the Black-Scholes option pricing model. The fair value of the Vireo Warrants at June 30, 2026, was estimated to be $
| Schedule of warrants | ||||||||||||||||||||
| Date | Expected dividends | Expected volatility | Risk-free rate of interest |
Expected term (years) |
Closing price per common share |
|||||||||||||||
| December 31, 2025 | % | % | % | $ | (CAD$ | ) | ||||||||||||||
| June 30, 2026 | % | % | % | $ | (CAD$ | ) | ||||||||||||||
On June 5, 2026 Vireo Growth Inc. enacted a 30-1 reverse split. The number of warrants and comparative closing price per common share have been retroactively applied.
During the three and six months ended June 30, 2026, the Company recorded an unrealized loss on the change in fair value of the warrants asset of $
12
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 7. | OTHER INVESTMENTS |
On March 5, 2024, the Company signed a definitive agreement to form Rogue EBC, a joint venture with EBC Ventures. Rogue EBC holds a craft growers license with the Illinois Department of Agriculture. Grown Rogue owns 79% of the joint venture and has contributed capital to support the development of the facility. The joint venture agreement includes multiple purchase options, which ultimately give the Company the ability to acquire 100% of the membership interests of the joint venture subject to approval by the Illinois Department of Agriculture. The Company does not have the unilateral ability to direct activities of Rogue EBC and therefore the investment constitutes a joint venture in accordance with ASC 323, Investments – Equity Method and Joint Ventures.
The investment in Rogue EBC has been accounted for using the equity method as follows:
| Schedule of other investment | ||||||||
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| Balance, beginning of period | ||||||||
| Investment in Rogue EBC | ||||||||
| Loss on equity investment in associate | ( |
) | ( |
) | ||||
| Deposit on purchase of remaining Rogue EBC | ||||||||
| Balance, end of period | ||||||||
The following table presents summarized financial information for Rogue EBC:
| Schedule of summarized financial information | ||||||||
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| Current assets | ||||||||
| Non-current assets | ||||||||
| Total assets | ||||||||
| Current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Net Assets | ||||||||
| Company share of net assets | ||||||||
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Net loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Company share of net loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
13
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 8. | NOTES RECEIVABLE |
Transactions related to the Company’s notes receivable for the six months ended June 30, 2026 and year ended December 31, 2025, include the following:
| Schedule of notes receivable | ||||||||
| June 30, 2026 |
December 31, 2025 |
|||||||
|---|---|---|---|---|---|---|---|---|
| $ | $ | |||||||
| Balance, Beginning of period | ||||||||
| Advances | ||||||||
| Accrued interest | ||||||||
| Balance, end of period | ||||||||
Accrued interest for the three and six months was $
| 9. | PROPERTY AND EQUIPMENT |
| Schedule of property and equipment | ||||||||
| June 30, 2026 |
December 31, 2025 |
|||||||
|---|---|---|---|---|---|---|---|---|
| $ | $ | |||||||
| Computer and office equipment | ||||||||
| Production equipment and other | ||||||||
| Land | ||||||||
| Construction in progress | ||||||||
| Leasehold improvements | ||||||||
| Gross property and equipment | ||||||||
| Less: Accumulated amortization | ( |
) | ( |
) | ||||
| Property and equipment, net | ||||||||
Finance lease right-of-use assets are included within property and equipment, net in the accompanying condensed consolidated balance sheets. Accumulated amortization associated with finance lease right-of-use assets was $
Depreciation and amortization
expense recognized in cost of revenues through inventory sold was approximately $
14
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 10. | RIGHT OF USE ASSET AND LEASE LIABILITY |
The Company’s leases consist of land and buildings and equipment used in the cultivation, processing, and warehousing of its products. The leases were classified as either operating leases or finance leases in accordance with ASC 842, Leases.
A summary of the maturity of contractual undiscounted liabilities associated with the Company’s operating leases and finance leases as of June 30, 2026 is as follows:
| Schedule of operating leases liabilities associated | ||||||||
| Operating leases | Finance leases | |||||||
| $ | $ | |||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| Total lease payments | ||||||||
| Less: Unamortized interest | ( |
) | ( |
) | ||||
| Total lease liability | ||||||||
| Current portion | ||||||||
| Non-current portion | ||||||||
A summary of the Company’s weighted average discount rate used in calculating lease liabilities and weighted average remaining lease term is as follows:
| Schedule of lease liabilities and weighted average | ||||||||
| June 30, 2026 |
December 31, 2025 |
|||||||
| Operating leases: | ||||||||
| Weighted average discount rate | % | % | ||||||
| Weighted average remaining lease term (years) | ||||||||
| Finance leases: | ||||||||
| Weighted average discount rate | % | % | ||||||
| Weighted average remaining lease term (years) | ||||||||
For the three and six months ended June 30, 2026, operating lease costs of $
On April 8, 2026, the Company executed an amendment to extend one of its commercial facility leases and recognized additions to right-of-use assets and operating lease liabilities of $
15
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 11. | LONG-TERM DEBT |
Transactions related to the Company’s long-term debt for the six months ended June 30, 2026 and year ended December 31, 2025 include the following:
| Schedule of long-term debt | ||||||||
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| Balance, beginning of period | ||||||||
| Advances | ||||||||
| Debt issuance costs | ( |
) | ||||||
| Interest and accretion expense | ||||||||
| Payments | ( |
) | ( |
) | ||||
| Balance, end of period | ||||||||
| Current portion | ||||||||
| Non-current portion | ||||||||
A summary of the maturity of contractual undiscounted liabilities associated with the Company’s long-term debt as of June 30, 2026 is as follows:
| Schedule of maturity of contractual undiscounted liabilities | ||||
| Amount ($) |
||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | - | |||
| Thereafter | - | |||
| Total payments | ||||
| Less: Unamortized interest | ( |
) | ||
| Total long-term debt | ||||
16
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 12. | DERIVATIVE ASSETS AND LIABILITIES |
| 12.1 | Western Alliance Credit Interest Rate Swap |
The Company measures the interest rate swaps at fair value on a recurring basis. The fair value measurements are categorized within Level 2 of the fair value hierarchy. The Company estimates the fair value of the interest rate swaps using a discounted cash flow model and significant inputs including observable Secured Overnight Financing Rate (“SOFR”) forward curve, discount rates, credit valuation adjustments, counterparty credit risk, and non-performance risk. There were no transfers between fair value hierarchy levels during the six months ended June 30, 2026.
On March 27, 2025, the Company entered and closed a $
On May 14, 2025, the Company executed an interest rate swap transaction with WAB for Tranche 1. The Company will bear interest of 8.07% per annum whereas WAB bears 4.32520% plus 400 bps interest per annum. The interest rate swap gives rise to a derivative liability, which was initially recorded at $
On September 15, 2025, the Company executed an interest rate swap transaction with WAB for Tranche 2. The Company will bear interest of 7.53% per annum whereas WAB bears 4.1739% plus 400 bps interest per annum. The interest rate swap gives rise to a derivative liability, which was initially recorded at $
The interest rate swaps were remeasured at June 30, 2026 and were estimated to be a net derivative asset of $
The following is a summary of movements in the interest rate swap during the six months ended June 30, 2026 and year ended December 31, 2025:
| Schedule of derivative liability interest rate | ||||
| Interest rate swap | $ | |||
| Balance, December 31, 2024 | ||||
| Initial recognition | ( |
) | ||
| Unrealized loss | ( |
) | ||
| Balance, December 31, 2025 | ( |
) | ||
| Unrealized gain | ||||
| Balance, June 30, 2026 | ||||
17
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 12. | DERIVATIVE ASSETS AND LIABILITIES (CONTINUED) |
| 12.2 | Warrant liabilities |
On January 1, 2026, as a result of the change in functional currency from CAD to USD (Note 2.1), certain warrants previously classified in equity no longer met the criteria for equity classification as the warrants possess exercise prices in CAD and no longer represent an instrument for providing the Company with fixed proceeds in exchange for a fixed number of its shares due to foreign exchange. As such, the warrants are accounted for as derivative liabilities measured at fair value. The previously recorded equity balances associated with these warrants were derecognized at their fair value measured on January 1, 2026 with the resulting difference recorded within paid in capital. No gain or loss was recognized in earnings upon reclassification.
The warrant liabilities are subsequently measured at fair value at each reporting date, with changes in fair value recognized through profit or loss. The fair value of the warrant liabilities was determined using a Black-Scholes option pricing model, which incorporates significant unobservable inputs (expected stock price volatility and estimated term) and is classified within Level 3 of the fair value hierarchy.
| Schedule of derivative liability conversion feature | ||||||||
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| Balance, beginning of period | ||||||||
| Fair value of warrants on reclassification | ||||||||
| Unrealized gain on changes in fair value | ( |
) | ||||||
| Balance, end of period | ||||||||
During the three and six months ended June 30, 2026, the Company recorded an unrealized loss of $
The warrant liabilities were measured using the following inputs in the Black-Scholes option pricing model:
| Date | Expected dividends | Expected volatility | Risk-free rate of interest |
Expected term (years) |
Exercise price | Closing price per common share |
||||||||||||||||||
| January 1, 2026 | % | % | % | $ | ) | $ | (CAD$ | ) | ||||||||||||||||
| June 30, 2026 | % | % | % | $ | ) | $ | (CAD$ | ) | ||||||||||||||||
As at June 30, 2026 and December 31, 2025, the following warrants were issued and outstanding:
| Schedule of warrants were issued and outstanding | ||||||||
| Expiry date | Number of warrants outstanding |
Weighted average exercise price |
||||||
| $ | ) | |||||||
18
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 13. | SHARE CAPITAL |
| 13.1 | Capital stock |
The Company is authorized to issue an unlimited number of Subordinate Voting Shares (“SV Shares”) and Multiple Voting shares (“MV Shares”) at no par value and an unlimited number of preferred shares issuable in series.
| 13.2 | Dividends |
The directors may declare dividends on one or more class of shares to the exclusion of the others or declare dividends at different rates on different classes of shares, at their discretion. No dividends shall be declared on SV Shares or the MV Shares if to do so would reduce the value of the net assets of the Company to less than the paid in capital of the common stock.
During the three and six months ended June 30, 2026, the Company’s subsidiary Golden Harvests, LLC, declared and paid dividends of $
During the three and six months ended June 30, 2026, the Company’s subsidiary, GRMA, declared and paid preferred return distributions on the voting preferred units of GRMA (the “GRMA Units”) of $nil
| 14. | WARRANTS CLASSIFIED AS EQUITY |
The following table summarizes the warrant activities for the six months ended June 30, 2026 and the year ended December 31, 2025:
| Schedule of warrant activities | ||||||||||||||||
| Number of warrants outstanding |
Weighted average exercise price |
Weighted average remaining life (years) |
Aggregate intrinsic value ($) |
|||||||||||||
| Balance, December 31, 2024 | $ | ) | ||||||||||||||
| Exercise to SV shares for December warrants | ) | $ | (CAD$ | ) | ||||||||||||
| Exercise to SV shares for July warrants | ) | $ | (CAD$ | ) | ||||||||||||
| Exercise to SV shares for August warrants | ) | $ | (CAD$ | ) | ||||||||||||
| Forfeit and return of cancelled warrants | ( |
) | $ | ) | - | |||||||||||
| Balance, December 31, 2025 | $ | ) | ||||||||||||||
| Reclassified to warrant liabilities (Note 12.2) | ( |
) | $ | ) | - | |||||||||||
| Balance, June 30, 2026 | - | |||||||||||||||
19
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 15. | STOCK OPTIONS AND RESTRICTED STOCK UNITS |
The Company’s board of directors adopted the 2020 Equity Incentive Plan (the “Plan”) on July 21, 2020. The maximum number of common shares that may be issued in respect of awards under the Plan is equal to 20% of the total SV Shares outstanding. The Company may issue stock options, stock appreciation rights, restricted stock and restricted stock units (“RSU’s”).
| 15.1 | Stock options |
The following table summarizes the stock option movements for the six months ended June 30, 2026 and year ended December 31, 2025:
| Schedule of stock option | |||||||||||||
| Number of stock options |
Weighted average exercise price |
Aggregate intrinsic value ($USD) |
|||||||||||
| Balance, December 31, 2024 | $ | (CAD$ | ) | $ | |||||||||
| Granted | $ | (CAD$ | ) | - | |||||||||
| Exercised | ) | $ | (CAD$ | ) | |||||||||
| Forfeited | ) | $ | (CAD$ | ) | - | ||||||||
| Balance, December 31, 2025 | $ | (CAD$ | ) | $ | |||||||||
| Granted(1)(2) | $ | (CAD$ | ) | - | |||||||||
| Exercised(3) | ) | $ | (CAD$ | ) | |||||||||
| Forfeited | ) | $ | (CAD$ | ) | - | ||||||||
| Balance, June 30, 2026 | $ | (CAD$ | ) | $ | |||||||||
| (1) |
| |
| (2) |
| |
| (3) |
|
20
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 15. | STOCK OPTIONS AND RESTRICTED STOCK UNITS (CONTINUED) |
| 15.1 | Stock options (continued) |
The following is a summary of the outstanding stock options as at June 30, 2026:
| Schedule of outstanding stock options | ||||||||||||||||||||||||
| Expiry Date | Outstanding (#) |
Aggregate intrinsic value ($) |
Exercisable (#) |
Aggregate intrinsic value ($) |
Exercise price ($) |
Remaining contractual life (years) |
||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| Balance, June 30, 2026 | $ | (CAD$ | ) | |||||||||||||||||||||
During the three and six months ended June 30, 2026, the Company recognized share-based compensation expense of $ and $, respectively (three and six months ended June 30, 2025 - $ and $ respectively) related to vesting of stock options. As at June 30, 2026, the Company has unrecognized stock-based compensation expense of $ associated with outstanding stock options.
The Company computes the fair value of stock options granted using the Black-Scholes option pricing model. The expected term used for options issued to non-employees is the contractual life and the expected term used for options issued to employees and directors is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee share purchase option grants. The Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.
21
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 15. | STOCK OPTIONS AND RESTRICTED STOCK UNITS (CONTINUED) |
| 15.1 | Stock options (continued) |
The Company applied the following inputs in the Black-Scholes option pricing model for the six months ended June 30, 2026 and year ended December 31, 2025:
| Schedule of summarizes the rsu movements | ||||||||
| June 30, 2026 |
December 31, 2025 |
|||||||
| Share price | $ | (CAD$ | ) | $ | (CAD$ | ) | ||
| Expected life options (years) | ||||||||
| Expected volatility | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Black-Scholes value of each option | $ | $ | ||||||
| 15.2 | Restricted stock units |
The following table summarizes the RSU’s movements for the six months ended June 30, 2026 and year ended December 31, 2025:
| Number of RSUs (#) |
Weighted average issue price ($) |
Aggregate intrinsic value ($) |
||||||||||
| Balance, December 31, 2024 | $ | (CAD$ | ) | |||||||||
| Granted to employees | $ | (CAD$ | ) | |||||||||
| Exercised | ) | $ | (CAD$ | ) | ||||||||
| Balance, December 31, 2025 | $ | (CAD$ | ) | |||||||||
| Balance, June 30, 2026 | $ | (CAD$ | ) | |||||||||
The following is a summary of the outstanding RSU’s as at June 30, 2026:
| Schedule of outstanding RSU | ||||||||||||
| Expiry Date | Outstanding at June 30, 2026 |
Weighted average grant date fair value ($) |
Weighted average remaining vesting period (years) |
|||||||||
| $ | (CAD$ | ) | ||||||||||
| $ | (CAD$ | ) | ||||||||||
| $ | (CAD$ | ) | ||||||||||
The Company computes the fair value of RSU’s granted based on the Company’s share price at the grant date. During the three and six months ended June 30, 2026, share-based compensation expense includes $nil and $nil , respectively, related to RSU’s (three and six months ended June 30, 2025 – $nil and $, respectively). As of June 30, 2026, there was no unrecognized compensation cost related to outstanding RSU’s.
22
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 16. | EARNINGS PER SHARE |
The calculation of earnings per share for the three and six months ended June 30, 2026 and 2025 is as follows:
| Schedule of earnings per share | ||||||||||||||||
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Net Income (loss) attributable to shareholders | ( |
) | ( |
) | ||||||||||||
| Weighted average number of SV Shares outstanding | ||||||||||||||||
| Dilutive effect of stock options outstanding | ||||||||||||||||
| Dilutive effect of RSU’s outstanding | ||||||||||||||||
| Dilutive effect of warrants outstanding | ||||||||||||||||
| Diluted weighted average number of SV Shares outstanding | ||||||||||||||||
| Basic net income (loss) per share | ( |
) | ( |
) | ||||||||||||
| Diluted net income (loss) per share | ( |
) | ( |
) | ||||||||||||
The following table displays the securities that have been excluded from the computation because their effects would be anti-dilutive:
| Schedule of anti-dilutive | ||||||||||||||||
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| # | # | # | # | |||||||||||||
| Stock options | ||||||||||||||||
| RSU’s | ||||||||||||||||
| Warrants | ||||||||||||||||
| Total | ||||||||||||||||
23
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 17. | INCOME TAXES |
The Company is a Canadian resident company, as defined in the Income Tax Act (Canada) (the “ITA”), for Canadian income tax purposes. However, it has subsidiaries that are treated as United States corporations for US federal income tax purposes per the Internal Revenue Code (US) (“IRC”) and are thereby subject to federal income tax on their worldwide income. As a result, the Company is subject to taxation both in Canada and the United States.
The Company has computed its provision for income taxes based on the actual effective tax rate for the quarter as management believes this is the best estimate for the annual effective tax rate. Significant judgment is required in evaluating the Company’s uncertain tax position and determining the provision for income taxes.
A summary of the Company’s income tax expense and effective tax rate is as follows:
| Schedule of effective tax rate | ||||||||||||||||
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Income (loss) before income taxes and noncontrolling interest | ( |
) | ( |
) | ||||||||||||
| Income tax expense | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Effective tax rate | % | ( |
)% | % | ( |
)% | ||||||||||
As at June 30, 2026, the Company recorded an uncertain tax liability of $
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. There are no positions for which it is reasonably possible that the uncertain tax benefit will significantly increase or decrease within twelve months. The Company files income tax returns in the United States, including various state jurisdictions, and in Canada, which remain open to examination by the respective jurisdictions for the 2018 tax year to the present.
24
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 18. | SUPPLEMENTAL CASH FLOW INFORMATION |
The changes to the Company’s operating assets and liabilities for the six months ended June 30, 2026 and 2025 are as follows:
| Schedule of non-cash working capital | ||||||||
| Six months ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Accounts receivable | ( |
) | ( |
) | ||||
| Inventory | ( |
) | ( |
) | ||||
| Prepaid expenses | ( |
) | ||||||
| Accounts payable and accrued liabilities | ( |
) | ||||||
| Income tax payable | ( |
) | ||||||
| Uncertain tax position liability | ||||||||
| Total | ( |
) | ||||||
Interest and income taxes paid in cash for the six months ended June 30, 2026 and 2025 were as follows:
| Schedule of interest and income taxes | ||||||||
| Six months ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Income taxes paid in cash | ||||||||
| Interest paid in cash | ||||||||
Non-cash investing and financing activities for the six months ended June 30, 2026 and 2025 are as follows:
| Schedule of non cash investing and financing activities | ||||||||
| Six months ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Fair value of SV Shares issued to settle convertible debentures | ||||||||
| Property, plant and equipment acquired through finance leases | ||||||||
| Reclassification of warrants to warrant liability from equity | ||||||||
| Right-of-use assets arising from lease liabilities | ||||||||
25
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 19. | RELATED PARTY TRANSACTIONS |
During the three and six months ended June 30, 2026 and 2025, the Company incurred the following related party transactions.
Transactions with related parties
Related parties of the Company include affiliates, entities for which investments are accounted for by the equity method, officers, and directors of the Company and members of their immediate families, and management involved in the financial statement preparation and members of their immediate families.
Transactions with related parties are presented in the following table:
| Schedule of related party transactions | ||||||||||||||||
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Salaries and consulting fees | ||||||||||||||||
| Lease payments made to CEO | ||||||||||||||||
| Fees paid to entity controlled by spouse of majority owner | ||||||||||||||||
| Share-based compensation expense | ||||||||||||||||
| Total | ||||||||||||||||
As of June 30, 2026, the Company had amounts due to related parties of $
Debt balances and movements with related parties
The following table sets out portions of debt pertaining to related parties which are included in consideration payable on business acquisitions and long-term debt:
| Schedule of debt pertaining to related parties | ||||||||||||||||||||
| CEO(1) | Director(1) | GM(1) | ABCO Holdings, Inc.(2) | Total | ||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Balance, December 31, 2024 | ||||||||||||||||||||
| Interest | ||||||||||||||||||||
| Payments | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Balance, December 31, 2025 | ||||||||||||||||||||
| Interest | ||||||||||||||||||||
| Payments | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Balance, June 30, 2026 | ||||||||||||||||||||
| (1) |
|
| (2) |
|
26
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 19. | RELATED PARTY TRANSACTIONS (CONTINUED) |
As part of the agreements transacted during the year ended October 31, 2020, to acquire interest in GR Michigan and Canopy, the Company incurred consideration payable on business acquisitions of $
Pursuant to the Canopy purchase agreement executed on April 24, 2024, the Company, through GR Unlimited, acquired the remaining 13% of the membership units in Canopy. As part of this transaction, the Company purchased a
During April 2024, the Company, through Canopy, acquired an additional
On May 29, 2025, Canopy Management LLC was dissolved, and all existing agreements and obligations were assigned and transferred to Grown Rogue Unlimited, LLC.
| 20. | FINANCIAL INSTRUMENTS |
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis, categorized within the fair value hierarchy:
| Schedule of valuations for the asset or liability not based on observable market data | ||||||||||
| Level in Fair Value Hierarchy |
June 30, 2026 |
December 31, 2025 |
||||||||
| $ | $ | $ | ||||||||
| Financial Assets: | ||||||||||
| Warrants asset | Level 2 | |||||||||
| Derivative asset | Level 2 | |||||||||
| Financial Liabilities: | ||||||||||
| Derivative liability | Level 2 | |||||||||
| Warrant liabilities | Level 3 | |||||||||
The fair value of the warrants asset is measured using the Black-Scholes option pricing model with inputs including the underlying share price, risk-free interest rate, expected volatility, and remaining term, consistent with the valuation methodology applied in the Company’s audited consolidated financial statements for the year ended December 31, 2025.
27
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 21. | SEGMENT REPORTING |
The reportable segments are those operations whose operating results are reviewed by the chief operating decision maker (“CODM”) to make decisions about resources to be allocated. The Company’s CODM is the CEO and is responsible for the management of the Company. Operating results are reviewed with respect to resource allocation and for which discrete financial information is available. Inter-segment transactions are recorded at amounts that reflect normal third-party terms and conditions, with inter-segment profits eliminated from the cost base of the segment incurring the charge. The Company has identified three operating segments:
| ● | Oregon segment represents cannabis production and sales activities in Oregon; |
| ● | Michigan segment represents cannabis production and sales activities in Michigan; and |
| ● | New Jersey segment represents cannabis production and sales activities in New Jersey. |
The Company’s general corporate administration expenses are included within “Corporate” to reconcile the reportable segments to the financial statements. The Company’s CODM reviews the results of the Company’s operating segments based on the total revenues, gross profit and net income (loss) in his evaluation of the performance of the operating segments to make decisions regarding resource allocations within the Company.
Segmented operational activity for the three months ended June 30, 2026 is as follows:
| Schedule of segmented operational activity | ||||||||||||||||||||
| Segments | Oregon | Michigan | New Jersey | Corporate | Total | |||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Total revenue | ||||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Net income (loss) | ( |
) | ( |
) | ||||||||||||||||
Segmented operational activity for the six months ended June 30, 2026 is as follows:
| Segments | Oregon | Michigan | New Jersey | Corporate | Total | |||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Total revenue | ||||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Net income (loss) | ( |
) | ( |
) | ||||||||||||||||
28
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 21. | SEGMENT REPORTING (continued) |
Entity-wide disclosures
All revenue for three and the six months ended June 30, 2026 was earned in the United States. For the three and six months ended June 30, 2026 no customer represented more than 10% of the Company’s net revenue. As at June 30, 2026, no customer represented more than 10% of the Company’s receivables.
A summary of the Company’s long-lived assets disaggregated by geographic area is as follows:
| Schedule of Geographical information activities | ||||||||||||||||||||
| Segments | Oregon | Michigan | New Jersey | Corporate | Total | |||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Non-current assets other than financial instruments: | ||||||||||||||||||||
| As at June 30, 2026 | ||||||||||||||||||||
| 22. | NON-CONTROLLING INTERESTS |
The activity in non-controlling interest for six months ended June 30, 2026 and year ended December 31, 2025 are as follows:
| Schedule of non-controlling interest | ||||||||
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| Balance, beginning of period | ||||||||
| Sale of 20% ownership of GRMA | ||||||||
| Dividends issued from Golden Harvest to minority owner | ( |
) | ( |
) | ||||
| Dividends issued from GRMA to minority owner | ( |
) | ||||||
| Net income for the period attributed to non-controlling interest | ||||||||
| Balance, end of period | ||||||||
During the six months ended June 30, 2026, the Company sold 20% of its ownership in GRMA through the sale of 20 GRMA Units at a par value of $ per unit for gross proceeds of $
29
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 23. | COMMITMENTS AND CONTINGENCIES |
On September 22, 2022, the Securities Exchange Commission (“SEC”) issued an Order Instituting Proceedings (OIP) pursuant to Section 12(j) of Securities Exchange Act of 1934 (“1934 Act”), against the Company alleging violations of the 1934 Act, as amended, and the rules promulgated thereunder, by failing to timely file periodic reports. Section 12(j) authorizes the SEC as it deems necessary or appropriate for the protection of investors to suspend for a period not exceeding 12 months, or to revoke, the registration of a security if the SEC finds, on the record after notice and opportunity for hearing, that the issuer of such security has failed to comply with any provision of the 1934 Act, as amended, or the rules promulgated thereunder. As of June 22, 2026 this order has been dismissed.
On December 8, 2025, ABCO, entered into an agreement with Blackwell & Associates, (“Blackwell”) for the construction of the Grandview Phase II project located at 1425 Grandview Avenue, Paulsboro, New Jersey. Under the agreement, payment is structured on a cost-plus-a-fee basis without a guaranteed maximum price. The total estimated cost of the project is approximately $1,430,000 which includes the cost of the work plus Blackwell’s fee. Blackwell’s fee is comprised of 6% overhead and 9% profit applied to the cost of the work as defined in the agreement. Because the agreement does not include a guaranteed maximum price, the final cost of the work may differ from this estimate, and the Company’s ultimate obligation under the contract could be higher or lower than the estimated amount depending on actual costs incurred. Work is largely complete as of June 30, 2026 and the final stages of the contract will be complete before September 30, 2026. Blackwell is considered a related party as it is controlled by the spouse of the majority owner of ABCO Holdings.
On April 22, 2026, Grown Rogue Unlimited, LLC (the “Company”) entered into an agreement with Grow America Builders, LLC (“Grow America”) for the construction of the Phase 1 cultivation and processing facility located at 40 77th Avenue NE, Fridley, Minnesota. Under the agreement, payment is structured on a cost-plus-a-fee basis, with Grow America’s fee equal to 5.7% of the cost of the work as defined in the agreement. The contract value as stipulated in the agreement, including subsequent revisions, is $3,861,899. Although the form of agreement contemplates a guaranteed maximum price, no guaranteed maximum price was stated; accordingly, the final cost of the work may differ from this estimate, and the Company’s ultimate obligation under the contract could be higher or lower than the estimated amount depending on actual costs incurred. To date, work completed totaled $2,492,200, or approximately 65% of the revised contract sum, leaving a remaining cost to complete of $1,369,699 plus retainage of $84,283, or total remaining payments of approximately $1,454,000 as of June 30, 2026. Work is meaningfully underway, with completion expected by the end of September 2026. Either party may terminate the contract for cause or convenience; if the Company terminates for convenience, it is obligated to pay for work in place, non-refundable deposits, one month of general conditions and approximately one additional month of fees, and any subcontractor termination fees.
On January 24, 2026, Grown Rogue Unlimited, LLC (the “Company”) entered into a Master Terms and Conditions Agreement, together with a Service Level Agreement and a Site Specific Agreement (collectively, the “Agreement”), with Harvest Air LLC dba Harvest Integrated (“Harvest”) for the provision of climate-control services to approximately 22,300 square feet of cultivation, drying, and ancillary space at the Company’s facility located at 40 77th Avenue NE, Fridley, Minnesota. Under the Agreement, Harvest owns, installs, operates, and maintains HVAC and dehumidification equipment specified by model and room, and delivers controlled temperature and humidity to the Company at agreed setpoints. The Company is responsible for installation, utilities, electrical and natural gas capacity, and upkeep of the premises. The monthly recurring fee is $40,000 over a non-cancellable minimum term of 120 months, representing total undiscounted committed consideration of approximately $4,800,000.
As of June 30, 2026, the Agreement had not commenced and no amounts have been recognized in the consolidated financial statements. Under the Site-Specific Agreement, the term begins upon the installation and commissioning of equipment on a room by room basis. The Company expects the all rooms to be installed and commissioned during the third quarter of 2026 and at which time it will record the contract as a finance type lease. Accordingly, the amounts and timing of any amounts ultimately recognized, and the classification thereof, may differ from the committed consideration disclosed above.
