6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the date of November 29, 2023

Commission File Number 000-56365

Adastra Holdings Ltd.

(Translation of registrant's name into English)

5451 - 275 Street, Langley, British Columbia Canada V4W 3X8

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F [X] Form 40-F [ ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) [ ]

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6- K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

SUBMITTED HEREWITH

99.1	Interim Financial Statements for September 30, 2023
99.2	Management's Discussion and Analysis for September 30, 2023
99.3	CEO Certification for September 30, 2023
99.4	CFO Certification for September 30, 2023
99.5	News Release dated November 29, 2023

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Adastra Holdings Ltd.

/s/ Michael Forbes

Michael Forbes, Chief Executive Officer

Date: November 29, 2023

Adastra Holdings Ltd.: Exhibit 99.1 - Filed by newsfilecorp.com

Adastra Holdings Ltd.

(formerly Phyto Extractions Inc.)

Condensed Interim Consolidated Financial Statements

For the nine months ended September 30, 2023 and 2022

(Unaudited - Expressed in Canadian dollars)

Notice of Disclosure of Non-Auditor Review

Pursuant to subsection 4.3(3)(a) of National Instrument 51-102 - Continuous Disclosure Obligations, issued by the Canadian Securities Administrators, if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed interim consolidated financial statements of Adastra Holdings Ltd. (the "Company") for the interim period ended September 30, 2023 and 2022, have been prepared in accordance with the International Accounting Standard 34 Interim Financial Reporting, as issued by the International Accounting Standards Board, and are the responsibility of the Company's management.

The Company's independent auditors have not performed a review of these condensed interim consolidated financial statements.

November 29, 2023

ADASTRA HOLDINGS LTD.<br><br> <br>Condensed Interim Consolidated Statements of Financial Position<br><br> <br>As at September 30, 2023 and December 31, 2022<br><br> <br>(Unaudited - Expressed in Canadian dollars)
	Note	September 30, 2023	December 31,2022
---	---	---	---
ASSETS
Current assets
Cash		1,780,686	1,013,867
Amounts receivable	4	4,374,637	3,561,765
Prepaid expenses and deposits	5	463,193	414,212
Inventory	6	3,701,350	4,005,282
		10,319,866	8,995,126
Long-term deposits	5	512,000	512,000
Property and equipment	7	9,392,892	9,726,822
Intangible assets	8	2,827,958	3,133,808
Goodwill	9	9,436,189	9,436,189
Total assets		32,488,905	31,803,945
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	10,15	11,831,647	8,545,048
Current portion of lease liability	11	16,155	17,640
Current portion of mortgage payable	12	-	3,507,389
Loan payable	13	66,365	314,555
Deferred revenue		-	275,575
		11,914,167	12,660,207
Deferred tax liability		768,000	808,000
Lease liability	11	91,941	45,948
Mortgage payable	12	3,479,284	-
Government loan		60,000	60,000
Total liabilities		16,313,392	13,574,155
SHAREHOLDERS' EQUITY
Share capital	14	29,964,446	29,964,446
Reserves	14	6,474,732	6,474,732
Deficit		(20,263,664	(18,209,388
Total shareholders' equity		16,175,514	18,229,790
Total liabilities and shareholders' equity		32,488,905	31,803,945

All values are in US Dollars.

Nature of operations and going concern (Note 1)

Commitments and contingencies (Note 18)

Subsequent events (Notes 12 & 13)

Approved on behalf of the Board of Directors on November 29, 2023:

"Michael Forbes"	"Paul Morgan"
Director	Director

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

ADASTRA HOLDINGS LTD.<br><br> <br>Condensed Interim Consolidated Statements of Loss and Comprehensive Loss<br><br> <br>For the nine months ended September 30, 2023 and 2022<br><br> <br>(Unaudited - Expressed in Canadian dollars, except number of shares)
		Three months endedSeptember 30,		Nine months endedSeptember 30,
---	---	---	---	---	---
	Note	2023	2022	2023	2022
Revenue		8,142,225	5,451,638	28,542,227	11,314,414
Excise taxes		(3,792,096)	(1,647,851)	(11,319,734)	(2,172,352)
Net revenue		4,350,129	3,803,787	17,222,493	9,142,062
Cost of sales	6,8	(2,125,784	(2,168,330	(10,758,365	(5,584,825
Gross profit		2,224,345	1,635,457	6,464,128	3,557,237
Operating expenses
Advertising and promotion		894,828	313,109	1,944,512	864,241
Data program expenses		435,558	462,650	1,007,321	828,370
Depreciation and amortization	7,8	140,010	148,112	399,504	444,420
Insurance		64,223	52,368	166,164	134,161
Office expenses		257,500	194,330	837,591	509,474
Professional fees and consulting	15	190,090	288,788	784,536	794,097
Repair and maintenance expenses		35,419	47,946	126,347	137,911
Share-based payments		-	138,713	-	138,713
Travel		49,635	44,019	107,363	106,370
Wages and salaries	15	539,242	368,979	1,479,035	1,041,554
Total operating expenses		2,606,505	2,059,014	6,852,373	4,999,311
Income (Loss) from operations		(382,160	(423,557	(388,245	(1,442,074
Other expense
Interest expense	11,12,13	(260,221	(57,708	(691,926	(190,492
Bad debt expense	4	(7,810	-	(482,578	-
Impairment of inventory	6	-	-	(482,103	-
Loss before income taxes		(650,191	(481,265	(2,044,852	(1,632,566
Deferred income tax recovery		8,000	22,000	40,000	78,000
Income tax expense		-	-	(49,424	(47,149
Net loss and comprehensive loss		(642,191	(459,265	(2,054,276	(1,601,715
Net loss per share
Basic and diluted		(0.01	(0.01	(0.04	(0.03
Weighted average number of common shares outstanding	****
Basic and diluted		55,970,547	55,970,547	55,970,547	60,308,782

All values are in US Dollars.

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

ADASTRA HOLDINGS LTD.<br><br> <br>Condensed Interim Consolidated Statements of Cash Flows<br><br> <br>For the nine months ended September 30, 2023 and 2022<br><br> <br>(Unaudited - Expressed in Canadian dollars, except number of shares)
	Nine months endedSeptember 30,
---	---	---
	2023	2022
Operating activities
Net loss and comprehensive loss for the period	(2,054,276	(1,601,715
Adjustments for non-cash items:
Depreciation and amortization	399,504	444,420
Depreciation - cost of sales	641,518	552,169
Interest expense	393,810	190,492
Deferred income tax recovery	(40,000	(78,000
Income tax expense	49,424	47,149
Impairment of inventory	482,103	-
Share-based payments	-	138,713
Bad debt expense	482,578	-
Net change in non-cash working capital items:
Amounts receivable	(1,295,450	(2,657,498
Prepaid expenses and deposits	(48,981	(462,443
Inventory	(178,171	(6,735
Accounts payable and accrued liabilities	3,679,034	3,540,236
Deferred revenue	(275,575	-
Cash provided by operating activities	2,235,517	106,788
Investing activities
Purchases of property and equipment	(761,695	(327,379
Cash used in investing activities	(761,695	(327,379
Financing activities
Interest paid - mortgage	(291,273	(170,625
Interest paid - lease liability	(6,843	(2,152
Principal repaid - lease liability	(12,309	(14,392
Repayment of loans payable	(361,578	-
Mortgage renewal fee	(35,000	-
Cash used in financing activities	(707,003	(187,169
Net increase (decrease) in cash	766,819	(407,760
Cash, beginning of period	1,013,867	744,541
Cash, end of period	1,780,686	336,781

All values are in US Dollars.

Supplemental cash flow information (Note 16)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

ADASTRA HOLDINGS LTD.<br><br> <br>Condensed Interim Consolidated Statements of Changes in Shareholder’s Equity<br><br> <br>(Unaudited - Expressed in Canadian dollars, except number of shares)
	Commonshares		Share capital	Shares to becancelled	Reserves	Deficit	Total
---	---	---	---	---	---	---	---
	#				$
Balance, December 31, 2021	65,970,547		41,964,446	(12,000,000	6,336,019	(13,927,749	22,372,716
Share returned to treasury	(10,000,000	)	(12,000,000	12,000,000	-	-	-
Loss for the period	-		-	-	-	(908,091	(908,091
Balance, September 30, 2022	55,970,547		29,964,446	-	6,336,019	(14,835,840	21,464,625
Balance, December 31, 2022	55,970,547		29,964,446	-	6,474,732	(18,209,388	18,229,790
Loss for the period	-		-	-	-	(2,054,276	(2,054,276
Balance, September 30, 2023	55,970,547		29,964,446	-	6,474,732	(20,263,664	16,175,514

All values are in US Dollars.

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

ADASTRA HOLDINGS LTD.<br><br> <br>Notes to the Condensed Interim Consolidated Financial Statements<br><br> <br>For the nine months ended September 30, 2023 and 2022<br><br> <br>(Unaudited - Expressed in Canadian dollars, except number of shares)

NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN

Adastra Holdings Ltd. (the "Company") was incorporated under the laws of the province of British Columbia on October 14, 1987. The Company extracts and processes cannabis for sale to the recreational and medical markets in Canada. The Company is listed on the Canadian Securities Exchange ("CSE") under the symbol "XTRX". The Company's head office is located at 5451 275th Street, Langley City, British Columbia, V4W 3X8 and its registered and records office is located at 2200-885 West Georgia Street, Vancouver, British Columbia, V6C 3E8.

On August 10, 2021, the Company completed the acquisition of all of the issued and outstanding shares of 1225140 B.C. Ltd., doing business as PerceiveMD ("PerceiveMD") from the shareholders of PerceiveMD, pursuant to the terms of a share purchase agreement dated August 10, 2021.

On September 15, 2021, the Company completed the acquisition of privately held 1204581 B.C. Ltd., doing business as Phyto Extractions ("Phyto BrandCo"), the owner of the intellectual property rights for the Phyto Extractions brand.

