Adastra Labs Holdings Ltd (CSE:XRTX) (FRA:D2EP) told investors Monday that it is progressing toward closing the acquisition of a 51% controlling interest in cannabis product producer Phyto Extractions Brands.
The deal includes a right of first refusal for the company to acquire the remaining 49% interest, the company said. In conjunction with the acquisition and a recently-obtained Health Canada sales license addendum, Adastra Labs is conducting an equity unit offering for working capital and to expand the sales and marketing of Phyto Extractions brands.
The two parties have received and signed off on an independent fairness opinion regarding the share consideration along with fair market values of C$61.5 million and C$56.4 million (51%), for the respective companies. The companies are also continuing under their agreed exclusivity and freeze period until closing of the definitive acquisition agreement.
READ: Adastra Labs appoints J. Scott Munro as its president, chief executive officer and chairman with effect from March 1, 2021
The planned equity unit offering (each unit is one common share and one purchase warrant) will be priced at C$1.10 per unit in order to raise working capital for expanded growth of business operations, Phyto Extraction product offerings and sales throughout Canada. Phyto has more than 16 new stock-keeping units (SKUs).
Each warrant will have an exercise price of C$1.75 per share with a 2-year expiry, which will accelerate if the company’s common shares trade at or above $2 per share for more than 50 trading days. The financing will be a private placement on an exempt basis to qualified investors, mainly accredited investors, the company said.
As a step towards the acquisition, Adastra has reserved to complete its name change to Phyto Extractions Inc. The company has permission to use the new name even if the acquisition isn't completed. Adastra also intends to enact a 3:1 share consolidation.
Phyto Extractions products include 0.3-gram disposable vaporizers in four strains/flavours; 0.5-gram vaporizing cartridges in six strains/flavours with one kit; 1 gram cartridges in four strains/flavours; two strains of Live Resin; and a unique High-Terpene Full Spectrum Extract (HTFSE) terp sauce SKU.
Phyto has new product launches planned for 2021, the company said, including edibles, beverages, flower (bags and pre-rolls), hydrocarbon extracts (butter, diamond, shatter, terp sauce and wax), and topicals (roll-on, creams, oils, oral spray and path).
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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