Adastra Holdings (CSE:XTRX, FRA:D2EA) Ltd, formerly Phyto Extractions Inc, announced that it has struck a share purchase agreement to acquire all the issued and outstanding shares of 1204581 BC Ltd, doing business as Phyto Extractions from the shareholders of Phyto Extractions.
Langley, British Columbia-based Adastra said it has agreed to issue 20 million shares to the vendors at a deemed price of $0.96 per share for a total purchase price of $19.2 million.
Phyto Extractions, a well-known brand in Canadian cannabis concentrates, was incorporated in 2019 in British Columbia. It licenses its intellectual property to Canadian cannabis license holders and collects royalties generated by selling cannabis consumer packaged goods to provincial distributors and retailers across the country.
READ: Adastra Holdings sees record August sales of $1.7M driven by new products and markets for its Phyto Extractions brand
According to the company, Phyto Extractions branded products generated unaudited royalty payments totaling $1.82 million between July 1, 2020, and June 30, 2021.
“Post-closing, Adastra intends to leverage Phyto Extraction's valuable suite of branded products to drive sales and integration efficiencies,” said the company. Phyto Extractions is being acquired with minimal long-term debt and positive working capital.
In a statement, Adastra CEO Michael Forbes said: "We are excited at the prospect of bringing the most prominent legacy brand into Adastra. We believe the proposed acquisition of Phyto Extractions will add tremendous shareholder value.”
“Phyto Extractions currently holds a preeminent place in the regulated cannabis concentrates market owing to unparalleled brand recognition, quality products, market penetration, and an exceptional sales team. As licensing agreements expire, Adastra intends to produce all Phyto Extractions products in-house and recognize full revenues resulting from branded sales."
Terms of the acquisition
Adastra has agreed to issue 20 million shares to the vendors at a deemed price of $0.96 per share for a total purchase price of $19.2 million. According to the share purchase agreement, the vendors have agreed that the shares will be subject 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, said the company.
In addition to standard closing conditions, the acquisition is contingent on satisfactory due diligence of Phyto Extractions, and it having positive working capital as of the closing date.
Adastra produces and distributes cannabis-derived products designed for medical cannabis and forward-looking therapeutic use.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
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