About Adastra Holdings

Adastra Holdings Ltd., an integrated Canadian cannabis company, focuses on extraction and associated analytical testing. The company, through one of its wholly owned subsidiaries, has a license to produce cannabis extracts under the Cannabis Act. In addition, the company, through one of its wholly owned subsidiaries, has been granted a license by Health Canada to conduct analytical testing for the cannabis industry. The company operates a research-based multidisciplinary centre with physicians and healthcare professionals providing medical cannabis therapies. Principal Products The company is a health and wellness company focused on the processing of cannabis and cannabis analytical testing. The company provides processing solutions to licensed cultivators of cannabis and hemp and supplies cannabis extracts to qualified Canadian and international business-to-business partners under its own brand. In addition to providing analytical testing services to Adastra, Chemia Analytics Inc. (Chemia), a wholly owned subsidiary of the company, provides full-suite cannabis analytical testing services to 3rd parties throughout the Province of British Columbia lower mainland. The company can provide consulting and testing services for product formulation and development for cannabis product developers. Extraction To meet growing requirements, the company intends to produce its cannabis extractions for both recreational and medical use: Indica and Sativa strains and combinations of both - for various medicinal purposes including anxiety, insomnia, pain, nausea and cancer treatment; and Premium extracts are expected to have a higher market value but only when they provide a truly unique experience. The company plans to process, sell, and distribute high quality cannabis extracts permitted by Health Canada under the Cannabis Act. The company plans to increase its product line offering for additional products to be manufactured per Health Canada regulations as permitted under the Cannabis Act. The company plans to develop special product lines, each with its unique identifier and use to allow customers to use cannabis based on why they want to consume it. The company also intends to create a line of single-origin and handcrafted cannabis extract products. The company's planned products, some of which are subject to legalization and/or obtaining necessary additional licenses, are projected to include: Bulk Low THC Cannabis Oil for tinctures; Bulk CBD Oil without THC; Consumer packaged Low THC Cannabis Oil; Consumer packaged CBD Oil without THC; Bulk High THC Cannabis Oil (distillate); Bulk Vaporizing pen formulations; Bulk water-soluble (nano-emulsion) cannabis oils and distillate; Bulk THC distillate Cannabis Gel Capsules (two-part); Consumer packaged THC Cannabis Oil Tinctures; Consumer packaged Vaporizing pens; Consumer packaged THC distillate Cannabis Gel Capsules; Bulk and consumer packaged hydrocarbon extracts; Bulk and consumer packaged Cannabis infused cosmetics and topics; and Bulk and consumer dried flower. During the year ended December 31, 2022, the company depended on the brand licensing agreement to CannMart Labs Inc. to bring its products to market in Canada. Per this agreement, CannMart Labs Inc. had an exclusive license to use the company's brands in association with development, manufacture, production, promotion, marketing, packaging, distribution and sale of the following types of products: Cannabis vaporizing pen cartridges and batteries; Cannabis capsules; Cannabis tincture bottles and tincture jars; Cannabis syringes; Cannabis terpene extracts (terp sauce); and Cannabis concentrates in solid form, such as shatter, wax, live resin, crystals (diamonds) produced with Butane Hash Oil (BHO) or Propane Hash Oil (PHO) processes. Testing Chemia provides QA/QC and compliance testing services for licensed producers of cannabis and cannabis products under Health Canada regulations. Chemia also provides in-process testing services to help cultivators and processors optimize their processes. Chemia expects to provide the following testing services: Potency Testing Fast, high sensitivity testing to determine the potency of cannabis products. Chemia's tests will determine the levels of THCA/THC and CBDA/CBD and their total equivalency. Potency can be determined on fresh/dried flower, oils, extracts and concentrates. Microbial Contamination Chemia will be outfitted to complete all Health Canada mandated microbial tests on fresh/dried flower, oils, extracts and concentrates. Including amounts of