These condensed interim consolidated financial statements are prepared on the basis that the Company will continue as a going concern, which assumes that the Company will be able to continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of operations. These condensed interim consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue in existence. The Company's ability to continue as a going concern is dependent on its ability to generate positive cash flows from operations, complete additional financings, and/or extend or modify its mortgage payable (Note 12).

As at September 30, 2023, the Company had a working capital deficiency of $1,594,300 (December 31, 2022 - $3,665,081). During the nine months ended September 30, 2023, the Company incurred a net loss and comprehensive loss of $2,054,276 (2022 - $1,142,450). These events and conditions indicate a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. If the going concern assumption were not appropriate for these condensed interim financial statements, it could be necessary to restate the Company's assets and liabilities on a liquidation basis.

NOTE 2 - BASIS OF PRESENTATION

(a) Statement of compliance

These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"). As such, these condensed interim consolidated financial statements do not contain all the disclosures required by IFRS for annual financial statements and should be read in conjunction with the Company's audited annual consolidated financial statements for the years ended December 31, 2022, 2021, and 2020.

These condensed interim consolidated financial statements were approved by the Board of Directors and authorized for issue on November 29, 2023.

(b) Basis of measurement

These condensed interim consolidated financial statements have been prepared on a historical cost basis except for those financial instruments which have been classified at fair value through profit or loss. In addition, except for cash flow information, these condensed interim consolidated financial statements have been prepared using the accrual method of accounting.

All amounts in these condensed interim consolidated financial statements are presented in Canadian dollars which is the functional currency of the Company and its subsidiaries.

ADASTRA HOLDINGS LTD.<br><br> <br>Notes to the Condensed Interim Consolidated Financial Statements<br><br> <br>For the nine months ended September 30, 2023 and 2022<br><br> <br>(Unaudited - Expressed in Canadian dollars, except number of shares)

NOTE 2 - BASIS OF PRESENTATION (continued)

(c) Principles of consolidation

These condensed interim consolidated financial statements include the financial information of the Company and entities controlled by the Company. Control exists where the parent entity has power over the investee and is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are included in the condensed interim consolidated financial statements from the date control commences until the date control ceases. All intercompany transactions and balances are eliminated on consolidation. The accounting policies of subsidiaries are changed where necessary to align them with the policies adopted by the Company. These condensed interim consolidated financial statements incorporate the accounts of the Company and the following subsidiaries:

	Functionalcurrency	Ownershippercentage
Adastra Labs Holdings (2019) Ltd. (formerly Adastra Labs Holdings Ltd.)	CAD	100%
Adastra Labs Inc.	CAD	100%
1178562 B.C. Ltd.	CAD	100%
Adastra Brands Inc.	CAD	100%
Chemia Analytics Inc. ("Chemia")	CAD	100%
1225140 B.C. Ltd ("PerceiveMD")	CAD	100%
1204581 B.C. Ltd. ("Phyto BrandCo")	CAD	100%

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied in the preparation of these condensed interim consolidated financial statements are consistent with those applied and disclosed in note 3 of the consolidated financial statements for the years ended December 31, 2022, 2021 and 2020.

The preparation of the condensed interim consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, revenues and expenses. Management continually evaluates these judgments, estimates and assumptions based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates and judgments which may cause a material adjustment to the carrying amounts of assets and liabilities. The Company's interim results are not necessarily indicative of its results for a full year. The critical judgements and estimates applied in the preparation of these interim financial statements are consistent with those applied and disclosed in Note 3 to the consolidated financial statements for the years ended December 31, 2022, 2021 and 2020.

(a) Standards issued but not yet effective

Certain pronouncements have been issued by the IASB or IFRIC that are effective for accounting periods beginning on or after October 1, 2023. The Company has reviewed these updates and determined that many of these updates are not applicable or consequential to the Company and have been excluded from discussion within these significant accounting policies.

Amendments to IAS 1 - Presentation of Financial Statements

In October 2022, the IASB issued amendments to IAS 1, Presentation of Financial Statements titled Non-current liabilities with covenants. These amendments sought to improve the information that an entity provides when its right to defer settlement of a liability is subject to compliance with covenants within 12 months after the reporting period. These amendments to IAS 1 override but incorporate the previous amendments, Classification of liabilities as current or non-current, issued in January 2020, which clarified that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Liabilities should be classified as non-current if a company has a substantive right to defer settlement for at least 12 months at the end of the reporting period. The amendments are effective January 1, 2024, with early adoption permitted. Retrospective application is required on adoption. We do not expect these amendments to have a material effect on our financial statements.

ADASTRA HOLDINGS LTD.<br><br> <br>Notes to the Condensed Interim Consolidated Financial Statements<br><br> <br>For the nine months ended September 30, 2023 and 2022<br><br> <br>(Unaudited - Expressed in Canadian dollars, except number of shares)

NOTE 4 - AMOUNTS RECEIVABLE

As at September 30, 2023 and December 31, 2022, amounts receivables consisted of the following:

	September 30,<br>2023	December 31,<br>2022
	$	$
Trade receivables, net of expected credit losses	4,374,637	3,561,765
	4,374,637	3,561,765

During the nine months ended September 30, 2023, the Company recorded a bad debt expense of $482,578 (2022 - $nil) related to a provision for expected credit losses against trade receivables.

NOTE 5 - PREPAID EXPENSES AND DEPOSITS

As at September 30, 2023 and December 31, 2022, prepaid expenses and deposits consisted of the following:

	September 30,<br>2023	December 31,<br>2022
	$	$
Prepaid expenses	150,731	379,456
Deposits	312,462	34,756
	463,193	414,212

As at September 30, 2023, deposits of $312,462 (December 31, 2022 - $34,756), consist of security deposits, deposits for inventory ordered and deposits for equipment that has been ordered.

Long-term deposits of $512,000 (December 31, 2022 - $512,000) consist of deposits held in trust for excise bond and other deposits.

NOTE 6 - INVENTORY

As at September 30, 2023 and December 31, 2022, inventory consisted of the following:

	September 30,<br>2023	December 31,<br>2022
	$	$
Dried cannabis, terpenes and solvents	331,737	262,517
Packaging	1,000,963	446,994
Production work in process	1,547,908	1,616,623
Finished goods	820,742	1,679,148
	3,701,350	4,005,282

Inventory expensed to cost of sales during the nine months ended September 30, 2023 was $9,119,784 (2022 - $5,032,656).

During the nine months ended September 30, 2023, the Company recognized $482,103 (2022 - $nil) in relation to the write down of slow-moving inventory.

ADASTRA HOLDINGS LTD.<br><br> <br>Notes to the Condensed Interim Consolidated Financial Statements<br><br> <br>For the nine months ended September 30, 2023 and 2022<br><br> <br>(Unaudited - Expressed in Canadian dollars, except number of shares)

NOTE 7 - PROPERTY AND EQUIPMENT

The following table summarizes the continuity of property and equipment as at September 30, 2023 and December 31, 2022:

	Land	Building	Furnitureandequipment	Computersoftware	Laboratoryequipment	Extractionequipment	Buildingimprovements	Right-of-useasset	Total
	$	$	$	$	$	$	$
Cost
Balance, December 31, 2021	1,592,232	1,999,328	157,784	12,105	469,215	3,253,988	3,928,281	40,376	11,453,309
Additions	-	-	21,361	-	772,956	45,652	30,127	49,968	920,064
Balance, December 31, 2022	1,592,232	1,999,328	179,145	12,105	1,242,171	3,299,640	3,958,408	90,344	12,373,373
Additions	-	-	154,545	-	89,481	74,811	-	82,333	401,170
Disposal	-	-	-	-	-	-	-	(40,376	(40,376
Balance, September 30, 2023	1,592,232	1,999,328	333,690	12,105	1,331,652	3,374,451	3,958,408	132,301	12,734,167
Accumulated depreciation
Balance, December 31, 2021	-	316,479	40,024	3,872	98,189	873,897	342,517	3,365	1,678,343
Depreciation	-	99,967	27,326	1,649	144,721	480,881	197,539	16,125	968,208
Balance, December 31, 2022	-	416,446	67,350	5,521	242,910	1,354,778	540,056	19,490	2,646,551
Depreciation	-	74,973	32,739	987	147,389	296,267	148,443	17,479	718,277
Disposal	-	-	-	-	-	-	-	(23,553	(23,553
Balance, September 30, 2023	-	491,419	100,089	6,508	390,299	1,651,045	688,499	13,416	3,341,275
Carrying value
Balance, December 31, 2022	1,592,232	1,582,882	111,795	6,584	999,261	1,944,862	3,418,352	70,854	9,726,822
Balance, September 30, 2023	1,592,232	1,507,909	233,601	5,927	941,353	1,723,406	3,269,909	118,885	9,392,892

All values are in US Dollars.

During the nine months ended September 30, 2023, the Company allocated $641,518 (2022 - $552,169) of depreciation to the production of inventory and $93,654 (2022 - $138,570) to operating expenses.

ADASTRA HOLDINGS LTD.<br><br> <br>Notes to the Condensed Interim Consolidated Financial Statements<br><br> <br>For the nine months ended September 30, 2023 and 2022<br><br> <br>(Unaudited - Expressed in Canadian dollars, except number of shares)

NOTE 8 - INTANGIBLE ASSETS

The following table summarizes the continuity of intangible assets as at September 30, 2023 and December 31, 2022:

	Trademarks	Patientrelationships	Total
	$	$	$
Cost
Balance, December 31, 2022 and 2021	3,250,000	414,000	3,664,000
Additions	-	-	-
Balance, September 30, 2023	3,250,000	414,000	3,664,000
Accumulated depreciation
Balance, December 31, 2021	94,792	27,600	122,392
Amortization	325,000	82,800	407,800
Balance, December 31, 2022	419,792	110,400	530,192
Amortization	243,750	62,100	305,850
Balance, September 30, 2023	663,542	172,500	836,042
Carrying value
Balance, December 31, 2022	2,830,208	303,600	3,133,808
Balance, September 30, 2023	2,586,458	241,500	2,827,958

Trademarks

During the year ended December 31, 2021, the Company acquired a total of $3,250,000 in Trademarks. These Trademarks have a useful life of 10 years and are measured at cost less accumulated amortization and impairment losses. These Trademarks are amortized on a straight-line basis over their estimated useful lives. Useful lives, residual values, and amortization methods for intangible assets with finite useful lives are reviewed at least annually.