30
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 24. | SUBSEQUENT EVENTS |
The Company evaluated subsequent events through the date the financial statements were issued, and determined that the following subsequent events occurred as of that date:
Rogue EBC
On July 14, 2026 the Company
received notice that its pending acquisition of the remaining
Stock Option and RSU grants
On July 21, 2026, the Company’s board of directors approved the grant of stock options and RSUs to directors, officers and employees under the Plan, and reserved SV Shares for issuance in respect of these awards. The stock options have an exercise price of $ (CAD$) and expire on
31
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read the following discussion and analysis of the Company’s financial condition and results of operations together with the Company’s financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2025.
Special Note Regarding Forward-Looking Statements
Certain of the information included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) is based upon express or implied estimates, projections or other “forward-looking statements” within the meaning of the U.S. federal securities laws. Such forward-looking statements include any projections or estimates made by Grown Rogue International, Inc. (“we,” “us,” “our,” or the “Company”) and our management in connection with our business operations. These statements may relate to future events or our future financial performance. This Quarterly Report may also contain estimates, projections data, and other information concerning our industry, our business and the markets for our products, including data regarding the estimated size of those markets and their projected growth rates, derived from reports, research surveys, studies and similar materials prepared by third parties, industry and general publications, government data and similar sources.
In some cases you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of those terms or other comparable terminology that does not relate strictly to historical or factual matters. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results may vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested therein. Such forward-looking statements involve various risks and uncertainties and other factors, including those risks described in Item 1A – “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Annual Report”), as may be updated from time to time in our periodic filings with the SEC which are accessible on the SEC’s website at www.sec.gov, and which may cause our actual results, levels of activities, performance or achievements to be materially different from any projected results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should evaluate all forward-looking statements made in this Quarterly Report in the context of these risks and uncertainties. All forward-looking statements in this Quarterly Report apply only as of the date made and are expressly qualified in their entirety by the cautionary statements included in this Quarterly Report and in other filings we make with the SEC. Except as required by applicable law, including federal securities laws, we do not undertake to update or revise any of forward-looking statements to reflect subsequent events or conform those statements to actual results.
Business Overview
The Company is a vertically integrated, multi-state cannabis operator focused on high-quality, low-cost production of premium flower and pre-roll products. Through its subsidiaries, the Company cultivates, manufactures, possesses, and distributes cannabis in the United States, with operations spanning Oregon, Michigan, New Jersey, and Illinois. Flower-based products, including indoor flower, sungrown (outdoor) flower, and pre-rolls, remain the Company’s strategic focus, reflecting management’s view that flower continues to lead category share in most state markets.
The Company manages indoor and outdoor cultivation in the Rogue Valley of Southern Oregon, an indoor cultivation facility in Bay City, Michigan operated through Golden Harvests, LLC, indoor cultivation in Paulsboro, New Jersey operated through ABCO Garden State, LLC, and joint-venture operations in Illinois through Rogue EBC, LLC, with additional Illinois activity initiated in the first quarter of 2026 as discussed under “Recent Developments” below.
For a more detailed description of our business, history, products, brand strategy, and competitive positioning, refer to “Part I, Item 1. Business” in our Annual Report.
Recent Developments
In addition to events discussed elsewhere in this Quarterly Report, the following developments occurred during, or have a direct bearing on, the three and six months ended June 30, 2026:
32
Illinois expansion. On March 12, 2026, the Company announced that it had taken operational control of a cannabis production facility in Dwight, Illinois, through its affiliate Grown Rogue Management Associates, LLC (“GRMA”), an 80% owned subsidiary of the Company, and entered into a Membership Interest Purchase Agreement to acquire a 49% interest in SEA Craft, the holder of an Illinois Adult Use Cannabis Craft Grower License. The agreement provides GRMA with an option, subject to regulatory approval and performance-based conditions, to acquire the remaining 51% of SEA Craft, and concurrently grants the holder of those remaining interests an option, subject to certain conditions precedent, to require GRMA to purchase those remaining interests. The transaction is subject to regulatory approval by the Illinois Department of Agriculture. As of June 30, 2026, the status of the required regulatory approvals and the closing of the SEA Craft acquisition remain outstanding.
Concurrently, SEA Craft entered into a three-year lease with Innovative Industrial Properties, Inc. (“IIP”) for a 43,000 square foot facility in Dwight, Illinois, including approximately 10,000 square feet of indoor flowering canopy, with capacity to expand to the 14,000 square feet permitted under the craft grow license. The lease is supported by a corporate guarantee provided by the Company.
To support the projected capital needs of the Illinois operation, the Company sold a 20% non-controlling interest in GRMA for gross proceeds of $3,000,000, less issuance costs of $15,000, resulting in net proceeds of $2,985,000. The outside investor’s interest takes the form of 20 non-voting preferred units of GRMA (the “GRMA Units”) that are reported as non-controlling interest in the Company’s condensed consolidated financial statements. The GRMA Units carry a cumulative non-compounded preferred return of 15% per annum on unreturned capital contributions, escalating to 20% per annum compounded quarterly if required quarterly distributions are not paid within the specified grace period. At the holders’ discretion, for a period of up to three years, the GRMA Units may be converted into SV Shares of the Company at a conversion price of $0.65 per SV Share. For further discussion, see Note 23 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
ABCO Phase II construction. As previously disclosed in our Annual Report, on December 8, 2025, ABCO entered into an agreement with Blackwell & Associates (“Blackwell”) for the construction of the Grandview Phase II project located at 1425 Grandview Avenue, Paulsboro, New Jersey, on a cost-plus-a-fee basis without a guaranteed maximum price. The total estimated cost is approximately $1,430,000, which includes the cost of the work plus Blackwell’s fee, subject to adjustments under the contract documents. Construction continued through the date of this report. Blackwell is considered a related party as it is controlled by the spouse of the majority owner of ABCO Garden State, LLC.
Functional currency change. Effective January 1, 2026, the Company changed its functional currency from the Canadian Dollar to the U.S. dollar based on management’s determination that the U.S. dollar had become the Company’s primary economic environment due to changes in underlying transactions, events, and operating conditions. The change was applied prospectively in accordance with ASC 830, Foreign Currency Matters. Translated amounts of non-monetary assets and liabilities at December 31, 2025 became the historical accounting basis for those assets and liabilities at January 1, 2026, and the cumulative translation adjustment previously recognized in accumulated other comprehensive loss has not been reversed. For further discussion, see Note 2.1 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Reclassification of warrants to derivative liability. As a result of the change in functional currency described above, 4,000,000 warrants previously classified within shareholders’ equity no longer met the criteria for equity classification under U.S. GAAP and were reclassified to a warrant liability measured at fair value, with subsequent changes in fair value recognized through profit or loss. On January 1, 2026, the Company recognized $1,539,665 of warrant liability with a corresponding decrease in share capital. During the six months ended June 30, 2026, the Company recorded a net unrealized gain of $433,547 on changes in the fair value of the warrant liability (comprising an unrealized gain of $770,714 in the first quarter and an unrealized loss of $337,167 in the second quarter), resulting in a warrant liability balance of $1,106,118 at June 30, 2026. For further discussion, see Note 12.2 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Stock option exercise. On January 12, 2026, the Company issued 200,000 SV Shares pursuant to the exercise of stock options for total proceeds of approximately $21,615 (CAD$30,000). As a result, total SV Shares issued and outstanding increased from 249,738,980 at December 31, 2025 to 249,938,980 on June 30, 2026.
Equity Incentive Awards. On July 21, 2026, the Company’s board of directors approved the grant of 400,000 stock options and 2,490,000 restricted share units (“RSU’s”) to directors, officers and employees, and reserved 2,890,000 SV Shares for issuance in respect of these awards. The stock options have an exercise price of $0.42 (CAD$0.60) and expire on July 21, 2030. The options vest as to 50% on June 30, 2027 and 50% on June 30, 2028. The RSUs vest as follows: 100,000 on January 1, 2027; 150,000 on June 30, 2028; 1,240,000 on January 1, 2029; and 1,000,000 in three equal annual tranches on January 1 of 2027, 2028 and 2029. Certain of the awards provide for immediate vesting upon termination of the holder’s engagement with the Company.
33
Results of Operations
Comparison of the Three and Six Months Ended June 30, 2026 and 2025
Significant items contributing to the change in net income (loss) are summarized below.
Total Revenues
All revenue for the three and six months ended June 30, 2026 and 2025 was earned from product sales of cannabis flower and pre-roll products. Total revenue for the three months ended June 30, 2026 was $11,273,837, an increase of $3,263,850 or approximately 41% as compared to $8,009,987 for the three months ended June 30, 2025. For the six months ended June 30, 2026, total revenue was $20,429,495, an increase of $5,269,325 or approximately 35% as compared to $15,160,170 for the six months ended June 30, 2025. The increase in revenue was driven primarily by continued growth at our New Jersey operations, which contributed $4,369,698 to revenue in the current quarter (as compared to $2,655,954 in the prior-year quarter) and $7,785,066 for the year-to-date period (as compared to $4,427,674 in the prior-year period), supplemented by year-over-year growth in the Oregon and Michigan operations.
Cost of Revenues and Gross Profit
Cost of finished cannabis inventory sold for the three months ended June 30, 2026 was $5,903,860, an increase of $1,448,358 or approximately 33% as compared to $4,455,502 for the three months ended June 30, 2025. For the six months ended June 30, 2026, cost of finished cannabis inventory sold was $11,101,884, an increase of $2,859,946 or approximately 35% as compared to $8,241,938 for the six months ended June 30, 2025. Cost of revenues grew broadly in line with revenue, reflecting product and market mix.
Gross profit for the three months ended June 30, 2026 was $5,369,977 (a gross margin of approximately 48%), an increase of $1,815,492 or approximately 51% as compared to $3,554,485 for the three months ended June 30, 2025 (a gross margin of approximately 44%). For the six months ended June 30, 2026, gross profit was $9,327,611 (a gross margin of approximately 46%), an increase of $2,409,379 or approximately 35% as compared to $6,918,232 for the six months ended June 30, 2025 (a gross margin of approximately 46%).
Operating Expenses
Total operating expenses for the three months ended June 30, 2026 were $4,533,321, an increase of $1,410,197 or approximately 45% as compared to $3,123,124 for the three months ended June 30, 2025. For the six months ended June 30, 2026, total operating expenses were $8,391,300, an increase of $1,195,028 or approximately 17% as compared to $7,196,272 for the six months ended June 30, 2025.
The three months ended June 30, 2026 increase was driven principally by higher general and administrative expenses ($4,318,584 for the three months ended June 30, 2026 as compared to $2,678,372 in the prior-year quarter) reflecting headcount and infrastructure additions in support of growth and expansion activities, partially offset by lower share-based compensation expense ($149,087 for the three months ended June 30 2026 as compared to $336,825 in the prior-year quarter) reflecting the timing of restricted share unit and stock option vesting and lower depreciation expense ($65,650 for the three months ended June 30 2026 as compared to $107,927 in the prior-year quarter).
The year-to-date increase was driven principally by higher general and administrative expenses ($7,930,407 for the six months ended June 30, 2026 as compared to $5,210,626 for the prior-year period), reflecting headcount and infrastructure additions in support of growth and expansion activities, together with certain Golden Harvests-related taxes, partially offset by lower share-based compensation expense ($304,081 for the six months ended June 30, 2026 as compared to $1,772,735 for the prior-year period), reflecting the timing of restricted share unit and stock option vesting and lower depreciation expense ($156,812 for the six months ended June 30, 2026 as compared to $212,911 for the prior-year period).
34
Other Income (Expense)
Total other income (expense) was and expense of $1,446,349 for the three months ended June 30, 2026 as compared to income of $2,144,054 for the three months ended June 30, 2025, and was an expense of $3,242,524 for the six months ended June 30, 2026 as compared to income of $4,227,634 for the six months ended June 30, 2025.
The year-over-year changes were driven principally by unrealized losses on the Vireo Growth warrant asset of $556,583 in the current quarter and $2,747,667 year-to-date (as compared to unrealized losses of $168,162 and $1,340,654, respectively, in the prior-year periods), reflecting the decline in Vireo Growth’s share price, and by the absence in 2026 of the large realized and unrealized loss on the convertible-debenture derivative liability recognized in 2025 upon the extinguishment of the convertible debentures. These were partially offset by an unrealized gain on the reclassified warrant liability of $433,547 year-to-date and by higher interest income of $104,356 in the current quarter and $146,543 year-to-date (as compared to $36,337 and $72,274, respectively). Interest and accretion expense was $429,240 in the current quarter and $979,220 year-to-date (as compared to $432,553 and $690,724, respectively), with the year-to-date increase reflecting the larger average outstanding balance under the Western Alliance Bank credit facility.
Income Tax Expense
Income tax expense was $871,331 for the three months ended June 30, 2026 as compared to income of $920,037 for the three months ended June 30, 2025. Income tax expense was $1,388,202 for the six months ended June 30, 2026, as compared to $1,551,347 for the six months ended June 30, 2025. The effective tax rate continues to be heavily influenced by the Company’s uncertain tax positions related to the treatment of certain transactions and deductions under Section 280E of the Internal Revenue Code. As at June 30, 2026, the uncertain tax liability, inclusive of penalties and interest, was approximately $9,830,257 (December 31, 2025 - $8,383,888) and is included in other non-current liabilities.
Net Income (Loss)
Net loss for the three months ended June 30, 2026 was $1,481,024, as compared to net income of $1,655,378 for the three months ended June 30, 2025. For the six months ended June 30, 2026, net loss was $3,694,415 as compared to net income of $2,398,248 for the six months ended June 30, 2025. Net loss attributable to shareholders was $1,692,836 for the current quarter and $4,395,053 year-to-date, with net income attributable to non-controlling interests of $211,812 and $700,638, respectively.
Segment Reporting
The Company operates in three reportable segments – Oregon, Michigan, and New Jersey – with general corporate and administrative expenses included within “Corporate” to reconcile the reportable segments to the financial statements. The following summarizes performance by segment for the three and six months ended June 30, 2026 and 2025:
For the three months ended June 30, 2026: net revenue of $3,511,544 (Oregon), $3,392,595 (Michigan), and $4,369,698 (New Jersey); gross profit of $1,209,207 (Oregon), $1,586,755 (Michigan), and $2,574,015 (New Jersey); and net income (loss) of $459,258 (Oregon), $439,146 (Michigan), $1,559,291 (New Jersey), and $(3,938,719) (Corporate).
For the three months ended June 30, 2025: net revenue of $3,075,599 (Oregon), $2,278,434 (Michigan), and $2,655,954 (New Jersey); gross profit of $1,069,878 (Oregon), $1,020,427 (Michigan), and $1,464,180 (New Jersey); and net income (loss) of $453,385 (Oregon), $467,694 (Michigan), $851,533 (New Jersey), and $(117,234) (Corporate). Michigan segment revenue includes approximately $402,309 of excise taxes collected following the implementation of Michigan’s cannabis excise tax effective January 1, 2026.
For the six months ended June 30, 2026: net revenue of $6,508,307 (Oregon), $6,136,122 (Michigan), and $7,785,066 (New Jersey); gross profit of $1,760,370 (Oregon), $2,912,018 (Michigan), and $4,655,223 (New Jersey); and net income (loss) of $538,327 (Oregon), $788,724 (Michigan), $2,604,114 (New Jersey), and $(7,625,580) (Corporate).
35
For the six months ended June 30, 2025: net revenue of $5,948,946 (Oregon), $4,783,550 (Michigan), and $4,427,674 (New Jersey); gross profit of $2,373,710 (Oregon), $2,149,513 (Michigan), and $2,395,009 (New Jersey); and net income (loss) of $1,135,409 (Oregon), $976,350 (Michigan), $1,560,796 (New Jersey), and $(1,274,307) (Corporate). Michigan segment revenue for the six-month period includes approximately $748,242 of Michigan cannabis excise taxes.
All revenue for the three and six months ended June 30, 2026 and 2025 was earned in the United States. For the three and six months ended June 30, 2026 and 2025, no customer represented more than 10% of the Company’s net revenue, and as at June 30, 2026 and December 31, 2025, no customer represented more than 10% of the Company’s accounts receivable.
Non-GAAP Financial Measures (EBITDA and Adjusted EBITDA)
In addition to financial measures presented in accordance with U.S. GAAP, management uses non-GAAP financial measures, including EBITDA and Adjusted EBITDA, to evaluate operating performance, for financial and operational decision-making, planning and forecasting purposes, and to compare results across accounting periods. EBITDA is defined as net income or loss before interest, taxes, depreciation and amortization, further adjusted to remove transaction costs, share-based compensation expense, accretion expense, gain or loss on derecognition of derivative liabilities, and other non-cash items or items not representative of operational performance. Adjusted EBITDA is EBITDA further adjusted for the impact of significant or unusual transactions, including, where applicable, costs associated with business acquisitions and pre-opening operating costs of new production locations.
These non-GAAP financial measures do not have any defined meaning under U.S. GAAP and may not be comparable to similarly titled measures presented by other companies. They should be considered in addition to, and not as a substitute for, financial measures prepared in accordance with U.S. GAAP. Adjusted EBITDA is intended to provide a proxy for the Company’s operating cash flow before changes in non-cash working capital.
The following table provides a reconciliation of net income (loss), as reported, to EBITDA and Adjusted EBITDA (non-GAAP) for the three and six months ended June 30, 2026 and 2025:
| Adjusted EBITDA Reconciliation Table (Unaudited) (US$) | ||||||||||||||||
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net income (loss) | (1,481,024 | ) | 1,655,378 | (3,694,415 | ) | 2,398,249 | ||||||||||
| Add back amortization of property and equipment included in cost of sales | 754,506 | 658,232 | 1,577,037 | 1,092,435 | ||||||||||||
| Add back interest and accretion expense | 429,240 | 432,553 | 979,220 | 690,724 | ||||||||||||
| Add back amortization of property and equipment | 65,650 | 107,927 | 156,812 | 212,911 | ||||||||||||
| Add back loss on equity investment in associate | 193,593 | 114,686 | 293,250 | 268,420 | ||||||||||||
| Add back income tax expense | 871,331 | 920,037 | 1,388,202 | 1,551,347 | ||||||||||||
| Deduct gain on derivative liability | (82,006 | ) | (2,997,005 | ) | (148,383 | ) | (5,832,090 | ) | ||||||||
| Deduct interest and other income (expense) | 11,772 | 137,550 | (195,683 | ) | (695,343 | ) | ||||||||||
| Add back changes in FV on warrants asset and liability | 893,750 | 168,162 | 2,314,120 | 1,340,654 | ||||||||||||
| EBITDA | 1,656,812 | 1,197,520 | 2,670,160 | 1,027,306 | ||||||||||||
| Add back share-based compensation | 149,087 | 336,825 | 304,081 | 1,772,735 | ||||||||||||
| Deduct GAAP bad debt conversion adjustment | - | (79,000 | ) | - | (158,000 | ) | ||||||||||
| Add back Golden Harvests acquisition costs | - | 60,000 | - | 60,000 | ||||||||||||
| Add back pre-operational startup costs1 | 250,997 | - | 647,162 | - | ||||||||||||
| Adjusted EBITDA | 2,056,896 | 1,515,345 | 3,621,403 | 2,702,041 | ||||||||||||
| 1 | During the three and six months ended June 30, 2026, we incurred approximately $250,997 and $647,162, respectively, in pre-operational startup costs associated with the build-out of new production locations inclusive of occupancy and pre-operational costs related to the Fridley Minnesota production facility offset by reimbursements to SEA Craft LLC; no such costs were incurred in the comparable 2025 periods. |
These figures are management’s preliminary calculations and remain subject to finalization by the finance team for any one-time adjustments (including, without limitation, transaction or acquisition costs, pre-opening operating costs of new production locations, and other items not representative of operational performance) consistent with the methodology applied in our Annual Report.
36
Liquidity and Capital Resources
Sources of Liquidity
Our ability to generate cash in the short term is based upon sales from production and financing proceeds, and in the long term is based upon sales from production (including production from investments to increase output), growth by business acquisitions, or a combination thereof. Investments to increase production or acquire businesses may require further financing. We generate operating cash flows from sales of cannabis products, the margins on which contribute to coverage of our other operating costs. Historically, we have raised financing through debt and equity, which has been and is expected to continue to be invested in the business in order to improve yields, fund operating costs, and facilitate strategic expansion.
We are typically able to sell inventory shortly after it reaches finished goods, with sales primarily made on cash-on-delivery terms or with short net terms. Our ability to fund operations, to plan capital expenditures, and to plan acquisitions, depends on future operating performance and cash flows and the availability of capital by way of debt or equity investment in the Company, which are subject to prevailing economic conditions and financial, business, and other factors, some of which are beyond our control.
We believe that our cash on hand at June 30, 2026, projected cash flows from current and future anticipated sales of finished goods, and net proceeds from current and anticipated financing activities, will be sufficient to meet our liquidity and capital resource requirements for the next twelve months from the date of issuance of this Quarterly Report on Form 10-Q.
Working Capital
At June 30, 2026 and December 31, 2025, our working capital was approximately $14,940,478 and $16,590,979, respectively, calculated as current assets less current liabilities (excluding the derivative liability and the warrant liabilities, in each case representing non-cash fair value items). Cash and cash equivalents were $11,532,826 at June 30, 2026 as compared to $11,371,834 at December 31, 2025. Total current assets were $22,554,876 at June 30, 2026 as compared to $22,178,714 at December 31, 2025.
Total current liabilities were $8,709,174 at June 30, 2026 as compared to $5,724,776 at December 31, 2025, with the increase reflecting growth in accounts payable and accrued liabilities ($2,544,834 at June 30, 2026 as compared to $1,262,519 at December 31, 2025), a higher current portion of long-term debt ($3,002,684 as compared to $2,576,228), the reclassification of warrant liabilities of $1,106,118 to current liabilities effective January 1, 2026 in connection with the change in functional currency, and an increase in income tax payable to $412,770 at June 30, 2026 (December 31, 2025 - $296,018).
We expect significant ongoing fluctuations in working capital over time as we continue to invest in expansion of cultivation capacity at ABCO Garden State, LLC and the initial build-out of operations in Dwight, Illinois. We have historically been able to meet commitments, modify debt maturities, and raise new financing as required to respond to changes in our liquidity position, although there is no guarantee we will be able to do so in the future.
Cash Flows
Cash and cash equivalents increased by $160,992 during the six months ended June 30, 2026 to $11,532,826, as compared to an increase of $4,681,969 during the six months ended June 30, 2025 (from $4,917,708 at January 1, 2025 to $9,599,677 at June 30, 2025).
37
Operating Activities
Net cash provided by operating activities was $4,247,865 for the six months ended June 30, 2026, as compared to net cash used in operating activities of $656,881 for the six months ended June 30, 2025. The current-period result reflects operating profitability and approximately $2,280,732 in favorable changes in non-cash working capital, principally driven by increases in accounts payable and accrued liabilities and in the uncertain tax position liability, partially offset by an increase in accounts receivable.
Investing Activities
Net cash used in investing activities was $6,291,761 for the six months ended June 30, 2026, as compared to $964,360 for the six months ended June 30, 2025. The current-period use was driven principally by $5,498,773 in property and equipment additions (as compared to $241,532 in the prior-year period), supporting the build-out of cultivation capacity at ABCO Garden State, LLC through the Grandview Phase II project and the Company’s ongoing expansion activities, together with $415,000 advanced on the purchase of the remaining Rogue EBC, LLC equity interest and $377,988 in payments of business acquisition consideration payable.
Financing Activities
Net cash provided by financing activities was $2,204,888 for the six months ended June 30, 2026, as compared to $6,301,925 for the six months ended June 30, 2025. Significant financing activities for the current period included: net proceeds of $2,985,000 from the sale of a 20% non-controlling interest in GRMA (gross proceeds of $3,000,000 less $15,000 of issuance costs); $1,000,000 in proceeds from long-term debt; $21,839 in proceeds from stock option exercises; $1,529,295 in repayment of long-term debt; $37,500 in repayment of finance leases; and $235,156 of distributions to non-controlling interests in subsidiaries.
Indebtedness
Our long-term debt and related obligations consist primarily of: (i) a senior secured credit facility (the “Credit Facility”) with Bridge Bank, a division of Western Alliance Bank (“WAB”), entered into on March 27, 2025 and amended and upsized on September 9, 2025, providing for maximum borrowings of up to $12,000,000 (fully drawn as of December 31, 2025), with a four-year term and bearing interest at the greater of (a) the Secured Overnight Financing Rate plus 4.9% and (b) 9.0% per annum; (ii) a secured note of GRU Properties, LLC dated January 12, 2024 in the principal amount of $1,285,000, maturing December 1, 2027; (iii) secured promissory notes of ABCO Garden State, LLC issued from time to time under a $1,100,000 advance facility with PMW LLC, bearing interest at 16% per annum; and (iv) a $450,000 convertible promissory note of ABCO dated October 17, 2024, bearing interest at 15% per annum and maturing October 17, 2027 (subject to extensions tied to the receipt of approval by the New Jersey Cannabis Regulatory Commission of GR Unlimited’s option to acquire equity of Nile of NJ LLC). On May 13, 2025 and September 15, 2025, we entered into interest rate swap agreements with respect to each of the $7,000,000 and $5,000,000 tranches of the Credit Facility, resulting in a blended interest rate of approximately 7.84%.
The Credit Facility contains negative covenants requiring that we maintain a fixed charge coverage ratio (as defined therein) of less than 1.5 to 1.0 and a leverage ratio (as defined therein) of no more than 2.0 to 1.0, in each case as of the last day of any fiscal quarter. As of December 31, 2025, we were in compliance with all such covenants.
As of June 30, 2026, the Company believes it was in compliance with all financial covenants under the Credit Facility, including the fixed charge coverage ratio and leverage ratio (each as defined therein).
In addition, as described under “Recent Developments” above, during the first quarter of 2026 the Company sold a 20% non-controlling interest in GRMA for net proceeds of $2,985,000.
For a complete description of our long-term debt, derivative liability, and consideration payable on business acquisitions, refer to Notes 13, 14, 15, and 16 to the audited consolidated financial statements included in our Annual Report, and to Notes 11 and 12 in the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
38
Contractual Obligations and Commitments
Set out below are undiscounted minimum future lease payments after June 30, 2026 based on the Company’s operating and finance leases. Total operating lease payments are approximately $27,633,880 (consisting of $1,312,195 for the remainder of 2026, $2,751,620 in 2027, $2,791,191 in 2028, $2,883,971 in 2029, $2,494,052 in 2030, and $15,400,851 thereafter), less unamortized interest of approximately $13,209,345, resulting in a total operating lease liability of approximately $14,424,535. Total finance lease payments are approximately $216,374 (consisting of $142,500 for the remainder of 2026 and $73,874 in 2027), less unamortized interest of approximately $17,590, resulting in a total finance lease liability of approximately $198,784.
As of June 30, 2026, total long-term debt was approximately $12,733,162 (comprising a current portion of $3,002,684 and a non-current portion of $9,730,478), as compared to $12,682,124 at March 31, 2026. Total long term debt payments are approximately $15,510,053 (consisting of $2,453,014 for the remainder of 2026, $3,815,153 in 2027, $2,934,466 in 2028, and $6,307,420 in 2029), less unamortized interest of approximately $2,776,891, resulting in a total long term debt liability of approximately $12,733,162. For a complete description of the Company’s debt obligations, refer to Note 11 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
During the three and six months ended June 30, 2026 and 2025, we did not have, nor do we currently have, any off-balance sheet arrangements as defined in the applicable rules of the SEC.
Critical Accounting Policies and Estimates
The preparation of our unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Significant areas requiring estimation and judgment include the assessment of transactions as business combinations or asset acquisitions; the valuation and costing of inventory; the impairment of long-lived and indefinite-lived intangible assets; fair value measurements (including share-based compensation, derivative assets and liabilities, and warrant assets and liabilities); the recoverability and measurement of deferred tax assets and liabilities; the recognition and measurement of uncertain tax positions, including those arising under Section 280E of the Internal Revenue Code; and the consolidation of entities in which we hold less than a majority of voting rights or in which we are deemed to be the primary beneficiary of a variable interest entity.
There have been no material changes to our critical accounting policies and estimates from those disclosed under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” in our Annual Report.
Recently Issued Accounting Pronouncements
For a discussion of recently issued and recently adopted accounting pronouncements and their expected impact, if any, on our consolidated financial statements, refer to Note 3 - Significant Accounting Policies in the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, and to Note 3 to the audited consolidated financial statements included in our Annual Report.
39
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision of and with the participation of the Company’s management, including our chief executive officer (“CEO”) and chief financial officer (“CFO”), of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). Based on that evaluation, the CEO and the CFO have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s disclosure controls and procedures were effective as of June 30, 2026.
Changes to Internal Controls and Procedures over Financial Reporting
Management, with the participation of the CEO and CFO, concluded that there were no changes in our internal control over financial reporting during the three months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
40
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings.
On September 22, 2022, the SEC instituted administrative proceedings against the Company alleging violations of the Exchange Act for failing to timely file its periodic reports. We have responded and are working toward resolving the matter. At present, we are current in our Exchange Act reporting, we have also filed a registration statement with the SEC to re-register our SV Shares under the Securities Act of 1933, as amended, and, once effective, we intend to seek a resolution of the administrative proceeding on the merits of our proactive registration. On June 22, 2026 this matter was dismissed.
