Adastra Holdings completes the acquisition of Phyto Extractions

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Provides additional details on strategy to leverage the Phyto brand to drive accelerated growth
The Company expects $ 5 million in monthly sales by July 2022

Adastra Holdings Ltd. (formerly Phyto Extractions Inc.) (CSE: XTRX) (FRA: D2EP) (“Adastra” or the “Company”), today announced the completion of its previously announced acquisition of privately held 1204581 BC Ltd., making business under the name of Phyto Extractions (“Phyto Extractions”), owner of the intellectual property rights of the Phyto Extractions brand. With full control of the assets of the popular Phyto Extractions brand, Adastra intends to leverage Phyto Extractions’ proven product development expertise, from its knowledgeable sales force coast to coast. and existing relationships with more than 1,400 retail stores across Canada to accelerate the growth and profitability of an expanded portfolio of Phyto Extractions branded cannabis products. The acquisition should be immediately accretive for Adastra.

“As a cannabis retail operator, I recognize the tremendous value that Phyto Extractions will bring to Adastra,” said Michael forbes , Chairman and CEO of Adastra. “Phyto Extractions has already won the trust of more than 1,400 retailers and consumers through Canada , representing over 70% of all regulated cannabis retail stores. I have no doubts that Adastra will leverage this position in the Canadian cannabis market to accelerate overall growth in the coming quarters as we move into new product categories. By adding flowers and other SKUs, we plan to achieve $ 5 million in monthly sales by July 2022 . ”

Strategy to drive accelerated growth and profitability

After finalizing the acquisition of Phyto Extractions, Adastra intends to accelerate its growth and profitability through a comprehensive product innovation strategy and increased retail engagement. The key elements include:

The introduction of a new product: Adastra plans to increase the number of provincially listed Phyto Extractions brand SKUs in the Canadian market from 18 to 48 over the next year by expanding its offering to new product categories that meet the changing preferences of Canadian consumers. of cannabis. In bloom, Adastra plans to introduce new formats and pre-rolls weighing 28g and 3.5g in various strains and sizes, targeting high-end and quality craft segments. In extracts, Adastra plans to launch products based on solvent-free cannabis extracts. These should include the already advertised shatter pen, as well as waxes and sugar crumbs. And in Cannabis 2.0 products, Adastra plans to launch edibles that will be created and sold by Adastra Labs without additional capital expenditure.

Optimize in-store: With full ownership of the assets of the Phyto Extraction brand, Adastra intends to embark on a targeted retail engagement strategy to optimize its existing in-store presence. This should include leveraging its strong brand and existing relationships with distributors and retailers to get new products into provincial listings, maximize storage space with retailers, and develop in-store promotion programs.

New store penetration: Adastra intends to continue expanding its retail presence by leveraging the strength of the Phyto Extractions brand and its coast-to-coast sales force in seven provinces and territories. According to Leafly, there were over 2,100 cannabis retail stores across Canada from July 2021.

Expansion of the sales force: Adastra employs a highly skilled internal sales force of 8 vendors across Canada that he intends to continue to evolve and support as the business grows.

Operating synergies: Adastra expects to achieve operating synergies on unified management by leveraging Adastra Labs’ 13,000 square foot state-of-the-art agricultural facilities.

Overview of transactions

At closing, Adastra issued 20 million ordinary shares to the former shareholders of Phyto Extractions at a deemed share price of $ 0.96 per share, for a total consideration of approximately $ 19.2 million . Under the terms of the share purchase agreement dated September 15, 2021 , the Sellers have agreed to a voluntary restriction period of four months and one day from the closing date of the acquisition. The acquisition is an arm’s length transaction, and there is no finder’s fee payable at closing.

About Adastra Holdings Ltd.