On October 3, 2022, the Company terminated the license agreement with the previous Trademark licensee who had sole use of the Trademarks acquired pursuant to the Phyto BrandCo acquisition. As a result, the Company now retains all rights to the Trademarks and will begin selling the related cannabis consumer packaged goods directly to provincial distributors and retailers. During the year ended December 31, 2022, the Company recorded a $1,542,492 loss on the termination of the license agreement.

Patient Relationships

During the year ended December 31, 2021, the Company acquired a total of $414,000 in Patient Relationships. These relationships have a useful life of 5 years and are measured at cost less accumulated amortization and impairment losses. These relationships are amortized on a straight-line basis over their estimated useful lives. Useful lives, residual values, and amortization methods for intangible assets with finite useful lives are reviewed at least annually.

NOTE 9 - GOODWILL

The following table summarizes the continuity of goodwill for the nine months ended September 30, 2023 and the year ended December 31, 2022:

	September 30,<br>2023	December 31,2022
****	$
Opening balance	9,436,189	11,108,422
Impairment - PerceiveMD	-	(1,672,233
Closing balance	9,436,189	9,436,189

All values are in US Dollars.

ADASTRA HOLDINGS LTD.<br><br> <br>Notes to the Condensed Interim Consolidated Financial Statements<br><br> <br>For the nine months ended September 30, 2023 and 2022<br><br> <br>(Unaudited - Expressed in Canadian dollars, except number of shares)

NOTE 10 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

As at September 30, 2023 and December 31, 2022, accounts payable and accrued liabilities consisted of the following:

	September 30,<br>2023	December 31,<br>2022
	$	$
Accounts payable	2,055,928	2,992,928
Accrued liabilities	279,751	549,747
Excise tax payable	8,934,120	4,153,096
Income tax payable	139,082	89,658
Sales tax payable	489,130	759,619
	11,898,011	8,545,048

NOTE 11 - LEASE LIABILITY

A summary of the Company's lease liabilities for the nine months ended September 30, 2023 and the year ended December 31, 2022 is as follows:

	September 30,2023	December 31,2022
Opening balance	63,588	32,155
Additions - equipment	82,333	49,968
Disposal	(25,516	-
Interest	6,843	3,810
Repayments	(19,152	(22,345
Closing balance	108,096	63,588
Less: current portion	(16,155	(17,640
Long-term portion	91,941	45,948

All values are in US Dollars.

On October 15, 2020, prior to being acquired by the Company, Phyto BrandCo entered into a four-year lease agreement for a promotional vehicle. The base monthly payment is $1,119 with an initial payment of $9,732. The incremental borrowing rate used to discount the lease liability was 10%. During the nine months ended September 30, 2023, the vehicle was traded in for another promotional vehicle and the remaining lease liability of $25,516 was removed.

On August 15, 2022, the Company entered into a five-year lease agreement for a forklift. The base monthly payment is $815 with an initial payment of $6,477. The incremental borrowing rate used to discount the lease liability was 10%.

On June 15, 2023, the Company entered into a four-year lease for a promotional vehicle. The base monthly payment is $1,188 with an initial payment of $9,806. The incremental borrowing rate used to discount the lease liability was 16%.

NOTE 12 - MORTGAGE PAYABLE

	FourthMortgage	FifthMortgage	Sixth Mortgage	Total
Balance, December 31, 2021	3,501,554	-	-	3,501,554
New mortgage (refinancing)	(3,500,000	3,500,000	-	-
Transaction costs	-	(35,000	-	(35,000
Finance expense	131,154	174,884	-	306,038
Repayments	(132,708	(132,495	-	(265,203
Balance, December 31, 2022	-	3,507,389	-	3,507,389
New mortgage (refinancing)	-	(3,500,000	3,500,000	-
Transaction costs	-	-	(35,000	(35,000
Finance expense	-	216,859	81,309	298,168
Repayments	-	(224,248	(67,025	(291,273
Balance, September 30, 2023	-	-	3,479,284	3,479,284

All values are in US Dollars.

ADASTRA HOLDINGS LTD.<br><br> <br>Notes to the Condensed Interim Consolidated Financial Statements<br><br> <br>For the nine months ended September 30, 2023 and 2022<br><br> <br>(Unaudited - Expressed in Canadian dollars, except number of shares)

NOTE 12 - MORTGAGE PAYABLE (continued)

a) On July 9, 2021, the Company refinanced the third mortgage and increased the facility to $3,500,000 (the "Fourth Mortgage") which bears interest at the rate of 6.5% per annum, calculated monthly, for one year. The Forth Mortgage has a maturity date of July 1, 2022 and is secured by the mortgage property and building improvements.

The Fourth Mortgage payable was recorded at amortized cost (principal value less $42,778 transaction costs). The Company maintained minimum interest-only payments of $18,959 per month. On September 28, 2022, the Forth Mortgage was refinanced.

b) On September 28, 2022, the Company refinanced the Fourth Mortgage (the "Fifth Mortgage") which bears interest at the greater of 9.75% or the prime rate plus 4.30% per annum, calculated monthly, for one year. The Fifth Mortgage had a maturity date of November 1, 2023 and was secured by the mortgage property and building improvements.

The Fifth Mortgage payable was recorded at amortized cost (principal value less $35,000 transaction costs). The Company maintained minimum interest-only payments of $28,438 per month. On July 26, 2023, the Fourth Mortgage was refinanced.

c) On July 26, 2023, the Company refinanced the Fifth Mortgage (the "Sixth Mortgage") which bears interest at the greater of 11.49% or the prime rate plus 4.29% per annum, calculated monthly, for one year. The interest rate will increase to 15.99% or the prime rate plus 8.79% for the remainder of the term. The Sixth Mortgage has a maturity date of November 1, 2024 and is secured by the mortgage property and building improvements. The Sixth Mortgage payable was recorded at amortized cost (principal value less $35,000 transaction costs). At September 30, 2023, the carrying value of the Sixth Mortgage was $3,479,284 (December 31, 2022 - $nil).

At September 30, 2023, the Company maintained minimum interest-only payments of $33,513 per month. As at September 30, 2023, the total non-discounted remaining scheduled payments related to the mortgage including interest payments totaled $3,975,037 (December 31, 2022 - $3,822,505). Total interest expense during the nine months ended September 30, 2023 was $298,168 (2022 - $188,030).

NOTE 13 - LOAN PAYABLE

During the year ended December 31, 2022, the Company received a short-term loan of $300,000 with an interest rate of 1.5% per month. The loan is unsecured and is due on demand. Total interest expense related to the loan during the nine months ended September 30, 2023 was $47,023 (2022 - $nil). During the nine months ended September 30, 2023, the Company fully repaid the loan balance and accrued interest.

NOTE 14 - SHARE CAPITAL

(a) Authorized

Unlimited number of voting common shares without par value.

(b) Issued share capital

As at September 30, 2023, 55,970,547 common shares were issued and outstanding.

(c) Share issuances

During the nine months ended September 30, 2023, the Company had no share issuances.

During the year ended December 31, 2022, the Company had the following share transactions:

• On April 29, 2022, 10,000,000 common shares related to the amended agreement between the Company and former owners of Phyto BrandCo were returned to treasury and cancelled for no consideration.

ADASTRA HOLDINGS LTD.<br><br> <br>Notes to the Condensed Interim Consolidated Financial Statements<br><br> <br>For the nine months ended September 30, 2023 and 2022<br><br> <br>(Unaudited - Expressed in Canadian dollars, except number of shares)

NOTE 14 - SHARE CAPITAL (continued)

(d) Escrow shares

The Company entered into an Escrow Agreement in connection with closing the Reverse takeover ("RTO") on December 20, 2019, in relation to certain of its common shares which were placed in escrow. Pursuant to the Escrow Agreement the escrowed common shares are subject to a timed-release schedule whereby a 10% portion of the escrow shares will be released beginning on listing date, and 15% every six months thereafter until January 6, 2023. As at September 30, 2023, no common shares were held in escrow (December 31, 2022 - 1,300,000).

(e) Stock options

The Company has an incentive stock option plan (the "Plan") which provides for the granting of options. Under the Plan the maximum number of stock options issued cannot exceed 10% of the Company's currently issued and outstanding common shares. Options granted under the Plan may have a maximum term of ten years. A participant, who is not a consultant conducting investor relations activities, who is granted an option that is exercisable at the market price at the date of grant, will have their options vest immediately, unless otherwise determined by the Board of Directors. Options granted at below market prices will vest one-sixth every three months.

Options belonging to a participant who is a consultant conducting investor relations activities who is granted an option under the Plan will become vested with the right to exercise one-quarter of the option upon conclusion of every three months subsequent to the grant date. All options are to be settled by physical delivery of shares.

During the nine months ended September 30, 2023, the Company had no stock option grants.

During the year ended December 31, 2022, the Company had the following stock option grants:

• On August 19, 2022, the Company granted 300,000 stock options to a certain director for the purchase of up to 300,000 common shares at a price of $0.75 per share. Each stock option is exercisable for a period of five years. The fair value of these options was $138,713 ($0.46 per option) and was recognized as a share-based payment expense.