total yeast and mold, total aerobic microbial counts, bile-tolerant gram-negative bacteria, E. coli, and Salmonella. Upon request testing for S. aureus, and P. aeruginosa will be conducted. Aflatoxins Analysis Chemia's method is capable of fulfilling Health Canada requirements for the analysis of aflatoxins on dried cannabis flower, oils and extracts. Chemia will test for aflatoxins B1, B2, G1 and G2. Heavy Metal Analysis Cannabis is known to accumulate heavy metals in its tissues. As required by Health Canada, its lab can efficiently and accurately test dried flower, oil and extracts for lead (Pb), cadmium (Cd), mercury (Hg) and arsenic (As). Additional metal screening for trace elements can also be performed as needed. Pesticide Screening Regulations for pesticide use on cannabis are strict. Chemia will use a combination of high-tech analytical techniques for pesticides screening. This screening can be done for fresh/dried flower, oils, extracts and concentrates. Residual Solvent Analysis To ensure the safety of customer's products and maintain compliance with Health Canada regulations, Chemia has developed tests to determine the quantity of residual solvents in cannabis oils, extracts and concentrates. Chemia can determine the quantity of methanol, ethanol, acetone, isopropanol (isopropyl alcohol), acetonitrile, hexane, heptane and pentane. Loss On Drying Before sale in Canada the moisture content of all dried cannabis flower must be reported. Chemia's tests will provide a customer with the percent moisture of customer's products. Foreign Matter As per Health Canada regulations Chemia will visually inspect customer's cannabis products for the presence of foreign material. Cannabinoid Profiling In addition to potency testing, Chemia can quantify 14 unique cannabinoids in cannabis products. The list of cannabinoids includes Tetrahydrocannabinolic acid (THCA), detla-9-tetrahydrocannabinol (detla 9-THC), Cannabidiolic acid (CBDA), Cannabidiol (CBD), Cannabinol (CBN), Cannabigerolic acid (CBGA), Cannabigerol (CBG), (±)-Cannabichromenic acid (CBCA), (±)-Cannabichromene (CBC), Tetrahydrocannabivarinic acid (THCVA), Tetrahydrocannabivarin (THCV), Cannabidivarinic acid (CBDVA), Cannabidivarin (CBDV), and Cannabigerovarinic acid (CBGVA). Terpene Analysis Flavour and aroma of cannabis come from its terpene profile. That's why Chemia can quantify 39 terpenes commonly detected in cannabis. Chemia's tests can determine the quantities of the monoterpenes, alpha-Pinene, Camphene, Sabinene, beta-Pinene, beta-Myrcene, alpha-Phellandrene, (1S)-(+)-3-Carene, alpha-Terpinene, (R)-(+)-Limonene, Eucalyptol, Ocimene, gamma-Terpinene, Sabinene Hydrate, L-(-)-Fenchone, Terpinolene, Linalool, (1R)-Endo-(+)-Fenchyl Alcohol, (1S)-(-)-Camphor, (-)-Isopulegol, Isoborneol, (+/-)-Borneol, Hexahydrothymolalpha-Terpineol,gamma-Terpineol, Geranyl Acetate, (+)-Pulegone, Geraniol, Nerol. CAI can also test for sesquiterpenes, including, alpha-Cedrene, trans-Caryophyllene, (-)-Caryophyllene Oxide, alpha-Humulene, Valencene, cis-Nerolidol, trans-Nerolidol, Guaiol, (+)-Cedrol, and (-)-Alpha-Bisabolol. Principal Markets Clients are to include direct retail, as well as wholesaling to distributors. To maintain a stable supply in the market that meets the demand level, the company expects to utilize a variety of distribution channels. The company's online presence will also help to connect with the B2B customers. The company will also be targeting other businesses that are licensed by Health Canada for product testing, white labelling products and toll processing. The retail market for cannabis products is still developing and there is a need for more participants within the industry. Health practitioners and doctors play a key role by introducing their patients to cannabis as an alternative treatment. The company anticipates designing marketing campaigns to create relationships with health care professionals, including education, forums, training, printed literature, and media. Healthcare professionals employed at the company's clinics will provide consultations to patients and may market its products to them depending on the patients' needs. The company aims to create relationships with healthcare professionals to support the marketing of its products, mainly through the use of social media. In April 2021, the company also entered into a marketing services agreement with Hybrid Financial Ltd. to assist in all aspects of a marketing campaign for it. Within the recreational use segment, the company views the following areas where there are potential growth