Adastra (CSE: XTRX, FRA: D2EP), a leading manufacturer and supplier of innovative ethnobotanical and cannabis science products designed for adult use, medical markets, and forward-looking therapeutic applications, saw its stock price literally skyrocketing. The company received approval to use COCAINE, leading to a 300% increase in its stock price (52-week high). Pump and dump or breakthrough technology? Let’s have a better look at the company. 

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Company Overview

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Adastra (CSE: XTRX, FRA: D2EP) is a top producer and supplier of cutting-edge ethnobotanical and cannabis science products created for the adult-use, medical, and future-looking therapeutic sectors. In Canada, Adastra is regarded as a co-manufacturer and high-capacity processor. Around 1,400 adult-use stores in Canada carry the Phyto Extractions line of cannabis concentrate products, which are well-known in the industry. The business also runs Adastra Laboratories Inc., a Langley, British Columbia-based agricultural-scale facility with a Health Canada license specializing in extracting, distilling, and producing cannabis-derived goods.

The company operates through 3 different steps: 

-Labs: where the company designs extraction methodologies and industry-leading equipment to meet consumer requirements;

-Analytics: Adastra analyzes impurities and additives that can impact the quality of the company’s extracts; 

-Extractions: to ensure quality thanks to strict quality controls to meet customers’ expectations. 

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Mr. Forbes heads Adastra. Mr. Forbes has more than 16 years of medical expertise and developed three methadone clinics in order to safeguard the public from drug diversion and improve access to plant medicine. He has also built and maintained drugstore chains throughout British Columbia and Alberta. The company also welcomed Mr. Lanchan as CFO. Lachlan has worked as a fractional CFO for several public companies and has experience in public practice. He spent four years as an auditor for one of the Big 4 accounting firms. Lachlan has a track record of success in assisting companies in fulfilling their financial and regulatory reporting obligations.

The company announced on February 9 that its Phyto Extractions brand was produced 100% in-house. It is a significant catalyst for the company as sales of Phyto have enormously augmented since 2020.  Sales for Phyto branded products totalled $6,690,618 in 2020 and reached $14,268,320 in 2021. Phyto has 114 active Stock Keeping Units, stocked in eight provinces and territories. Adastra bought back $2,232,137 worth of inventory from the third party and did not incur any debt. By bringing every operation in-house, Adastra now has full control of the supply chain and allows the company to streamline its business and retain 100% of its revenues. No doubt Adastra will be very pleased to know this. 

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On February 17, Adastra received Health Canada Approval for the amendment to include cocaine. The amended license allows Adastra to interact with up to 250 grams of cocaine and to import coca leaves to manufacture and synthesize the substance.

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“Harm reduction is a critically important and mainstream topic, and we are staying at the forefront of drug regulations across the board,” said Michael Forbes, CEO of Adastra. “We proactively pursued the amendment to our Dealer’s License to include cocaine back in December 2022. We will evaluate how the commercialization of this substance fits in with our business model at Adastra in an effort to position ourselves to support the demand for a safe supply of cocaine.”

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Because of the huge hype, the company had to clarify is not currently undertaking any activities with cocaine under the Controlled Substances Licence. Before doing so, it will only undertake such activities legally permitted by the Controlled Substances Licence and after consultation with applicable Provincial Governments. The  Controlled Substances Licence issued to Adastra Labs does not permit Adastra Labs to sell coca leaf, psilocybin or cocaine to the general public. For cocaine, and under the  Controlled Substances Licence, Adastra Labs is only permitted to sell to other licensed dealers who have cocaine listed on their licence including pharmacists, practitioners, hospitals, or the holder of a section 56(1) exemption for research purposes under the Controlled Drugs and Substances Act (CDSA).

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Share Structure / Financials

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The latest financial statements occurred for the period ending September 30, 2022. The company had $336k in cash, $31.2M in total assets, and $10M in liabilities. Adastra recorded $3.8M in revenue and kept a $1.6M gross profit. YoY, the company marks a 111% increase. 

Adastra detains an exciting share structure as it boasts only 55.9M shares issued and outstanding. Adastra also holds 3.6M options at $1.40 and 2M warrants at $1.8M.

Let’s talk about the most exciting financial part, the stock price. Within 52 weeks, the stock price fluctuated from $0.105 to $2.00, and the volume literally burst the roof first with March 2 and its 165k shares traded, and finally, March 3 and its 2.5M in volume when the 3-month-average is only 9k! At this point, it could go sideways. Either the rocket will have some more fuel to go higher or will run out of gas and a potential decline. What the company will benefit from is its financials that keep improving, helping the company’s valuation not to turn as overrated. 

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Conclusion

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Adastra (CSE: XTRX, FRA: D2EP) is undoubtedly under the spotlight. The stock price witnessed a solid increase, set to create wide variations, and everything came from the cocaine news. In the meantime, the 100% in-house Python Extractions brand will bring more revenue to the company. The company has actual revenues, important news, and a strong share structure. Undoubtedly, day traders are involved in the company, but adding it to your portfolio or watchlist wouldn't kill you. 

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