Citation Growth Corp.
(OTCQX: CGOTF) Weathering the Cannabis
Downturn
Citation Growth Corp. (OTCQX:
CGOTF) Report
released on EmergingGrowth.com
https://emerginggrowth.com/weathering-the-cannabis-downturn-with-a-revenue-growing-multi-state-operator/
CGOTF is an MSO – Has operations in more than one
state with 75% market
penetration
CGOTF turned gross profit in most recent
quarter
Expected to yield $200 million in
sales
Miami,
FL-- (InvestorsHub NewsWire – December 9, 2019) –
EmergingGrowth.com, a leading independent small cap media portal
with an extensive history of providing unparalleled content for the
Emerging Growth markets and companies, reports on Citation Growth
Corp. (OTCQX: CGOTF).
This could be the biggest play in
the Cannabis space. See the full story on http://www.EmergingGrowth.com
CGOTF may not be at these levels much
longer.
See the Press Release and more on
Citation Growth Corp. (OTCQX: CGOTF) at
EmergingGrowth.com
https://emerginggrowth.com/?s=CGOTF
Citation Growth Corp. (OTCQX:
CGOTF) distinguishes itself in the world of
cannabis through its branding and it seems to be paying off and
translating into financial performance. Citation Growth is a
multi-state operator (MSO) which means that they have operations in
more than one state. Their brands include Gardens of WeEden,
Blunt Box, Superior, Fiore, PureCloud 9, and Diamante, which
squarely targets the cannabis connoisseurs looking to purchase the
highest quality products. This means that they are constantly
experimenting with genetic combinations, different growing
techniques, and processing
protocols.
Citation established footings in
multiple legalized regions to provide the highest quality products
to consumers. By focusing on their branding message, coupled
with attractive consumer packaging, they are able to charge a
premium price that allows them to expand their
offerings.
For Citation Growth to be
successful in their business model, they need to wholesale their
product to retailers and the most effective way is through branding
and having a massive retail distribution channel. The company
is expanding operations in a period where other MSO’s like MedMen
(OTCQX: MMNFF) are laying off 190
employees in an effort to achieve
profitability. According to MJ Business Daily MedMen is
“joining a growing list of cannabis companies shedding workers amid
falling MJ stock prices and a dearth of outside
funding.”
Show Me the Money
Mentality
Cresco Labs Inc. (OTCQX: CRLBF) is an MSO, and was due to merge
with Origin House
in what was supposed to be an $823
million transaction. For a period, it was on hold until just
recently when this was renegotiated and got slashed in half to a
$400 million deal. According to MJ business Daily
“terms of the renegotiated deal had a small effect on
the overall value – analysts estimate about a 7% decline from the
transaction restructuring versus almost 50% just on falling stock
prices alone – it is a significant change, because the deal is now
more likely to close.” When the ex-CEO of Canopy Growth
(NYSE: CGC) joined the board as executive chairman of
Vireo Health International (OTCQX: VREOF) the stock ran only to give up its gains
in a couple of days. This price action just goes to show how
sour the market sentiment is toward cannabis companies when news of
the most successful cannabis entrepreneur joining a board is unable
to move the needle on stock price. Investors are clearly
focused on profitability.
Challenges Facing Cannabis
Companies
-
Limited
funding to build out the
business
-
M&A deal
renegotiated or canceled due to declining stock
prices
-
Top level
executives shaken up
-
Huge layoffs
announced in USA and Canada
-
Stigma of
Federal Legality
This chart illustrates the flow of
capital into the cannabis sector over the past 2 years. It’s
absolutely chilling to see the precipitous drop off in deals.
The bubble burst and everyone including the marijuana companies are
looking for new investors, but they are few and far
between.
The top reason investors are seeing
all this pressure in the marijuana stocks is because most of these
companies are unable to get funding and when they do scrape funding
together it’s typically a highly dilutive financing.
This is precisely what is allowing
Citation
Growth Corp. (OTCQX: CGOTF). to outperform its peers. They are profit oriented and
unlike 95% of their peers looking for financial scraps, they are
working towards executing their business plan in stages, focusing
on increasing revenues for
sustainability.
Potential Turnaround on the
Horizon
In an industry plagued by heavy
taxation the recent move via the Marijuana Opportunity and
Reinvestment and Expungement Act of 2019 (the “MORE Act”) was a
welcome site. A group of lawmakers fired the first salvo in
their quest for US legalization of cannabis. The house
judiciary committee approved the Bill in late November by a margin
of 24-10 with bipartisan support. What this rule does is
level the playing field with normal business. No longer would
cannabis companies be treated like 2nd class citizens
and have to hire specialized lawyers and bankers to have access to
the infrastructure like normal business banking. This is one
of the first cracks in getting legalization legislation
enacted.
Citation Growth
Blueprint
Since 2014, Citation Growth Corp.
(OTCQX: CGOTF) has set a new standard in the medical
and recreational cannabis space with licensed cultivation and
production facilities as well as dispensary locations in key North
American state-legal jurisdictions. Their innovative operation is a
fully integrated process from seed to sale that has made them a
dominant industry force.