A summary of the changes in the Company's stock options outstanding and exercisable is as follows:

	Stock optionsoutstandingandexercisable		Weightaverage <br>exercise price
	#		$
As at December 31, 2021	3,715,001		1.45
Granted	300,000		0.75
Cancelled	(283,334	)	1.51
Expired	(66,667	)	1.35
As at December 31, 2022	3,665,000		1.40
Forfeited	(795,000	)	1.47
As at September 30, 2023	2,870,000		1.38

As at September 30, 2023, the Company had stock options outstanding and exercisable as follows:

Expiry date	Options outstanding <br>and exercisable	Weighted averageexercise price	Weighted averageremaining life
	#	$	Years
January 30, 2025	1,333,334	1.35	1.34
August 5, 2025	483,333	2.34	1.85
August 5, 2026	33,333	1.35	2.85
October 25, 2026	600,000	1.06	3.07
October 28, 2026	120,000	0.95	3.08
August 19, 2027	300,000	0.75	3.89
****	2,870,000	1.38	2.14
ADASTRA HOLDINGS LTD.<br><br> <br>Notes to the Condensed Interim Consolidated Financial Statements<br><br> <br>For the nine months ended September 30, 2023 and 2022<br><br> <br>(Unaudited - Expressed in Canadian dollars, except number of shares)
---

NOTE 14 - SHARE CAPITAL (continued)

(f) Warrants

As an incentive to complete a private placement the Company may issue units which include common shares and common share purchase warrants. Finders' warrants may be issued as a private placement share issue cost and are valued using the Black-Scholes option pricing model.

A summary of the changes in the Company's warrants outstanding and exercisable is as follows:

	Warrantsoutstandingandexercisable		Weightaverage <br>exercise price
	#		$
As at December 31, 2021	8,458,719		1.80
Expired	(8,335,992	)	1.80
As at December 31, 2022 and September 30, 2023	122,727		1.75

As at September 30, 2023, the Company had warrants outstanding and exercisable as follows:

Expiry date	Warrants outstanding <br>and exercisable	Weighted averageexercise price	Weighted averageremaining life
	#	$	Years
October 18, 2023^(1)^	122,727	1.75	0.05
****	122,727	1.75	0.05

^(1)^ Subsequent to September 30, 2023, 122,727 warrants expired unexercised.

NOTE 15 - RELATED PARTY TRANSACTIONS

Key management personnel are those having the authority and responsibility for planning, directing, and controlling the Company. There were no loans to key management personnel or directors, or entities over which they have control or significant influence at September 30, 2023 and December 31, 2022.

During the nine months ended September 30, 2023, no options were granted to Officers and Directors (2022 - nil).

The following related parties transacted with the Company or Company-controlled entities during the nine months ended September 30, 2023 and the year ended December 31, 2022:

• George Routhier was a former Director. He is the owner of Pipedreemz Inc., which provided advisory services to the Company. He resigned on June 23, 2022.
• Michael Forbes is a Director and the Company's President and CEO. He was appointed on April 29, 2021 and is the owner of MDC Forbes, which provides CEO services to the Company.
• Donald Dinsmore is a former Director and former COO of the Company. He was appointed on April 29, 2021 and left the Company on March 24, 2022.
• Oliver Foeste was the Company's CFO until January 1, 2023. He is the Managing Partner of Invictus Accounting Group LLP which provided the Company with CFO, accounting, and tax services.
• Paul Morgan is a Director of the Company. He was appointed on July 14, 2021.
• Smoke Wallin is a Director of the Company. He was appointed on May 16, 2022.
• Lachlan McLeod was appointed CFO of the Company on January 1, 2023 and was an employee of Fehr & Associates CPA ("F&A"), which provided accounting services to the Company. On June 2, 2023, the Company hired Mr. McLeod as an employee and the F&A agreement was subsequently terminated.

ADASTRA HOLDINGS LTD.<br><br> <br>Notes to the Condensed Interim Consolidated Financial Statements<br><br> <br>For the nine months ended September 30, 2023 and 2022<br><br> <br>(Unaudited - Expressed in Canadian dollars, except number of shares)

NOTE 15 - RELATED PARTY TRANSACTIONS (continued)

The aggregate value of transactions, excluding share-based payments, with key management personnel and directors and entities over which they have control or significant influence during the nine months ended September 30, 2023 and 2022 were as follows:

Nine months ended September 30	2023	2022
	$	$
Donald Dinsmore	-	104,863
Fehr & Associates	106,949	-
Invictus Accounting Group LLP	-	239,491
Lachlan McLeod	36,695	-
MDC Forbes Inc.	75,750	92,750
Pipedreemz Inc.	-	3,001
	219,394	440,105

As at September 30, 2023 and December 31, 2022, the Company had an outstanding accounts payable balance with related parties as follows:

	September 30, <br>2023	December 31,<br>2022
	$	$
Fehr & Associates	10,080	-
Invictus Accounting Group LLP	12,915	13,884
MDC Forbes Inc.	26,088	62,427
Michael Forbes	-	20,000
Pipedreemz Inc.	-	3,350
	49,083	99,661

All related party balances are unsecured and are due on demand without interest and incurred in the normal course of business.

The transactions with the key management personnel and directors are included in operating expenses as follows:

(a) Consulting fees and professional fees

Included CEO services by Michael Forbes, charged to the Company via MDC Forbes Inc., accounting services of the Company's former CFO, Oliver Foeste, charged to the Company via Invictus Accounting Group LLP, and accounting services of the Company's CFO, Lachlan McLeod, charged to the Company via F&A. During the nine months ended September 30, 2023, the Company incurred a placement fee of $52,500 to employ Lachlan McLeod directly and terminate the F&A agreement.

(b) Wages and salaries

Included services provided by Lachlan McLeod as CFO and Donald Dinsmore as former COO.

(c) Share-based payments

During the nine months ended September 30, 2023, stock options with a fair value of $138,713 were granted to Smoke Wallin.

ADASTRA HOLDINGS LTD.<br><br> <br>Notes to the Condensed Interim Consolidated Financial Statements<br><br> <br>For the nine months ended September 30, 2023 and 2022<br><br> <br>(Unaudited - Expressed in Canadian dollars, except number of shares)

NOTE 16 - SUPPLEMENTAL CASH FLOW INFORMATION

Nine months ended September 30	2023	2022
Non-cash financing activities
Shares returned to treasury	-	12,000,000
Non-cash investing activities
Equipment additions included in accounts payable and accrued liabilities	-	(387,000
Equipment acquired through a lease agreement	(82,333	(49,968
Equipment disposed through lease cancellation	25,516	-

All values are in US Dollars.

Total income tax paid in the nine months ended September 30, 2023 was $3,240 (2022 - $12,000).

NOTE 17 - FINANCIAL RISK MANAGEMENT

(a) Capital management

The Company's capital structure consists of all components of shareholders' equity. The Company's objective when managing capital is to maintain adequate levels of funding to support the current operations including corporate and administrative functions and to support operations. The Company obtains funding primarily through issuing common stock and through its mortgage payable. Future financing is dependent on market conditions and there can be no assurance the Company will be able to raise funds in the future.

There were no changes in the Company's approach to capital management during the nine months ended September 30, 2023. The Company is not subject to externally imposed capital requirements.

(b) Financial instruments - fair value

The Company's financial instruments consist of cash, trade receivables, deposits, accounts payable, mortgage payable, loan payable and government loan, all of which are classified as and measured at amortized cost.

As at September 30, 2023, the carrying values of cash, trade receivables, deposits, loans payable and accounts payable approximate their fair value because of the short-term nature of these instruments.

(c) Financial instruments - risk

The Company's financial instruments are exposed to certain financial risks, including credit risk, liquidity risk and interest rate risk.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to fulfill its contractual obligations.

The Company is exposed to credit risk through its cash balances held in financial institutions and trade receivables. The maximum exposure to credit risk is equal to the carrying value of such financial assets.

The objective of managing credit risk is to minimize potential losses on financial assets. The Company assesses the quality of its counterparties, taking into account their credit worthiness and reputation, past performance and other factors. The Company has recognized a provision for expected credit losses on its trade receivables.

Cash is only deposited with or held by institutions of high credit worthiness.

ADASTRA HOLDINGS LTD.<br><br> <br>Notes to the Condensed Interim Consolidated Financial Statements<br><br> <br>For the nine months ended September 30, 2023 and 2022<br><br> <br>(Unaudited - Expressed in Canadian dollars, except number of shares)

NOTE 17 - FINANCIAL RISK MANAGEMENT (continued)

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with its financial liabilities. The Company manages its liquidity risk by reviewing on an ongoing basis its cash position and if required raises funding through additional share capital issuances or debt financing.

As at September 30, 2023, the Company had a cash balance of $1,780,686 and current liabilities of $11,914,166 (December 31, 2022 - $1,013,867 and $12,660,207 respectively).

Interest rate risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company's mortgage payable and lease liabilities carry fixed interest rates and as such, the Company is not exposed to interest rate risk.

(d) Economic dependence

Economic dependence risk is the risk of reliance upon a select number of customers which significantly impact the financial performance of the Company. During the nine months ended September 30, 2023, three customers represented approximately 82% of the Company's revenue (2022 - 83%). These significant customers represent certain provincial distributors.

NOTE 18 - COMMITMENTS AND CONTINGENCIES

A summary of undiscounted liabilities and future operating commitments as at September 30, 2023, are as follows:

****	Total	Within 1 year	2 - 5 years
Maturity analysis of financial liabilities	$	$	$
Accounts payable and accrued liabilities	11,898,011	11,898,011	-
Lease liability	147,641	30,197	117,444
Mortgage payable	3,975,038	428,400	3,546,638
Government loan	60,000	-	60,000
	16,080,690	12,356,608	3,724,082

Contingencies

On March 15, 2023, the Company was served with a civil claim filed in the Supreme Court of British Columbia pursuant to the Class Proceedings Act, R.S.B.C. 1996, c. 50 alleging that the Company's press release of February 22, 2023 misstated certain material facts which mislead the plaintiff in the claim. The suit also names the Company's subsidiary ALI. and the Company's Chief Executive Officer. The Company denies the allegations in the claim and specifically that the press release was misleading. No specific amount of damages is claimed.