There are no additional pending legal proceedings to which we or our subsidiaries are a party or of which any of our property or assets is subject. There are no legal proceedings to which any of the directors, officers or affiliates or any associate of any such directors, officers or affiliates of either our company or our subsidiary is a party or has a material interest adverse to us.
We may, from time to time, become involved in disputes and proceedings arising in the ordinary course of business. In addition, as a public company, we are also potentially susceptible to litigation, such as claims asserting violations of securities laws. Any such claims, with or without merit, if not resolved, could be time-consuming and result in costly litigation. There can be no assurance that an adverse result in any future proceeding would not have a potentially material adverse effect on our business, results of operations, and financial condition.
Item 1A. Risk Factors
There have been no material changes from the risk factors as previously disclosed in the Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following SV Shares were issued pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), afforded by Section 4(a)(2) thereof for the sale of securities not involving a public offering:
On January 12, 2026, the Company issued 200,000 SV Shares pursuant to the exercise of stock options for total proceeds of approximately $21,615 (CAD$30,000).
During the six months ended June 30, 2026, the Company sold a 20% non-controlling interest in its subsidiary GRMA, in the form of 20 non-voting preferred units of GRMA, for gross proceeds of $3,000,000. The GRMA Units may be converted, at the holders’ discretion and for a period of up to three years, into subordinate voting shares of the Company at a conversion price of $0.65 per share, representing 4,615,384 subordinate voting shares on an as-converted basis.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended June 30, 2026, no director or Section 16 officer of the Company
41
EXHIBIT INDEX
42
|
Incorporated by Reference | ||||||||||
|
Exhibit Number |
Exhibit Description | Form | File Number | Exhibit | Filing Date | |||||
| 31.1* | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the U.S. Securities Exchange Act of 1934 of the Principal Executive Officer | |||||||||
| 31.2* | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the U.S. Securities Exchange Act of 1934 of the Principal Financial Officer | |||||||||
| 32.1* | Section 1350 Certification of the Principal Executive Officer | |||||||||
| 32.2* | Section 1350 Certification of the Principal Financial Officer | |||||||||
| 101.INS | Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document | |||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |||||||||
| * | Filed herewith. |
43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GROWN ROGUE INTERNATIONAL INC.
| /s/ Obie Strickler | |
| By: Obie Strickler | |
| President and Chief Executive Officer and Director (Principal Executive Officer) |
|
| Dated:August 4, 2026 |
| /s/ Andrew Marchington | |
| By: Andrew Marchington | |
| Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |
| Dated: August 4, 2026 |
44
Exhibit 10.4
LEASE AGREEMENT
This LEASE AGREEMENT (“Lease”) is made as of the 5th day of December, 2025 (the “Effective Date”), by and between RAINBOW WBSE MN LLC, a Delaware limited liability company, having its principal office at c/o Rainbow Realty Group, LLC, 60 Cutter Mill Road, Suite 303, Great Neck, New York 11021 (“Landlord”), and GROWN ROGUE UNLIMITED, LLC, an Oregon limited liability company, having an address at 550 Airport Road, Medford, OR 97504 (“Tenant”).
Landlord hereby leases to Tenant and Tenant hereby rents from Landlord the Property (hereinafter defined) for the Term (hereinafter defined) and at the Rent (hereinafter defined) and on all the terms and conditions set forth herein. Intending to be legally bound hereunder and in consideration of the rents to paid hereunder and other good and valuable consideration, Landlord and Tenant hereby agree with each other as follows:
ARTICLE I
BASIC LEASE INFORMATION AND DEFINITIONS
Section 1.01 Basic Lease Information and Definitions
(a) Approved Capital Expenditures Budget. “Approved Capital Expenditures Budget” shall mean that certain budget, to be finalized by Tenant, and approved by Landlord in Landlord’s reasonable discretion, to be utilized for the construction and completion of the Initial Tenant Improvements.
(b) Architect. “Architect” shall mean Artemis EP or another architectural firm selected by Tenant, from time to time, which shall be approved by Landlord, in Landlord’s reasonable discretion.
(c) Base Rent. “Base Rent” shall mean the amount set on Exhibit A (the “Base Rent”) for the respective time periods stated thereon, subject to adjustment in accordance with Section 5.
(d) Building. The “Building” shall mean that certain building located at 40 77th Ave NE, Fridley, MN 55432 (the “Building”), containing approximately One Hundred Nine Thousand (109,000) rentable square feet of area.
(e) Certificate of Occupancy. “Certificate of Occupancy” shall mean a certificate of occupancy or similar document or permit (whether conditional, unconditional, temporary or permanent) that must be obtained from the appropriate governmental authority as a condition to Tenant’s lawful occupancy of the Property issued by the building department of the City of Fridley, County of Anoka, State of Minnesota, certifying that the Property has been improved in compliance with all applicable Laws and the Building is in a condition suitable for occupancy. Landlord shall cooperate with and provide assistance to Tenant as reasonably necessary at no cost to Landlord to obtain the Certificate of Occupancy including, but not limited to, signing applications and other documents that require Landlord’s signature.
(f) Capital Expenditures. “Capital Expenditures” means costs incurred by Tenant in connection with the Initial Tenant Improvements (including, but not limited to, costs of demolition, as well as the “hard” and “soft” costs associated with such capital improvements) to the Property as set forth in the Approved Capital Expenditures Budget.
(g) Complete, Completed or Completion. “Complete, Completed or Completion” means the full and complete performance of all work (including all punch list items) required to fully construct and equip the Initial Tenant Improvements in accordance with this Lease, the Approved Capital Expenditures Budget, the Plans and all Legal Requirements (for clarity and the avoidance of doubt, Operational Approval (as hereinafter defined) is not required for Completion)).
(h) Completion Date. “Completion Date” means December 4, 2026.
(i) Control. “Control” shall mean, when used with respect to any specified Person means the power to direct the management and policies of such Person, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise.
(j) Disbursement Conditions. “Disbursement Conditions” means the specific conditions to be satisfied with respect to the disbursement of any Amount of the Tenant Improvement Allowance pursuant to a Draw Request, which conditions are specified on Exhibit B annexed hereto.
(k) Emergency Repairs. “Emergency Repairs” shall mean expenditures or repairs to the Property which, in Tenant’s opinion, using reasonable business judgment, are immediately required to be made for the preservation and safety of the Property, or to avoid danger to life or property at the Property.
(l) Facility License. “Facility License” means collectively, that certain Cannabis Cultivator license, License # CUL-A24-000024, granted by the OCM for purposes of operating a “Cannabis Business” (as defined in the OCM Regulations) from the Property, together with any additional licenses to be granted by the OCM and assigned to the Property.
(m) Governmental Authority. “Governmental Authority” means any national, federal, state, regional or local government, or any other political subdivision of any of the foregoing, including, without limitation, the OCM, in each case with jurisdiction over Tenant or the Property, or any Person with jurisdiction over Tenant or the Property exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
(n) Initial Tenant Improvements. “Initial Tenant Improvements” shall mean the improvements to the Building performed by or on behalf of Tenant for the initial build-out of the Building, made pursuant to the Approved Capital Expenditures Budget, as more particularly described in the Scope of Work (and to be further described by the Plans), and any and all additions, alterations, betterments or appurtenances thereto, now or at any time hereafter situated, placed or constructed upon the Land pursuant to the Approved Capital Expenditures Budget or any part thereof.
(o) Land. “Land” shall mean the land described in Exhibit C attached hereto (the “Land”). The Building and the Land are sometimes referred to collectively as the “Real Estate” or the “Property.”
(p) Lease Commencement Date. The “Lease Commencement Date” shall mean the date hereof.
(q) Lease Expiration Date. The “Lease Expiration Date” shall mean the date immediately preceding the fifteenth (15th) anniversary of the Effective Date subject to extension in accordance with Section 4, or termination in accordance with this Agreement.
2
(r) Legal Requirements. “Legal Requirements” means (i) all statutes, laws, rules, orders, regulations, ordinances, judgments, orders, decrees and injunctions of Governmental Authorities affecting Tenant, the Property, or any part thereof, and all Permits and regulations relating thereto (but excluding, however, current federal laws pertaining to cannabis), including, without limitation, the OCM Regulations, (ii) all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Tenant, at any time in force affecting the Property or any part thereof, (iii) terms of any insurance policy maintained by or on behalf of Tenant, and (iv) the organizational documents of Tenant.
(s) Management Agreement. “Management Agreement” shall mean that certain Management Agreement, dated as of the date hereof, by and between Permitted Sublessee and Sublessee’s Manager.
(t) Plans. “Plans” mean, collectively, the final, complete and coordinated plans and specifications, shop drawings or other technical descriptions prepared for the development of the Initial Tenant Improvements, prepared by Architect (or other design professional) approved by Landlord in Landlord’s reasonable discretion and by all applicable Governmental Authorities, all amendments and modifications thereof approved in writing by the same, and all other design, engineering or architectural work, test reports, surveys, shop drawings and related items, in all cases, made pursuant to the Scope of Work.
(u) OCM. “OCM” means the State of Minnesota’s Office of Cannabis Management.
(v) OCM Regulations. “OCM Regulations” shall mean the governing laws for commercial cannabis activity in the State of Minnesota, as promulgated by the OCM, including, without limitation, Minnesota Statutes, Chapter 342.
(w) Operational Approval. “Operational Approval” means receipt of all approvals, Permits and similar rights or authorizations (whether conditional, unconditional, temporary, or permanent) that must be obtained by the appropriate Governmental Authority as a condition to open and operate a cultivation “Cannabis Business” (as defined in the OCM Regulations) from the Property, under the authority of the Facility License, in compliance with all required Legal Requirements, including, without limitation, achieving Completion, receipt the Certificate of Occupancy and all required business licenses for the City of Fridley, MN.
(x) Permits. “Permits” means all licenses, registrations, permits, allocations, filings, authorizations, approvals and certificates used in connection with the ownership, operation, construction, renovation, use or occupancy of the Property, including, without limitation, building permits, business licenses, state health department licenses, food service licenses, liquor licenses, licenses to conduct business and all such other permits, licenses and rights, obtained from any Governmental Authority or private Person concerning the ownership, construction, operation, renovation, use or occupancy of the Property
(y) Permitted Sublease. “Permitted Sublease” shall mean that certain Sublease Agreement, dated as of the date hereof, by and between Tenant, as sublandlord, and Permitted Sublessee, as subtenant, a form of which is attached hereto as Exhibit D.
(z) Permitted Sublessee. “Permitted Sublessee” shall mean Christian Stiers, an individual.
(aa) Permitted Use. “Permitted Use” shall mean the cultivation, manufacturing, processing, distribution and sale of cannabis and activities related thereto, and for no other use or purpose, in all cases, subject to applicable Legal Requirement, including, without limitation the Facility License and all related OCM Regulations.
3
(bb) Person. “Person” means any individual, corporation, limited liability company, partnership, joint venture, estate, trust, unincorporated association, or any other entity, any Governmental Authority, and any fiduciary acting in such capacity on behalf of any of the foregoing.
(cc) Security Deposit. Shall have the meaning in Section 22.01.
(dd) Scope of Work. “Scope of Work” shall mean that certain description of the Initial Tenant Improvements described on Exhibit E attached hereto.
(ee) State. The term “State” shall mean the State of Minnesota.
(ff) Sublessee’s Manager. “Sublessee’s Manager” shall mean Three Bees LLC, a Nevada limited liability company.
(gg) Submission Date. “Submission Date” shall mean the date that is thirty (30) days following the Completion Date.
(hh) Tenant Improvement Allowance. “Tenant Improvement Allowance” shall mean an allowance in the amount of up to TWO MILLION SEVEN HUNDRED FIFTY THOUSAND and 00/100 Dollars ($2,750,000.00) given by Landlord to Tenant in accordance with Section 2.05.
| (ii) Tenant Notice Address. | Grown Rogue Unlimited, LLC | ||
| 550 Airport Road | |||
| Medford, OR 97504 | |||
| Attn: Obie Strickler | |||
| Email: Obie@grownrouge.com | |||
| (jj) | Term. |
(i) Initial Term – the “Initial Term” shall mean Fifteen (15) years from the date hereof (the “Initial Term”)
(ii) Extension Terms – Tenant shall have three (3) separate, consecutive options to extend the Initial Term of this Lease for an additional period of five (5) years each (each, the “First Extension Term”, the “Second Extension Term” and the “Third Extension Term”; together with the Initial Term, collectively, the “Term”).
(kk) Total Acquisition Costs. “Total Acquisition Cost” shall mean an amount equal to Eight Million Four Hundred Fifty-Five Thousand Five Hundred Eighty-Three and No/100 ($8,455,583.00).
Section 1.02 Conflict. If there is a conflict between this summary and the further provisions of this Lease, the provisions of this Lease will control.
ARTICLE II
DEMISE; PROPERTY
Section 2.01 Lease of Property. The “Property” shall mean, collectively, the Building and the Land. Landlord hereby exclusively leases the Property to Tenant, and Tenant hereby rents the Property from Landlord together with all licenses, rights, privileges, and easements appurtenant to the Property, for the Term and subject to the conditions of this Lease. The Property includes any alterations, additions, or repairs made thereto. Landlord and Tenant agree that the computation of rentable square footage shall be binding and conclusive on the parties, and their successors and assigns.
4
Section 2.02 Lease of Property for Lease Term. Subject to the terms and conditions of this Lease, Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Property for the Term, subject to earlier termination pursuant to any of the terms, covenants, or conditions of this Lease or pursuant to Law.
Section 2.03 Acceptance of Property. Tenant hereby acknowledges that: (a) Tenant has had the opportunity to inspect the Property and accepts the Property in its “AS IS, WHERE IS” condition; (b) the Property is acceptable for Tenant’s intended Permitted Use; (c) neither Landlord nor any of Landlord’s agents, has made any oral or written representations or warranties with respect to said matters other than as set forth in this Lease; and (d) TENANT EXPRESSLY WAIVES ANY WARRANTY OF CONDITION OR OF HABITABILITY OR SUITABILITY FOR OCCUPANCY, USE, HABITATION, FITNESS FOR A PARTICULAR PURPOSE, OR MERCHANTABILITY, EXPRESS OR IMPLIED, RELATING TO THE PROPERTY.
Section 2.04 Delivery; Tenant Improvement Allowance.
(a) Landlord shall deliver the Property to Tenant on the Lease Commencement Date in “AS IS, WHERE IS” condition.
(b) Subject to Section 2.05, Landlord shall provide to Tenant the Tenant Improvement Allowance, which shall be used by Tenant for reimbursements of Tenant’s costs for the Initial Tenant Improvements and for the cost of architectural, engineering, legal costs and fees, permits and related fees, utility hook-ups, space planning, and construction documents related to the same. Tenant shall use its Architect to prepare the construction documents, with Landlord having final approval prior to submission to the zoning authority for Fridley, MN, which approval shall not be unreasonably withheld, conditioned, or delayed. Upon receipt of the aforementioned construction documents, Landlord shall provide approval or objection to said documents within five (5) business days, and in the event that Landlord does not respond within five (5) business days, it shall be deemed approval for Tenant to submit to the zoning authority. Tenant’s contractor must be licensed (as required by the State or municipality), and registered, bonded, and insured in the State (“Tenant’s Contractor”).
(c) The Tenant Improvement Allowance shall be paid by Landlord to Tenant in accordance with the provisions set forth in Section 2.05 hereof. If all or part of the Tenant Improvement Allowance due and owing to Tenant is not paid to Tenant within the time period prescribed in Section 2.05, subject to satisfaction of the conditions set forth herein, then Tenant may either (i) reduce its Base Rent payment obligations by twenty percent (20%) until the date the same is reimbursed or deducted as aforesaid, (ii) exercise the Purchase Option referenced in Section 17.01, or (iii) if the Tenant Improvement Allowance is not paid within sixty (60) days of the time prescribed in Section 2.05, then Tenant may reduce its Base Rent payment obligations by twenty percent (20%) for the remainder of the Initial Term.
Section 2.05 Draw Requests.
(a) Per this Section 2.05, Tenant shall be entitled to receive disbursement of the Tenant Improvement Allowance from time to time during the Term to pay for reimbursements of Tenant’s costs for the Initial Tenant Improvements, provided that at such time the applicable Disbursement Conditions have been satisfied, and provided, further, that in each case, Tenant’s Draw Request for such disbursement must be received by Landlord at least fifteen (15) Business Days prior to the requested disbursement date for the payment of any such disbursement. Tenant shall be permitted to submit two (2) Draw Requests, as follows:
(i) The first (1st) Draw Request shall be equal to the amount of $500,000 and shall be permitted to be submitted by Tenant following Tenant’s expending a minimum amount of $1,000,000 towards the Initial Tenant Improvements, including, without limitation, costs towards equipment and other construction related items (the “Initial Draw”) (evidence of such equity requirement, as aforesaid, shall be furnished by Tenant to the reasonable satisfaction of Landlord prior to the Initial Draw); and
5
(ii) The second (2nd) Draw Request shall be equal to the amount of $2,250,000 and shall be made following Tenant’s receipt of the Operational Approval (the “Final Draw”).
(b) Any Draw Request shall include lien waivers and releases in a form and substance satisfactory to Landlord (in Landlord’s reasonable discretion) from Tenant’s Contractor, all subcontractors, and any other lienors performing services or providing materials for such work who may be entitled to a lien as permitted by Law, waiving any applicable mechanics liens relating to such work, which waivers may be conditioned upon receipt of the amount set forth in the applicable Draw Request (each a “Draw Request”).
(c) Landlord shall pay the amount set forth in the Initial Draw to Tenant within thirty (30) after receipt of the first Draw Request. Landlord shall disburse the Final Draw (not to exceed the aggregate amount of the Tenant Improvement Allowance) within thirty (30) days after the later to occur of final Completion of the Initial Tenant Improvements and receipt of the Operational Approval. All Initial Tenant Improvements must be in conformance with the building codes of the State and applicable municipality and all other Laws of the State of Minnesota and the County of Anoka, MN. Tenant shall provide to Landlord a copy of the Certificate of Occupancy and final Facility License promptly after receipt thereof. Landlord agrees to reasonably cooperate with Tenant to obtain the Certificate of Occupancy, the Operational Approval, and all material Permits, including, but not limited to, signing applications that require Landlord’s signature.
(d) Subject to the exact date of payment by Landlord to Tenant, Exhibit F outlines the terms and payment schedules related to Tenant’s repayment of the Initial Draw and the Final Draw. Following receipt of each respective draw, Tenant shall timely pay to Landlord as Additional Rent, all amounts listed on Exhibit F.
ARTICLE III
CONDITION OF THE PROPERTY
Section 3.01 No Representation. Except to the limited extent, if any, expressly set forth elsewhere in this Lease, Tenant hereby acknowledges and agrees that: (a) Landlord has made no representations, covenants, or warranties whatsoever to Tenant with respect to the Property, the condition of the Property, or the suitability for use by Tenant of the Property in connection with the business operations of Tenant; and (b) Landlord has no obligation to Tenant whatsoever, pursuant to this Lease or otherwise, with respect to the obtaining or maintaining of any governmental approvals, consents, licenses, permits, certificates of occupancy, or other certificates (collectively, the “Governmental Authorizations”) necessary or desirable in connection with the use and occupancy of the Property by Tenant pursuant to this Lease and that any and all such Governmental Authorizations are to be obtained by Tenant, at Tenant’s sole cost and expense. Furthermore, Tenant hereby acknowledges and agrees that: (i) the Property is being leased to Tenant by Landlord in its “as is, where is and with all defects” condition, as of the Lease Commencement Date; and (ii) Landlord shall have no obligation whatsoever, pursuant to this Lease or otherwise, to make any alterations or improvements to or with respect to the Property, except as expressly set forth in this Lease.
ARTICLE IV
TERM
Section 4.01 Term. The Initial Term of this Lease shall be for a period of fifteen (15) years and shall commence on the Lease Commencement Date and shall expire on the Lease Expiration Date, subject to extension in accordance with Section 4, or termination in accordance with this Agreement.
Section 4.02 Lease Commencement Date. The “Lease Commencement Date” shall mean the date hereof.
6
Section 4.03 Option to Extend.
(a) Subject to satisfaction of all of the Extension Conditions, Tenant shall have three (3) separate, consecutive options (each an “Extension Option”) to extend the Term and Lease Expiration Date of this Lease for three (3) additional periods of five (5) years (the “First Extension Term,” the “Second Extension Term,” and the “Third Extension Term” respectively; the First Extension Term, the Second Extension Term and the Third Extension Term are herein, sometimes, individually or collectively referred to as an “Extension Term”). In order for an Extension Term to be effective, the Extension Conditions must be fully satisfied in the Landlord’s sole discretion both at the time the option is exercised and at the time of the commencement of the applicable Extension Term. The term “Extension Conditions” means that, as a condition to Tenant exercising each Extension Option: (i) Tenant shall have timely given Landlord an Extension Notice in accordance with Section 4.03(b); (ii) on the date the applicable Extension Option is exercised, and at the commencement of the First Extension Term, the Second Extension Term, or the Third Extension Option, as applicable, no Event of Default shall have occurred and be continuing beyond any applicable notice and cure periods; and (iii) Tenant shall not have been more than ten (10) days late in the payment of any or all Rent more than a total of three (3) times for all periods before the commencement of the applicable Extension Term.
(b) Each Extension Option shall be exercisable by written notice (the “Extension Notice”) to Landlord given not later than One Hundred Eighty (180) days prior to the expiration of the then-current Term. Time is of the essence as to the giving of each Extension Notice. If Tenant does not timely exercise the First Extension Option in accordance with the terms hereof, all Extensions Options shall automatically terminate, and the Lease Term shall expire as of the expiration of the then-current Term.
(c) Each Extension Term shall constitute an extension of the Term and shall be upon all of the same terms and conditions as the existing Term, except that: (i) Landlord shall not be required to furnish any materials or perform any work to prepare the Property for Tenant’s continued occupancy during an Extension Term (nor shall Landlord be required to reimburse Tenant for any Alterations made or to be made by Tenant during or in preparation for an Extension Term); (ii) the Rent for each Extension Term shall be payable at the rate specified in Section 5; and (iii) there shall be no option to extend the Term of this Lease beyond the Third Extension Term.
ARTICLE V
RENT
Section 5.01 Base Rent. Tenant covenants and agrees to pay Base Rent in advance on the first (1st) day of each calendar month during the Term and without notice, demand, abatement, deduction, counterclaim, setoff, defense, or otherwise, in lawful money of the United States, to Landlord (i) by wire transfer of immediately available funds to an account at a bank designated by Landlord in writing; or (ii) by any other method reasonably requested by Landlord.
If the Lease Commencement Date is a day other than the first day of the month, the first installment of Base Rent shall be prorated for each day commencing with the Lease Commencement Date up to and including the last day of that month. Each subsequent installment of Base Rent shall be due on the first day of each month during the Term. If the Lease Expiration Date occurs on a day other than the last day of any month, Base Rent for the last month of the Term shall be prorated in the same manner.
Concurrently with Tenant’s execution of this Lease, Tenant shall pay to Landlord an amount equal to the prorated monthly amount due for such month, together with the Base Rent payment amount due for the following month.
7
Section 5.02 Operating Expenses.
(a) From and after the Lease Commencement Date, Tenant shall be required to directly pay for all Operating Expenses (as defined below). In the event that Landlord is forced to pay any Operating Expenses, then Tenant shall pay to Landlord, as Additional Rent, all such Operating Expenses expended by Landlord within thirty (30) days of demand.
(b) As used in this Lease “Operating Expenses” shall mean and include all costs and expenses (and taxes, if any, thereon) paid or incurred on behalf of Landlord (whether directly or through independent contractors) in connection with the ownership, management, operation, maintenance, and repair of the Property (including any sales or other taxes thereon) during the Term, including, without limitation:
(i) supplies, materials, and equipment purchased or rented, total wage and salary costs paid to, and all contract payments made on account of, all persons to the extent engaged in the operation, maintenance, security, cleaning, and repair of the Property at or below the level of building manager (including the amount of any taxes, social security taxes, unemployment insurance contributions, union benefits) and any on-site employees of Landlord’s property management agent;
(ii) the maintenance, repair, and replacement of building systems, including heating, ventilating, air-conditioning, plumbing, electrical, mechanical, sewer, fire detection, sprinkler, life safety, and security systems (collectively, “Building Systems”), telecommunications facilities, elevators and escalators, exterior windows and doors, tenant directories, emergency generator, and other equipment used in common by, or for the benefit of, occupants of the Building including such repairs and replacements as may be necessary to maintain the same in proper working order and in compliance with all Laws (as hereinafter defined) and industry performance standards;
(iii) charges of contractors for services and facilities otherwise includable in Operating Expenses, including security, trash removal, cleaning, janitorial, window washing, snow and ice removal, exterior and interior landscaping, and the maintenance and repair of the parking facilities, roadways, and light poles;
(iv) the cost of utility services for the Property, including, without limitation, water, sanitary sewer, electricity, gas, fuel oil, steam, and chilled water, and domestic water to lavatories servicing the Property;
(v) the premiums for fire, extended coverage, loss of rents, boiler, machinery, sprinkler, public liability, property damage, earthquake, flood, and other insurance relative to the Property and the operation and maintenance thereof and unreimbursed costs incurred by Landlord that are subject to commercially reasonable insurance deductibles;
(vi) the operation and maintenance of any areas, facilities, and amenities located at the Property, including, without limitation, the cost of utilities, repairs, and insurance associated with such amenities;
(vii) the amortized cost of capital expenditures incurred with respect to the ownership, operation, maintenance, and repair of the Property;
8
(viii) legal and accounting fees and other expenses of maintaining and auditing Property accounting records and preparing Landlord’s Reconciliation Statements; and
(ix) costs incurred in connection with a federal, state, or municipal governmentally mandated transportation demand management program or similar program.
Notwithstanding anything herein to the contrary, Operating Expenses shall not include any costs for (i) repairs, restoration or other work occasioned by fire, wind, the elements or other casualty covered by the required insurance coverages under this Lease pertaining to casualty loss; (ii) income, profit, franchise, corporate, capital stock, estate, inheritance or transfer taxes; (iii) any depreciation allowance or expense; (iv) costs or expenses incurred due to Landlord’s gross negligence or intentional misconduct or the gross negligence or intentional misconduct of its employees, agents, contractors, workmen, or invitees; (v) payment of principal, finance charges or interest on debt or amortization on any mortgage encumbering the Building or any penalties assessed as a result of Landlord’s late payments of such amounts; or (vi) compensation, benefit costs, overhead, or salaries except for those related to on-site maintenance or the management of the Property (but in no event in excess of 3% of gross rent received from the operation of the Property).
(c) Tenant shall pay and discharge punctually all other charges levied, assessed, imposed or otherwise payable in respect of the Property, or the ownership, leasing, operation, use, occupancy or possession thereof, including, without limitation, all charges for water, steam, heat, gas, hot water, electricity, light, power and any other service, facility or utility furnished to the Property or any portion thereof during the term of this Lease and all charges and expenses that are chargeable to the occupant or owner of fee title to the Property in any document or agreement of record against title to the Property (excluding only discharging debt service payments coming due under any fee mortgage obtained by Landlord) (collectively, “Other Expenses”). Tenant shall indemnify and hold harmless Landlord from and against all Taxes and Other Expenses due under this Lease, which indemnity shall survive the expiration or earlier termination of this Lease.
(d) “Operating Year” shall mean a calendar year.
(e) Within one hundred twenty (120) days after the end of each Operating Year, Landlord shall furnish to Tenant a statement (a “Reconciliation Statement”) showing the actual or prorated Operating Expenses incurred by Landlord during such Operating Year. Any delay or failure by Landlord in delivering any Reconciliation Statement shall not constitute a waiver of Landlord’s right to require Tenant to pay Operating Expenses pursuant hereto. Any amount due Tenant shall be credited against installments of Operating Expenses next coming due, and any deficiency shall be paid by Tenant together with the next installment of Operating Expenses. Should Tenant fail to object in writing to Landlord’s determination of Operating Expenses within sixty (60) days following delivery of Landlord’s Reconciliation Statement, Landlord’s determination of Operating Expenses for the applicable Operating Year shall be conclusive and binding on Tenant for all purposes and any future claims by Tenant to the contrary shall be barred. Tenant shall have the right, at its own cost to audit Landlord’s records of the Operating Expenses during an Operating Year, within one hundred twenty (120) days after receipt of the Reconciliation Statement, and shall recover a reimbursement for any expenses improperly accounted for and included in Operating Expenses. In the event such audit reveals discrepancies which in the aggregate amount to more than a four percent (4%) difference than that previously reported by Landlord, then Landlord shall reimburse Tenant for all reasonable costs associated with conducting said audit.
9
Section 5.03 Taxes; Insurance.
(a) In addition to Section 5.02, and for avoidance of the doubt, from and after the Lease Commencement Date, Tenant shall be required to pay for all Taxes and all insurance costs required under Article XVIII (“Insurance Costs”) as Additional Rent. Prior to the Lease Commencement Date, and prior to the start of each full or partial Tax Year (as hereinafter defined), Landlord shall give Tenant a written statement of the amount of Taxes and Insurance Costs for the applicable Tax Year. During each month of the Term, on the same date that Base Rent is due, Tenant shall escrow with Landlord an amount equal to 1/12th of the Taxes and Insurance Costs for the Tax Year, to be released to Tenant following payment of the same. When the final tax bills for the Tax Year are available, Landlord shall give Tenant an amended statement that makes any necessary adjustment to Tenant’s payment of Taxes and Insurance Costs. Any amount due Tenant shall be credited against future installments of Taxes coming due for the Tax Year, and any deficiency shall be paid by Tenant together with the next installment of Taxes. In addition to the foregoing, on the Lease Commencement Date, Tenant shall escrow with Landlord an amount equal to two (2) months of Taxes.
