Adastra Holdings Reports Second Quarter Results; Demonstrating Record Quarterly Revenue of $10.9m

Record Q2 2023 revenue of $10.9M, an increase of 205% from Q2 2022

Record Q2 2023 income from operations of $235K, compared to a loss of $394K in Q2 2022

Q2 2023 gross profit of $2.6M, compared to $1.1M in Q2 2022, an increase of 135%

LANGLEY, BC / ACCESSWIRE / August 17, 2023 / Adastra Holdings Ltd. (CSE:XTRX)(FRA:D2EP) ("Adastra" or the "Company"), a leading cannabis processor and producer of two top Canadian concentrates brands, with a focus on product innovation and commercialization for adult-use and medical markets, is pleased to report financial results for the three and six months ended June 30, 2023.

"The initial half of this year marked a significant milestone for Adastra, as we achieved a 248% increase in revenue compared to the first six months of 2022. This impressive growth is a testament to the resilience and adaptability of our hard working team," said Michael Forbes, CEO of Adastra. "In Q2 2023, our focus was directed towards enhancing the efficiency and scope of operations at our centralized processing facility in Langley, BC. Simultaneously, our team diligently undertook initiatives to amplify the recognition of our two brands, Endgame and Phyto Extractions, across Canada. Adastra's premium product range has continued to maintain its leadership position within the market, with top-selling SKUS in Alberta and British Columbia, and now includes a top-selling SKU in Ontario. Heading into the next quarter, we remain focused to set new records, maintain our market leadership across Canada, and continue to generate revenue from our four primary verticals."

Key Q2 2023 Financial Highlights

• Revenue of $10.9M in Q2 2023, compared to $3.6M in Q2 2022, representing an increase of 205%, due to a significant increase in the throughput of the Langley facility.
• Revenue experienced a 15% increase from Q1 2023 to Q2 2023.
• Gross profit of $2.6M in Q2 2023, compared to $1.1M in Q2 2022, representing an increase of 135%. This was achieved by increasing the economies of scale of production as well as managing the costs of inputs of production.
• Operating expenses as a percentage of revenue decreased from 42% in Q2 2022 to 21% in Q2 2023.
• Cash position as at June 30, 2023 increased to $2M, an increase of $103K from March 31, 2023. The Company continues to closely monitor and manage cash.
• Inventory levels decreased to $3.3M at June 30, 2023, due to the Company clearing out Phyto Extractions inventory that was bought back during 2022 in connection with the termination of a legacy license agreement. This resulted in a one-time impairment of inventory totaling $482K.
• Operating expenses increased 57% from $1.5M during Q2 2022 to $2.3M during Q2 2023 which was the result of the Company's expansion during the period, especially from an increase in advertising and promotion. The Company raised awareness of its operational successes and incurred costs by the sales team as it expanded its reach to more provincial distributors. The Company also worked to build brand awareness of the Endgame and Phyto Extractions product lines by hosting events. These investments in the brand are expected to result in higher sales for future periods.

Key Q2 2023 Future-Looking Corporate and Business Highlights