NOTE 19 - SEGMENTED INFORMATION

Reportable segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources, and in assessing performance.

The Company's chief operating decision makers are the Chief Executive Officer and the Chief Financial Officer. They review the operating performance of the Company by two segments comprised of manufacturing and non-manufacuring operations. The manufacturing operations includes the manufacturing, sale and distribution of cannabis related products. The non-manufacturing operations include PerceiveMD. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The chief operating decision makers utilize gross profit as a key measure in making operating decisions and assessing performance. The non-manufacturing segment is immaterial and, accordingly, segmented figures are not presented.

Adastra Holdings Ltd.: Exhibit 99.2 - Filed by newsfilecorp.com

Adastra Holdings Ltd.

(formerly Phyto Extractions Inc.)

MANAGEMENT'S DISCUSSION AND ANALYSIS

For the nine months ended September 30, 2023 and 2022

This management's discussion and analysis ("MD&A") of the financial condition and results of operations of Adastra Holdings Ltd., together with its wholly-owned subsidiaries (the "Company" or "Adastra") constitutes management's review of the factors that affected the Company's financial and operating performance for the nine months ended September 30, 2023 and 2022. This MD&A has been prepared in compliance with the requirements of National Instrument 51-102 Continuous Disclosure Obligations. This MD&A should be read in conjunction with Adastra's unaudited condensed interim consolidated financial statements for the nine months ended September 30, 2023 and 2022, and the audited consolidated financial statements for the years ended December 31, 2022, 2021 and 2020 which have been prepared in accordance with International Financial Reporting Standards ("IFRS").

The results for the periods presented are not necessarily indicative of the results that may be expected for any future period. Except as otherwise indicated, all financial data in this MD&A has been prepared in accordance with IFRS issued by the International Accounting Standards Board and interpretations of the International Financial Reporting Interpretations Committee.

All monetary amounts in the MD&A are expressed in Canadian dollars, except number of shares, or as otherwise indicated. Additional information regarding the Company is available on SEDAR at www.sedar.com, and the Company's website www.adastraholdings.ca. This MD&A has been prepared effective as of November 29, 2023.

The Company's condensed interim consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes that the Company will be able to continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of operations. The Company's ability to continue as a going concern is dependent on its ability to generate positive cash flows from operations, complete additional financings, and/or extend or modify its mortgage payable. The Company's condensed interim consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue in existence.

FORWARD-LOOKING STATEMENTS

This MD&A contains certain forward-looking information within the meaning of Canadian securities laws (collectively referred to herein as "forward looking statements"). These statements relate to future events or the Company's future performance. All statements other than statements of historical fact are forward-looking statements. Any statements contained herein that are not statements of historical fact may be deemed to be forward looking statements, including those identified by the expressions "considers", "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved", or the negative of these terms or comparable terminology. In this document, certain forward-looking statements are identified by words including "may", "future", "expected", "will", "intends", and "estimates".

Such forward-looking statements are based on numerous assumptions, including among others, the Company's ability to create long-term value for its shareholders and establish itself as a premier cannabis processing company; the Company's ability to grow market share; the Company's ability to develop new and innovative products, including but not limited to cannabis extracts such as oils, tinctures, sprays, capsules and soft gels; the Company's ability to operate in a cost-efficient manner; the Company's ability to fulfill consumer demand in Canada; the Company's expectations with respect to future increases in product output; the Company's ability to fulfill current and future orders; the Company's expectations with respect to continuing demand for its products; the Company's expectations with respect to the expansion of its line of cannabis products; the Company's ability to achieve positive cash flow from operations; the Company's ability to expand into new provincial and territorial markets; the Company's expectations with respect to maintaining a competitive advantage over competitors; the Company's ability to finance operating costs with current cash on hand and cash flow from operations; the Company's expectations with respect to other economic, business, and/or competitive factors; the Company's expectations with respect to the validity, use and scope of its licences throughout Canada; and the Company's expectations with respect to its regulatory and statutory obligations.

Forward-looking statements are not guarantees of future performance, but are instead based on the reasonable assumptions and estimates of management of the Company at the time they are made and involve known and unknown risks, uncertainties and other factors that may cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements contained in this MD&A. Such factors include, but are not limited to the factors discussed in the section entitled "Risks and Uncertainties" herein.

Forward-looking statements contained herein are made as of the date of this MD&A and, other than as required by law, the Company disclaims any obligation to update publicly or otherwise revise any forward-looking statements or the foregoing list of factors, whether as a result of new information, future events or results or otherwise. Additionally, the Company undertakes no obligation to comment on analysis, expectations or statements made by third parties in respect of its financial/operating results or securities.

There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Readers are cautioned that the foregoing list of important factors and assumptions is not exhaustive and all forward-looking statements herein are qualified by this cautionary statement. Accordingly, readers should not place undue reliance on forward-looking statements.

The forward-looking statements contained herein are based on information available as of November 29, 2023.

NATURE OF OPERATIONS AND GOING CONCERN

Adastra Holdings Ltd. was incorporated under the laws of the province of British Columbia on October 14, 1987. The Company extracts and processes cannabis for sale to the recreational and medical markets in Canada using its state-of-the-art large scale extraction facility to produce a variety of products including vape pens, wax, resin, infused pre-rolls, diamonds and shatter. The Company is listed on the Canadian Securities Exchange ("CSE") under the symbol "XTRX". The Company's head office is located at 5451 275th Street, Langley City, British Columbia, V4W 3X8 and its registered and records office is located at 2200-885 West Georgia Street, Vancouver, British Columbia, V6C 3E8.

On August 10, 2021, the Company acquired all of the issued and outstanding shares of 1225140 B.C. Ltd., doing business as PerceiveMD ("PerceiveMD"). At closing, the Company issued 2,513,720 common shares to the former shareholders of PerceiveMD at a share price on the date of acquisition of $0.80 per share for $2,010,976 and $10,000 in cash, for total consideration of $2,020,976. PerceiveMD is a multidisciplinary, patient-focused center providing comprehensive assessments for medical cannabis therapies.

On September 1, 2021, the Company changed its name to Adastra Holdings Ltd. Trading of the Company's common shares resumed under the new name and under the same ticker symbol "XTRX" on the CSE as the market opened on September 1, 2021. Prior to this on April 9, 2021 the Company changed its name from Adastra Labs Holdings Ltd. to Phyto Extractions Inc. and on December 19, 2019 from Arrowstar Resources Ltd to Adastra Labs Holdings Ltd.

On September 15, 2021, the Company acquired all of the issued and outstanding shares of Phyto BrandCo, the owner of the intellectual property rights for the Phyto Extractions brand. At closing, the Company issued 20,000,000 common shares to the former shareholders of Phyto BrandCo at a share price on the date of acquisition of $1.20 per share, for total consideration of $24,000,000. Subsequent to the closing of the acquisition, the Company renegotiated terms of the acquisition with the former shareholders of Phyto BrandCo. It was resolved that the consideration be amended from $24,000,000 to $12,000,000 by a voluntary return to treasury of 10,000,000 common shares. Phyto BrandCo licences its intellectual property to Canadian cannabis licence holders and collects royalties from the licence holders, from sales of cannabis consumer packaged goods to provincial distributors and retailers.

HIGHLIGHTS

The Company's focus for the nine months ended September 30, 2023 included the expansion and increased efficiency of its operations at its centralized processing facility in Langley, BC. As of the date of this MD&A, the Company is focused on generating revenue from four primary verticals: processing cannabis for sale to the recreational and medical markets; service fees for cannabis consultations; educational fees for clients' referral to licenced cannabis producers; and the licensing of cannabis trademarks.

During the nine months ended September 30, 2023, the Company had the following breakdown of revenues:

• Cannabis manufacturing revenues

• Cannabis product sales of $28,017,816

• White label manufacturing and tolling revenues of $251,561

• Cannabis consultation fees and referral revenues of $272,850

• Licensing revenues of $nil

The Company had gross revenue of $28,542,227 for the nine months ended September 30, 2023 compared to $11,314,414 for the nine months ended September 30, 2022. This represents a 152% increase in gross revenues from the comparable period.

Excise taxes of $11,319,734 were incurred during the nine months ended September 30, 2023 compared to $2,172,352 in the comparable period.

The Company achieved a gross profit of $6,464,128 for the nine months ended September 30, 2023 compared to $3,557,237 in the comparable period, achieving a growth of 82%. This was achieved by increasing the economies of scale of production as well as managing the costs of inputs of production. Inflation had a minimal impact on the costs of inputs for the Company as these were offset by the Company being able to purchase larger quantities at lower prices per unit. In addition, the Company has continued its transition to increase the sales of higher margin products.

The Company had cash of $1,780,686 at September 30, 2023 compared to $1,013,867 as at December 31, 2022. The Company continues to closely monitor and manage cash.

Working capital deficit as at September 30, 2023 was $1,594,300 compared to $3,665,081 as at December 31, 2022. During the nine months ended September 30, 2023, the Company renewed the $3,500,000 mortgage with a new maturity date of November 1, 2024.

Operating expenses increased from $4,999,311 in the nine months ended September 30, 2022 to $6,852,373 during the nine months ended September 30, 2023. This represents an increase in operating expenses of 37% from the comparable period. The Company reduced operating expenses as a percentage of gross revenues from 44% during the nine months ended September 30, 2022 to 24% during the nine months ended September 30, 2023. This reduction in operating expenses as a percentage of revenues demonstrates the Company's ability to keep operation costs stable while continuing to grow revenues.

For the nine months ended September 30, 2023, the Company had a net loss and comprehensive loss of $2,054,276 (2022 - $1,601,715). This included a $482,578 one-time charge to bad debt expense and a $482,103 one-time charge to the impairment of inventory.