(b) As used in this Lease:
(i) “Tax” or “Taxes” shall mean and include any form of federal, state, county, or local government or municipal taxes, fees, charges, or other impositions of every kind (whether general, special, ordinary, or extraordinary) related to the ownership, leasing, or operation of the Property, including, without limitation, the following: (A) all real estate taxes or personal property taxes levied, payable, or imposed against the Property, as such property taxes may be reassessed from time to time; (B) other taxes, charges, and assessments which are levied with respect to this Lease or the Property, and any improvements, fixtures, and equipment and other property of Landlord located in the Building and/or the Property; (C) all assessments and fees for public improvements, services, and facilities and impacts thereon, including, without limitation, arising out of any community facilities district, special improvement district, or similar assessment districts, and any traffic impact mitigation assessments or fees; (D) any tax, surcharge, or assessment which shall be levied in addition to or in lieu of real estate or personal property taxes; (E) taxes based on the receipt of rent (including gross receipts or sales taxes applicable to the receipt of rent); and (F) costs and expenses incurred in contesting the amount or validity of any Tax by appropriate proceedings. Notwithstanding the foregoing, Taxes shall not include general net income or franchise taxes imposed against Landlord.
(ii) “Tax Year” shall mean the twelve (12)-month period commencing on January 1 of each year, or such other twelve (12)-month period as may be duly adopted as the fiscal year for real estate tax purposes by the applicable taxing authorities.
Section 5.04 Payment of Rent or Additional Rent.
(a) “Additional Rent” shall mean and include all Operating Expenses, all Taxes, and any and all other sums payable by Tenant hereunder, including, without limitation, all amounts payable in connection with the Tenant Improvement Allowance, as outlined on Exhibit F, attached hereto and made a part hereof. “Rent” shall mean and include Base Rent and Additional Rent. Except as expressly provided otherwise in this Lease, Rent shall be paid on the first day of each calendar month in lawful currency of the United States without notice, demand, counterclaim, offset, deduction, defense, or abatement.
(b) All Rent payable under this Lease shall be payable to Landlord by wire transfer of immediately available funds to an account at a bank designated by Landlord in writing.
10
(c) If Tenant shall fail to pay Base Rent, Additional Rent, or any other charges payable hereunder, whether or not the same are called Base Rent, Rent, or Additional Rent, Landlord shall have all remedies provided for in the Lease or at law as in the case of nonpayment of Rent. Tenant’s obligations (accruing during the Term) under this Article V shall survive the expiration or earlier termination of this Lease.
Section 5.05 Late Fee and Default Interest. Any Rent payable by Tenant to Landlord under this Lease that is not paid within three (3) days after the same is due will be automatically subject to a late payment charge of five percent (5%) of the delinquent amount, in each instance, to cover Landlord’s additional administrative costs. In addition to the late charge set forth above, Tenant shall also be required to pay interest on all such unpaid sums including any late charges, at a per annum rate equal to sixteen percent (16%) (or such other maximum rate as permitted under state law) (“Default Rate”) on all such outstanding charges of Rent, with said interest charges, as applicable, to be payable on the first (1st) day of each month throughout the Term of this Lease, without further notice or demand therefor by Landlord. Such late charges and interest will be due and payable as set forth herein and will accrue from the date that such Rent (including late charges and interest) sums are payable under the provisions of this Lease until actually paid by Tenant.
Section 5.06 NNN Lease. This Lease is intended to be, and shall be construed as, an absolutely net-net-net lease, whereby under all circumstances and conditions the Base Rent payable to Landlord shall be a completely net return to Landlord throughout the Term of this Lease, and Tenant shall pay, and shall indemnify, defend and hold harmless Landlord from and against any and all claims, losses, damages, expenses, costs, liabilities, obligations and charges whatsoever (including, without limitation, reasonable counsel fees) which shall arise or be incurred, or shall become due, during the term of this Lease, with respect to or in connection with, the Property, and the ownership, leasing, operation, management, maintenance, repair, rebuilding, use or occupation thereof, or any portion thereof, except as otherwise expressly set forth herein. Landlord shall not be required to provide any services, make any repair or do any act in connection with the Property, except as otherwise expressly set forth herein, and the Base Rent and Additional Rent and Other Expenses under this Lease shall be paid to Landlord without any claim on the part of Tenant for diminution or abatement.
ARTICLE VI
REPAIRS AND MAINTENANCE OBLIGATIONS
Section 6.01 Repairs by Tenant.
(a) Tenant shall, at all times during the Term and at Tenant’s sole cost and expense, maintain, repair and make replacements to the Property as necessary to keep the same at all times in good condition and repair, including, but not limited to, all required maintenance, repair and replacements to the roofs of the Property, the building’s foundation system and all structural portions of the, maintaining, repairing and replacing as necessary all electrical and gas lines and all other structural and non-structural repairs and replacements to the Property and all building systems serving the Property (including, without limitation, the HVAC systems) of whatever kind and nature and howsoever arising, whether ordinary or extraordinary, interior or exterior, foreseeable or unforeseeable, and at the expiration or sooner termination of the Term of this Lease Tenant shall yield and deliver the Property to Landlord in good condition and repair (ordinary and reasonable wear and tear excepted) and otherwise in the condition provided on the date hereof and required by this Lease. For clarity and avoidance of the doubt, all damage or injury to the Property or to any other part of the Building and Building Systems, or to its fixtures, equipment, and appurtenances, whether requiring structural or nonstructural repairs, caused by or resulting from carelessness, omission, neglect, or improper conduct of, or Alterations made by, Tenant, or any of Tenant’s employees, servants, licensees, subtenants, assignees, contractors, heirs, successors, legatees, and devisees (collectively, “Tenant’s Agents”), shall immediately be repaired at Tenant’s sole cost and expense, by Tenant to the reasonable satisfaction of Landlord. Subject to Article VII, any repairs or maintenance obligation that is structural in nature shall require the prior written approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed.
11
(b) When used in this Article, the term “repairs” shall include replacements, restorations and/or renewals when necessary. The necessity for and adequacy of repairs pursuant to this Article shall be measured by the standard which is reasonably adopted by Landlord for the Building. All repairs made by Tenant shall be substantially equal in quality and workmanship to the original work. If Tenant fails after thirty (30) days’ notice (or such shorter period as Landlord may be permitted pursuant to any master lease or mortgage, or such shorter period as may be required due to an emergency) to proceed with due diligence to make repairs required to be made by Tenant, the same may be made by Landlord at the expense of Tenant, and the expenses thereof incurred by Landlord, with interest thereon at a rate of sixteen percent (16%), shall be forthwith paid to Landlord as Additional Rent after rendition of a bill or statement therefor. Tenant shall give Landlord prompt notice of any defective condition in the Property, Building or in any Building System, located in, servicing, or passing through the Property.
(c) Tenant shall keep, or cause to be kept, and make available to Landlord upon Landlord’s reasonable request, all records of repair, maintenance or replacement at the Property. Further, at all times during the Term of this Lease as same may be extended, Tenant shall either (i) engage a reputable heating, ventilating and air conditioning (“HVAC”) contractor and refrigeration contractor pursuant to a written service contract for same, or (ii) employ qualified individuals, in each case, at Tenant’s expense, to regularly inspect, maintain and repair the HVAC and refrigeration systems servicing the Property, and Tenant shall be responsible for all repairs and replacements made and to be made to the HVAC systems. If Tenant utilizes a maintenance contract pursuant to the foregoing then, upon written request, Landlord shall be promptly supplied with copies of the maintenance contract and all renewals of same, and all inspection reports.
(d) Tenant shall not perform any acts or carry on (or permit any of its employees, agents, invitees or sublessees to carry on) any practices which may damage the Property beyond ordinary wear and tear, and shall not commit or suffer any physical waste with respect to the Property. In no event shall Landlord be liable to Tenant for any damage to the Property or to any property of Tenant resulting from any cause. If Tenant does not comply with the provisions of this Section and such failure to comply continues after ten (10) days written notice of same from Landlord (except in the case of an emergency, in which event no such notice shall be required), then same shall constitute a default by Tenant under this Lease and, in addition to Landlord’s other rights and remedies with respect to such default, Landlord may but shall not be obligated to enter upon the Property and perform any repair, maintenance or replacement which Landlord reasonably deems necessary, in which event Tenant shall pay all out-of-pocket costs that Landlord may incur for such repair, maintenance or replacement.
(e) Tenant shall give notice to Landlord promptly after Tenant learns of: (i) any accident in or about the Property; (ii) all fires on the Property; (iii) all damages to or defects in the Property, including the fixtures, equipment, and appurtenances thereof, for the repair; and (iv) all damage to or defects in any parts or appurtenances of the Building Systems located in or passing through the Property or any part thereof.
Section 6.02 Landlord’s Maintenance and Repair Obligations. Landlord shall have no maintenance, repair or replacement obligations with respect to the Property, all of the same being Tenant’s sole responsibility at Tenant’s sole cost and expense as set forth above.
Section 6.03 Access. Tenant shall permit, or cause to be permitted, Landlord and Landlord’s authorized representatives to enter the Property at all reasonable times for the purpose of inspecting all or any part thereof to determine Tenant’s compliance with this Section 6, upon reasonable prior notice to Tenant, provided that Landlord’s rights of access under this Section 6 shall be exercised only in a manner which will permit Tenant to maintain compliance with all OCM Regulations.
12
Section 6.04 Landlord’s Interference. Landlord shall use its reasonable efforts to minimize interference with Tenant’s use and occupancy of the Property; provided, however, that there shall be no Rent abatement or allowance to Tenant for a diminution of rental value, no actual or constructive eviction of Tenant, in whole or in part, no relief from any of Tenant’s other obligations under this Lease, and no liability on the part of Landlord, by reason of inconvenience, annoyance, or injury to business arising from the performance of any such required repairs, alterations, additions, or improvements or the storage of any materials in the Property or in any hallways in connection therewith, and Landlord shall have no obligation to employ contractors or labor at so called overtime or other premium pay rates or to incur any other overtime costs or expenses whatsoever.
Section 6.05 Emergency Repairs. If, in an emergency, Landlord determines that, in its reasonable business judgment, Emergency Repairs are required, Landlord may enter the Property and proceed to make or cause such repairs or replacements to be made and Tenant shall reimburse Landlord for its actual expenses. Landlord shall give Tenant such notice of such emergency as shall be practicable under the circumstances. Within thirty (30) days after Landlord renders a bill for such repairs or replacements, Tenant shall reimburse Landlord for the cost of making such repairs.
ARTICLE VII
ALTERATIONS
Section 7.01 Approval for Alterations.
(a) Subject to Section 7.01(b), other than (i) the Initial Tenant Improvements, which are approved by Landlord, or (ii) Emergency Repairs, Tenant shall not make or allow to be made any (A) structural alterations, additions, or improvements in or to the Property or (B) any non-structural alterations to the Property in excess of $250,000 (collectively, “Alterations”) without first obtaining Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned, or delayed; provided, however, in the event Landlord grants its consent to any Alterations to be made by Tenant, the terms and conditions of this Article VII shall govern such Alterations. In the event that Tenant performs any Emergency Repairs pursuant to the terms hereof, Tenant shall immediately notify Landlord of such repairs, and work in good faith to alleviate any resulting damages or reasonable concerns of Landlord related thereto.
(b) Tenant agrees that all such work performed by Tenant in completing the Alterations (the “Tenant’s Work”) shall be completed at Tenant’s sole cost and expense and in a good and workmanlike manner, that the structural integrity of the Building shall not be impaired, and that no liens shall attach to all or any part of the Building, or the Property by reason thereof. Tenant shall obtain, at its sole expense, all Permits required for Tenant’s Work. For clarity and avoidance of the doubt, Tenant may from time to time during the Term of the Lease, at its own expense and without Landlord’s prior written consent, make such interior, non-structural alterations, additions or modifications to the Property as Tenant deems necessary or desirable, provided, however, that this Article VII shall apply to any such work.
Section 7.02 Tenant Obligations.
(a) Prior to making any Alterations, Tenant shall:
(i) submit to Landlord detailed plans and specifications (including layout, architectural, mechanical, and structural drawings) for each proposed Alteration and shall not commence any such Alteration without first obtaining Landlord’s prior written approval of such plans and specifications, which approval shall be in the reasonable discretion of Landlord. Landlord reserves the right to disapprove any plans and specifications in part, to reserve approval of items shown thereon pending its review and approval of other plans and specifications, and to condition its approval upon Tenant making revisions to the plans and specifications or supplying additional information. Any review or approval by Landlord of any plans and specifications or any preparation or design of any plans by Landlord’s architect or engineer (or any architect or engineer designated by Landlord) with respect to any Alterations is solely for Landlord’s benefit, and without any representation or warranty whatsoever to Tenant or any other person with respect to the compliance thereof with any Laws, the adequacy, correctness, or efficiency thereof or otherwise.
13
(ii) at Tenant’s sole cost and expense, obtain all permits, approvals, and certificates required by any governmental authorities for each Alteration. Upon the request of Tenant, Landlord, at Tenant’s sole cost and expense, shall join in any applications for any permits, approvals, or certificates required to be obtained by Tenant in connection with any permitted Alteration (provided that the applicable legal requirement shall require that Landlord join in such application) and shall otherwise cooperate with Tenant in connection therewith, provided that Landlord shall not be obligated to incur any cost or expense, including, without limitation, attorneys’ fees and disbursements, or suffer any liability in connection therewith; and
(iii) furnish to Landlord duplicate original policies or certificates thereof of workers’ compensation (covering all persons to be employed by Tenant, and Tenant’s contractors and subcontractors in connection with such Alteration) and comprehensive public liability (including property damage coverage) insurance in such form, with such companies, for such periods and in such amounts as Landlord may reasonably approve, naming Landlord and its agents, any ground lessor, and any mortgagee, as additional insureds. Such policies shall provide for the coverage amounts described in Article XIII hereof and shall be noncancelable without thirty (30) days’ prior notice to Landlord by the insurance company.
(b) Tenant shall perform its Alterations in accordance with and subject to each of the following:
(i) all Alterations shall be performed, at Tenant’s sole cost and expense, by contractors, subcontractors, or mechanics approved by Landlord, which approval shall not be unreasonably withheld.
(ii) all Alterations shall be made and performed in strict conformance with the plans and specifications therefor as approved by Landlord, all Laws, the Rules and Regulations, and all rules and regulations relating to Alterations promulgated by Landlord in its reasonable judgment. Upon completion of any Alteration, Tenant, at Tenant’s expense, shall obtain certificates of final approval of such Alteration required by any governmental authority and shall furnish Landlord with copies thereof, together with the “as-built” plans and specifications for such Alterations, it being agreed that all filings with governmental authorities to obtain such certificates of final approval shall be made, at Tenant’s sole cost and expense;
(iii) all materials and equipment to be incorporated in the Property as a result of any Alterations or a part thereof shall be of first quality and no such materials or equipment (other than Tenant’s Owned Property (as hereinafter defined below)) shall be subject to any lien, encumbrance, chattel mortgage, or title retention or security agreement. In addition, no Alteration costing in excess of $750,000 shall be undertaken prior to Tenant’s delivering to Landlord either: (A) a performance bond and labor and materials payment bond (issued by a surety company and in form reasonably satisfactory to Landlord), each in an amount satisfactory to Landlord); or (B) such other security as shall be reasonably satisfactory to Landlord or required by any Mortgagee. Any mechanic’s lien filed against the Property for work claimed to have been done for, or materials claimed to have been furnished to, Tenant shall, at Tenant’s sole cost and expense, be discharged of record or bonded within thirty (30) days after notice to Tenant of the filing or imposition thereof (or such shorter period if required by the terms of any Mortgage), and Tenant shall indemnify and defend Landlord against and save Landlord harmless from all losses, costs, damages, expenses, liabilities, suits, penalties, claims, demands, and obligations, including, without limitation, reasonable counsel fees, resulting therefrom. If Tenant fails to comply with the foregoing provisions, Landlord shall have the option of discharging or bonding any such lien, charge, order or encumbrance, and Tenant agrees to reimburse Landlord (as Additional Rent) for all losses, costs, damages, and expenses resulting therefrom or incurred in connection therewith, together with interest thereon (at a rate equal to the maximum rate permitted by applicable Law), promptly upon demand. All materialmen, contractors, artisans, mechanics, laborers, and any other persons now or hereafter furnishing any labor, services, materials, supplies, or equipment to Tenant with respect to any portion of the Property, are hereby charged with notice that they must look exclusively to Tenant to obtain payment for same. Notice is hereby given that the Landlord shall not be liable for any labor, services, materials, supplies, or equipment furnished or to be furnished to the Tenant upon credit, and that no mechanic’s or other lien for any such labor, services, materials, supplies, or equipment shall attach to or affect the estate or interest of the Landlord in and to the Property; and
14
(iv) all Alterations shall be performed only under the supervision of an independent licensed architect approved by Landlord, which approval shall not be unreasonably withheld. Tenant shall not, at any time prior to or during the Term, directly or indirectly, employ, or permit the employment of, any contractor, mechanic.
(c) Unless otherwise elected by Landlord as hereinafter provided, all Alterations made by Tenant shall become the property of Landlord and shall be surrendered to Landlord on or before the Lease Expiration Date, except as otherwise set forth in this Lease. Notwithstanding the foregoing, movable equipment, trade fixtures, personal property, furniture, or any other items that can be removed without material harm to the Building will remain Tenant’s property (collectively, the “Tenant Owned Property”) and shall not become the property of Landlord but shall be removed by Tenant, at its sole cost and expense, not later than the Lease Expiration Date. When granting consent for any Alterations, Landlord shall indicate whether it will require the removal of those Alterations prior to the Lease Expiration Date. Tenant shall repair at its sole cost and expense all damage caused to the Building by the removal of any Alterations that Tenant is required to remove or Tenant Owned Property. Landlord may remove any Tenant Owned Property or Alterations that Tenant is required but fails to remove at the Lease Expiration Date and Tenant shall pay to Landlord the cost of removal. Tenant’s obligations under this Section 7.02(c) shall survive the expiration or earlier termination of this Lease.
Section 7.03 Reimbursement to Landlord. Tenant shall (a) reimburse Landlord for all reasonable costs and expenses incurred by Landlord in connection with the review and inspection of Tenant’s Work, including, but not limited to architect’s, engineer’s, and attorneys’ fees incurred by Landlord in connection with the review of the Tenant’s plans and specifications for Tenant’s Work, all changes and modifications thereto, and the Landlord’s inspection of Tenant’s Work, and (b) a compliance review fee equal to the lesser of one percent (1%) of all related construction costs and five thousand dollars ($5,000).
ARTICLE VIII
SERVICES; UTILITIES
Section 8.01 Services; Utilities. Tenant shall arrange for, and promptly pay when due, all amounts and charges for, all services and utilities to the Property as Tenant deems necessary for Tenant’s business operations. Landlord shall not be required to furnish or render any services or utilities to the Property, Tenant or any occupant, and shall have no responsibility for any of same. Landlord shall not be liable for any failure to receive any utility service and/or any interruption in the provision of same regardless of cause.
ARTICLE IX
USE AND OPERATIONS
Section 9.01 Construction; Use of Property; Compliance with Laws; Hazardous Materials.
(a) The Property shall be used only for the Permitted Use and for no other purpose.
(b) Tenant, at Tenant’s sole cost and expense, shall comply with and shall cause all Tenant’s Agents to comply with all applicable laws, ordinances, rules, and regulations of governmental and quasi-governmental authorities, including, without limitation, the Americans with Disabilities Act of 1990, as amended by the Americans with Disabilities Act Amendments Act of 2008 (and the regulations promulgated thereunder) (“Laws”) applicable to the use or occupancy of the Property. The foregoing obligation of Tenant shall not however permit Tenant to make, without Landlord’s prior written approval, any Alterations to the Property which otherwise would require Landlord’s approval under this Lease, and Tenant shall comply with all the requirements of this Lease in making any such Alterations.
15
(c) Cannabis may not be consumed at the Property if prohibited by OCM Regulations.
(d) Tenant shall complete the Initial Tenant Improvements in a timely manner and free and clear of any mechanic’s liens, materialmen’s liens and equitable liens or any other liens, and otherwise in accordance with applicable Legal Requirements.
(e) Tenant shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses (including, without limitation, (i) diligently pursuing all required actions to achieve Completion by the Completion Date and submitting all deliverables required under the OCM Regulations to the OCM for the Operational Approval by the Submission Date, (ii) the Facility License and (iii) any other license, permit or other approval held or owned by Tenant as a “License holder” as that term is defined in the OCM Regulations), Permits and franchises necessary for the conduct of its business and shall comply in all respects with all applicable Legal Requirements (but excluding, however, current federal laws pertaining to cannabis). Tenant shall notify Landlord promptly of any written notice or order that Tenant receives from any Governmental Authority relating to Tenant’s failure to comply with such applicable Legal Requirements.
(f) Tenant will cause the construction of the Initial Tenant Improvements (a) to be prosecuted with diligence and continuity in accordance with the Plans and pursuant to the construction schedule approved by Landlord with all materials, supplies, chattels and fixtures typically furnished or installed at such stage of construction to be so furnished or installed in accordance with such schedule, and (b) to be Completed on or before the Completion Date, free and clear of liens or claims for liens for materials supplied and for labor and services performed in connection with the construction of the Initial Tenant Improvements.
(g) At all times that the Property is operated as a cannabis Cultivation facility (as defined by the OCM Regulations), Tenant shall provide security to the Property consistent with the requirements of the OCM Regulations.
(h) At all times that the Property is operated as a cannabis Cultivation facility (as defined by the OCM Regulations), Tenant shall maintain policies and procedures consistent with the requirements of the OCM Regulations.
(i) Tenant shall not cause or permit any Hazardous Materials to be generated, used, released, stored, or disposed of in or about the Building or the Property; provided, however, Tenant may use and store reasonable quantities of cleaning and office supplies and other similar materials as may be reasonably necessary for Tenant to conduct normal business operations at the Property. Tenant shall indemnify and hold Landlord, its employees, and agents, harmless from and against any damage, injury, loss, liability, charge, demand, or claim based on or arising out of the presence or removal of, of failure to remove, Hazardous Materials generated, used, released, stored, or disposed of by Tenant or Tenant’s Agents, invitees, or visitors in or about the Building, or the Property, whether before or after the Lease Commencement Date.
(j) As used in this Lease: (i) “Hazardous Materials” shall mean any chemical, compound, material, substance, or other matter that: (A) is defined as a hazardous substance, hazardous material, or waste, or toxic substance under any Environmental Law; (B) is regulated, controlled, or governed by any Environmental Law or other Laws; (C) is petroleum or a petroleum product; or (D) is asbestos, formaldehyde, radioactive material, drug, bacteria, virus, or other injurious or potentially injurious material (by itself or in combination with other materials); and (ii) “Environmental Laws” shall mean any and all federal, state, or local laws, ordinances, rules, decrees, orders, regulations, or court decisions relating to hazardous substances, hazardous materials, hazardous waste, toxic substances, environmental conditions on, under, or about the Building, or the Property, or soil and ground water conditions, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), the Resource Conservation and Recovery Act (RCRA), the Hazardous Materials Transportation Act, any other law or legal requirement concerning hazardous or toxic substances, and any amendments to the foregoing.
16
ARTICLE X
TRANSFERS BY TENANT
Section 10.01 Transfers Require Landlord Consent.
(a) Other than the Permitted Sublessee, the Permitted Sublease or Sublessee’s Manager (pursuant to the terms of the Management Agreement), which are hereby approved by Landlord, neither Tenant nor any sublessee or assignee of Tenant, directly or indirectly, voluntarily or by operation of law, shall sell, assign, encumber, mortgage, pledge, or otherwise transfer or hypothecate all or any part of the Property, the Facility License or Tenant’s leasehold estate hereunder (each such act is referred to as an “Assignment”), or sublet the Property or any portion thereof or permit the Property to be occupied by anyone other than Tenant (each such act is referred to as a “Sublease”), without Landlord’s prior written consent in each instance, which consent shall not be unreasonably withheld, conditioned or delayed. Any Assignment or Sublease that is not in compliance with this Article X shall be void. The acceptance of rental payments by Landlord from a proposed assignee, sublessee, or occupant of the Property shall not constitute consent to such Assignment or Sublease by Landlord. Other than rent collected under the Permitted Sublease, Tenant shall promptly pay to Landlord one hundred percent (100%) of the excess payable by such assignee or sublessee over and above the Rent due and payable under this Lease in connection with any Assignment or Sublease. For clarity and the avoidance of doubt, the foregoing sentence shall not apply to the Permitted Sublease.
(b) For the purposes of this Lease, a merger, reorganization, or dissolution involving Tenant or any transfer of this Lease by operation of law, shall be deemed to be an Assignment of this Lease which triggers the provisions of this Section 10.01. Furthermore, the sale, issuance, or transfer of any voting capital stock of Tenant or voting capital stock of any corporate entity which directly or indirectly Controls (hereinafter defined) Tenant or the sale, issuance, or transfer of any interest in any noncorporate entity which directly or indirectly Controls Tenant, which sale, issuance, or transfer results in a change in the direct or indirect voting Control of Tenant, shall be deemed to be an Assignment of this Lease which triggers the provisions of this Section 10.01, except that the foregoing shall not be applicable to stock which is traded on the New York Stock Exchange, the American Stock Exchange, the Canadian Securities Exchange or any other nationally or internationally recognized stock exchange. If Tenant is a partnership, trust, or unincorporated association, then the sale, issuance, or transfer of a controlling interest therein or of an interest therein which would result in a change in the voting Control of Tenant, or the sale, issuance, or transfer of a majority interest in or a change in the voting Control of any partnership, trust, or unincorporated association or corporation which directly or indirectly Controls Tenant, or the sale, issuance, or transfer of any portion of any general partnership or managing interest in Tenant or in any such entity, shall be deemed to be an Assignment of this Lease which triggers the provisions of this Section 10.01.
Section 10.02 Tenant’s Request for Landlord Consent. Any request by Tenant for Landlord’s consent to a specific Assignment or Sublease shall include:
(a) The identity of the proposed assignee, sublessee, or occupant;
(b) The nature of the proposed assignee’s, sublessee’s, or occupant’s business to be carried on at the Property;
(c) A copy of the proposed Assignment agreement or Sublease; and
(d) Such other information as Landlord may request concerning the proposed assignee, sublessee, or occupant or its business, including without limitation, financial information about the proposed assignee, sublessee, or occupant or its business.
17
Landlord shall respond in writing, either granting approval or stating the reasons for any disapproval, within thirty (30) days after receipt of all information reasonably necessary to evaluate the proposed Assignment or Sublease. If Landlord fails to respond to Tenant’s request for consent within thirty (30) days, Tenant may deliver a second written notice stating that Landlord’s consent will be deemed to be given if no response is received within an additional seven (7) days. If Landlord fails to respond within that additional seven-day period, Landlord’s consent shall be deemed to be given.
Section 10.03 Tenant’s Liability. No consent by Landlord to any Assignment or Sublease by Tenant, and no specification in this Lease of a right of Tenant to make any Assignment or Sublease, shall relieve Tenant of any obligation to be performed by Tenant under this Lease, whether arising before or after: (a) the Assignment or Sublease; or (b) any extension of the Term (pursuant to exercise of any option granted in this Lease). The consent by Landlord to any Assignment or Sublease shall not relieve Tenant or any successor of Tenant from the obligation to obtain Landlord’s express written consent to any other Assignment or Sublease. No Assignment or Sublease shall be valid or effective unless the assignee or sublessee or Tenant shall deliver to Landlord a fully executed counterpart of the Assignment or Sublease and an instrument that contains a covenant of assumption by the assignee or agreement of the sublessee, reasonably satisfactory in substance and form to Landlord.
Section 10.04 Tenant Pays Landlord Expenses. Tenant shall pay to Landlord the full amount of Landlord’s reasonable costs of processing every proposed Assignment or Sublease, including, without limitation, landlord’s legal review fees and expenses, together with the reasonable amount of all direct and indirect expenses incurred by Landlord (including, without limitation, security service, janitorial and cleaning service, and rubbish removal service) arising from any assignee, occupant, or sublessee taking occupancy.
Section 10.05 Permitted Transfers. Notwithstanding anything herein to the contrary, Permitted Sublessee may form a Minnesota limited liability company (the “Permitted Transferee”) and transfer his interest in the Facility License to the same, in all cases, subject to compliance with Legal Requirements, including, without limitation, the OCM Regulations, provided that the following conditions are satisfied: (a) Permitted Transferee assumes the Permitted Sublease and agrees to be bound by all obligations thereunder, pursuant to an assignment and assumption agreement approved by Landlord; (b) Permitted Sublessee retains a sixty-five percent (65%) or greater interest in the Permitted Transferee; (c) Permitted Sublessee retains all Control over the Permitted Transferee; and (d) Tenant provides Landlord with thirty (30) days’ notice of any such proposed Permitted Transferee. Tenant’s notice to Landlord shall include information and documentation showing that each of the above conditions has been satisfied.
ARTICLE XI
SUBORDINATION; ESTOPPEL CERTIFICATES
Section 11.01 Subordination.