opportunities: 25-to-35-YEAR-OLD URBAN PROFESSIONALS: The 25-to-35 'yuppie' market prefer the upscale branding approach. ATHLETES: This target group is a blend of medical and recreational use, seeking CBD products for cell generation and healing properties. BABY BOOMERS: This was the original 'hippie' generation who likely experimented in their youth. Now, largely with grown children, not needing to set moral standards, or frankly seeing the benefits of legalizing an industry to protect users from indiscriminate processors, they have become more accepting of legalization. The company has one direct wholly owned subsidiary, Adastra Labs Holdings (2019) Ltd. (Adastra), a British Columbia corporation. Adastra has six wholly owned direct and indirect subsidiaries incorporated in British Columbia, Canada: Adastra Labs Inc., for the extraction and concentrates production facility; Chemia Analytics Inc., for a cannabis testing and analysis laboratory; 1178562 B.C. Ltd., the owner of the Facility; Adastra Brands Inc., a holding company for future branding of cannabis products, which has no activities; PerceiveMD, a direct subsidiary of Adastra Labs Inc. and the owner of a multidisciplinary medical clinic focusing on treatments with cannabis and certain controlled substances; and 1204581, a direct subsidiary of Adastra Labs Inc. and the owner of intellectual property rights for the Phyto Extractions brand. The company through Adastra and Chemia have acquired two licenses from Health Canada to become a legal processor of cannabis in Canada through Adastra and to be a licensed cannabis analytical testing laboratory with Chemia. Licences of the company In October 2018, Adastra submitted applications with Health Canada for the licenses under An Act respecting cannabis and to amend the Controlled Drugs and Substances Act, the Criminal Code and other Acts (the Cannabis Act), which licenses will designate Adastra and Chemia Analytics Inc. (Chemia), a wholly owned subsidiary of Adastra, as a licensed processor and a licensed cannabis tester, respectively. In October 2019, Chemia received a licence from Health Canada (the Analytical Testing Licence) to conduct analytical testing on cannabis at its Facility. In March 2020, the company, through its wholly owned subsidiary, Adastra Labs Inc. (ALI), received a Standard Processing licence (the Processing Licence) for the Facility. In April 2021, the company received an amendment to its Analytical Testing Licence allowing for organoleptic testing of its products. In August 2021, the company submitted a further sales licence amendment for dried flower and a controlled substance dealer's licence for cannabis products. In December 2021, the company received its Flower Sales Licence from Health Canada (Flower Licence), that permits it to sell dried cannabis flower products provincially and territorially in Canada. In August 2022, the company received its medical sales licence (the Medical Sales Licence) that permits it to sell cannabis extracts to medical cannabis patients and licenced health practitioners and to develop products classed as cannabis extracts, such as tinctures, oils, capsules, soft gels, and sprays. In August 2022, the company received its Controlled Substances Dealer's Licence (the Dealer's Licence), which allows it to procure and process controlled substances, including synthesis, propagation, cultivation, and harvesting of mushrooms for controlled substance extraction, research and manufacture controlled substances and business-to-business sale of controlled substances, including by export. On February 22 and March 3, 2023, the company announced that its wholly owned subsidiary, ALI, received approval from Health Canada on February 17, 2023, for its amendment of the Dealer's License to include the following regulated activities: possession, production, assembling, sale/provision and sending, transportation and delivery of certain controlled substances. Status of Cannabis License Applications In May 2023, the company submitted an application with the British Columbia Liquor and Cannabis Regulation Branch (LCRB) for a Cannabis Marketing License, which allows marketers to promote the products of licensed federal cannabis producers to licensed cannabis retail stores and people over 19-years-old. Intellectual Property Pursuant to the acquisition of 1204581BC the company became the owner of intellectual property rights for the Phyto Extractions Brand. History The company was formerly knowns as Phyto Extractions Inc. and changed its name to Adastra Holdings Ltd. in 2021.