On February 14, 2023, the Company announced that it had appointed Lachlan McLeod as the Chief Financial Officer. During the nine months ended September 30, 2023, the Company agreed to employ Mr. McLeod directly.

On March 15, 2023, the Company announced that it has been served with a civil claim filed in the Supreme Court of British Columbia pursuant to the Class Proceedings Act, R.S.B.C. 1996, c. 50 alleging that the Company's press release of February 22, 2023 (the "Press Release") misstated certain material facts which misled the plaintiff in the claim. The suit also names the Company's subsidiary ALI and the Company's Chief Executive Officer, Mr. Michael Forbes. The Company denies the allegations in the claim and specifically that the Press Release was misleading, and the Company intends to vigorously defend against these allegations should the class action be certified. Currently, no specific amount of damages is claimed.

On March 16, 2023, the Company announced that it has engaged Hybrid Brand Management ("Hybrid") to expand its sales coverage and product sell-through in British Columbia, Alberta, Saskatchewan, Manitoba, and Ontario, with regular in-store activations and staff product education sessions. Hybrid serves approximately 2,800 cannabis retailers in Canada. In addition, the Company announced that during January and February 2023 it has shipped a record volume of 379,343 grams of cannabis products and achieved this result with over 1,300 orders.

On April 6, 2023, the Company announced that it had entered into an investor relations agreement with Apollo Shareholder Relations Ltd. ("Apollo") for a monthly fee of $15,000 for an initial three-month term, continuing on a monthly basis thereafter. Apollo provides investor communications and is based out of Victoria, British Columbia which provides email marketing, investor outreach, content creation and live events.

On October 11, 2023, the Company announced it received the Brand of the Year award for its brand, Endgame Extracts, and the Extraction Specialist of the Year award for the contributions of Creed Taylor to the Endgame Extracts brand.

Licences

On March 13, 2020, the Company, through its wholly-owned subsidiary, ALI, received a Standard Processing licence (the "Processing Licence") for the Langley Facility authorizing the sale of cannabis extract, cannabis edibles, and cannabis topicals.

On April 16, 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. On December 16, 2021 the Company received its Flower Sales Licence from Health Canada ("Flower Licence"), that permits the Company to sell dried cannabis flower products provincially and territorially in Canada.

On August 12, 2022, the Company received its medical sales licence (the "Medical Sales Licence") that permits the Company 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.

On August 24, 2022, the Company received its Controlled Substances Dealer's Licence (the "Dealer's Licence") which allows the Company to procure and process controlled substances, including synthesis, propagation, cultivation, and harvesting of psychedelic mushrooms for Psilocybin extraction, research and manufacture controlled substances such as Psilocybin and business-to-business sale of controlled substances, including by export. The Dealer's License does not permit the Company to sell controlled substances to the public. For such substances, the Company is only permitted to sell to other licensed dealers who have such substances listed on their license including pharmacists, practitioners, hospitals, or the holder of a Section 56(1) exemption for research purposes under the Controlled Drugs and Substances Act (CDSA).

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 in limited quantities. The Dealer's Licence does not permit ALI to sell controlled substances to the general public. Under the Dealer's Licence, ALI is only permitted to sell to other licenced dealers who have such controlled substances listed on their licence including pharmacists, practitioners, hospitals or the holder of a section 56(1) exemption for research purposes under the CDSA. On August 1, 2023, the Dealer's License was renewed with an expiry date of July 31, 2026.

The Company is not currently undertaking any activities with psilocybin, cocaine, or coca leaf under the Dealer's Licence, including selling to other licenced dealers, business-to-business sale, or export, and does not intend to undertake any activities relating to controlled substances for the foreseeable future. As such, the Company has no plan to use or rely upon the Dealer's Licence as at the date of this MD&A. At this time, and for the foreseeable future, the Company solely intends to pursue its cannabis extracts business.

Below is a chart containing all of the Company's current licences, the activities permitted under each licence, any restrictions on the use of each licence, and expiry dates:

Licence	Permitted Activities	Restrictions	ExpiryDate
Standard Processing<br><br> <br>(Health Canada Licence No. LIC-SRIM66H586-2023)	<ul type="disc"><br> <li>To possess cannabis</li><br> <li>To produce cannabis, other than obtain it by cultivating, propagating or harvesting it</li><br> <li>To sell cannabis in accordance with subsection 17(5) of the Cannabis Regulations</li><br> </ul>	<ul type="disc"><br> <li>The licence holder must meet the requirements set out in the Health Canada document entitled "<i>Mandatory cannabis testing for pesticide active ingredients - Requirements</i>"</li><br> <li>The only cannabis products that the licence holder may sell or distribute to a holder of (i) a licence for sale, and (ii) a person that is authorized under a provincial Act referred to in subsection 69(1) of the Act to sell cannabis, are as follows: cannabis plants, cannabis plant seeds, dried cannabis, fresh cannabis, cannabis topicals, cannabis extracts, and edible cannabis.</li><br> <li>The only cannabis products that the licence holder may send or deliver to the purchaser at the request of (i) a holder of a licence for sale, and (ii) a person that is authorized under a provincial Act referred to in subsection 69(1) of the Act to sell cannabis, are as follows: cannabis plants; cannabis plant seeds; dried cannabis; fresh cannabis; cannabis topicals; cannabis extracts; and edible cannabis.</li><br> </ul>	February 16, 2028
Sale for Medical Purposes<br><br> <br>(Health Canada Licence No. LIC-SRIM66H586-2023)	<ul type="disc"><br> <li>To possess cannabis</li><br> <li>To sell cannabis products in accordance with section 27 and Part 14, Division 1 of the Cannabis Regulations</li><br> </ul>	N/A	February 16, 2028
Analytical Testing<br><br> <br>(Health Canada Licence No. LIC-WOUX7802CE-2022)<br><br> <br><br><br> <br>[issued to Chemia Analytics Inc.]	<ul type="disc"><br> <li>To possess cannabis for the purpose of testing</li><br> <li>To obtain cannabis by altering its chemical or physical properties by any means for the purpose of testing</li><br> </ul>	<ul type="disc"><br> <li>Any pesticide testing activities conducted under the scope of Health Canada's "Mandatory cannabis testing for pesticide active ingredients-Requirements" must meet the requirements set out in that document</li><br> </ul>	August 24, 2027
Research<br><br> <br>(Health Canada Licence No. LIC-ZIDPSA6BYY-2021-2)	<ul type="disc"><br> <li>To possess cannabis for the purpose of research</li><br> <li>To produce cannabis for the purpose of research</li><br> </ul>	<ul type="disc"><br> <li>This licence is restricted, in addition to all other applicable conditions, in that all research conducted under this licence is based on the Research Protocol "Organoleptic - Sensory - Taste Testing of Cannabis Products" provided to Health Canada on January 26, 2021</li><br> <li>The maximum quantity of cannabis to be stored for the purpose of research at the address indicated on this licence is: 11 kg of dried cannabis (or equivalent) at any given time</li><br> <li>The researcher may only possess and produce cannabis if such possession and production is to use in accordance with the research protocol submitted</li><br> <li>With respect to research involving the administration or distribution of cannabis to human research subjects for assessments of taste, sight, smell or touch of cannabis, in addition to any other conditions listed in this licence, the researcher must meet the requirements set out in the document entitled <i>Appendix: Additional conditions for licenced researchers administering or distributing cannabis to human research subjects using cannabis obtained from a holder of a licence for processing in the final form of cannabis</i></li><br> <li>All record keeping requirements pertaining to this research licence must be met in accordance with Part 11 of the Cannabis Regulations</li><br> <li>At the end of the research, all cannabis must be destroyed in accordance with s.43 of the Cannabis Regulations unless distributed in a manner authorized by the Cannabis Regulations</li><br> </ul>	April 16, 2026
Licence	Permitted Activities	Restrictions	ExpiryDate
---	---	---	---
Dealer's Licence<br><br> <br>(Health Canada Licence No. 6-1360)	<ul type="disc"><br> <li>Possession, production, assembling, sale/provision, sending, transportation and delivery of controlled substances, including their salts as listed in the Regulations and specified by this licence</li><br> <li>List of controlled substances, including their salts, that are specified in the licence are as follows: psilocybin (up to 1000g), and cocaine (up to 250g)</li><br> </ul>	<ul type="disc"><br> <li>Under the Dealer's Licence, holder is only permitted to sell to other licenced dealers who have such substances listed on their licence including pharmacists, practitioners, hospitals or the holder of a section 56(1) exemption for research purposes under the CDSA</li><br> <li>Psilocybin may only be sold or provided to the holder of a dealer's licence for controlled substances or the holder of an authorization issued under subsection J.01.059(4) of Part J of the Food and Drug Regulations</li><br> <li>Any sale or provision of psilocybin or psilocybin-containing fungi, other than to another licenced dealer, must be approved in writing by Health Canada prior to the sale or provision taking place</li><br> <li>Sale or provision to the holder of a Controlled Drugs and Substances Act subsection 56(1) exemption is strictly prohibited</li><br> <li>The sale or provision of psilocybin to a licenced dealer or authorization holder may only be for clinical testing in the institution by qualified investigators for the purpose of determining the hazards and efficacy of the drug; or laboratory research in the institution by qualified investigators; or destruction</li><br> <li>Room 121 is a restricted room at the Langley facility</li><br> <li>Access to room 121 is restricted to the following individuals: designated personnel for this licence, as per the most recent list of approved personnel issued by Health Canada; or employees conducting activities under this licence and under the supervision of designated personnel for this licence</li><br> <li>This licence does not authorize the cultivation of fungi or plants containing controlled substance(s)</li><br> </ul>	July 31, 2026

ACQUISITION OF PERCEIVEMD

On August 10, 2021, the Company acquired all of the issued and outstanding shares of PerceiveMD. PerceiveMD is a multidisciplinary, patient-focused center providing comprehensive assessments for medical cannabis and other therapies. The acquisition allows the Company to generate revenue from providing cannabis under medical prescriptions. At closing, the Company issued 2,513,720 common shares to the former shareholders of PerceiveMD at a share price on the date of acquisition of $0.80 per share for $2,010,976 and $10,000 in cash, for total consideration of $2,020,976. The transaction was accounted for as a business combination under IFRS 3 Business Combinations. The allocation of the purchase consideration is as follows:

Assets acquired:
Cash	26,302
Accounts receivable	13,647
Corporate taxes receivable	26,000
	65,949
Liabilities assumed:
Accounts payable and other accrued liabilities	(19,206
Fair value of net assets acquired	46,743
Purchase consideration
Cash consideration	2,010,976
Share consideration	10,000
****	2,020,976
Identifiable intangible assets
Patient relationships	414,000
Deferred tax liability	(112,000
Goodwill	1,672,233

All values are in US Dollars.