As a Multi-State Operator Citation
Growth needs to expand geographically and expand its product lines
and brands. In terms of territory, the company gives
investor’s exposure to Canada and the US markets. They have
fully operational facilities in Nevada, a facility nearing
completion in Celista, BC, Canada, a dispensary in CA and licensed
properties in WA and CA. They have 6 brands. Fiore is their
triple-certified organically cultivated cannabis. Diamante is
their ultra-premium brands of cannabis concentrates which include
resin from their crop of triple-certified organically grown Fiore
flower. Superior is all about the highest quality of
genetically grown flower in the Las Vegas market. The Gardens
of WeEden brand relates to the seed genetics used to makes strains
the consumers want. BluntBox represents traditional flower
rolled cannabis. PureCloud 9 is a skincare line of high
potency products that are blended with hemp oil and other
botanicals.
North Las
Vegas: This operation is expected to be completed in
the next 2 years with a finished footprint of up to 275,000 SF of
space. Within the facility they will have area for
cultivation, processing, and distribution. The facility is
designed to produce up to 23,000 kg of triple-certified organic
flower. The processing is expected to fit into about 16,000
SF of the facility and yield $80 mil in sales. Distribution
is in place for their brands and Citation has 75% market
penetration in the state of Nevada and is in 47 of the 60
dispensaries across the state. When totally completed the facility
could produce close to $180 million in revenue. The facility
is expected to be highly efficient and produce 4.5 crops
annually.
Pahrump,
Nevada: This facility is also expected to be built in
phases reaching up to 195,000 SF. This facility will house
the genetic experts working to build award winning varieties of
cannabis. At full capacity this is expected to produce $113
million and do 5.5 crops per
year.
Californian
Dispensaries/Cultivation:
In Coachella Valley, California they have two 1.25 acre sites in
proximity to the dispensary. Coachella Valley is known for
its concerts which attract 600,000 visitors annually. The expected
revenue is $17.2 million annually, once fully built
out.
Washington Grow
Facility: The company has a 13.8 acre site and a 28,000 SF
facility cultivation facility and a 30,000 SF processing facility
in Lynden WA.
British
Columbia: This is an industrial grade facility with ten
10,000 SF buildings on a 40 acre site. At full capacity it’s
expected to produce 19,000 kg of flower which will translate into
$74.5 million in revenue. It will use co-generation to power
the lights and keep the operating costs
low.
Financial
Analysis
In the latest quarterly filing,
they had $650K in sales which represents an 81% increase from the
$358K in same period last year. The company turned a gross
profit of $111K for the quarter.
In May 2019 they did a
non-brokered offering for CDN$250,000 on similar terms this time
with a $1.25 warrant. In October 2019
they also closed a CDN$1,084,500
private placement for $.30 and half a warrant coverage with a
strike price of $.60 for 2 years. Track record is everything
in this period of financial uneasiness in the cannabis
sector. Citation Growth’s ability to attract capital in this
downturn is an attestation to the viability of management and their
business plan. This access to capital makes them power
players in a consolidating
market.
Summary
Citation Growth’s high-end user
basis is the foundation of their business strategy. They have
created an ecosystem of high-end users. Brand building is a
small part of what they do. The company has the ability to
assimilate organizations and is well positioned to attract capital
in the harshest of financing environments. This demonstrates
their ability to seize opportunity wherever it exists. If
there are potential acquisitions on the horizon, Citation Growth
should be able to capitalize on it.
We are just scratching the surface of
this story because something has to explain the relative price
performance to its peers. In the past 2 months Citation Growth Corp. (OTCQX: CGOTF) has increased 25% with a price
movement from $.20 to $.25. Over the same period market
leader Canopy Growth slid $27.00 to $18.30 which represents a 32%
decline in just the past 50 trading days. Juxtapose Canopy
Growth and the large cap cannabis names against the rest of the
sector. Cannabis investors that want exposure to the sector
are sustaining large losses by staying in these large cap
names. Profitable MSO’s represent the perfect balance of risk
and reward. Sales multiples are no longer the measuring
sticks they used to be in cannabis.
The only thing working in the
space seems to be Multi-State Operators focused on
profitability. Citation Growth Corp. (OTCQX: CGOTF) is well positioned to weather the storm,
and when the downturn ends it could be a star performing MSO with a
proven track record. They have growing revenue, expanding
product lines, some of the highest quality certified organically
grown plants, and have the right packaging to entice the retail
buyers. The most important point to investors is that
they are outperforming the entire sector primarily due to their
strategy of selling high margin consumer packaged goods. The
ship is sinking on these large cannabis names, if you are a
cannabis investor is it time to fine tune your portfolio with a
name that floats or sinks?
CGOTF may not be at these levels much
longer.
See the Press Release and more on
Citation Growth Corp. (OTCQX: CGOTF) at
EmergingGrowth.com
https://emerginggrowth.com/?s=CGOTF
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Have a
look at Citation Growth Corp. (OTCQX: CGOTF), a growing multi state operator with 75%
market penetration.
Northwest Biotherapeutics,
Inc.
Shares
of Northwest Biotherapeutics, Inc. (OTCQB: NWBO) has fallen 25% over the past 12
months. Shares are currently in a consolidation just above
its support of $.22, however it will have a difficult time breaking
resistance of $.28 before moving
higher.
Citation Growth Corp. (OTCQX:
CGOTF) turned a gross profit in its recent
quarter.
Mr. Cooper Group,
Inc.
Shares of Mr. Cooper Group, Inc.
(NASDAQ: COOP) have fallen 50% this year before
rebounding to approximately $13.35 per share. The stock has
strong resistance at $15.5 and its support has fallen to
$10.00. I would watch for a pullback to around 12.00 before
considering an entry.
Look at Citation Growth Corp.
(OTCQX: CGOTF) who is expecting to yield $200 million
in sales.
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