(a) For purposes of this Article XI: (i) “Mortgage” shall mean any mortgage, deed to secure debt, trust indenture, or deed of trust which may now or hereafter affect, encumber or be a lien upon the Building, or the Real Estate, and any spreading agreements, renewals, modifications, consolidations, replacements, and extensions thereof; and (ii) “Mortgagee” shall mean a lender under any Mortgage. This Lease shall be subject and subordinate at all times to: (i) any Mortgage that may now exist or hereafter be executed in any amount for which the Property or any portion thereof; and (ii) all modifications, renewals, supplements, consolidations, and replacements thereof. The provisions of this Section 11.01 shall be self-operative and no further instrument shall be required to effect the provisions of this Section 11.01. Notwithstanding anything to the contrary contained herein, Landlord shall, as a condition to the subordination of this Lease, provide Tenant with an executed subordination, non-disturbance, and attornment agreement with Landlord’s Mortgagee, on customary terms.
18
(b) If any Mortgage is foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant, notwithstanding any subordination, shall attorn to and become the tenant of the successor in interest to Landlord at the option of such successor in interest. If any Mortgage is foreclosed, or Landlord’s interest under this Lease is conveyed or transferred in lieu of foreclosure, neither the Mortgagee, beneficiary, nor any person or entity acquiring title to the Property as a result of foreclosure or trustee’s sale, nor any successor or assign of either of the foregoing, shall be: (i) liable for any default by Landlord; (ii) bound by or liable for any payment of Rent which may have been made more than thirty (30) days before the due date of such installment; (iii) subject to any defense or offset which Tenant may have to the payment of Rent or other performance under this Lease arising from any default by Landlord; or (iv) bound by any amendment or modification to this Lease made without the consent of such Mortgagee if the consent of such Mortgagee or beneficiary thereto is required.
(c) Within thirty (30) days following a request by Landlord, Tenant agrees to execute any documents reasonably required to effectuate the foregoing subordination or such other reasonable and customary subordination, non-disturbance, and attornment agreement submitted by Landlord to Tenant, which documents may contain such other terms as any Mortgagee or prospective Mortgagee may reasonably require, or to make this Lease prior to the lien of any Mortgage or underlying lease, as the case may be.
(d) Tenant agrees to simultaneously give to any Mortgagee, by registered or certified mail, a copy of any notice of default served upon Landlord specifying the default in reasonable detail, provided Tenant has been notified in writing of the names and addresses of such Mortgagees and such parties shall have the same cure rights as Landlord has under this Lease.
Section 11.02 Estoppel Certificate. Tenant, at any time and from time to time, within ten (10) days after written request from Landlord, shall execute, acknowledge, and deliver to Landlord, addressed to Landlord and any prospective purchaser, ground or underlying lessor, or Mortgagee or beneficiary of any part of the Property, an estoppel certificate in form and substance reasonably designated by the Landlord. It is intended that any such certificate may be relied upon by the Landlord and any prospective purchaser, investor, ground or underlying lessor, or Mortgagee or deed of trust beneficiary of all or any part of the Property. Tenant constitutes and appoints Landlord as Tenant’s attorney-in-fact to execute a tenant estoppel certificate on behalf of Tenant if Tenant does not execute such certificate within said thirty (30) days after receipt of request of Landlord.
ARTICLE XII
CASUALTY AND CONDEMNATION
Section 12.01 Casualty.
(a) If the Building shall be partially or totally damaged or destroyed by fire or other casualty not attributable to the fault, negligence, or misuse of Tenant or Tenant’s Agents, the Rent payable hereunder shall be abated to the extent that the Building shall have been rendered untenantable and for the period from the date of such damage or destruction to the date it is rendered tenantable. Should Tenant reoccupy a portion of the Building during the period any restoration work is taking place and prior to the date same is made completely tenantable, Rent allocable to such portion shall be payable by Tenant from the date of such occupancy.
19
(b) If the Building shall be damaged or destroyed by fire or other casualty so as to require (determined in the Landlord’s sole discretion) an expenditure by Landlord of more than twenty-five percent (25%) of the full insurable value of the Building or if the Building is completely destroyed or so badly damaged that, in Landlord’s reasonable opinion, repairs to the Building cannot be commenced within thirty (30) days or completed within one hundred twenty (120) days from the date of the damage or destruction, then in either such case, Landlord may terminate this Lease by giving Tenant written notice within sixty (60) days after the date of the casualty, specifying the date of termination of this Lease. In such event, Tenant shall forthwith quit, surrender, and vacate the Property without prejudice, subject however, to Landlord’s rights and remedies against Tenant as of the date of termination or as to those rights which survive such termination. In the event of termination, the Rent payable hereunder shall be abated from the date of damage or destruction.
(c) If all or any portion of the Building is damaged by fire or other casualty and if Landlord has not elected to terminate this Lease, Landlord shall, within a reasonable time after such occurrence, repair or rebuild the Building or such portion to its condition immediately prior to the Lease Commencement Date. Tenant may terminate this Lease by giving written notice to Landlord, if Landlord has not commenced the required repairs within sixty (60) days or has not restored and/or rebuilt the Building as herein provided within one hundred eighty (180) days from the date of such damage or destruction and such delay is due solely to Landlord’s fault. Landlord shall not be obligated to expend in such repair or rebuilding any sums greater than the proceeds of any insurance policy carried by Landlord or for Landlord’s benefit. Notwithstanding the foregoing, both Landlord and Tenant shall have the right to cancel this Lease upon sixty (60) days’ prior written notice in the event twenty-five percent (25%) or more of the Building are destroyed at any time during the last twelve (12) months of the Term (as the same may be extended or renewed) and Landlord reasonably determines that such damage cannot be repaired within sixty (60) days of the date of such damage, destruction or casualty.
(d) Landlord shall not be obligated to pay any damages, compensation, or claim for inconvenience, loss of business or annoyance arising from any casualty, or repair or restoration of any portion of the Building pursuant to this Article.
Section 12.02 Condemnation.
(a) As used herein, the following words have the following meanings:
(i) “Taking” shall mean the deprivation of or damage to the Property or any portion thereof, as the result of the exercise by a governmental authority of any power of eminent domain, condemnation, or purchase under threat thereof.
(ii) “Taking Date” shall mean with respect to any Taking, the date on which the condemning authority shall have the right to possession of the Property or any portion thereof.
(iii) “Award” shall mean the proceeds of any Taking, less all expenses in connection therewith, including reasonable attorneys’ fees.
(b) In the event of a Taking of the whole or a substantial part of the Building, other than a Taking for a temporary use, then as of the Taking Date, this Lease shall immediately cease and terminate, and the Rent payable hereunder shall be adjusted as of the Taking Date and Tenant shall have no claim for the value of the unexpired term hereof or to any part of the Award or any claim against Landlord relating to the Taking.
20
(c) In the event of a Taking of all or any part of the Property, Landlord shall have the right to terminate this Lease as of the Taking Date. Landlord shall be entitled to the Award and Tenant shall have no claim for the value of the unexpired term of this Lease or to any part of the Award or have any claim against Landlord relating to the Taking, except as provided in Section 12.02(g) hereof.
(d) In the event of a Taking of all the Property or such portion thereof as shall substantially and materially impede or impair Tenant’s use and occupancy of the Property, as reasonably determined by Landlord, then Tenant shall have the right to terminate this Lease as of the Taking Date. Landlord shall be entitled to the Award and Tenant shall have no claim for the value of the unexpired term of this Lease or to any part of the Award or have any claim against Landlord relating to the Taking, except as provided in Section 12.02(g) hereof.
(e) In the event of a Taking of less than all the Property and neither party shall elect to terminate this Lease, the Rent payable hereunder shall be reduced in proportion to the ratio that the rentable square footage of the Property so taken bears to the total rentable square footage of the Property prior to the Taking.
(f) If there is a Taking of the Property for temporary use, this Lease shall continue in full force and effect, and Tenant shall continue to comply with all the provisions hereof, except as such compliance shall be rendered impossible or impracticable by reason of such Taking. Rent shall be abated during the course of such Taking to the extent and for the period of time that the Property shall have been rendered untenantable.
(g) All Awards shall belong to Landlord without any participation by Tenant. Tenant hereby assigns to Landlord any share of any Award which may be granted to Tenant, except Tenant shall be entitled to make a separate claim with regard to the unamortized cost of any leasehold improvements paid for by Tenant and Tenant’s moving and relocation expenses, provided same does not diminish Landlord’s Award.
ARTICLE XIII
INSURANCE
Section 13.01 Insurance.
(a) At all times during the Term of this Lease, Tenant shall carry and maintain, at Tenant’s expense, the insurance required hereunder, in the amounts specified in this Article XIII, or such other amounts and in form and substance as Landlord may from time-to-time reasonably request and issued by an insurance company reasonably satisfactory to Landlord. Landlord and Tenant shall work in good faith to ensure that such amounts are consistent with the types and amounts of insurance customarily required for businesses such as Tenant’s in accordance with prudent industry practice, in all cases, subject to Landlord’s reasonable determination. Upon the execution of this Lease, Tenant shall deliver to Landlord duplicate originals or certificates of all insurance policies required to be carried hereunder with evidence of payment of applicable premium. Tenant’s insurance shall be issued by companies authorized to do business in, or eligible surplus lines, in the State of Minnesota. Tenant shall have the right to provide insurance coverage pursuant to blanket policies obtained by Tenant if the blanket policies expressly afford the coverage required by this Article XIII. All insurance policies required to be carried by Tenant under this Lease (except for workers’ compensation insurance) shall: (i) name Landlord, any Landlord property manager, any Landlord lender, and their collective affiliates, as additional insureds; (ii) as to liability coverages, be written on an “occurrence” basis; (iii) Tenant shall use its best efforts to provide Landlord with at least (A) thirty (30) days’ notice from the insurer before any cancellation, nonrenewal, or change in coverage, and (B) ten (10) days’ notice of any nonpayment; and (iv) contain provisions with Landlord as an additional insured, together with primary and contributory negligence and waiver of subrogation. Each such policy
21
shall contain a provision that such policy and the coverage evidenced thereby shall be primary and non-contributing with respect to any policies carried by Landlord. Tenant shall deliver reasonably satisfactory evidence of such insurance to Landlord on or before the date Tenant first enters or occupies the Property, and thereafter at least thirty (30) days before the expiration dates of expiring policies. Notwithstanding the foregoing, if any such insurance expires without having been renewed by Tenant, Landlord shall have the option, in addition to Landlord’s other remedies, to procure such insurance for the account of Tenant, immediately and without notice to Tenant, and the cost thereof shall be paid to Landlord. The limits of the insurance required under this Lease shall not limit Tenant’s liability.
(b) Each insurance policy so issued shall expressly provide: (i) that it may not be canceled for nonpayment, or for other reason without thirty (30) days’ advance notice to Landlord; (ii) that the insurance company shall not fail to renew the policy without thirty (30) days’ advance notice to Landlord; (iii) that no cancellation or reduction in required coverage may be effectuated without Landlord’s consent; and (iv) that it is not subject to invalidation as to Landlord’s interest by reason of any act or omission of the Tenant.
(c) The term “insurance policy” shall include any extensions or renewals of such insurance policy.
(d) Tenant may carry insurance required hereunder under a blanket policy provided such blanket policy allocates to the Property coverage in amounts satisfactory to Landlord, and further provided all other requirements of insurance are met by such blanket policy.
(e) Landlord shall maintain insurance coverage for the Building and Real Estate as it deems necessary full insurable value thereof under “All-Risk” policies, and Tenant shall not do or permit to be done any act or thing upon the Property which would: (i) jeopardize or be in conflict with fire insurance policies covering the Building and fixtures and property in the Real Estate; (ii) increase the rate of fire or other casualty insurance applicable to the Real Estate to a rate higher than it otherwise would be for general office use of the Building; or (iii) subject Landlord to any liability or responsibility for injury to any person or persons or to property by reason of any business or operation Tenant conducts at the Property.
(f) In addition to the foregoing, in connection with the construction of the Initial Tenant Improvements, Tenant shall carry and maintain, at Tenant’s expense, “Builder’s All Risk” insurance in an amount equal to the total value of the Initial Tenant Improvements, reasonably approved by Landlord covering the construction of such Alterations, and such other insurance as Landlord may reasonably require, it being understood and agreed that all of such final improvements shall be insured by Tenant pursuant to this Article XIII immediately upon Completion thereof. The foregoing Builder’s All Risk insurance shall including Landlord as Loss Payee for all work and Additional Insured as it relates to liability coverage for the construction
Section 13.02 Liability Insurance.
(a) Tenant shall provide on or before it enters the Property for any reason and shall keep in force during the Term for the benefit of Landlord and Tenant, comprehensive commercial general liability insurance naming Landlord and any designee of Landlord as additional insureds. The policy shall protect Landlord, Tenant, and any designee of Landlord against any liability occasioned by any occurrence on or about the Property or any appurtenance thereto or arising from any of the items indicated in Section 14.01 against which Tenant is required to indemnify Landlord. Such policy is to be written in a combined single limit of at least Three Million Dollars ($3,000,000) for injury or death to one or more than one person arising from any one occurrence and in the amount of Five Million Dollars ($5,000,000) in the aggregate.
22
(b) In addition to the foregoing, (1) Tenant shall provide on or before it enters the Property for any reason and shall keep in force during the Term for the benefit of Landlord and Tenant, a pollution legal liability insurance policy issued, which policy shall be in form and substance reasonably satisfactory to Landlord and shall be in amounts of not less than One Million Dollars ($1,000,000.00) per occurrence for losses caused by known and unknown pollution conditions that arise from the operations of the Tenant at the Property, their contractors, or their sub-contractors, with coverage to include: (i) bodily injury or death, (ii) property damage, including physical injury to or destruction of tangible property, (iii) clean-up costs, and (iv) defense, including costs, charges and expenses incurred in the investigation, adjustment or defense of claims for damages, and (2) within thirty (30) days of the Completion Date, Tenant shall provide and shall keep in force during the Term for the benefit of Landlord and Tenant, “Owned”, “Hired” and “Non Owned Auto Liability” policies in an amount equal to One Million Dollars ($1,000,000).
Section 13.03 Fire Insurance. Tenant shall insure and keep its equipment, personal property, and all leasehold improvements benefiting the Property or elsewhere on the Real Estate insured against damage by fire, water damage, and other casualties and risks covered by “All Risk” and extended coverage insurance. Landlord shall not be required to carry insurance of any kind on Tenant’s property, and, except as provided by law or by reason of its fault or its breach of any of its obligations hereunder, shall not be obligated to repair any damage thereto or replace the same.
Section 13.04 Workers’ Compensation Insurance. Tenant shall maintain statutory workers’ compensation insurance, and employer’s liability insurance with limits covering all Tenant’s employees as required by law.
Section 13.05 Other Insurance. Tenant shall carry insurance against such other hazards and in such amounts as may be customarily carried by tenants, owners, and operators of similar businesses, as Landlord may reasonably require for its protection from time to time.
Section 13.06 Waiver of Subrogation. Landlord and Tenant each hereby releases the other, its officers, directors, employees, and agents, from liability or responsibility (to the other or anyone claiming through or under them by way of subrogation or otherwise) for any loss or damage to property covered by insurance either carried by such party or required under this Lease to be carried by such party, even if such loss or damage shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible. However, this release shall apply only if the releasor’s insurance policies contain a clause or endorsement providing that any such release shall not adversely affect or impair such policies or prejudice the right of the releasor to recover thereunder. Landlord and Tenant each agrees that any fire and extended coverage insurance policies carried by each of them respectively and covering the Property or their contents will include such a clause or endorsement as long as the same shall be obtainable without extra cost, or, if an extra cost shall be charged therefor, the other party shall pay for such extra cost upon notice of the extra cost.
Section 13.07 Insurance Rate. If, as a result of: (a) any act or omission by Tenant or breach of any terms of this Lease; (b) the use to which Tenant has put the Property; or (c) Tenant’s failure to comply with Landlord’s insurance requirements, Landlord’s insurance rates applicable to the Real Estate are raised, Tenant shall reimburse Landlord, on demand, for the increased cost of Landlord’s insurance premiums. For the purposes of this Section, any finding or schedule of the fire insurance rating organization having jurisdiction over the Real Estate shall be deemed to be conclusive and attributable to Tenant’s use of the Property.
ARTICLE XIV
INDEMNIFICATION AND LIABILITY
Section 14.01 Indemnification.
(a) Except as otherwise caused by the gross negligence or willful misconduct of Landlord or Landlords’ agents, Tenant hereby agrees to indemnify and defend and hold Landlord, its employees or agents, and any Mortgagee harmless from and against any and all claims, suits, proceedings, actions, causes of action, responsibility, liabilities, payments, demands and expenses (including attorneys’ fees) in connection with or arising from:
23
(i) Tenant’s possession, use, occupation, management, repair, maintenance or control of the Property, or any portion thereof;
(ii) any act, omission, or negligence of Tenant, Tenant’s Agents, invitees, or visitors;
(iii) any default, breach, violation, or nonperformance of this Lease or any provision herein by Tenant; and
(iv) injury or damages to persons or property or loss of life sustained in or about the Property.
(b) Tenant shall defend any actions, suits, and proceedings which may be brought against Landlord or any Mortgagee with respect to the foregoing or in which they may be impleaded. Tenant shall pay, satisfy, and discharge any judgments, orders, and decrees which may be recovered against Landlord or any Mortgagee in connection with the foregoing. Landlord shall promptly notify Tenant of any claims for which Landlord seeks indemnification pursuant to this Section 14.01 provided, however, the failure to so notify Tenant shall not in any way modify or impair Tenant’s obligations pursuant to this Section 14.01 or otherwise.
(c) The provisions of this Section 14.01 shall survive the termination of this Lease.
Section 14.02 Waiver and Release.
(a) Tenant hereby waives and releases all claims against Landlord with respect to all matters for which Landlord has disclaimed liability pursuant to the provisions of this Lease.
(b) Tenant shall not be entitled to make, nor shall Tenant make, any claim, and Tenant waives any claim, for money damages (nor shall Tenant claim any money damages by way of setoff, counterclaim, or defense) based upon any claim or assertion by Tenant that Landlord has unreasonably withheld or unreasonably delayed its consent or approval with respect to any provision of this Lease providing for such consent or approval. Tenant’s sole remedy will be an action or proceeding to enforce any such provision, or for specific performance, injunction, or declaratory judgment.
Section 14.03 Landlord Liability.
(a) Neither Landlord nor any agent or employee of Landlord shall be liable to Tenant for and Tenant waives any claims against Landlord for: (i) any injury or damage to Tenant or to any other person; or (ii) any damage to, or loss (by theft or otherwise) of, any property of Tenant or any other person, irrespective of the cause of such injury, damage, or loss, unless caused by or due to the willful misconduct or gross negligence of Landlord, its agents, or employees without contributory negligence on the part of Tenant. Any such damage or loss that is the result of Landlord’s gross negligence or willful misconduct, shall be without gross contributory negligence on the part of Tenant.
(b) Landlord, (and, in case Landlord shall be a joint venture, partnership, tenancy-in-common, association, or other form of joint ownership, the members of any such joint venture, partnership, tenancy-in-common, association, or other form of joint ownership) shall have absolutely no personal liability with respect to any provision of this Lease, or any obligation or liability arising therefrom or in connection therewith. Tenant shall look solely to the equity of the owner in the Real Estate for the satisfaction of any remedies of Tenant in the event of a breach by the Landlord of any of its obligations. Such exculpation of liability shall be absolute and without any exception whatsoever.
24
(c) All property (whether real, personal, or mixed) at any time located in or upon the Property shall be at the risk of the Tenant only, and Landlord shall not become liable for any damage to said property or to Tenant, or to any other person or property, caused by water leakage, steam, sewerage, gas, or odors or for any damage whatsoever done or occasioned by or from any boiler, plumbing, gas, water, steam, or other pipes, or any fixtures or equipment or appurtenances whatsoever, or for any damage arising from any act or neglect or arising by reason of the use of, or any defect in, the Property or any of the fixtures, equipment, or appurtenances therein contained, or by the act or neglect of any other person or caused in any other manner whatsoever or occasioned by a Force Majeure Event.
(d) Except as otherwise expressly provided herein, this Lease and the obligations of Tenant hereunder shall be in no way affected, impaired, or excused because Landlord is unable to fulfill, or is delayed in fulfilling, any of its obligations under this Lease.
ARTICLE XV
DEFAULT AND REMEDIES
Section 15.01 Events of Default. Each of the following shall constitute an “Event of Default” hereunder:
(a) The failure of Tenant to pay any item of Rent when due and such failure continues beyond five (5) days after written notice from Landlord of said failure.
(b) The failure by Tenant to perform or observe any requirement of this Lease not specifically referred to in Section 15.01(a) above, and such failure continuing for thirty (30) days after written notice from Landlord to Tenant specifying the items in default.
(c) At Landlord’s option, the occurrence of any of the following:
(i) the appointment of a receiver to take possession of all or substantially all the assets of Tenant or the Property;
(ii) an assignment by Tenant for the benefit of creditors;
(iii) the filing of any voluntary petition in bankruptcy by Tenant, or the filing of any involuntary petition by Tenant’s creditors, which involuntary petition remains undischarged for a period of thirty (30) days;
(iv) the attachment, execution, or other judicial seizure of all or substantially all Tenant’s assets or the Property, if such attachment or other seizure remains undismissed or undischarged for a period of thirty (30) days after the levy thereof;
(v) the admission of Tenant in writing of its inability to pay its debts as they become due;
(vi) the filing by Tenant of any answer admitting or failing timely to contest a material allegation of a petition filed against Tenant in any proceeding seeking reorganization, arrangement, composition, readjustment, liquidation, or dissolution of Tenant or similar relief;
25
(vii) if within thirty (30) days after the commencement of any proceeding against Tenant seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future statute, law, or regulation, such proceeding shall not have been dismissed; or
(viii) the occurrence of any of the foregoing with respect to Guarantor;
(ix) if construction of the Initial Tenant Improvements is (i) discontinued due to acts or matters within Tenant’s control for a period of sixty (60) or more consecutive days; or (ii) not Completed by the Completion Date;
(x) if all deliverables required under the OCM Regulations for Operational Approval are not submitted to the OCM by the Submission Date;
(xi) Tenant sells, assigns or transfers the Facility License without Landlord’s express written consent;
(xii) the fraud, intentional misrepresentation or willful misconduct by Tenant under this Lease;
(xiii) the misapplication, misappropriation, or conversion by Tenant, or any affiliate thereof of (A) any insurance proceeds paid by reason of any casualty to the Property, (B) any condemnation proceeds received in connection with any taking or (C) any rental or security deposits received at the Property;
(xiv) Tenant allows an encumbrance or debt of any kind to be placed upon the leasehold or fee interest in the Property or the Facility License, as applicable, without Landlord’s express written consent;
(xv) except as expressly stated herein, a Transfer or Assignment occurs without Landlord’s express written consent;
(xvi) a default occurs under that certain Credit Agreement, dated March 27, 2025, between Tenant and Bridge Bank, a division of Western Alliance Bank, in the principal amount of $12,000,000.00, as amended as of April 30, 2025, and September 9, 2025; or
(xvii) the failure by Tenant to maintain the insurance policies required hereunder.
(d) Unless caused by the order or decree of a Governmental Authority, the vacation and abandonment of the Property by Tenant, permitting the same to remain unoccupied and unattended for thirty (30) or more consecutive days.
(e) Except as otherwise expressly stated herein, if Tenant is a corporate entity (including other entity formations), the transfer by sale, assignment, operation of law or other disposition of any part or all its shares of stock so as to result in a change in the effective voting control of Tenant on the date of this Lease.
26
Section 15.02 Landlord’s Remedies. At any time after the occurrence of an Event of Default, the following provisions shall apply and Landlord shall have the rights and remedies set forth in this Lease, which rights and remedies may be exercised upon or at any time following the occurrence of an Event of Default unless, prior to such exercise, Landlord shall agree in writing with Tenant that the Event of Default has been cured by Tenant in all respects:
(a) If an Event of Default shall have occurred and be continuing beyond any applicable cure period, Landlord shall have the right to terminate this Lease upon thirty (30) days’ prior written notice to Tenant (the “Termination Notice”). In the event the Lease is terminated, Landlord may re-enter the Property, solely by summary proceedings, remove Tenant and all other persons and property from the Property, and store such property in a public warehouse or elsewhere at the sole cost and expense of and for the account of Tenant without Landlord being deemed guilty of trespass or becoming liable for any loss or damage occasioned thereby.
(b) Without terminating this Lease, Landlord may re-enter and take possession of the Property solely under and by virtue of the laws of the State of Minnesota or by such other proceedings, including re-entry and possession as may be applicable.
(c) If Landlord elects to terminate this Lease, everything contained in the Lease on the part of the Landlord to be done and performed shall cease without prejudice, however, subject to the right of Landlord to recover from Tenant the sum of: (i) Landlord’s actual, reasonable costs incurred in terminating this Lease and recovering possession of the Property including, without limitation, reasonable attorneys’ fees and disbursements; and (ii) the actual, reasonable costs of reletting the Property, but not including the costs of alterations or improvements to the Property; and (iii) all Rent and other charges due under this Lease through the end of the Term, excluding any unexercised renewal term if any.
(d) All rights and remedies of Landlord set forth herein are in addition to all other rights and remedies available to Landlord at law or in equity. Landlord may elect to seek any combination of or all remedies available to Landlord under this Lease or at law or equity. All remedies hereinbefore given to Landlord and all rights and remedies given to it at law and in equity shall be cumulative and concurrent.
(e) Landlord shall not be deemed to have waived any default by Tenant hereunder unless such waiver is set forth in a written instrument signed by Landlord.
(f) The acceptance by Landlord of delayed or defective performance shall not constitute a waiver by Landlord of any future breach or of any other covenant, condition, or agreement set forth herein, nor of any of Landlord’s rights hereunder. Neither the payment by Tenant of a lesser amount than the installments of Rent, Additional Rent, or of any sums due hereunder nor any endorsement or statement on any check or letter accompanying a check for payment of any sums payable hereunder shall be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such sums or to pursue any other remedy available to Landlord. No re-entry by Landlord, and no acceptance by Landlord of keys from Tenant, shall be considered an acceptance of a surrender of this Lease.
(g) Notwithstanding any provision in this Lease to the contrary, Tenant’s right to any rent abatement, discount, or reduction of rent shall be null and void upon the default of Tenant under this Lease, and in addition to any other remedy which Landlord may be entitled to, seek, or obtain, Landlord shall be entitled and Tenant shall pay to Landlord all rent which Tenant would have paid to Landlord, including but not limited to any abated discounted or reduced Rent.
27
(h) By written notice to Tenant, Landlord shall have the right to accelerate all Base Rent and any other sums due hereunder and otherwise payable in installments over the remainder of the Term, and, at Landlord’s option, the amount of accelerated rent, without further notice or demand for payment, shall be due and payable by Tenant within one hundred twenty (120) days after Landlord has notified Tenant. Provided, however, Landlord shall use commercially reasonable efforts to mitigate its damages under such circumstances.
Section 15.03 Landlord’s Re-entry. If this Lease shall be terminated as provided in Section 15.02, Landlord, or its agents or employees, may re-enter the Property at any time and remove therefrom Tenant, Tenant’s Agents, and any subtenants, licensees, concessionaires, or invitees, together with any of its or their property, either by summary dispossess proceedings or by any suitable action or proceeding at law or otherwise. In the event of such termination, Landlord may repossess and enjoy the Property. Landlord shall be entitled to the benefits of all provisions of law respecting the speedy recovery of lands and tenements, or proceedings in forcible entry and detainer. Tenant waives any rights to the service of any notice of Landlord’s intention to re-enter provided for by any present or future law. Landlord shall not be liable in any way in connection with any action it takes pursuant to the foregoing. Notwithstanding any such re-entry, repossession, dispossession, or removal, Tenant’s liability and responsibility under all the provisions of this Lease shall continue.
Section 15.04 Landlord’s Additional Remedies.
(a) In case of re-entry, repossession, or termination of this Lease, whether the same is the result of the institution of summary or other proceedings, Tenant shall remain liable (in addition to accrued liabilities) to the extent legally permissible for the following (hereinafter referred to as “Current Damages”): (i) the Base Rent, Additional Rent, and all other charges provided for herein until the date this Lease would have expired had such termination, re-entry, or repossession not occurred; and all expenses which Landlord may have incurred in re-entering the Property and repossessing the same; making good any Event of Default of Tenant; painting, altering or dividing the Property; combining or placing the same in proper repair; protecting and preserving the Property by placing therein watchmen and caretakers; reletting the Property (including attorneys’ fees and disbursements, brokerage fees, in so doing); and any expenses which Landlord may incur during the occupancy of any new tenant; less (ii) the net proceeds of any reletting. Tenant agrees to pay to Landlord the difference between items (i) and (ii) hereinabove with respect to each month, at the end of such month. Any suit brought by Landlord to enforce collection of such difference for any one month shall not prejudice Landlord’s right to enforce the collection of any difference for any subsequent month. In addition to the foregoing, Tenant shall pay to Landlord such sums as the court may adjudge reasonable as attorneys’ fees with respect to any successful lawsuit or action instituted by Landlord to enforce the provisions hereof.