The carrying value of the assets and liabilities acquired equates to fair value due to their short-term nature, other than patient relationships ("Patient Relationships") which are amortized over their estimated useful economic lives. The fair value of Patient Relationships was determined using the discounted cash flow method considering the future cashflows expected to be received from patients, adjusted to reflect attrition. The key assumptions used in the cash flow projection related to Patient Relationships include: a discount rate of 16%; patient attrition rate of 20%; number of patients of 3,492 at the acquisition date; annual spending of $143 per patient, assumed growth at a long-term annual rate of 2%.

The Company's acquisition of PerceiveMD constituted a related party transaction as Michael Forbes, Chief Executive Officer and a director of the Company was also a director and controlling shareholder of PerceiveMD.

The goodwill generated as a result of this acquisition relates to other intangible assets that do not qualify for separate recognition. The two companies have operating synergies that can be leveraged subsequent to the acquisition by allowing the Company to sell manufactured products directly to clinical patients, increasing margins of both companies.

During the year ended December 31, 2022, the Company impaired the goodwill of PerceiveMD by $1,672,233 due to delays in the Company's ability to realize business synergies.

ACQUISITION OF PHYTO BRANDCO

On September 15, 2021, the Company acquired all of the issued and outstanding shares of Phyto BrandCo, the owner of the intellectual property rights for the Phyto Extractions brand consisting of 21 registered trademarks. Phyto BrandCo licenses its intellectual property to Canadian cannabis license holders and collects royalties from the license holders, from sales of cannabis consumer packaged goods to provincial distributors and retailers. At closing, the Company issued 20,000,000 common shares to the former shareholders of Phyto BrandCo at a share price on the date of acquisition of $1.20 per share, for consideration of $24,000,000.

Subsequent to the closing of the acquisition, the Company renegotiated the terms of the acquisition with the former shareholders of Phyto BrandCo due to certain conditions in the acquisition agreement not being met. It was resolved that the consideration be amended from $24,000,000 to $12,000,000 by a voluntary return to treasury of 10,000,000 common shares. As a result, the revised consideration is 10,000,000 common shares at a share price on the date of acquisition of $1.20 per share, for total consideration of $12,000,000.

The transaction has been accounted for as a business combination under IFRS 3 Business Combinations. The allocation of the purchase consideration is as follows:

Assets acquired:
Cash	301,966
Accounts receivable	255,154
Prepayments	19,500
Property and equipment	85,108
	661,728
Liabilities assumed:
Accounts payable and other accrued liabilities	(434,252
Lease liability	(34,665
Fair value of net identifiable assets acquired	192,811
Purchase consideration
Share consideration	24,000,000
Shares to be cancelled	(12,000,000
****	12,000,000
Identifiable intangible assets:
Trademarks	3,250,000
Deferred tax liability	(879,000
Goodwill	9,436,189

All values are in US Dollars.

The carrying value of the assets and liabilities acquired equates to fair value due to their short-term nature, other than property and equipment and trademarks which are depreciated over their estimated useful economic lives.

The intangible asset is comprised of trademarks (the "Trademarks") with a fair value of $3,250,000. The fair value of the Trademarks was determined using the relief from royalty method. The key assumptions used in the cash flow projection related to the asset include: a discount rate of 12.5%; royalty rate of 10.0% for the remaining period of the licensing agreement and 2.0% thereafter, and annual net profit of the licensee.

The goodwill generated as a result of this acquisition relates to other intangible assets that do not qualify for separate recognition. The Company believes that by acquiring Phyto BrandCo, certain synergies related to marketing, distribution networks, and brand loyalty can be leveraged.

SELECTED QUARTERLY INFORMATION

Results of Operations

The following table compares the three months ended September 30, 2023 ("Q3 2023") and 2022 ("Q3 2022"), as well as the nine months ended September 30, 2023 ("YTD 2023") and 2022 ("YTD 2022").

****	Q3 2023	Q3 2022	YTD 2023	YTD 2022
****
Revenue	8,142,225	5,451,638	28,542,227	11,314,414
Excise taxes	(3,792,096	(1,647,851	(11,319,734	(2,172,352
Cost of sales	(2,125,784	(2,168,330	(10,758,365	(5,584,825
Gross profit	2,224,345	1,635,457	6,464,128	3,557,237
Operating expenses	(2,606,505	(2,059,014	(6,852,373	(4,999,311
Income (Loss) from operations	(382,160	(423,557	(388,245	(1,442,074
Other expenses	(268,031	(57,708	(1,656,607	(190,492
Loss before income taxes	(650,191	(481,265	(2,044,852	(1,632,566
Income tax expense, net of DIT recovery	(8,000	(22,000	(9,424	30,851
Net loss and comprehensive loss	(642,191	(459,265	(2,054,276	(1,601,715

All values are in US Dollars.

The nine months ended September 30, 2023 compared to nine months ended September 30, 2022:

Revenues increased to $28,542,227 during YTD 2023, compared to $11,314,414 during YTD 2022, due to revenue from a range of provincial distributors which were only beginning to come online in 2022. These sales augmented the existing revenue from the processing of cannabis biomass for third-party licenced producers, in-house distillate production, hydrocarbon extraction, licensing revenues from the acquisition of Phyto BrandCo, and MSP remittance and referral revenue from the acquisition of PerceiveMD.

Excise taxes of $11,319,734 are included in the net sales in YTD 2023 compared to $2,172,352 in YTD 2022. In the comparable period, the Company mainly had sales which did not require excise taxes to be charged in early 2022. In late 2022 and throughout 2023, the Company increased sales to distributors and retailers which require excise stamps to be used on the sale.

Cost of sales increased to $10,758,365 during YTD 2023, compared to $5,584,825 during YTD 2022, driven by increased sales. Cost of sales consists of biomass, terpenes, solvents, packaging, production labour, and an allocation of production overheads such as facility costs and depreciation of production equipment and the building. The overall cost of sales as a percentage of gross revenues has decreased from 49% during YTD 2022 as compared to 38% during YTD 2023 because of increasing economies of scale and reduced pricing of inputs of production.

During YTD 2023, the Company had operating expenses of $6,852,373 and a net loss and comprehensive loss of $2,054,276, compared to operating expenses of $4,999,311 and net loss and comprehensive loss of $1,601,715 during YTD 2022.

The change in operating expenses were the result of the Company's expansion during the period. The most significant changes in operating expenses were as follows:

• Advertising and promotion increased to $1,944,512 during YTD 2023, compared to $864,241 during YTD 2022, as 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 multiple events. These investments in the brand are expected to result in higher sales for future periods.

• Data program expenses increased to $1,007,321 during YTD 2023, compared to $828,370 during YTD 2022, as the Company incurred higher costs for programs that share sales data from stores across Canada to help manage the Company's product mix, pricing strategies, and production planning.

• Depreciation and amortization charged to operating expenses decreased to $399,504 during YTD 2023, compared to $444,420 during YTD 2022, due to the Company using the declining balance method of amortization for a portion of the fixed asset. In addition, the Company uses more of the Langley facility for production as compared to the prior period, resulting in a higher percentage of depreciation being allocated to cost of sales.

• Office expenses increased to $837,591 during YTD 2023, compared to $509,474 during YTD 2022 due to additional costs in relation to computer software, internet, utilities as well as equipment and vehicle rentals.

• Professional fees and consulting expenses decreased to $784,536 during YTD 2023, compared to $794,097  during YTD 2022 due to offsetting changes. Legal expenses increased related to increased licencing compliance and the costs relate to the ongoing class action lawsuit. The increase has been more than offset by the Company hiring employees directly instead of hiring external consultants.

• Share-based payments decreased by $138,713 as the Company granted stock options to a director in the prior year. No stock options have been granted in the current year.

• Wages and salaries increased to $1,479,035 during YTD 2023, compared to $1,041,554 during YTD 2022. This increase is due to the Company hiring more employees directly instead of relying on external consultants. These changes include the direct hiring of a Chief Financial Officer, Financial Controller and Inventory Manager, among others.

During YTD 2023, the Company included the following in other expenses:

• Interest expense increased to $691,926 in YTD 2023, compared to $190,492 in YTD 2022. This increase is due partially to a raise in interest rates of the Company's mortgage. In addition, the Company's interest expense related to the outstanding excise taxes has grown substantially.
• During the YTD 2023, the Company impaired inventory of $482,103 related to slow moving product that was destroyed during the period. This is expected to be a one-time charge against inventory.
• During the YTD 2023, the Company incurred bad debt expense of $482,578 related to expected credit losses due certain customers limited ability to pay outstanding balances.

The three months ended September 30, 2023 compared to the three months ended September 30, 2022:

Revenues increased to $8,142,225 during Q3 2023, compared to $5,451,638 during Q3 2022, due to revenue from a range of provincial distributors which were only beginning to come online in 2022. These sales augmented the existing revenue from the processing of cannabis biomass for third-party licenced producers, in-house distillate production, hydrocarbon extraction, licensing revenues from the acquisition of Phyto BrandCo, and MSP remittance and referral revenue from the acquisition of PerceiveMD.

