Grown Rogue International Inc. (CSE: GRIN) (OTC: GRUSF) announced that its New Jersey cannabis cultivation affiliate generated $1.8 million in preliminary first-quarter revenue with gross margins between 55% and 60%, showing some early success in the Garden State market.

The Oregon-based craft cannabis company provided some details on both the performance and financial structuring of its New Jersey operation, ABCO Garden State, LLC.

According to the company, ABCO has achieved cultivation yields exceeding 60 grams of flower per square foot of bench space and has penetrated more than half of New Jersey’s dispensaries with its flower and pre-roll products.

“I’m excited by the initial progress we have seen in New Jersey across cultivation, post-harvest, and sales,” CEO Obie Strickler said in a statement. “We are seeing strong cultivation yields, greater than 60g of flower per square foot of bench space with preliminary gross margin between 55-60%.”

The company reported an average selling price exceeding $2,500 per pound for whole flower and pre-roll products during the first quarter. Strickler noted that ABCO products are seeing “accelerating re-order trends, providing some early validation with respect to our quality, value, and brand strength.”

Grown Rogue currently owns 44% of ABCO but plans to exercise its rights to convert to 70% ownership in fall 2026, the earliest opportunity allowed under New Jersey regulations. The company has structured its investment primarily through senior secured promissory notes that require repayment before any profit distributions, with a March 31 balance of $8.2 million including accrued interest.

“The majority of the capital Grown Rogue has deployed in ABCO has been structured through secured loans,” CFO Andrew Marchington said in the news release. “The repayment of these notes are structured to be paid as a first priority before the distribution of any profits to ABCO partners. We believe this is a preferred deal structure for Grown Rogue shareholders despite its complex impact on our financial statements.”

ABCO is planning some big expansion, with construction of Phase II scheduled to begin in the second quarter. That’ll double steady-state production from the current 500-600 pounds per month to 1,000-1,200 pounds monthly, it said, with full capacity expected by early 2026.

Due to accounting rules, Grown Rogue doesn’t anticipate being able to consolidate ABCO’s financial results until it obtains 70% ownership. Instead, the company said it will provide pro forma disclosure regarding ABCO operations to give investors appropriate transparency.