(b) Landlord may relet the whole or any part of said Property for the whole of the unexpired period of this Lease, or longer, or from time to time for shorter periods, for any rental then obtainable, giving such concessions of rent and making such special repairs, alterations, decorations, and paintings for any new tenant as it may in its sole and absolute discretion deem advisable (all of which, without limitation, Tenant shall be liable for pursuant to Section 15.04(a)(i)) and may collect and receive the rents therefor.
(c) TENANT HEREBY EXPRESSLY WAIVES, FOR ITSELF AND ALL PERSONS CLAIMING BY, THROUGH OR UNDER IT, ANY OBLIGATION IMPOSED BY LAW ON LANDLORD TO RELET THE PROPERTY AND MITIGATE ANY DAMAGES LANDLORD MAY SUFFER AS A RESULT OF ANY DEFAULT BY TENANT UNDER THIS LEASE.
28
(d) Tenant shall pay to Landlord, on demand (the “Demand”), as liquidated and agreed “Final Damages” (and not as a penalty) for Tenant’s Default and in lieu of all Current Damages beyond the date of Demand for Final Damages, an amount equal to the present cash value using an annual discount rate of four percent (4%) on the date of Demand of the Base Rent and Additional Rent which would have been payable from the date of Demand for what would have been the unexpired Term if it had not been terminated, plus the Base Rent and Additional Rent due through the earlier of the date of termination or repossession, and the Current Damages up to the date of Demand, which remain unpaid. If any statute or rule of law governing a proceeding in which Final Damages are to be proved validly limits the Final Damages to an amount less than that provided for herein, Landlord is entitled to the maximum amount allowable under the statute or rule of law. Before exercising this remedy, Landlord shall use commercially reasonable efforts to mitigate its damages.
Section 15.05 Waiver of Right of Redemption. Tenant hereby expressly waives (to the extent legally permissible), for itself and all persons claiming by, through, or under it, any right of redemption or for the restoration of the operation of this Lease under any present or future law in case Tenant shall be dispossessed for any cause, or in case Landlord shall obtain possession of the Property as herein provided.
Section 15.06 Landlord’s Right to Perform on Account of Tenant. If an Event of Default shall occur hereunder, Landlord may, at any time, cure said Event of Default for the account and at the expense of Tenant. Tenant shall pay, on demand, to Landlord, with interest at the Default Rate, the amount so paid, expended, or incurred by the Landlord and any expense of Landlord including reasonable attorneys’ fees incurred in connection with such Default; and all the same shall be deemed to be Additional Rent.
Section 15.07 Additional Remedies, Waivers. With respect to the rights and remedies of and waivers by Landlord:
(a) The rights and remedies of Landlord set forth herein shall be in addition to any other right and remedy now and hereafter provided by law or equity. All such rights and remedies shall be cumulative and not exclusive of each other. Landlord may exercise such rights and remedies at such times, in such order, to such extent, and as often as Landlord deems advisable without regard to whether the exercise of one right or remedy proceeds, concurs with or succeeds the exercise of another.
(b) A single or partial exercise of a right or remedy shall not preclude: (i) a further exercise thereof; or (ii) the exercise of another right or remedy from time to time.
(c) No delay or omission by Landlord in exercising a right or remedy shall exhaust or impair the same or constitute a waiver of, or acquiescence to a default.
(d) No waiver of a default shall extend to or affect any other default or impair any right or remedy with respect thereto.
(e) No action or inaction by Landlord shall constitute a waiver of default.
(f) No waiver of a default shall be effective unless it is in writing and signed by Landlord.
29
ARTICLE XVI
BANKRUPTCY
Section 16.01 During Term of Lease. If, on the Lease Commencement Date or at any time during the Term, there shall be filed by or against Tenant in any court, pursuant to any statute either of the United States or of any state, a petition in bankruptcy, or there shall be commenced a case by or against Tenant under the Bankruptcy Code, or a petition filed in insolvency or for reorganization or for the appointment of a receiver or trustee of all or a portion of Tenant’s property, and within thirty (30) days thereafter Tenant fails to secure a discharge thereof, or if Tenant makes an assignment for the benefit of creditors or petitions for or enters into an arrangement with its creditors, this Lease, at the option of Landlord, exercised within a reasonable time after notice of the happening of any one or more of such events, may be canceled and terminated, in which event neither Tenant nor any person claiming through or under Tenant by virtue of any statute or of an order of any court shall be entitled to possession or to remain in possession of the Property, but shall forthwith quit and surrender the Property, and Landlord, in addition to the other rights and remedies Landlord has by virtue of any other provision herein or elsewhere in this Lease contained or by virtue of any statute or rule of law, may retain as liquidated damages any rent, security, deposit, or monies received by it from Tenant or others on behalf of Tenant.
Section 16.02 Liquidated Damages. It is stipulated and agreed that in the event of the termination of this Lease pursuant to Sections 16.01 or 16.02 hereof, Landlord shall forthwith, notwithstanding any other provisions of this Lease to the contrary, be entitled to recover from Tenant as and for liquidated damages an amount equal to the difference between the Rent reserved hereunder for the unexpired portion of the Term and the then fair and reasonable rental value of the Property for the same period. In the computation of such damages, the difference between any installment of Rent becoming due hereunder after the date of termination and the fair and reasonable rental value of the Property for the period for which such installment was payable shall be discounted to the date of termination at the rate of three percent (3%) per annum. If the Property or any part thereof be relet by the Landlord for the unexpired term of this Lease, or any part thereof, before presentation of proof of such liquidated damages to any court, commission, or tribunal, the amount of rent reserved upon such reletting shall be deemed prima facie to be the fair and reasonable rental value for the part or the whole of the Property so relet during the term of the reletting. Nothing herein contained shall limit or prejudice the right of the Landlord to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to, or less than the amount of the difference referred to above.
ARTICLE XVII
PURCHASE OPTION
Section 17.01 In the event that Landlord fails to fund the Tenant Improvement Allowance within thirty (30) days of the date requested (in all cases, pursuant to Section 2.05), then, provided that an Event of Default has not occurred, Tenant shall have one hundred twenty (120) days following the end of such thirty (30) day period (the “Tenant Response Period”) to notify (the “Tenant Notice”) Landlord in writing whether or not Tenant desires to purchase the Property (the “Purchase Option”). If Tenant notifies Landlord of its intention to exercise the Purchase Option within the Tenant Response Period, Landlord and Tenant shall promptly enter into a purchase and sale agreement for the Property (such period not to exceed ninety (90) days), in form and substance reasonably approved by both parties, with a purchase price equal to the sum of (a) the Total Acquisition Cost, and (b) all Landlord costs and expenses committed or funded for the benefit of the Property up to and including such date, including, without limitation, the Tenant Improvement Allowance. If either (A) Tenant fails to notify Landlord of its intention to purchase the Property within the Tenant Response Period, or (B)the parties shall fail to enter into a purchase agreement in form and substance satisfactory to both parties within such ninety (90) days following the Tenant Notice, then Tenant shall forfeit its option to purchase the Property.
30
ARTICLE XVIII
NOTICES
Section 18.01 Notices. Unless specifically stated otherwise in this Lease, all notices, waivers, and demands required or permitted hereunder shall be in writing and delivered to the addresses set forth below, by one of the following methods: (a) hand delivery, whereby delivery is deemed to have occurred at the time of delivery; (b) a nationally recognized overnight courier company, whereby delivery is deemed to have occurred the Business Day following deposit with the courier; (c) registered U.S. mail, signature required and postage-prepaid, whereby delivery is deemed to have occurred on the third Business Day following deposit with the United States Postal Service; or (d) electronic transmission (email) provided that the transmission is completed no later than 4:00 p.m. EST on a Business Day and the original also is sent via overnight courier or U.S. Mail, whereby delivery is deemed to have occurred at the end of the Business Day on which electronic transmission is completed.
| To Landlord: | Rainbow WBSE MN LLC
c/o Rainbow Realty Group, LLC 60 Cutter Mill Road, Suite 303, Great Neck, New York 11021 Attention: Benjamin Bolanos Email: ben@rainbowrg.com | |
| With a copy to: | Rainbow WBSE MN LLC
c/o Rainbow Realty Group, LLC 60 Cutter Mill Road, Suite 303 Great Neck, New York 11021 Attention: Steven Rosenzweig Email: srosenzweig@gouldlp.com | |
| With a copy to: | The Anderson Firm, P.C.
101 Hudson Street, Floor 21 Jersey City, New Jersey 07302 Attention: Zachary J. Levy, Esq. Email: zlevy@tafpc.com | |
| To Tenant: | Grown Rogue Unlimited, LLC
550 Airport Road Medford, OR 97504 Attn: Obie Strickler Email: Obie@grownrouge.com | |
| With a copy to: | Greenspoon Marder LLP
227 W. Monroe, Suite 3950 Chicago, IL 60606 Email: Irina.dashevsky@gmlaw.com; Ryan.holz@gmlaw.com Attn: Irina Dashevsky; Ryan Holz |
Any party may change its address for purposes of this Section 18.01 by giving written notice as provided in this Section 18.01. All notices and demands delivered by a party’s attorney on a party’s behalf shall be deemed to have been delivered by said party. Notices shall be valid only if served in the manner provided in this Section 18.01.
31
ARTICLE XIX
BROKERS
Section 19.01 Brokers. Neither Tenant nor Landlord have engaged or agreed to pay a real estate commission to any real estate broker in connection with this Lease.
ARTICLE XX
RENEWAL RIGHTS
Section 20.01 Renewal Right. Per Section 4.03, and subject to the limits in Section 20.03 Tenant may renew this Lease for three (3) additional periods of five (5) years each by delivering written notice of the exercise thereof to Landlord not earlier than one hundred eighty (180) days nor later than ninety (90) before the expiration of the Term.
Section 20.02 Renewal Rent. The Base Rent payable for each month during each extended Term shall be equal to the product of the then-current Base Rent multiplied by one hundred and three percent (103%).
Section 20.03 Limits on Renewal Rights. Tenant’s rights under this Article XX shall terminate if: (a) an Event of Default exists; (b) this Lease or Tenant’s right to possession of the Property is terminated; (c) Tenant assigns any of its interest in this Lease or sublets any portion of the Property without Landlord Consent, except as otherwise permitted hereunder; or (d) Tenant fails to timely exercise its option under this Agreement, time being of the essence with respect to Tenant’s exercise thereof.
ARTICLE XXI
GUARANTY; SECURITY
Section 21.01 As an inducement to enter into this Lease, and as additional security for Tenant’s performance hereunder, upon execution of this Lease Tenant shall cause (i) Grown Rogue International Inc., a Canadian corporation (“Guarantor”) to execute a Guaranty of the Lease substantially in the form attached hereto as Exhibit G (the “Guaranty”)
Section 21.02 In addition to the foregoing, Tenant and Landlord acknowledge and agree that a material aspect of this Lease arrangement is the Tenant’s privity and arrangement with Permitted Sublessee and Permitted Sublessee’s ownership of the Facility License. In connection with the foregoing, in the event that Permitted Sublessee wishes to transfer ownership of the Facility License to an entity, the parties shall work in good faith to enter into a pledge and security agreement in form and substance reasonably approved by Landlord, with Landlord as pledgee, and Permitted Sublessee as pledgor, pertaining to 100% of Permitted Sublessee’s equity in such entity.
ARTICLE XXII
SECURITY DEPOSIT
Section 22.01 Security Deposit.
(a) Tenant shall, upon the execution hereof, deposit with Landlord as security for the full and faithful performance by Tenant of all its obligations under this Lease or in connection with this Lease, the sum of One Hundred Thousand and 00/100 Dollars ($100,000.00), the full amount of which shall be credited against the amounts owed to Tenant by Landlord under that certain Assignment and Assumption Agreement dated as of the date hereof, by and between Tenant, as assignor, and Landlord, as assignee (the “Security Deposit”).
32
(b) The Security Deposit shall bear no interest; and if legally permissible, Landlord shall be entitled to commingle the Security Deposit with Landlord’s other Funds.
Section 22.02 Application of the Security Deposit. If an Event of Default shall occur and be continuing, Landlord may apply the whole or any part of the security so deposited toward:
(a) The payment of any Base Rent, Additional Rent, or any other item of Rent as to which Tenant is in default.
(b) Any sum which Landlord may expend or be required to expend by reason of Tenant’s default in respect of any of the terms, covenants, and conditions of this Lease, including, without limitation, any damage, liability, or expense (including, without limitation, reasonable attorneys’ fees and disbursements) incurred or suffered by Landlord.
(c) Any damage or deficiency incurred or suffered by Landlord in the reletting of the Property, whether such damages or deficiency accrue or accrues before or after summary proceedings or other re-entry by Landlord.
Section 22.03 Transfer of the Security Deposit. In the event of a sale or leasing of the Real Property or the Building, Landlord shall have the right to transfer the Security Deposit to the transferee, and Landlord shall thereupon be released by Tenant from all liability for the transfer to the transferee of the Security Deposit. Tenant shall look solely to the new landlord for the return of the Security Deposit. The provisions hereof shall apply to every transfer or assignment of the Security Deposit made to a new landlord. Tenant shall not assign or encumber or attempt to assign or encumber the monies deposited herein as security and neither Landlord nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment, or attempted encumbrance.
Section 22.04 Return of the Security Deposit. If Tenant shall fully and faithfully comply with all the terms, provisions, covenants, and conditions of this Lease, the Security Deposit shall be returned to Tenant after the Lease Expiration Date and after delivery of possession of the Property to Landlord.
ARTICLE XXIII
CERTIFICATE OF OCCUPANCY
Section 23.01 Compliance with the Certificate of Occupancy. Tenant shall not at any time use or occupy the Property in violation of the Certificate of Occupancy issued at such time for the Property or for the Building, and in the event that any department of the City of Fridley or State of Minnesota shall hereafter contend or declare by notice, violation, order or in any other manner whatsoever that the Property are used for a purpose which is a violation of such Certificate of Occupancy, Tenant, upon written notice from Landlord or any governmental authority, shall immediately discontinue such use of the Property.
Section 23.02 Tenant’s Obligation for a New Certificate of Occupancy. Tenant shall obtain a temporary or permanent Certificate of Occupancy covering the Property permitting the Property to be used as cannabis Cultivation facility (as defined by the OCM Regulations) and such temporary or permanent Certificate of Occupancy will be in force upon the date upon which Tenant shall occupy all or any portion of the Property for the conduct of its business, provided, however, neither such certificate, nor any provision of this Lease, nor any act or omission of Landlord, shall be deemed to constitute a representation or warranty that the Property, or any part thereof, lawfully may be used or occupied for any particular purpose or in any particular manner. Landlord covenants that, on the date Tenant shall apply for said temporary or permanent Certificate of Occupancy Landlord shall not have taken any action or failed to comply with any requirements which Landlord is obligated to comply with under this Lease which would prevent Tenant from obtaining said temporary or permanent Certificate of Occupancy.
33
ARTICLE XXIV
MISCELLANEOUS
Section 24.01 Governing Law; Venue. The Laws of Minnesota shall govern the validity, performance, and enforcement of this Lease. Tenant consents to personal jurisdiction and venue in the state and judicial district in which the Property is located. The courts of the state where the Property is located will have exclusive jurisdiction and Tenant hereby agrees to such exclusive jurisdiction.
Section 24.02 Entire Agreement; Waivers. This Lease forms the entire agreement between Landlord and Tenant and no provision hereof shall be altered, waived, amended, or extended, except in a writing signed by both parties. Tenant affirms that, except as expressly set forth herein, neither Landlord nor any of its agents has made, nor has Tenant relied upon, any representation, warranty, or promise with respect to the Property or any part thereof. Landlord shall not be considered to have waived any of the rights, covenants, or conditions of this Lease unless evidenced by its written waiver and the waiver of one default or right shall not constitute the waiver of any other. The acceptance of Rent shall not be construed to be a waiver of any breach or condition of this Lease.
Section 24.03 Successors. The provisions of this Lease shall be binding upon and inure to the benefit of Landlord and Tenant, respectively, and their respective successors, assigns, heirs, executors, and administrators. Tenant agrees to become the tenant of Landlord’s successor in interest under the same terms and conditions of its tenancy hereunder.
Section 24.04 Partial Invalidity. If any clause or provision of this Lease is found to be illegal, invalid, or unenforceable under present or future laws, the remainder of this Lease shall not be affected thereby and there shall be added as part of this Lease a replacement clause or provision as similar in terms to such illegal, invalid, or unenforceable clause or provision as may be possible and still be legal, valid, and enforceable.
Section 24.05 Relationship of the Parties. Landlord and Tenant agree that the relationship between them is that of landlord and tenant and that Landlord is leasing space to Tenant. It is not the intention of the parties, nor shall anything herein be constructed to constitute Landlord as a partner or joint venturer with Tenant.
Section 24.06 Headings. The headings as to the contents of particular paragraphs herein are intended only for convenience and are in no way to be constructed as a part of this Lease or as a limitation of the scope of the particular paragraphs to which they Refer.
Section 24.07 Survival of Obligations. All obligations of Tenant hereunder not fully performed as of the expiration or earlier termination of the Term of this Lease shall survive the expiration or earlier termination of the Term hereof.
Section 24.08 Independent Covenants. Tenant’s covenants to pay Rent and other sums due hereunder are independent of Landlord’s covenants hereunder and Tenant shall have no right to withhold any such payments on account of any alleged failure by Landlord to perform or comply with any of Landlord’s covenants.
Section 24.09 Limitation of Liability. Anything in the Lease to the contrary notwithstanding, any judgment obtained against Landlord in connection with this Lease or the subject matter hereof shall be limited solely to Landlord’s interest in the Property and shall be absolutely nonrecourse with respect to Landlord personally and all other assets of Landlord. Anything in this Lease to the contrary notwithstanding, the term “Landlord” shall be limited to mean and include only the then owner of the Property, or tenant under any underlying or ground lease of the Building, and not any predecessor owner or tenant.
34
Section 24.10 Authority. Tenant makes the following representations to Landlord, on which Landlord is entitled to rely in executing this Lease: (i) Tenant is a limited liability company duly organized and existing under the laws of the State of Oregon and is qualified to do business in the State of Minnesota and has the power to enter into this Lease and the transactions contemplated hereby and to perform its obligations hereunder; (ii) by proper resolution the signatory hereto has been duly authorized to execute and deliver this Lease; and (iii) the execution, delivery, and performance of this Lease and the consummation of the transactions herein contemplated shall not conflict with or result in a violation or breach of, or default under Tenant’s certificate of formation or by-laws, or partnership or operating agreements, as amended, or any indenture, mortgage, note, security agreement, or other agreement or instrument to which Tenant is a party or by which it is bound or to which any of its properties is subject.
Section 24.11 Compliance with Laws. Tenant shall comply at its cost and expense with all Laws, and with any direction or recommendation of any public officer or officers, pursuant to Law, or any reasonable request of any insurance company carrying any insurance on the Property, and any insurance inspection or rating bureau which shall impose any duty upon Landlord or Tenant with respect to the Property or the use or occupation thereof, and shall bear all costs of any kind or nature whatsoever occasioned by or necessary for compliance with the same, provided such costs or expenses arise from Tenant’s specific use of the Property. If, during the Term of this Lease any Law requires that an alteration, repair, addition, or other change be made to the Property, and such alteration, repair, addition, or other change is a result of Tenant’s use of the Property, such work will be performed at Tenant’s expense.
Section 24.12 Waiver of Jury Trial. LANDLORD AND TENANT KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY EITHER PARTY AGAINST THE OTHER IN ANY MATTER ARISING OUT OF THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT’S USE OR OCCUPANCY OF THE PROPERTY, OR ANY CLAIM OF INJURY OR DAMAGE.
Section 24.13 Counterparts. This Lease may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original for all purposes, and all such counterparts shall together constitute but one and the same instrument.
Section 24.14 Memorandum of Lease. Concurrently with the execution of this Lease, Landlord and Tenant are executing a memorandum to be recorded promptly after execution in the county recorder’s office where the Property are located (“Memorandum of Lease”). The Memorandum of Lease shall include the names and addresses of Landlord and Tenant, a description of the Property, the Term of the Lease, and the terms of any options to extend the Term of this Lease but shall omit a discussion of Rent. Further, upon Landlord’s request, Tenant agrees to execute and acknowledge a termination of memorandum of lease in recordable form to be held by Landlord’s counsel in trust until the expiration or sooner termination of the Term of this Lease.
Section 24.15 Prevailing Party. If any party brings an action or proceeding involving the Property to enforce the Terms hereof or to declare rights hereunder, then such initiating party shall be entitled to reasonable attorneys’ fees, if it is the Prevailing Party in any such proceeding, action, or appeal thereon. The term, “Prevailing Party” shall include, without limitation, a party that substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other party of its claim or defense. The attorneys’ fees award shall not be computed in accordance with any court fee schedule but shall be such as to fully reimburse all attorneys’ fees reasonably incurred. In addition, the Prevailing Party shall be entitled to attorneys’ fees, costs, and expenses incurred in the preparation and service of notices of default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such default.
35
Section 24.16 Patriot Act. Neither Tenant nor Landlord (i) are now or shall become a person or entity with whom Tenant or Landlord is restricted from doing business with under regulations of the Office of Foreign Assets Control (“OFAC”) of the Department of the Treasury (including but not limited to, those named on OFAC’s Specially Designated Nationals and Blocked Persons list) or under any statute, executive order (including but not limited to, the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who commit, Threaten to Commit, or Support Terrorism), or other governmental action; (ii) are now or shall become a person or entity with whom Tenants is restricted from doing business with under the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001, or the regulations or orders thereunder; and (iii) are not knowingly engaged in, and shall not engage in, any dealings or transaction, or be other-wise associated with such persons or entities described in this Lease.
Section 24.17 Financial Statements. Within one hundred twenty (120) days after the completion of Tenant’s fiscal year, Tenant shall deliver to Landlord: (a) Tenant’s audited financial statements for the most recently completed fiscal year; or (b) if audited statements for Tenant are not prepared, then unaudited financial statements for the most recent fiscal year of Tenant which shall be certified to be true and correct by Tenant’s Chief Financial Officer. Upon Landlord’s request, Tenant shall provide such additional information as Landlord may reasonably request to enable Landlord to assess the creditworthiness of Tenant as a tenant of the Building. Landlord shall endeavor to ensure that all financial statements furnished by Tenant are kept confidential by Landlord and any Mortgagee or prospective purchaser that may receive the same, and that such statements are used only for the purpose of assessing the creditworthiness of Tenant as a tenant of the Building.
Section 24.18 Days; Performance on a Saturday, Sunday, or Holiday. Whenever the term “day” is used in this Lease, it shall refer to a calendar day unless otherwise specified. A “Business Day” shall mean any weekday except for those weekdays that a banking institution within the State of Minnesota is required by said state to be closed (a “Holiday”). Should this Lease require an act to be performed or a notice to be given on a Saturday, Sunday, or Holiday, the act shall be performed or notice given on the following Business Day.
Section 24.19 Landlord’s Consent. Except as otherwise expressly provided herein, Landlord shall not unreasonably withhold, condition, or delay any consent or approval required under this Lease. If Landlord fails to respond to Tenant’s written request for consent or approval within thirty (30) days, Tenant may deliver a second written notice stating that Landlord’s consent will be deemed to be given if no response is received with an additional seven (7) days. If Landlord fails to respond within said additional seven (7) day period, Landlord’s consent or approval shall be deemed to be given.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURED FOLLOW]
36
IN WITNESS WHEREOF, the Parties hereto have executed this Lease as of the date set forth above.
| LANDLORD: | |||
| RAINBOW WBSE MN LLC, | |||
| a Delaware limited liability company | |||
| By: | /s/ Benjamin Bolanos | ||
| Name: | Benjamin Bolanos | ||
| Title: | COO | ||
| TENANT: | |||
| GROWN ROGUE UNLIMITED, LLC, an Oregon limited liability company | |||
| By: | /s/ J. Obie Strickler | ||
| Name: | Obie Strickler | ||
| Title: | Manager | ||
[Signature Page to Lease Agreement]
37
Exhibit 10.5
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (“Sublease”) is made this 5th day of December, 2025 (the “Effective Date”), by and between Grown Rogue Unlimited, LLC, an Oregon limited liability company (“Sublandlord”), Christian Stiers, an individual, d/b/a/ Stiers Farms (“Subtenant”).
WITNESSETH
WHEREAS, Sublandlord, as Tenant, and Rainbow WBSE MN LLC, as Landlord (“Landlord”), are parties to that certain Lease Agreement dated December 5, 2025 (the “Lease”) demising certain space containing approximately One Hundred Nine Thousand (109,000) rentable square feet (the “Leased Premises”) in the building located at 40 77th Ave. NE, Fridley, MN 55432 (the “Building”); and
WHEREAS, Sublandlord desires to sublease to Subtenant, and Subtenant desires to sublease from Sublandlord, a portion of the Leased Premises, containing approximately One Hundred Nine Thousand (109,000) rentable square feet of the Building, as shown on the floor plan attached hereto as Exhibit A, on the terms and conditions set forth in this Sublease; and
WHEREAS, the Lease requires the consent by Landlord to this Sublease;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Sublandlord and Subtenant agree as follows:
1. Premises. Subject to the terms and conditions hereof, Sublandlord hereby subleases to Subtenant, and Subtenant hereby accepts and subleases from Sublandlord, the Premises, upon and subject to the terms and conditions hereinafter set forth.
2. Sublease Term. The Term of this Sublease (the “Sublease Term”) shall commence on the date (the “Commencement Date”) which is the later to occur of (i) Sublandlord’s receipt of the Consent (as hereinafter defined), and (ii) the Lease Commencement Date of the Lease, and shall expire on the day immediately preceding the Lease Expiration Date of the Lease (the “Expiration Date”), unless terminated earlier in accordance with the provisions hereof. Upon the expiration or earlier termination of this Sublease, Subtenant shall immediately surrender possession of the Premises, in the condition required by the Lease, and otherwise in good order and repair, normal wear and tear excepted, and remove all of Subtenant’s trade fixtures, furniture, cabling, equipment and personal property. Any holdover Subtenant shall be deemed a tenant at sufferance, subject to immediate eviction, at a rental of 200% of the current rental rate under this Sublease. Notwithstanding anything contained hereinto to the contrary, Subtenant shall indemnify Sublandlord and Landlord against any and all claims and damages, including but not limited to consequential damages and any holdover rent payable by Sublandlord under the Lease which Sublandlord incurs from Subtenant’s holdover in the Premises beyond the expiration or earlier termination of this Sublease.
| Sublease Agreement | Page 1 of 12 |
3. Delivery of Premises. Provided that Subtenant has delivered Subtenant’s Insurance (as hereinafter defined), Sublandlord shall make the Premises available to Subtenant on the Commencement Date with the FF&E present, and in its then “AS IS” condition, reasonable wear and tear and any damage resulting from the acts or omissions of Subtenant or its agents, contractor and/or employees between the Effective Date and the Commencement Date excepted. Sublandlord has not made and does not make any representations or warranties as to the physical condition of the Premises, the use to which the Premises may be put, or any other matter or thing affecting or relating to the Premises.
4. Use. The Premises shall be used only for the Permitted Use under Section 1.01(aa) of the Lease and for no other purpose without the prior written consent of Sublandlord and Landlord. Subtenant shall comply with all Legal Requirements (as defined in the Lease) governing such use.
5. Sublease Rent. Subtenant shall pay to Sublandlord Base Rent, as set forth in Exhibit A to the Lease (as may be amended from time to time), and all other monetary obligations of Subtenant hereunder at the times and in the manner hereunder provided, without notice or demand, monthly in advance on the first calendar day of each month commencing on the Commencement Date in accordance with the table below. Base Rent and any other sums due from Subtenant to Sublandlord under this Sublease will be paid directly to Sublandlord at the address provided in Section 16, Notices (or such other address as Sublandlord may designate from time to time by written notice to Subtenant). Notwithstanding the foregoing, Subtenant shall be permitted to defer payment of Base Rent until the date on which Subtenant receives its Operational Approval (as defined in the Lease) (the “Approval Date”). Base Rent shall continue to accrue from the Commencement Date, and all Base Rent accruing but unpaid prior to the Approval Date shall be paid by Subtenant within one (1) year following the Approval Date.
6. Additional Rent. Commencing on the Commencement Date (but deferred until the Approval Date), Subtenant shall pay, monthly, as additional rent, Subtenant’s Pro Rata Share of Operating Expenses (as defined in the Lease) paid by Sublandlord for each calendar year or portion thereof occurring during the Term. In addition to the Operating Expenses set forth under the Lease, the parties agree that Subtenant’s Operating Expenses shall include the full amount of the Tenant Improvement Allowance set forth in Exhibit F to the Lease (as may be amended from time to time) and Sublandlord’s costs for any other alterations or tenant improvements performed by Sublandlord pursuant to the Lease, all amounts which shall bear an annual interest rate of fifteen percent (15%) until such time as all such tenant improvements or alterations paid for by Sublandlord have been fully repaid by Subtenant. Such Additional Rent may also include additional amounts to reimburse Sublandlord for interest paid on the Tenant Improvement Allowance and any other associated charges, as determined in Sublandlord’s sole discretion and set forth in the Subtenant’s Operating Contribution Estimate (as hereinafter defined). Subtenant’s Pro Rata Share (the numerator of which is the number of rentable square feet in the Premises, and the denominator of which is the rentable square feet of the Building) is one hundred percent (100%).