Founded in 2018 and formerly known as Phyto Extractions Inc., Adastra is a leading manufacturer and supplier of innovative ethnobotany and cannabis science products designed for medical and adult markets and prospective therapeutic applications. Adastra is renowned throughout Canada for its popular line of Phyto Extractions branded cannabis concentrates available on the shelves of more than 1,400 adult retailers across the country. The Company also operates Adastra Labs, a 13,500 square foot Health Canada licensed agricultural facility located in Langley, BC ., focused on the extraction, distillation and manufacture of cannabis-derived products. Adastra has now successfully taken the first steps to become a licensed grower, tester, extractor and seller of controlled substances including Psilocybin, Psilocin, MDMA, N, N-Dimethyltryptamine (DMT), 5-MeO- DMT and LSD by applying for a Controlled Substance Distributor’s License, which is under review by Health Canada. Pending Health Canada approval, Adastra is poised to become a leader in drug formulation and development in this emerging industry. In addition, with the recent acquisition of 1225140 B .VS. Ltd., doing business as PerceiveMD, Adastra operates a multidisciplinary center for medical cannabis and psychedelic therapies, working alongside physicians and healthcare professionals in a regulated environment to help create effective remedies that respond to the real patient needs.

ON BEHALF OF THE BOARD
Adastra Holdings LTD. (CSE: XTRX)

Forward-looking information

This press release contains forward-looking information within the meaning of Canadian securities legislation concerning the activities of the Company. Forward-looking information is based on certain key expectations and assumptions made by the management of the Company. Although the Company believes that the expectations and assumptions on which this forward-looking information is based are reasonable, one should not place undue reliance on forward-looking information as the Company cannot guarantee that it will prove to be correct. Forward-looking information contained in this press release includes statements regarding plans to leverage Phyto Extraction’s existing product development expertise, sales force and relationships, with the expectation that the acquisition will be immediately accretive for the Company; expectations of accelerated growth and profitability; the roll-out of additional SKUs and new product categories such as flowers, pre-rolled products, solvent-free cannabis extracts, branded drinks and other edibles; expectation of sales growth rising to $ 5 million in monthly sales by July 2022 ; plans to embark on a targeted retail engagement strategy; plans to expand the business footprint; the planned expansion of the Company’s sales force; the expected operational synergies between the Company and Phyto Extractions; and the timelines associated with new product offerings and SKUs. There are numerous risks and uncertainties which could cause the actual results and the plans and objectives of the Company to differ materially from those expressed in the forward-looking information. Important factors that could cause actual results to differ materially from those expressed in the forward-looking information include the fact that the parties may not complete the transaction at all or within the expected time frames stated herein; regulatory or license changes affecting the activities of the Company; decreased demand for cannabis and cannabis-related products; reductions in retail space and Company store locations; and other factors beyond the control of the Company. This subsequent written and oral forward-looking information and all subsequent forward-looking information are based on management’s estimates and opinions on the dates on which they are made and are expressly qualified in their entirety by this notice. Except as required by law, the Company does not intend to update these forward-looking statements.

This press release contains forward-looking financial information and financial outlook information (collectively, “FOFI”) regarding the expected increase in sales of the Company on a post-closing and pro forma basis, which are subject to the same assumptions, risk factors, limitations, and qualifications set out in the paragraphs above. The actual financial results of the Company after closing may differ from the amounts stated herein and this variation may be material. The Company and its management believe that the FOFI has been prepared on a reasonable basis, reflecting management’s best estimates and judgments. However, since this information is subjective and subject to many risks, it should not be taken as necessarily indicative of future results. Unless required by applicable securities laws, the Company assumes no obligation to update these FOFIs. The FOFI contained in this press release has been established as of the date hereof and has been provided for the purpose of providing further information on the Company’s anticipated future business activities after closing. Readers are cautioned that the FOFI contained in this press release should not be used for any purpose other than that for which it is disclosed here.

The financial information concerning Phyto Extractions has been provided by Phyto Extractions and has not been independently verified by the Company at the date hereof.

The Canadian Securities Exchange has not reviewed or approved the contents of this press release.

SOURCE Adastra Holdings Ltd.

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