Adastra Holdings Ltd., announced the completion of its previously-announced acquisition of privately held 1204581 B.C. Ltd., doing business as Phyto Extractions, the owner of the intellectual property rights for the Phyto Extractions brand. With complete control of the popular Phyto Extractions brand asset, Adastra intends to leverage Phyto Extractions’s proven product development expertise, skilled coast-to-coast sales force, and existing relationships with over 1,400 retail stores across Canada to drive accelerated growth and profitability for an expanded portfolio of Phyto Extractions branded cannabis products. The acquisition is expected to be immediately accretive to Adastra.
“As a cannabis retail operator, I recognize the tremendous value Phyto Extractions will bring to Adastra,” said Michael Forbes, Chief Executive Officer of Adastra. “Phyto Extractions has already gained the trust of over 1,400 retailers and consumers across Canada, representing over 70% of all regulated Cannabis retail stores. I am confident that Adastra will leverage this position in the Canadian cannabis market to accelerate overall growth over the coming quarters as we enter new product categories. Adding flower and other SKUs, we expect to achieve $5 million in monthly sales by July 2022.”
Strategy to Drive Accelerated Growth and Profitability
Having completed its acquisition of Phyto Extractions, Adastra intends to drive accelerated growth and profitability through a comprehensive strategy of product innovation and enhanced retail engagement. Key elements include:
New Product Introduction: Adastra plans to increase the number of provincially listed Phyto Extractions branded SKUs in the Canadian market from 18 to 48 over the next year by expanding its offering into new product categories that meet the evolving preferences of Canadian cannabis consumers. In flower, Adastra plans to introduce new 28g and 3.5g weight formats and pre-rolls under various strains and sizes, targeted at the value and premium craft segments. In extracts, Adastra plans to release solvent-less cannabis extract products. These are expected to include the already announced shatter pen, along with sugar waxes and crumbles. And in Cannabis 2.0 products, Adastra plans to launch edibles that will be created and sold through Adastra Labs without additional capital expenditures.
Optimize In-Store: With full ownership of the Phyto Extraction brand asset, Adastra intends to engage in a targeted retail engagement strategy to optimize its existing in-store presence. This is expected to include leveraging its strong brand and existing relationships with distributors and retailers to get new products into provincial listings, maximize shelf space with retailers, and develop store promotion programs.
New Store Penetration: Adastra intends to continue to expand its retail footprint by leveraging the strength of the Phyto Extractions brand and its coast-to-coast sales force across seven provinces and territories. According to Leafly, there were over 2,100 cannabis retail stores across Canada as of July 2021.
Sales Force Expansion: Adastra employs a highly-skilled inside sales force of 8 salespeople across Canada that it intends to continue to scale and support as the business grows.
Operating Synergies: Adastra expects to realize operating synergies on unified management through leveraging Adastra Labs’ state-of-the-art 13,000 sq. ft. agricultural scale facility.
Transaction Overview
At closing, Adastra issued 20 million common shares to the former shareholders of Phyto Extractions at a deemed share price of $0.96 per share, for total consideration of approximately $19.2 million. Pursuant to the terms of the Share Purchase Agreement dated September 15, 2021, the Vendors have agreed to a voluntary restricted 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 on closing.
About Adastra Holdings Ltd.
Founded in 2018 and formerly known as Phyto Extractions Inc., Adastra is a leading manufacturer and supplier of innovative ethnobotanical and cannabis science products designed for the adult-use and medical markets and forward-looking therapeutic applications. Adastra is renowned throughout Canada for its popular line of Phyto Extractions branded cannabis concentrate products available on shelves at over 1,400 adult-use retailers across the country. The Company also operates Adastra Labs, a 13,500 sq. ft. agricultural-scale Health Canada licensed facility located in Langley, BC., focused on extraction, distillation, and manufacturing of cannabis-derived products.