Prior to the Approval Date and prior to each calendar year during the Term thereafter, Sublandlord shall notify Tenant of the amount of Operating Expenses and Tenant Improvement costs and additional charges that Sublandlord estimates it may incur during the forthcoming calendar year or portion thereof. Subtenant shall pay as additional rent on the first day of each month an amount equal to 1/12th of the product of (i) the amount of Operating Expenses and Tenant Improvement costs and additional charges for the calendar year and (ii) Subtenant’s Pro Rata Share (“Subtenant’s Operating Contribution Estimate”). Subtenant shall pay Subtenant’s Operating Contribution Estimate in equal installments on the first day of each month of such calendar year.
| Sublease Agreement | Page 2 of 12 |
Within one hundred twenty-five (125) days after the end of each calendar year during the Term, and within one hundred twenty-five (125) days after the end of the Term, Sublandlord shall deliver to Subtenant a report of the actual amount of Subtenant’s Pro Rata Share of Sublandlord’s Operating Expenses (“Subtenant’s Operating Contribution”) incurred by Sublandlord during such calendar year, or with respect to the last year of the Term of this Sublease, during the Term of the Sublease occurring during such calendar year (the “Statement”). Any amount due Subtenant shall be credited against installments of Subtenant’s Operating Contribution next coming due, and any deficiency shall be paid by Subtenant together with the next installment of Subtenant’s Operating Contribution.
Subtenant shall also pay to Sublandlord as Additional Rent within ten (10) days after demand therefor as additional rent any Surcharges. “Surcharges” shall mean any and all amounts which, by the terms of the Lease, become due and payable by Sublandlord to Landlord as additional rent or otherwise and which would not have become due and payable but for the acts, requests for services, and/or failures to act of Subtenant, its agents, officers, representatives, employees, servants, contractors, invitees, licensees or visitors under this Sublease, including, but not limited to: (i) any increases in Landlord’s fire, rent or other insurance premiums, resulting from any act or omission of Subtenant, or (ii) any charges which may be imposed on Sublandlord, to the extent that such charges are attributable to the Premises or the use thereof or services or utilities provided thereto during the Term hereof and are payable by Sublandlord under the Lease.
All amounts payable by Subtenant under this Sublease other than Base Rent shall be deemed “additional rent” or “Additional Rent” hereunder, for which Sublandlord shall have all the same rights and remedies available hereunder or under applicable law for the non-payment of Base Rent. Base Rent and Additional Rent are collectively referred to herein as “Rent”. Subtenant’s obligation to pay any Additional Rent shall survive the termination of this Sublease.
7. Assumption of Obligations. All of the terms and conditions of the Lease are hereby incorporated in this Sublease by reference and shall apply as though set forth at length in this Sublease, with, where applicable, “Sublandlord” being substituted for “Landlord” and “Subtenant” being substituted for “Tenant.” Subtenant shall comply with all of the provisions of the Lease which are to be observed or performed during the Sublease Term by the Sublandlord as Tenant thereunder. Except as set forth in this Sublease, between Sublandlord and Subtenant, Sublandlord shall have all of the rights, privileges, remedies and duties accorded Landlord in the Lease and Subtenant shall have with respect to the Premises all of the rights, privileges, remedies and duties accorded Sublandlord under in the Lease, subject to Section 8 below and pursuant to Landlord’s consent. In the event of any conflict between this Sublease and the Lease, this Sublease shall control. Sublandlord shall not be liable for any obligation of, or liability resulting from any act or omission of, Landlord, including, without limitation, any violation or breach by Landlord of the Lease. Notwithstanding the foregoing, the following terms and provisions of the Lease shall not be incorporated into this Sublease and shall have no force or effect as between Sublandlord and Subtenant:
| Sublease Agreement | Page 3 of 12 |
BASIC LEASE INFORMATION:
1.01(a), 1.01(b), 1.01(c), 1.01(f), 1.01(j), 1.01(m), 1.01(o), 1.01(p), 1.01(r), 1.01(z), 1.01(bb), 1.01(cc), 1.01(ee)
SECTIONS:
2.04, 2.05, 4.01, 4.02, 4.03, 5.01, 5.02, 5.03, 7.01(a), 7.02(a)(iii), 7.02(b)(iii)(second sentence), 9.01(d), 9.01(f), Section 10.05, 11.01(a)(last sentence), 12.01 (any right of Sublandlord to an abatement of rent and any obligation of Landlord to rebuild or restore), 12.02 (any right of Sublandlord to an abatement of rent and any obligation of Landlord to rebuild or restore), 16.02, Article XIII, Article XVII, Article XVIII, Article XX, Article XXI, Article XXII, Section 24.14, Section 24.17
EXHIBITS:
Schedule 1, Schedule 2, A, B, C, E, F, G
8. No Enlargement of Rights. To the extent Sublandlord is granted in the Lease or otherwise any rights to extend the term of the Lease or to expand the Premises pursuant to an expansion option or a right of first refusal, the same are not included in this Sublease and do not pass to Subtenant. This should not be deemed a waiver by Subtenant of any above rights.
9. Default. In the event Subtenant defaults in the performance of any of the terms, covenants and conditions of this Sublease beyond any applicable notice and cure period set forth herein or in the Lease, Sublandlord shall be entitled to exercise any and all of the rights and remedies to which it is entitled under applicable law, and also any and all of the rights and remedies specifically provided for in the Lease, which are hereby incorporated herein and made a part hereof with the same force and effect as if herein specifically set forth in full, and that wherever in the Lease rights and remedies are given to Landlord, the same shall be deemed given Sublandlord.
In addition to the Events of Default enumerated under the Lease, each of the following shall be considered an Event of Default hereunder:
(a) The failure of Subtenant to, within one hundred twenty (120) days of the Effective Date, enter into a management agreement, approved in Sublandlord’s reasonable discretion, with a management service provider (the “Management Agreement”) to operate the cultivation facility at the Premises.
(b) The failure of Subtenant to continuously comply, beyond any applicable notice and cure periods, with all requirements, duties, and performance obligations imposed under the Management Agreement.
(c) The failure of Subtenant to maintain the required Operational Approval, Permits, or any other licenses and permits from time to time required, in full force and effect to enable Subtenant to conduct its business under this Sublease.
| Sublease Agreement | Page 4 of 12 |
10. Insurance. During the Sublease Term, Subtenant shall either maintain and provide or contract with a management service provider to maintain and provide insurance for the Premises, as required to be maintained by Sublandlord pursuant to Article XIII of the Lease, in form and substance satisfactory to Sublandlord and Landlord (“Subtenant’s Insurance”). The limit of said insurance shall not, however, limit (a) any other insurance required for compliance with any and all applicable statutes, laws, ordinances, codes, rules and regulations of any and all governments and /or quasi-governmental agencies and bodies, or (b) any other insurance which may be reasonably required by Landlord or its mortgagee(s) or ground or underlying Landlord(s). Subtenant, or Subtenant’s management service provider, shall cause Sublandlord, Landlord, any other party which Landlord or Sublandlord may request under the Lease, and Subtenant if such policy is provided by the management service provider, to be included as additional insureds and/or loss payees in said policy or policies. Subtenant, or Subtenant’s management service provider shall deliver to Sublandlord and any additional insured(s), certificates from the company(ies) issuing such insurance as to the coverages afforded and the existence, in force, of such fully paid for policies. Subtenant, or Subtenant’s management service provider, shall provide certificates for renewal policies to Sublandlord, the Landlord and any additional named insured(s), not more than thirty (30) days after the renewal of any existing policy. Sublandlord’s insurance shall at all times be primary with respect to any insurance carried by Sublandlord, Landlord and its agents and any such coverage of Sublandlord, Landlord and its agents shall be deemed to be excess insurance. Each such policy shall be written with a company acceptable to Landlord and Sublandlord and authorized to engage in business of general liability insurance and/or fire and extended coverage and/or insurance, as the case may be, in the State of Minnesota. Such policies shall not be cancelled without at least thirty (30) days written notice from the Subtenant (or Subtenant’s management service provider) to the Landlord and Sublandlord sent via certified mail, return receipt requested. All insurance policies herein required to be procured by Sublandlord shall contain an express waiver of any right of subrogation by the insurance company against Landlord, Landlord’s mortgagee(s), if any, and Sublandlord, with respect to property damage. All exclusions shall be subject to Landlord’s approval, and there shall be no change in such policies which modify such exclusions or reduce the coverage unless alternate additional coverage is provided by Subtenant to Sublandlord and Landlord.
11. Subtenant Alterations.
11.1 Subtenant shall not make any alterations, installations, improvements, additions or other physical changes in or about the Premises (“Subtenant Alterations” or a “Subtenant Alteration”) without first obtaining the written consent of (1) Sublandlord, which shall not be unreasonably withheld, and (2) Landlord, if and to the extent the consent of Landlord is required under the Lease. Any Subtenant Alterations shall be performed by Subtenant, at Subtenant’s sole cost and expense, in accordance with all applicable federal, state and local laws, regulations, ordinances and codes (collectively, “Legal Requirements”) and all applicable provisions of this Sublease and the Lease, including, without limitation, the provisions of Article 7 of the Lease. All Subtenant Alterations shall be performed only by contractors, subcontractors and/or mechanics reasonably approved by Sublandlord and/or designated by Landlord, to the extent Landlord consent or designation is required under the Lease. Anything contained in this Section 11.1 to the contrary notwithstanding, Sublandlord may withhold its consent in its sole and absolute discretion to any Subtenant Alterations which affect (i) the Building’s roof, (ii) any of the structural components of the Premises or the Building, (iii) any of the electrical, fire, life/safety, plumbing or other mechanical or utilities systems of the Premises or the Building, or (iv) any Subtenant Alterations costing in excess of $50,000.
| Sublease Agreement | Page 5 of 12 |
11.2 Subtenant’s Alterations shall be scheduled and performed at times reasonably designated by Sublandlord, and Subtenant shall use best efforts, and shall cause its contractors, to minimize any disruption to the operations of other tenants in the Building. Subtenant shall cause its contractors to maintain a safe, clean and sanitary environment in the Premises during the performance of any Subtenant Alterations, and Subtenant shall cause its contractors to comply with any reasonable requirements imposed by Sublandlord with respect to the performance of Subtenant’s Alterations. Sublandlord may require some or all of any Subtenant Alterations to be performed after regular business hours and on weekends, and in such event, Subtenant shall cause its contractors to perform such work on days and at times designated by Sublandlord.
11.3 Subtenant shall promptly reimburse Sublandlord upon demand for all actual third-party out-of-pocket costs and expenses reasonably incurred by Sublandlord in connection with Sublandlord’s review of any Plans and Specifications (as hereinafter defined) submitted to Sublandlord hereunder, including without limitation, architects’ and engineers’ fees and any and all costs and fees incurred by Sublandlord under the Lease in connection with Landlord’s review of such Plans and Specifications. Sublandlord shall have no liability to Subtenant for Landlord’s failure or refusal to approve Subtenant’s Plans and Specifications for any Alterations, including, without limitation, Subtenant’s Initial Alterations, provided, however, that Sublandlord shall reasonably cooperate with Subtenant at no cost or liability to Sublandlord in requesting Landlord’s consent to any Alterations. Notwithstanding the foregoing, Sublandlord shall not charge any supervisory fee in connection with any Subtenant Alterations.
11.4 Prior to commencing any Subtenant Alterations, Subtenant shall (i) submit to Landlord and Sublandlord two (2) complete sets of detailed plans and specifications (including layout, architectural, mechanical and structural drawings) prepared by professional engineer or architect licensed to conduct business in the State of Minnesota and reasonably approved by Sublandlord and Landlord (“Plans and Specifications”) for the proposed Subtenant Alterations and shall not commence any such Subtenant Alterations without first obtaining Sublandlord’s and Landlord’s prior written approval of such Plans and Specifications, (ii) at Subtenant’s sole cost and expense, obtain all permits, approvals and certificates required by any governmental authorities having jurisdiction over the Premises and provide Sublandlord with copies of same, and (iii) furnish to Sublandlord certificates of worker’s compensation (covering all persons to be employed by Subtenant, and Subtenant’s contractors and subcontractors in connection with such work) and commercial public liability (including property damage coverage) insurance in such form, with such companies, for such periods and in such amounts as are required under the Lease, naming Sublandlord and Landlord, and their respective officers, directors and employees, and any lender or mortgagee, as additional insureds. Subtenant’s Plans and Specifications, once approved by Landlord and Sublandlord, shall be deemed the “Approved Plans”. Any changes or modifications to the Approved Plans shall require the approval of Sublandlord and Landlord pursuant to this Section 11.4.
| Sublease Agreement | Page 6 of 12 |
11.5 Upon completion of any Subtenant Alterations, Subtenant shall deliver to Sublandlord general releases and final waivers of lien from all contractors, subcontractors and materials suppliers involved in the performance of such Subtenant Alterations, and a certificate from Subtenant’s independent licensed architect certifying to Sublandlord and Landlord that (i) in such architect’s opinion such Subtenant Alterations have been performed in a good and workmanlike manner and completed in accordance with the Approved Plans for such Subtenant Alterations and (ii) all contractors, subcontractors and materialmen have been paid for such Subtenant Alterations and materials furnished through such date. In addition, upon completion of any Subtenant Alterations, Subtenant, at Subtenant’s sole cost and expense, shall obtain certificates of final approval of such work required by any governmental authority and shall furnish Sublandlord with copies thereof, together with “as built” plans and specifications for such Subtenant Alterations, it being agreed that all filings with governmental authorities to obtain such permits, approvals and certificates shall be made, at Subtenant’s sole cost and expense. All materials and equipment to be incorporated in the Premises as a result of any Subtenant Alterations, including, without limitation, shall be first class quality and no such materials or equipment shall be subject to any lien, encumbrance, chattel mortgage or title retention or security agreement. All Subtenant Alterations shall be performed only under the supervision of an independent licensed architect approved by Sublandlord, which approval shall not be unreasonably withheld or delayed provided that Landlord has previously approved such architect.
11.6 For purposes of this Section 11, the term “Substantially Completed” and like variations thereof shall mean that the Subtenant Alterations or applicable portion thereof, shall have been completed in accordance with the Approved Plans and all governmental permits and authorizations, notwithstanding that minor or insubstantial details of construction, mechanical adjustment or decoration remain to be performed, the non-completion of which does not interfere other than to a de minimis extent with Subtenant’s performance of such Subtenant Alterations, including, without limitation, Subtenant’s Initial Alterations and/or Subtenant’s use and occupancy of the Premises.
12. Limitation of Liability. Notwithstanding any provisions of the Lease or this Sublease to the contrary, Landlord nor its officers, directors, employees, or agents shall be liable to Subtenant, or any of its agents, employees, servants, or invitees, for any damage to persons or property due to the condition or design or any defect in the Building or mechanical systems, which may exist or subsequently occur; and Subtenant with respect to itself and its agents, employees, servants, and invitees, hereby expressly assumes all risk and damage to persons and property, either proximate or remote, by reason of the present or future condition of the Premises or the Building. Sublandlord hereby waives any and all rights of recovery, claim, action or cross action, against Subtenant and against Landlord, its agents, directors, officers, and employees, for loss or damage that may occur to the Premises, or any improvements therein, or the Building, or any personal property of such party therein, by reason of any cause other than the negligence or willful misconduct of Landlord or the willful misconduct of Subtenant performed outside of the bounds of the Permitted Use.
13. Assignment and Subletting. Subtenant shall not transfer or assign any portion or all of this Sublease or sub-sublet the Premises, in whole or in part, without obtaining the prior written consent of Sublandlord, which consent may be withheld in Sublandlord’s sole and absolute discretion, and Landlord, to the extent required under Section 10.01 of the Lease. Further, this Sublease shall not be assigned by operation of law. Any such attempted sublease or assignment without the prior written consent of Sublandlord and Landlord shall be null and void and of no force or effect. If Sublandlord and Landlord give their consent to any sublease or assignment of this Sublease or of any interest in this Sublease, neither shall thereby be barred from later refusing to consent to any further sublease or assignment.
| Sublease Agreement | Page 7 of 12 |
14. No Default. Sublandlord represents and warrants to Subtenant that, to Sublandlord’s actual knowledge, without independent verification, Sublandlord is not in default under the Lease as of the Effective Date. Sublandlord further represents and warrants to Subtenant that the copy of the Lease previously provided to Subtenant, with the financial provisions redacted, is a true, correct and complete copy of the Lease.
15. Brokerage. Both parties represent and warrant that neither it nor its officers or agents nor anyone on its behalf has dealt with any real estate broker in the negotiation or making of this Sublease and agree to defend and indemnify the other party from and against any claims by any other broker, agent or other person claiming to have shown or interested Subtenant in the Premises or claiming to have caused Subtenant to enter into this Sublease.
16. Notices. Any notice required or permitted to be given hereunder by one party to the other shall be deemed to be given when personally delivered or mailed, postage prepaid by certified, registered or overnight mail, addressed to the respective party to whom notice is intended to be given at the following addresses:
| if to Sublandlord: | Grown Rogue Unlimited, LLC | |
| 550 Airport Road | ||
| Medford, OR 97504 | ||
| Attn: Obie Strickler | ||
| Email: Obie@grownrouge.com |
| if to Subtenant: | Christian Stiers | |
| 2888 Ross Lane | ||
| Central Point, OR 97502 | ||
| Email: ilovethisplant@gmail.com |
17. Intentionally Omitted.
18. FF&E. Subject to the terms of this Section 18, Subtenant may, during the Term hereof, use the existing workstations, tables, chairs and equipment, including grow equipment, presently located in the Premises (collectively, the “FF&E”). Subtenant shall, at its sole cost and expense, promptly maintain and repair the FF&E, as reasonably necessary to keep the FF&E in good order, repair and operating condition, subject to normal wear and tear throughout the Term hereof, and shall replace any broken items of FF&E. On the Expiration Date or earlier termination of this Sublease, provided Subtenant is not in default hereunder, Sublandlord shall retain all of its right, title and interest in and to the FF&E. Subtenant acknowledges that it has inspected the FF&E, is familiar with its condition and shall accept the same in its “AS-IS, WHERE IS” physical condition as of the Commencement Date with all faults and defects (latent, patent or otherwise). Subtenant acknowledges that no representations, warranties, agreements of any kind whatsoever, either express or implied, have been made by Sublandlord, Sublandlord’s agents or employees or agents or anyone else acting or purporting to act on Sublandlord’s behalf, and Sublandlord shall have no liability to Subtenant its agents or employees in regard to the physical or operating condition of the FF&E, any freedom from defects (latent, patent or otherwise), any income or profit to be derived therefrom, any expenses in connection with the operation, maintenance, repair or replacement thereof, the ability to maintain, operate or use the FF&E, its merchantability or fitness for any particular purpose or use, or any other matter or thing affecting or relating to the whole of any part thereof.
| Sublease Agreement | Page 8 of 12 |
19. Intentionally Omitted.
20. Intentionally Omitted.
21. Indemnity. Subtenant shall not do or permit any act or thing to be done on or about the Premises which may subject Sublandlord to any liability or responsibility for injury, damages to persons or property or to any liability by reason of any violation of any requirement of law, and shall exercise such control over the Premises as to reasonably protect Sublandlord against any such liability. Subtenant shall indemnify and hold harmless Sublandlord, and its employees, agents and contractors (collectively, the “Sublandlord Indemnitees”) from and against the following harms, but only when such harms are caused by the willful misconduct of Subtenant performed outside of the scope of the Permitted Use: (i) all third-party claims, damages, suits, causes of action, losses, fines, costs or expenses of whatever nature, including, without limitation, reasonable attorney’s fees and costs (collectively, “Claims”) against the Sublandlord Indemnitees, (ii) all Claims against the Sublandlord Indemnitees to the extent arising from any accident, injury or damage whatsoever caused to any person or to the property of any person and occurring during the Term in the Premises, (iii) all Claims against the Sublandlord Indemnitees to the extent arising from any accident, injury or damage occurring outside of the Premises but anywhere within or about the Building. This indemnity and hold harmless agreement shall include indemnity from and against any and all actual third-party liability, fines, suits, demands, costs and expenses of any kind or nature (including, without limitation, reasonable attorneys’ fees and disbursements) incurred in or in connection with any such claim or proceeding brought thereon, and the defense thereof. Sublandlord shall indemnify and hold Subtenant harmless from (i) any Claims resulting from or arising in connection with any breach or default of any of the terms or conditions of this Sublease or the Lease, to the extent same have been incorporated herein, except to the extent such breach or default was caused by the willful misconduct of Subtenant performed outside of the scope of the Permitted Use, and (ii) any actual, third-party damages incurred by Subtenant resulting from a termination of this Sublease caused by a default under the Lease, except to the extent Sublandlord’s default was caused by caused by the willful misconduct of Subtenant performed outside of the scope of the Permitted Use. This indemnity and hold harmless agreement shall include indemnity from and against any and all actual third-party liability, fines, suits, demands, costs and expenses of any kind or nature (including, without limitation, reasonable attorneys’ fees and disbursements) incurred in or in connection with any such claim or proceeding brought thereon, and the defense thereof. Notwithstanding the foregoing, the phrase “performed outside of the bounds of the Permitted Use” shall not include: (i) violations of any Legal Requirements (as defined in the Lease), OCM Regulations (as defined in the Lease), or conditions governing the Facility License (as defined in the Lease) made in the ordinary course of Subtenant’s job duties, or (ii) any violations of such regulations when Subtenant had a good faith believe that it was acting in compliance therewith.
| Sublease Agreement | Page 9 of 12 |
22. Intentionally Omitted.
23. Severability. If any term or provision of this Sublease or the application thereof to any person or circumstances shall, to any extent, be invalid and unenforceable, the remainder of this Sublease or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term or provision of this Sublease shall be valid and be enforced to the fullest extent permitted by law.
24. Entire Agreement; Waiver. This Sublease contains the entire agreement between the parties hereto and shall be binding upon and inure to the benefit of their respective heirs, representatives, successors and permitted assigns. Any agreement hereinafter made shall be ineffective to change, modify, waive, release, discharge, terminate or effect an abandonment hereof, in whole or in part, unless such agreement is in writing and signed by the parties hereto.
25. Captions and Definitions. Captions to the Sections in this Sublease are included for convenience only and are not intended and shall not be deemed to modify or explain any of the terms of this Sublease.
26. Further Assurances. The parties hereto agree that each of them, upon the request of the other party, shall execute and deliver, in recordable form if necessary, such further documents, instruments or agreements and shall take such further action that may be necessary or appropriate to effectuate the purposes of this Sublease.
27. Governing Law. This Sublease shall be governed by and in all respects construed in accordance with the internal laws of the State of Minnesota.
28. Legal Fees. In the event of any action or proceeding between the parties hereto, the non-prevailing party shall pay the reasonable attorney’s fees and costs of the prevailing party
29. Exculpation. Neither the shareholders comprising Sublandlord, nor the affiliates, shareholders, partners, directors or officers of Sublandlord or any of the foregoing (collectively, the “Sublandlord Parties”) shall be liable for the performance of Sublandlord’s obligations under this Sublease. Subtenant shall look solely to Sublandlord to enforce Sublandlord’s obligations hereunder and shall not seek damages against any of the Sublandlord Parties. Subtenant shall look only to the assets of Sublandlord for the satisfaction of Subtenant’s remedies for the collection of a judgment (or other judicial process) requiring the payment of money by Sublandlord in the event of any default by Sublandlord hereunder, and no property or assets of the Sublandlord Parties shall be subject to levy, execution or other enforcement procedure for the satisfaction of Subtenant’s remedies under or with respect to this Sublease, the relationship of Sublandlord and Subtenant hereunder or Subtenant’s use or occupancy of the Premises.
30. Licenses and Permits. If any governmental license or permit shall be required for the proper and lawful conduct of Subtenant’s business in the Premises or any part thereof, including, without limitation, an amendment to the certificate of occupancy, Subtenant, at its sole cost and expense, shall duly procure, and thereafter maintain, such license or permit and submit the same for inspection by Sublandlord.
| Sublease Agreement | Page 10 of 12 |
31. Capitalized Terms. Capitalized terms used herein shall have the same meanings as are ascribed to them in the Lease, unless otherwise expressly defined herein.
32. Consent of Landlord. The validity and effectiveness of this Sublease shall be expressly contingent upon receipt of Landlord’s prior written consent (the “Consent”), which shall be acceptable to Sublandlord in its sole and absolute discretion. If Landlord does not deliver the Consent in accordance with this Section 32 within forty-five (45) days after the Effective Date, Sublandlord may terminate this Sublease on notice to Subtenant.
33. Force Majeure. Neither party shall be liable in damages or have the right to terminate this Sublease for any delay or default in performing hereunder if such delay or default is caused by conditions beyond its control including, but not limited to acts of God, government restrictions (including the denial or cancellation of any export or other necessary license), wars, insurrections, outbreak of disease, shortages of labor or materials, government shut-downs of public activity, and/or any other cause beyond the reasonable control of the party whose performance is affected. Each such party shall resume its performance as promptly as practicable under the circumstances. Nothing contained in this Section 33 shall be construed to excuse the timely payment of Rent by Subtenant hereunder.
34. OFAC and FCPA Compliance.
34.1 Subtenant represents, warrants and covenants to Sublandlord that:
(a) Subtenant nor any person or entity that directly or indirectly (a) controls Subtenant or (b) has an ownership interest in Subtenant of ten percent (10%) or more, appears as of the Effective Date, or will appear (nor will any assignee appear) at any time during the Term hereof, on the list of Specially Designated Nationals and Blocked Persons (“OFAC List”) published by the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury.
(b) It is not acting and during the Term hereof will not act, directly or indirectly, for or on behalf of any person, group, entity, or nation named on the OFAC List or other banned or blocked person, entity, nation or transaction pursuant to any law, order, rule, or regulation that is enforced or administered by OFAC or the U.S. Department of the Treasury;
(c) Subtenant, its agents, joint venture partners, and any other party acting on its behalf or at its instruction, shall not at any time during the Term hereof be in violation of the provisions of the United States Foreign Corrupt Practices Act (“FCPA”) and any other law, order, rule, or regulation concerning anti-corruption and anti-bribery.
34.2 Any breach or misrepresentation of any of the forgoing representations, warranties or covenants constitutes a material breach of this Sublease and shall entitle Sublandlord to any and all remedies thereunder, or at law or in equity.
35. Counterparts. This Sublease may be executed in separate counterparts, each of which shall be deemed an original, and all of which shall be deemed one and the same instrument. Facsimile signatures and electronically-transmitted copies of signatures (e.g., in an Adobe PDF file or DocuSign) shall be deemed valid and binding to the same extent as the original.
| Sublease Agreement | Page 11 of 12 |
IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be executed as of the day and year first above written.
| SUBLANDLORD: | ||
| Grown Rogue Unlimited, LLC, | ||
| an Oregon limited liability company | ||
| By: | /s/ J. Obie Strickler | |
| Name: | J. Obie Strickler | |
| Title: | Manager | |
| SUBTENANT: | ||
| Christian Stiers, an individual, d/b/a/ Stiers Farms, Christian Stiers, d/b/a Stiers Farms | ||
| By: | /s/ Christian Stiers | |
| Individually | ||
| Sublease Agreement | Page 12 of 12 |
Exhibit 10.6
LEASE GUARANTY
THIS LEASE GUARANTY (this “Guaranty”), dated as of December 5, 2025, is made by made by GROWN ROGUE INTERNATIONAL INC., a Canadian corporation (“Guarantor”), for the benefit of RAINBOW WBSE MN LLC, a Delaware limited liability company, having its principal office at c/o Rainbow Realty Group, LLC, 60 Cutter Mill Road, Suite 303, Great Neck, New York 11021 (“Landlord”).
RECITALS
WHEREAS, pursuant to that certain Lease Agreement, dated as of the date hereof, by and between Grown Rogue Unlimited, LLC, an Oregon limited liability company (“Tenant”), as tenant, and Landlord, as landlord (as the same may be amended or otherwise modified from time to time in accordance with the terms thereof, the “Lease”), Landlord has leased that certain property as more particularly described on Exhibit A attached hereto and made a part hereof (collectively, the “Property”) to Tenant, as more particularly described therein;
WHEREAS, Tenant is a subsidiary of Guarantor and Guarantor will therefore benefit from Landlord entering into the Lease with Tenant; and
WHEREAS, Landlord is not willing to enter into the Lease unless Guarantor unconditionally guarantees to Landlord the payment and performance of the Guaranteed Obligations (as herein defined). Capitalized terms used but not otherwise defined in this Guaranty shall have the meanings ascribed to such terms in the Lease.
NOW, THEREFORE, as an inducement to Landlord to enter into the Lease with Tenant, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:
ARTICLE I - NATURE AND SCOPE OF GUARANTY
Section 1.1 Guaranty of Obligations. Guarantor hereby irrevocably and unconditionally guarantees to Landlord the payment and performance of the Guaranteed Obligations as and when the same shall be due and payable. Guarantor hereby irrevocably and unconditionally covenants and agrees that it is liable for the Guaranteed Obligations as a primary obligor.
Section 1.2 Definition of Guaranteed Obligations. As used herein, the term “Guaranteed Obligations” means (i) the obligations or liabilities of Tenant to Landlord to pay all Base Rent and Additional Rent as and when due, (ii) the performance of the prompt and complete observance, performance and discharge of each and every obligation (including, without limitation, payment of the Base Rent and Additional Rent and the performance and completion by Tenant of the Initial Tenant Improvements in accordance with the terms of the Lease), representation, covenant and agreement of Tenant under the Lease, and all modifications, extensions or renewals thereof, and (iii) any obligation hereunder to pay Landlord costs or expenses (including, but not limited to, any obligation contained in Sections 1.7 hereunder).
