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Citation Growth Corp
Symbol CGRO
Shares Issued 61,969,000
Close 2019-08-06 C$ 0.41
Recent Sedar Documents

Citation Growth closes acquisition of ACC Group

2019-08-06 07:59 ET - News Release

Mr. Rahim Mohamed reports

CITATION GROWTH CORP. CLOSES ACQUISITION OF PREMIUM CANNABIS CULTIVATOR, ACC GROUP OF COMPANIES

Further to the company's press release dated July 24, 2019, on Aug. 2, 2019, Citation Growth Corp. closed the previously announced transaction to acquire the ACC Group of Companies, a Nevada-based group of companies licensed for cannabis cultivation and well known for its award-winning cannabis cultivars. The company believes the integration of ACC into Citation's existing cultivation and extraction infrastructure will support its continuing corporate growth strategy to become a leading multistate operator of cannabis assets across the United States and Canada, as applicable legislation and regulations may permit.

Rahim Mohamed, the newly appointed president of Citation, commented: "The acquisition of ACC provides the fuel required to accelerate Citation's movement to large-scale cannabis cultivation and production. Pairing complementary cultivation and seed genetics assets provided by ACC with Citation's Nevada production facility and advanced propagation techniques gives the company the resources necessary to rapidly expand throughout the legal cannabis market in the state of Nevada and beyond."

Citation anticipates that the acquisition of ACC, pursuant to the closing of the transaction, will:

  • Create one of the largest licence holders for cultivation in the state of Nevada, with an estimated consolidated licensed footprint for the combined entity of up to 569,600 square feet, including up to 16,000 square feet in processing space for cannabis concentrates and edibles, assuming the successful completion of all proposed site phases. The company estimates capital expenditure requirement for the combined entity of approximately $90-million (U.S.), which the company anticipates will be made available through a combination of equity and non-dilutive debt financings, as well as from the reinvestment of profits generated from the company's operations;
  • Significantly enhance Citation's Nevada operations by combining the company's comprehensive experience in organic cultivation techniques with ACC's award-winning seed genetics program, fostering a new, premium cannabis powerhouse in the state of Nevada, and any such other jurisdictions it may enter, as regulations and legislation may permit;
  • Provide the opportunity to build upon ACC's successful current-year 2018 unaudited financial performance, where it achieved revenue of approximately $7.9-million (U.S.), gross margin of approximately 57 per cent, and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of approximately $1-million (U.S.);
  • Provide Citation with an approximate (ACC management estimated) annualized $114-million (U.S.) in additional forward-looking revenue, at an (ACC management estimated) annualized EBITDA margin of approximately 25 per cent, assuming the completion of all proposed phases and maximum operational efficiencies being realized, with an estimated capital expenditure requirement of approximately $50-million (U.S.);
  • Enhance the company's suite of portfolio products with the addition of three new, established brands within the state of Nevada, including BluntBox, Garden of Weeden and Superior, to complement Citation's established FIORE cannabis flower brand.

Terms of the transaction

In connection with the transaction, the company has issued an aggregate of 35 million common shares in the capital of the company, which is inclusive of the approximately 11.5 million common shares issuable upon the conversion of the ACC amended notes (as defined below) that were assumed by the company in the transaction and converted immediately following closing. The acquired ACC entity had approximately $15-million (U.S.) in convertible notes outstanding. As a condition of the transaction, the holders of the notes agreed to restructure the notes such that all principal and interest outstanding at the time of closing converted into units of the company comprised of one common share and one common share purchase warrant, with each full amended warrant exercisable at $2.50 per common share for a period of 24 months following the closing. The amended warrants contain an acceleration provision such that in the event the volume-weighted average trading price of the common shares on the Canadian Securities Exchange is greater than $3.50 for a period of 10 consecutive trading days, the company may, upon providing notice to the holders of the amended warrants, accelerate the expiry of the amended warrants to a period that is 30 days from the date such notice is given.

Upon closing, the company issued an aggregate of 1.75 million common shares as finders' fees to certain business advisers in connection with the transaction.

All common shares (including common shares issuable upon the exercise of the amended warrants) issued to management of ACC pursuant to the transaction are subject to three-year escrow provisions substantially similar to those that are required for an emerging issuer under National Policy 46-201 Escrow for Initial Public Offerings. All other common shares, including any common shares issued in exchange for outstanding convertible securities in the acquired ACC entity, are subject to resale restrictions under the Securities Act (British Columbia) which do not allow for any resale or transfer until the date that is four months and one day following closing, as well as application restrictions under the U.S. Securities Act of 1933, as amended.

Grant of performance and retention bonus shares

Citation also announces that the company's board of directors approved the grant of common shares pursuant to a performance bonus to certain directors, officers and employees of the company that shall vest upon the achievement of certain performance milestones as well as the grant of common shares as a retention bonus to certain key employees. An aggregate of 3.15 million bonus shares were issued by the company. The bonus shares will vest on the date that is four months from the date of issue.

Issuance of shares in lieu of cash

The board of directors also approved the issuance of an aggregate of 1.1 million common shares in lieu of cash to certain consultants for services rendered in connection with the development of the company's property located in Celista, B.C. The common shares issued in lieu of cash are subject to a four-month-and-one-day hold in accordance with applicable securities laws.

About Citation Growth Corp.

Citation Growth is a publicly traded company that has been investing in the medical and recreational cannabis space since 2014. Citation has rapidly expanded its operating portfolio to include cultivation, production and dispensary locations in key North American state-legal jurisdictions and is seeking expansion opportunities worldwide.

About the ACC Group of Companies

The ACC Group of Companies is a group of privately held companies that have held indoor cannabis cultivation licences in the state of Nevada since 2014. Primarily located in Pahrump, Nev., ACC prides itself on its expansive collection of premium cannabis cultivars and its innovative seed genetics program.

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