Adastra Holdings (CSE:XTRX) Inc. has been through a few transformations over the past year – both in name and management.
Formerly known as Phyto Extractions Inc., the company is one of the best-known brands in the Canadian cannabis market. Its popular vapes, concentrates, and oil products are widely available at 1,500 retailers across Canada.
Michael Forbes was appointed the firm’s new CEO and director on May 10, 2021. Forbes has a background firmly rooted in medicine, cannabis production, and entrepreneurship, having founded five cannabis medical clinics under the Concord Medical Clinic umbrella, built Clarity Cannabis and Honeycomb Cannabis to over 10 locations, and founded the cannabis licensed production facility, Sitka Weed Works, in Canada.
At the same time, the company announced that Donald Dinsmore had been appointed its Chief Operating Officer and an additional Director. Then on July 15, it announced the appointment of Oliver Foeste as the company’s new chief financial officer. As the dust settles,
Proactive sat down with the new Adastra CEO to learn more about what is driving the company forward.
Proactive: The company has undergone dramatic changes so far in 2021 with the acquisition of Phyto Extractions, name changes and of course your appointment as CEO. Are things settling done now?
Michael Forbes: Things are smoother now, and the operations are much more organized and flowing better. I've reduced overheads and staff significantly, to the tune of over $100,000 a month in expenses, so you can see I'm a very frugal operator. I like to empower people and get the most out of them by giving them incentives and to help them make more money, but also by being more efficient in the office.
I'm still busy but it's definitely a well-run ship now and I'm excited for the future. Now that the base and the back of house have been restructured we can add revenue streams very systematically and concisely going forward as we have all the people in place and all the budgets and costings in line. I
The company has a proud pedigree in the Canadian cannabis industry, having been producing award-winning concentrates since 2015. What will the focus be going forward?
Adastra has a long history in cannabis and I've been in the space for a while as well and also have a grow facility on the island. I'm a multiple chain operator and in the retail space. As a pharmacist, I'm very familiar with making drugs and that is really aligned with where I want to take Adstra and Phyto to. I
t's going to be a very powerful company going forward because we have such a large footprint in the Canadian shelf space already and we're going to be able to leverage new products and new revenue streams in there to get up to $5 million a month in gross sales. We're going to be adding a lot more SKUs (stock keeping units) to the mix now and we're going to be very aggressive as to how we leverage the footprint that the Phyto brand has.
Can you tell us a little about your contract manufacturing revenue stream through Adastra Labs?
We are doing more contract manufacturing for other companies now. However, our main focus is still our own in-house brands because we keep 100% of that revenue.
I do like to keep the machines running, so we're moving to 24-hour shifts now seven days a week and if the machines are there and the staff want to work, we might as well keep everything moving and make more money. So we kind of fill in the voids with contract manufacturing. But our main focus is our own brands because of the high revenues there.
So what sort of products are the key selling points for your brands, I know you do have moved into the Shatter space?
We're like the people brand. We are cost-conscious but yet strive to have that high quality. So we've got great supply partners that we work with that give us really great input biomass and cannabis to extract at a really cheap price. And then, through years of being in the legacy market, we have the knowledge of what sells, at what price point, and what quality.
We've really dialed into that, so now we have a winning formula that we're really scaling out and it's working. We are the head choice in multiple provinces now, to the tune of over 80% in some provinces, so it's definitely working.
What do you think you bring to Adastra as its CEO?
Like I said, I cut my teeth in pharmacy and was able to build a large chain in the pharmacy and medical space, so I love being able to formulate and manufacture drugs through my pharmacies. I also understand highly regulated environments and complex operations very well.
I've been successful in multiple areas in that world and I'm cash flowing and debt-free in the cannabis space already in my other ventures. So I do have a lot of knowledge and skill and expertise and experience in driving the ship home to be a very profitable well-known company in the near term.
So, what should investors expect from Adastra in the near term to medium term?
Well, once we start showing our financials, we will be one of the few cashflow positive and debt-free cannabis companies in the public space. I also think that it's a very tightly held company right now, so there's no downward selling pressure and the stock is very poised to spring past $2. So once people catch on to that, once they understand what we're doing and see the numbers and see our sales and how diverse we are, I think the stock will have a very, very good upward run.
Two extra main points are, once we start adding the other SKUs we want to get into flower. We have over 1,500 retailers across the country and flower is the biggest seller. So we're going to enter that market with a value-priced flower and we'll be able to slip that into a lot of our retailers already. We expect a big upward lift there, and are anticipating to hit $5 million a month in sales by the end of the summer, which is pretty good.
If you look at some of our competitors, they are in debt and still aren't even doing that sort of value. They are companies valued at $400 million or $500 million and they're still losing money. So we expect it to be a good run for Adastra.
Contact the author at jon.hopkins@proactiveinvestors.com