Section 1.3 Nature of Guaranty. This Guaranty is an irrevocable, absolute, continuing guaranty of payment and performance and not a guaranty of collection. This Guaranty may not be revoked by Guarantor and shall continue to be effective with respect to any Guaranteed Obligations arising or created after any attempted revocation by Guarantor.
Section 1.4 Payment by Guarantor. Guarantor shall, immediately upon demand by Landlord, pay the amount due on the Guaranteed Obligations to Landlord at Landlord’s address as set forth herein or as otherwise instructed by Landlord. Such demand(s) may be made at any time coincident with or after the time for payment of all or any part of the Guaranteed Obligations with respect to the same or different Guaranteed Obligations.
Section 1.5 No Duty to Pursue Others. Landlord shall not be required (and Guarantor hereby waives any rights to require Landlord), in order to enforce the obligations of Guarantor hereunder, to take any action, obtain any judgment or file any claim prior to enforcing this Guaranty, including (i) to institute suit or otherwise exhaust its remedies against Tenant or any other Persons liable under the Lease or the Guaranteed Obligations, or against any other Person, (ii) to enforce Landlord’s rights against any other guarantors of the Guaranteed Obligations, (iii) to join Tenant or any other Persons liable on the Guaranteed Obligations in any action seeking to enforce this Guaranty, (iv) to exhaust any available remedies against any collateral given to secure the Lease, or (v) to resort to any other means of obtaining payment of the Guaranteed Obligations.
Section 1.6 Waivers.
(a) Guarantor agrees to the provisions of the Lease and hereby waives notice of (i) acceptance of this Guaranty, (ii) any amendment, modification, replacement or extension of the Lease, (iii) the execution and delivery by Tenant and/or Landlord of any other agreements, promissory notes or other documents arising under the Lease or in connection with the Property, (iv) any Event of Default, (v) Landlord’s transfer, participation, componentization or other disposition of the Guaranteed Obligations, or any part thereof, (vii) protest, presentment, intention to accelerate the term or payments of the Lease, or proof of non-payment or default by Tenant, or (viii) any other action taken or omitted by Landlord and any and all demands and notices of every kind in connection with this Guaranty, the Lease, and any documents or agreements evidencing, securing or relating to any of the Guaranteed Obligations and any other obligations hereby guaranteed.
(b) Guarantor hereby waives any and all rights it may now or hereafter have to, and covenants and agrees that it shall not at any time, insist upon, plead or in any manner whatsoever claim or take the benefit or advantage of, any and all appraisal, valuation, stay, extension, marshaling-of-assets or redemption laws, or right of homestead or exemption, whether now or at any time hereafter in force, that may delay, prevent or otherwise affect the performance by Guarantor of its obligations under, or the enforcement by Landlord of, this Guaranty. Guarantor hereby further waives any and all rights it may now or hereafter have to, and covenants and agrees that it shall not, set up or claim any defense, counterclaim, cross-claim, set-off, offset, right of recoupment or other objection of any kind to any action, suit or proceeding in law, equity or otherwise, or to any demand or claim that may be instituted or made by Landlord hereunder.
Section 1.7 Payment of Expenses. If Guarantor fails to timely perform any provisions of this Guaranty, Guarantor shall, immediately upon demand by Landlord, pay Landlord any and all reasonable costs and expenses (including court costs and reasonable attorneys’ fees and expenses in the event of a lawsuit with Landlord as the prevailing party) incurred by Landlord in the enforcement hereof or the preservation of Landlord’s rights hereunder. The covenant contained in this Section 1.7 shall survive the payment and performance of the Guaranteed Obligations.
Section 1.8 Effect of Bankruptcy. If pursuant to any Insolvency Action concerning Tenant or Guarantor, Landlord must rescind, restore or return any payment or any part thereof received by Landlord in satisfaction (in full or in part) of the Guaranteed Obligations, as set forth herein, any prior release or discharge from the terms of this Guaranty given to Guarantor by Landlord shall be without effect, and this Guaranty shall remain in full force and effect. Guarantor acknowledges that Guarantor’s obligations hereunder shall not be discharged except by Guarantor’s performance of same and then only to the extent of such performance. In addition, if at any time any payment of principal, interest or any other amount payable by Tenant under the Lease, is rescinded or must be restored or returned pursuant to an Insolvency Action concerning Tenant or otherwise, Guarantor’s obligations hereunder with respect to such payment shall be fully reinstated as though such payment has been due but not made.
Section 1.9 Waiver of Subrogation, Reimbursement and Contribution. Notwithstanding anything to the contrary contained in this Guaranty, Guarantor hereby unconditionally and irrevocably waives, releases and abrogates any and all rights it may now or hereafter have under any agreement, at law or in equity (including, without limitation, any law subrogating Guarantor to the rights of Landlord), to assert any claim against or seek contribution, indemnification or any other form of reimbursement from Tenant or any other party liable for payment of any or all of the Guaranteed Obligations for any payment made by Guarantor under or in connection with this Guaranty or otherwise until the indebtedness due under the Lease is paid in full. The provisions of this paragraph shall survive the termination of this Guaranty, and any satisfaction and discharge of Tenant by virtue of any payment, court order or any applicable law.
2
Section 1.10 Tenant. The term “Tenant” as used herein shall include any new or successor corporation, association, partnership (general or limited), limited liability company, joint venture, trust or other individual or organization formed as a result of any merger, reorganization, sale, transfer, assignment, devise, gift or bequest of or by Tenant or any interest in Tenant or the Lease.
ARTICLE II - EVENTS AND CIRCUMSTANCES NOT
REDUCING OR DISCHARGING GUARANTOR’S OBLIGATIONS
Section 2.1 Events and Circumstances Not Reducing or Discharging Guarantor’s Obligations. Guarantor hereby consents and agrees to each of the following and agrees that Guarantor’s obligations hereunder shall not be released, diminished, impaired, reduced or adversely affected in any way by any of the following, and waives any common law, equitable, statutory or other rights (including, without limitation, rights to notice) which Guarantor might have in connection with any of the following:
(a) Modifications, Releases, Etc. Any (i) renewal, extension, increase, reduction, modification, alteration or rearrangement of all or any part of the Guaranteed Obligations, the Lease, or any other document or agreement between Tenant and Landlord or any other parties pertaining to the Guaranteed Obligations; (ii) adjustment, indulgence, forbearance or compromise that might be extended, granted or given by Landlord to Tenant or Guarantor; (iii) full or partial release of the liability of Tenant, Guarantor, or any other Person, with respect to the Guaranteed Obligations; (iv) taking or accepting of any other security, collateral or guaranty of payment for all or any part of the Guaranteed Obligations; or (v) release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including, without limitation, negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security at any time existing in connection with, or assuring or securing payment of, all or any part of the Guaranteed Obligations.
(b) Condition of Tenant or Guarantor. The existence of an Insolvency Action concerning Tenant, Guarantor or any other party liable for the payment of all or part of the Guaranteed Obligations, or any dissolution of Tenant or Guarantor or any sale, lease or transfer of any or all of the assets of Tenant or Guarantor, or any changes in the shareholders, partners or members of Tenant or Guarantor, or any merger, consolidation, or reorganization of Tenant or Guarantor into or with any other Person.
(c) Invalidity, Unenforceability, Offset, Etc. The invalidity, illegality or unenforceability of all or any part of the Guaranteed Obligations or the Lease, or of any other document or agreement executed in connection with the Guaranteed Obligations for any reason whatsoever, including, without limitation, the fact that (i) the Guaranteed Obligations or any part thereof exceeds the amount permitted by law, (ii) the act of creating the Guaranteed Obligations or any part thereof is ultra vires, (iii) the officers or representatives executing the Lease or otherwise creating the Guaranteed Obligations acted in excess of their authority, (iv) the Guaranteed Obligations violate applicable usury laws, (v) other than defenses, claims or offsets expressly set forth in the Lease, Tenant has valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Guaranteed Obligations wholly or partially uncollectible from Tenant, and whether such defense, claim, or right of offset arises in connection with the Guaranteed Obligations, the transactions creating same, or otherwise (including any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal and any defense of the statute of limitations in any action hereunder or in any action for the collection or performance of any obligations hereby guaranteed), (vi) the creation, performance or repayment of the Guaranteed Obligations (or the execution, delivery and performance of any document or instrument representing part of the Guaranteed Obligations, or executed in connection with the Guaranteed Obligations, or given to secure the repayment of the Guaranteed Obligations) is illegal, uncollectible or unenforceable, (vii) the Lease has been forged, or is not genuine or authentic, it being agreed that Guarantor shall remain liable hereunder regardless of whether Tenant or any other person be found not liable on the Guaranteed Obligations or any part thereof for any reason, or (viii) any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Guaranteed Obligations, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being acknowledged and agreed by Guarantor that Guarantor is not entering into this Guaranty in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectability or value of any of the collateral for the Guaranteed Obligations.
3
(d) Care and Diligence. The failure of Landlord or any other party to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of any collateral, property or security, including, without limitation, any neglect, delay, omission, failure or refusal of Landlord (i) to take or prosecute any action for the collection of any of the Guaranteed Obligations, (ii) to evict, or initiate any action to evict, or, once commenced, prosecute to completion any action to evict upon any security therefor, or (iii) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Guaranteed Obligations.
(e) Preference. Any payment by Tenant to Landlord is held to constitute a preference under bankruptcy laws or for any reason Landlord is required to refund or remit any such payment or amount to Tenant or any other Person.
(f) Other Actions Taken or Not Taken. Any other action taken or not taken with respect to the Lease, the Guaranteed Obligations, or the security and collateral therefor, whether or not such action or inaction prejudices Guarantor or increases the likelihood that Guarantor will be required to pay the Guaranteed Obligations pursuant to the terms hereof.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties. To induce Landlord to enter into the Lease, Guarantor represents and warrants to Landlord that: (a) Guarantor will receive a direct or indirect benefit from Landlord entering into the Lease with Tenant; (b) Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of Tenant and any and all collateral intended to be given as security for the payment obligations under the Lease; (c) after giving effect to this Guaranty, and during the Term of the Lease, the Guarantor will remain solvent; (d) the execution, delivery and performance by Guarantor of this Guaranty and the consummation of the transactions contemplated hereunder do not and will not contravene or conflict with any law, statute or regulation to which Guarantor is subject, or constitute a default under, or result in the breach of, any indenture, mortgage, charge, lien, or any contract or agreement to which Guarantor is a party or which may be applicable to Guarantor; (e) no approval, authorization, order, license or consent of, or registration or filing with, any Governmental Authority or other person, and no approval, authorization or consent of any other Person is required in connection with this Guaranty; (f) to Guarantor’s knowledge, there are no actions, suits or proceedings at law or in equity by or before any Governmental Authority or other agency now pending and served or threatened, involving or concerning Guarantor; (g) no statement of fact made by or on behalf of Guarantor in this Guaranty or in any other document or certificate delivered to Landlord by Guarantor contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading; (h) to Guarantor’s actual knowledge, there is no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect; (i) Intentionally Omitted; (j) Guarantor has not incurred any obligation or liability, contingent or otherwise, not reflected in such financial data which might materially adversely affect its business operations or the Property; (k) Guarantor: (1) is not currently identified on the list of specially designated nationals and blocked persons subject to financial sanctions that is maintained OFAC or any other similar list maintained by OFAC pursuant to any applicable legal requirement (or if such list does not exist, the similar list then being maintained by the United States), including trade embargo, economic sanctions, or other prohibitions imposed by Executive Order of the President of the United States; (2) is not a Person subject to any trade restriction, trade embargo, economic sanction, or other prohibition under federal law, including the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any executive orders or regulations promulgated thereunder; and (3) is not in violation of Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism and the Uniting and Strengthening America by Providing Appropriate Tools Required in Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56), with the result that (A) the investment in Tenant or Guarantor, as applicable (whether directly or indirectly), is prohibited by law, or (B) the Lease is in violation of law; (l) Guarantor has filed all federal, state, county, municipal, and city income and other tax returns required to have been filed by it and has paid all taxes and related liabilities which have become due pursuant to such returns or pursuant to any assessments received by it and Guarantor does not have knowledge of any basis for any material additional assessment in respect of any such taxes and related liabilities for prior years; (m) to Guarantor’s knowledge, this Guaranty is a legal, valid and binding obligation of Guarantor, and is enforceable in accordance with its terms, except as may be limited by principles of equity, bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors’ rights, and (n) the person signing this Guaranty on behalf of Guarantor is duly authorized to do so.
4
Section 3.2 Additional Provisions. Without limiting anything set forth in Section 3.1 above, Guarantor hereby represents, warrants, covenants and agrees that at all times until the Guaranteed Obligations have been fully satisfied:
(a) Guarantor shall maintain a direct legal ownership interest in Tenant which equals or exceeds fifty-one percent (51%) (the “Equity Threshold”) (for avoidance of the doubt, Guarantor shall not convey, transfer, sell, assign, pledge or lien, whether by operation of law or otherwise, its legal ownership interest in Tenant such that Guarantor’s direct legal ownership interest in Tenant falls below the Equity Threshold without Landlord’s express written consent (which consent may be given or withheld in the Landlord’s sole and absolute discretion));
(b) Guarantor (i) is duly organized and validly existing in good standing under the laws of the State of its formation, (ii) is duly qualified to do business in each jurisdiction in which the nature of its business makes such qualification necessary, (iii) has the requisite power and authority to carry on its business as now being conducted, and (iv) has the requisite power to execute and deliver, and perform its obligations under, this Guaranty and any other document related to the Lease to which it is a party.
(c) The execution and delivery by Guarantor of this Guaranty and any other document related to the Lease to which it is a party, and Guarantor’s performance of its obligations thereunder (i) have been duly authorized by all requisite action on the part of Guarantor, (ii) will not violate any provision of any applicable Legal Requirements, and (iii) will not be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or result in the creation or imposition of any lien of any nature whatsoever upon any of the property or assets of Guarantor pursuant to, any indenture, mortgage, charge, lien, or any contract, agreement or instrument to which Guarantor is a party or which may be applicable to Guarantor, including, but not limited to, the Guarantor’s organizational documents.
(d) This Guaranty and the other lease documents to which Guarantor is a party have been duly executed and delivered by Guarantor.
ARTICLE IV - SUBORDINATION OF CERTAIN INDEBTEDNESS
Section 4.1 Subordination of All Guarantor Claims. As used herein, the term “Guarantor Claims” shall mean any and all debts and liabilities of Tenant owed to Guarantor, whether now existing or hereafter incurred, including, without limitation, all rights and claims of Guarantor against Tenant (arising as a result of subrogation or otherwise) as a result of Guarantor’s payment of all or any portion of the Guaranteed Obligations. Without limiting the provisions of Section 1.8 hereof and/or Section 1.9 hereof, Guarantor hereby subordinates its rights to receive any payment from Tenant on account of any Guarantor Claims to the full and indefeasible payments owed by Tenant to Landlord under the Lease. Following the occurrence of an Event of Default, Guarantor shall not demand, receive or collect, directly or indirectly, from Tenant or any other party, and shall not claim any offset or other reduction of Guarantor’s obligations hereunder because of, any amount pursuant to or in satisfaction of the Guarantor Claims until all obligations of Tenant under the Lease are paid in full.
Section 4.2 Claims in Bankruptcy. In the event of an Insolvency Action involving Guarantor as debtor, Landlord shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and receive directly from the receiver, trustee or other court custodian dividends and payments which would otherwise be payable pursuant to or in satisfaction of Guarantor Claims. Guarantor hereby assigns any and all such dividends and payments to Landlord.
Section 4.3 Payments Held in Trust. If, notwithstanding anything to the contrary contained in this Guaranty, Guarantor should receive any funds, payment, claim or distribution which is prohibited hereunder, Guarantor covenants and agrees to hold in trust for Landlord an amount equal to the amount of all funds, payments, claims or distributions so received, and Guarantor acknowledges and agrees that it shall have absolutely no dominion over the amount of such funds, payments, claims or distributions so received, except to pay them promptly to Landlord, and Guarantor hereby covenants and agrees promptly to pay the same to Landlord.
5
Section 4.4 Liens Subordinate; Standstill. Guarantor acknowledges and agrees that any liens, security interests, judgment liens, charges or other encumbrances upon Tenant’s assets securing payment of the Guarantor Claims shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon Tenant’s assets securing payment of the Guaranteed Obligations, regardless of whether such encumbrances in favor of Guarantor or Landlord presently exist or are hereafter created or attach. Guarantor shall not (i) exercise or enforce any creditor’s right it may have against Tenant, or (ii) evict, foreclose, repossess, sequester or otherwise take steps or institute any action or proceedings (judicial or otherwise, including, without limitation, the commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency proceeding) to enforce any liens, mortgages, deeds of trust, security interests, collateral rights, judgments or other encumbrances on assets of Tenant held by Guarantor.
ARTICLE V - MISCELLANEOUS
Section 5.1 Not a Waiver, No Set-Off. The failure of any party to enforce any right or remedy hereunder, or to promptly enforce any such right or remedy, shall not constitute a waiver thereof, nor give rise to any estoppel against such party, nor excuse any other party from its obligations hereunder, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Guaranty, Landlord shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Guaranty or to declare a default for failure to effect prompt payment of any such other amount. Landlord shall not be required to mitigate damages or take any other action to reduce, collect or enforce any of the obligations under the Lease or the Guaranteed Obligations. No set-off, counterclaim (other than compulsory counterclaims), reduction, diminution of any obligations or any defense of any kind or nature that Guarantor has or may hereafter have against Tenant or Landlord shall be available hereunder to Guarantor.
Section 5.2 Notices. All notices, consents, approvals, demands and requests required or permitted hereunder shall be given in writing and shall be effective for all purposes if sent by (a) certified or registered United States mail, postage prepaid, or (b) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, addressed to the parties as follows:
| To Landlord: |
Grown Rogue Unlimited, LLC c/o Rainbow Realty Group, LLC 60 Cutter Mill Road, Suite 303, Great Neck, New York 11021 Attention: Benjamin Bolanos Email: ben@rainbowrg.com |
| With a copy to: |
Grown Rogue Unlimited, LLC c/o Rainbow Realty Group, LLC 60 Cutter Mill Road, Suite 303 Great Neck, New York 11021 Attention: Steven Rosenzweig Email: srosenzweig@gouldlp.com |
| With a copy to: |
The Anderson Firm, P.C. 101 Hudson Street, Floor 21 Jersey City, New Jersey 07302 Attention: Zachary J. Levy, Esq. Email: zlevy@tafpc.com |
6
| To Guarantor: |
Grown Rogue International Inc. 550 Airport Road Medford, OR 97504 Attn: Obie Strickler Email: Obie@grownrouge.com |
| With a copy to: |
Greenspoon Marder LLP 227 W. Monroe, Suite 3950 Chicago, IL 60606 Email: Irina.dashevsky@gmlaw.com; Ryan.holz@gmlaw.com Attn: Irina Dashevsky; Ryan Holz |
A party receiving a notice which does not comply with the technical requirements for notice under this Section 5.2 may elect to waive any deficiencies and treat the notice as having been properly given. A notice shall be deemed to have been given: (a) in the case of electronic mail, when sent by the sender; (b) in the case of registered or certified mail, when delivered or the first attempted delivery on a business day; or (c) in the case of expedited prepaid delivery upon the first attempted delivery on a business day.
Section 5.3 Governing Law; Submission to Jurisdiction.
(a) This Guaranty shall be interpreted and enforced according to the laws of the State where the Property is located (without giving effect to rules regarding conflict of laws).
(b) Guarantor hereby consents and submits to the exclusive jurisdiction and venue of any state or federal court sitting in the county and state where the Property is located with respect to any legal action or proceeding arising with respect to this Guaranty and waives all objections which it may have to such jurisdiction and venue.
Section 5.4 Severability. Wherever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty.
Section 5.5 Modification; Waiver in Writing. No modification, amendment, extension, discharge, termination or waiver of any provision of this Guaranty, nor consent to any departure by Guarantor therefrom, shall in any event be effective unless the same shall be in a writing signed by Guarantor, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on Guarantor, shall entitle Guarantor to any other or future notice or demand in the same, similar or other circumstances.
Section 5.6 Number and Gender. All references to sections and exhibits are to sections and exhibits in or to this Guaranty unless otherwise specified. Unless otherwise specified, the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Guaranty shall refer to this Guaranty as a whole and not to any particular provision, article, section or other subdivision of this Guaranty. Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa.
Section 5.7 Headings, Etc. The headings and captions of various paragraphs of this Guaranty are for the convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof.
7
Section 5.8 Counterparts. This Guaranty may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Guaranty. The failure of any party hereto to execute this Guaranty, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder.
Section 5.9 Rights and Remedies. If Guarantor becomes liable for any indebtedness owing by Tenant to Landlord, by endorsement or otherwise, other than pursuant to this Guaranty, such liability shall not be in any manner impaired or affected hereby, and the rights of Landlord hereunder shall be cumulative of any and all other rights that Landlord may ever have against Guarantor. The exercise by Landlord of any right or remedy hereunder or under any other instrument, or at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy.
Section 5.10 Entire Agreement. This Guaranty and the Lease embody the final, entire agreement of Guarantor and Landlord with respect to the Guarantor’s guaranty of the Guaranteed Obligations and supersedes any and all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof. This Guaranty is intended by Guarantor and Landlord as a final and complete expression of the terms of the Guaranty, and no course of dealing between Guarantor and Landlord, no course of performance, no trade practices, and no evidence of prior, contemporaneous or subsequent oral agreements or discussions or other extrinsic evidence of any nature shall be used to contradict, vary, supplement or modify any term of this Guaranty. There are no oral agreements between Guarantor and Landlord.
Section 5.11 Waiver of Right to Trial by Jury. GUARANTOR HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY GUARANTOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. THE AFOREMENTIONED WAIVER OF JURY TRIAL SHALL ALSO APPLY TO LANDLORD AND LANDLORD IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY GUARANTOR.
[Signature on the following page]
8
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of the day and year first above written.
| GUARANTOR: | |||
| GROWN ROGUE INTERNATIONAL INC., a Canadian corporation | |||
| By: | |||
| Name: | |||
| Title | |||
9
Exhibit 10.7
FIRST AMENDMENT TO COMMERCIAL LEASE AGREEMENT
(LEASE EXTENSION)
This First Amendment to Commercial Lease Agreement (this “Amendment”) is entered into as of April 1, 2026 (the “Amendment Effective Date”), by and between:
LESSOR: 2046 Lars, LLC, an Oregon limited liability company (“Lessor”); and LESSEE: Grown Rogue Gardens, LLC, an Oregon limited liability company (“Lessee”).
Lessor and Lessee are sometimes collectively referred to herein as the “Parties” and each individually as a “Party.”
RECITALS
WHEREAS, Lessor and Lessee entered into that certain Commercial Lease Agreement dated July 1, 2021 (the “Original Lease”), for the property located at 2046 Lars Way, Jackson County, Oregon, 97501, consisting of approximately 20,000 square feet of industrial warehouse building with fenced yard and loading docks (the “Premises”);
WHEREAS, the Original Lease provides for an initial term commencing July 1, 2021 and expiring June 30, 2026, together with two (2) five-year extension options as set forth in Section 3.2 of the Original Lease;
WHEREAS, the Board of Directors of Grown Rogue International Inc., the ultimate parent of Lessee, duly authorized entry into this Amendment by resolution dated March 25, 2026, and in compliance with applicable conflict-of-interest disclosure requirements;
WHEREAS, Lessee desires to exercise its first Extension Option pursuant to Section 3.2 of the Original Lease, and the Parties desire to amend the Original Lease to reflect the terms of such extension;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
AGREEMENT
Article 1 – DEFINED TERMS
Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Original Lease. The Original Lease, as modified by this Amendment, is referred to herein as the “Lease.”
Article 2 – EXTENSION OF LEASE TERM
2.1 Exercise of Extension Option. Lessee hereby exercises its first Extension Option pursuant to Section 3.2 of the Original Lease. The term of the Lease is hereby extended for a period of five (5) years (the “First Extension Term”), commencing on July 1, 2026 (the “Extension Commencement Date”) and expiring on June 30, 2031 (the “Extension Expiration Date”), unless sooner terminated in accordance with the terms of the Lease.
2.2 Remaining Extension Option. Following the First Extension Term, Lessee shall retain one (1) additional five-year extension option as provided under Section 3.2 of the Original Lease, subject to Lessee not then being in Default and providing the required advance written notice as specified therein.
Article 3 – RENT DURING FIRST EXTENSION TERM
3.1 Basic Rent. Pursuant to Section 4.1(b) of the Original Lease, Basic Rent during the First Extension Term shall be as follows:
| (a) | Year 1 (July 1, 2026 – June 30, 2027): $20,000.00 per month. |
| (b) | Year 2 (July 1, 2027 – June 30, 2028): $20,600.00 per month (3% increase). |
| (c) | Year 3 (July 1, 2028 – June 30, 2029): $21,218.00 per month (3% increase). |
| (d) | Year 4 (July 1, 2029 – June 30, 2030): $21,854.54 per month (3% increase). |
| (e) | Year 5 (July 1, 2030 – June 30, 2031): $22,510.18 per month (3% increase). |
3.2 Triple Net. The Lease shall remain a triple net lease throughout the First Extension Term. Lessee shall continue to be responsible for all insurance, utilities, taxes, and other costs associated with the Premises as provided in Section 4.3 of the Original Lease.
3.3 Time and Place of Payment. Basic Rent shall continue to be due and payable on the first day of each calendar month during the First Extension Term, in accordance with Section 4.2 of the Original Lease, without abatement, deduction, or offset.
2
Article 4 – CONDITION OF PREMISES; NO LESSOR OBLIGATIONS
Lessee accepts the Premises in their current “as-is” condition as of the Extension Commencement Date. Lessor shall have no obligation to make any improvements, alterations, or repairs to the Premises in connection with the First Extension Term, unless otherwise specifically agreed to in writing by the Parties.
Article 5 – CONFLICT OF INTEREST DISCLOSURE
The Parties acknowledge that J. Obie Strickler (also known as Jesse Strickler) is both the President and Chief Executive Officer of Grown Rogue International Inc. (the ultimate parent of Lessee) and the sole member of Lessor. This relationship has been disclosed to and acknowledged by the Board of Directors of Grown Rogue International Inc. pursuant to section 132 of the Business Corporations Act (Ontario). The Parties confirm that the rental rate set forth in this Amendment is at or below market rates for comparable industrial warehouse space in Jackson County, Oregon.
Article 6 – RATIFICATION OF ORIGINAL LEASE
6.1 Except as expressly modified by this Amendment, all terms and conditions of the Original Lease shall remain in full force and effect and are hereby ratified and confirmed. In the event of any conflict between the terms of this Amendment and the Original Lease, the terms of this Amendment shall control.
6.2 Lessee represents and warrants that, as of the Amendment Effective Date, Lessee is not in Default under the Original Lease and no event has occurred that, with the passage of time or the giving of notice, would constitute a Default.
Article 7 – GENERAL PROVISIONS
7.1 Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Oregon, without regard to its choice-of-law provisions.
7.2 Entire Agreement. This Amendment, together with the Original Lease and all exhibits thereto, constitutes the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior negotiations, representations, warranties, and understandings of the Parties with respect thereto.
7.3 Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument. Electronic and facsimile signatures shall be deemed valid and binding to the same extent as original signatures.
7.4 Authority. Each Party represents and warrants that the person executing this Amendment on its behalf has full authority to do so and to bind such Party to the terms hereof.
3
IN WITNESS WHEREOF, the Parties have executed this First Amendment to Commercial Lease Agreement as of the Amendment Effective Date.
| LESSOR: | ||
| 2046 Lars, LLC | ||
| /s/ J. Obie Strickler | ||
| Signature: | ||
| Name: | J. Obie Strickler | |
| Title: | Sole Member | |
| Date: | April 1, 2026 | |
| LESSEE: | ||
| Grown Rogue Gardens, LLC | ||
| /s/ J. Obie Strickler | ||
| Signature: | ||
| Name: | J. Obie Strickler | |
| Title: | President | |
| Date: | April 1, 2026 | |
4
Exhibit 31.1
CERTIFICATION
I, J. Obie Stricker, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Grown Rogue International, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| GROWN ROGUE INTERNATIONAL, INC. | ||
| Date: August 4, 2026 | By: | /s/ J. Obie Stricker |
| J. Obie Stricker | ||
| Chief Executive Officer and Director | ||
Exhibit 31.2
CERTIFICATION
I, Andrew Marchington, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Grown Rogue International, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| GROWN ROGUE INTERNATIONAL, INC. | ||
| Date: August 4, 2026 | By: | /s/ Andrew Marchington |
| Andrew Marchington | ||
| Chief Financial Officer | ||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Grown Rogue International, Inc. (the “Company”) for the fiscal quarter ended June 30, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| 1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company |
| GROWN ROGUE INTERNATIONAL INC. | ||
| Date: August 4, 2026 | By: | /s/ J. Obie Stricker |
| Chief Executive Officer and Director | ||
Exhibit 32.2
CERTIFICATION PURSUANT
TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Grown Rogue International, Inc. (the “Company”) for the fiscal quarter ended June 30, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| 1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company |
| GROWN ROGUE INTERNATIONAL INC. | ||
| Date: August 4, 2026 | By: | /s/ Andrew Marchington |
| Chief Financial Officer | ||