Excise taxes of $3,792,096 are included in total sales in Q3 2023 compared to $1,647,851 in Q3 2022. In the comparable period, the Company mainly had sales which did not require excise taxes to be charged. In Q3 2023, the Company is now selling to distributors and retailers which require excise stamps to be used on the sale which has increased excise taxes significantly.

Cost of sales remained consistent at $2,125,784 during Q3 2023, compared to $2,168,330 during Q3 2022. Cost of sales consists of biomass, terpenes, solvents, packaging, production labour and an allocation of production overheads such as facility costs and depreciation of production equipment and the Langley facility. The cost of sales as a percentage of gross revenues decreased from 40% in Q3 2022 to 26% in Q3 2023 due to increasing economies of scale and reduced pricing of inputs of production.

During Q3 2023, the Company had operating expenses of $2,606,505 and a net loss and comprehensive loss of $642,191, compared to operating expenses of $2,059,014 and net loss and comprehensive loss of $459,265 during Q3 2022.

The change in operating expenses and net loss and comprehensive loss were the result of the Company's expansion during the period. The most significant changes in operating expenses and other expenses were as follows:

• Advertising and promotion increased to $894,828 during Q3 2023, compared to $313,109 during Q3 2022, as 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.

• Data program expenses decreased to $435,558 during Q3 2023, compared to $462,650 during Q3 2022, as the Company incurred higher costs for programs that share sales data from stores across Canada to help manage the Company's product mix, pricing strategies, and production planning.

• Depreciation and amortization charged to operating expenses decreased to $140,010 during Q3 2023, compared to $148,112 during Q3 2022, due to the Company using the declining balance method of amortization for a portion of the fixed asset. In addition, the Company uses more of the Langley facility for production as compared to the comparable period, resulting in a higher percentage of depreciation being allocated to cost of sales.

• Office expenses increased to $257,500 during Q3 2023, compared to $194,330 during Q3 2022 due to additional costs in relation to computer software, internet, utilities as well as equipment and vehicle rentals.

• Professional fees and consulting expenses decreased to $190,090 during Q3 2023, compared to $288,788 during Q3 2022 due to the Company hiring employees directly instead of hiring external consultants. The decrease has been partially offset by an increase in legal expenses related to increased licencing compliance and the defense relate to the ongoing class action lawsuit.

• Repairs and maintenance expenses were $35,419 during Q3 2023 compared to $47,946 in Q3 2022. These costs are related to refrigeration suppliers, mechanical services, and other maintenance services. These costs are mainly based on timing of maintenance being performed.

• Share-based payments decreased by $138,713 as the Company granted stock options to a director in the prior year during Q3 2022. No stock options have been granted in Q3 2023.

• Wages and salaries increased to $539,242 during Q3 2023, compared to $368,979 during Q3 2022. This increase is due to the Company hiring more employees directly instead of relying on external consultants. These changes include the direct hiring of a Chief Financial Officer, Financial Controller and Inventory Manager, among others.

During Q3 2023, the Company included the following in other expenses:

• Interest expense increased to $260,221 in Q3 2023, compared to $57,708 in Q3 2022. This increase is due partially to a raise in interest rates of the Company's mortgage. In addition, the Company's interest expense related to the outstanding excise taxes has grown substantially.

SUMMARY OF QUARTERLY RESULTS

The following table shows results from the previous eight fiscal quarters:

Quarter ended	Revenue, netof excise tax	Net loss andcomprehensiveloss	Weightedaveragenumber ofshares	Basic anddiluted (loss)income pershare
	$		#
September 30, 2023	4,350,129	(642,191	55,970,547	(0.01
June 30, 2023	7,100,565	(1,071,485	55,970,547	(0.02
March 31, 2023	5,771,799	(308,626	55,970,547	(0.01
December 31, 2022	4,153,016	(2,679,924	55,970,547	(0.05
September 30, 2022	3,803,787	(459,265	55,970,547	(0.01
June 30, 2022	3,051,554	(478,136	59,081,658	(0.01
March 31, 2022	2,286,721	(664,314	65,970,547	(0.01
December 31, 2021	1,989,604	(1,668,673	65,872,770	(0.03

All values are in US Dollars.

During Q3 2023, the Company's revenue net of excise taxes decreased by $2,750,436 as compared to Q2 2023. The decrease in net sales from the previous quarter was due to the Company focusing on increasing the efficiency of production and lowering cost of inputs. The comprehensive loss decreased by $429,294 from the previous quarter mainly due to other expenses in Q2 2023 related to bad debt expense and impairment of inventory.

During Q2 2023, the Company's revenue net of excise taxes increased by $1,328,766 as compared to Q1 2023. The 23% increase in net sales from the previous quarter was due to the Company continuing to focus on reducing the amount of time to fulfill the incoming purchase orders. The comprehensive loss increased by $762,859 from the previous quarter mainly due to the bad debt expense and impairment of inventory charges which totalled $956,871.

The Company's revenue net of excise taxes in Q1 2023 increased by $1,618,783 as compared to Q4 2022. The 39% increase in sales from the previous quarter was due to the Company continuing to focus on reducing the amount of time of packaging and shipping products to increase the amount of inventory turnover in the facility.

The Company's revenue in Q4 2022 increased by $349,229 as compared to Q3 2022. The 9% increase in sales from the previous quarter was due to the Company increasing the flowthrough of shipments being delivered out of the facility. The Company expects revenues to continue to increase in future quarters and the Company pushes to increase inventory turnover and production rates. The comprehensive loss increased $2,220,659 from Q3 2022 due to the loss on the termination of the Phyto license agreement and the impairment of the PerceiveMD goodwill. This was offset by increased sales and gross profits as compared to Q3 2022.

The Company's net revenue and net loss and comprehensive loss in Q3 2022 were $3,803,787 and $459,265, respectively. The increase of revenues and movement in net loss and comprehensive loss are driven by factors noted in Results of Operations.

The Company's revenue and net loss and comprehensive loss in Q2 2022 were $3,051,554 and $478,136, respectively. The increase of revenues was driven by significant revenue from a range of provincial distributors which were not present in Q1 2022. The decrease in net loss was caused by the higher revenue and thus higher gross profit which more than offset any rise in operating expenses form the growth.

During Q1 2022, the increase of revenues to $2,286,721 was driven primarily by the licensing revenue in Phyto BrandCo and increased processing services of cannabis biomass for third-party licenced producers. The decrease in operating expenses was due to a reduction in share-based compensation as a significant number options and warrants were issued during Q4 2021 and share-based compensation related to these equity instruments was fully recognized during that period.

The Company's net loss and comprehensive loss for Q4 2021, was $1,668,673. The increase of revenues to $1,989,604 was driven primarily by the licensing revenue in Phyto BrandCo. The Company recognized a provision of expected credit losses of $134,083 relating to a significantly aged account receivable the Company no longer considered collectible and share-based payments of $871,067 related to the granting of 1,115,000 options in the quarter which vested immediately.

LIQUIDITY AND CAPITAL RESOURCES

Capital resource management

The Company's capital structure consists of all components of shareholders' equity. The Company's objective when managing capital is to maintain adequate levels of funding to support the current operations including corporate and administrative functions and to support operations. The Company obtains funding primarily through issuing common stock and through its mortgage payable. Future financings are dependent on market conditions and there can be no assurance the Company will be able to raise funds in the future.

There were no changes in the Company's approach to capital management during the nine months ended September 30, 2023. The Company is not subject to externally imposed capital requirements.

Cash and working capital

As at September 30, 2023, the Company had a working capital deficit of $1,594,300 (December 31, 2022 - $3,665,081). And has no working capital requirements.

During the nine months ended September 30, 2023, the Company refinanced the Fourth Mortgage (the "Fifth Mortgage") which bears interest at the greater of 11.49% or the prime rate plus 4.29% per annum, calculated monthly, for one year. The interest rate will increase to 15.99% or the prime rate plus 8.79% for the remainder of the term. The Sixth Mortgage has a maturity date of November 1, 2024 and is secured by the mortgage property and building improvements. The Sixth Mortgage payable was recorded at amortized cost (principal value less $35,000 transaction costs). At September 30, 2023, the carrying value of the Sixth Mortgage was $3,479,284 (December 31, 2022 - $nil).

As at September 30, 2023, the Company has total taxes payable of $9,562,332 which relates mainly to excise taxes and GST. The Company is working with the Canadian Revenue Agency ("CRA") to pay down the balance. The Company has also applied for a reduction in the outstanding fees and accrued interest to pay off the balance faster. The balance is accruing interest at the CRA's prescribed rate.

Cash flow activity

****	YTD 2023	YTD 2022
****
Cash provided by operating activities	2,235,517	106,788
Cash used in investing activities	(761,695	(327,379
Cash used in financing activities	(707,003	(187,169
Net increase (decrease) in cash	766,819	(407,760
Cash, beginning of period	1,013,867	744,541
Cash, end of period	1,780,686	336,781

All values are in US Dollars.

Cash provided by operating activities of $2,235,517 during the nine months ended September 30, 2023 was the result of operating losses as noted in Results of Operations which were more than offset by adjustments for non-cash items and working capital movements. During YTD 2023, the cash provided by operating activities was mainly the result of excise taxes payable increasing. In the comparable period, the Company used cash of $189,497 in operating activities.

Cash used in investing activities of $761,695 during the nine months ended September 30, 2023 (2022 - $327,379) was the result of cash payments for the purchase of equipment which was included in additions during 2023 and additions that were included in accounts payable at December 31, 2022 and were paid for during 2023. At September 30, 2023, there were no capital additions included in account payable.

Cash used in financing activities of $707,003 during the nine months ended September 30, 2023 (2022 - $187,169) was the result of interest paid on the mortgage payable, payments on the lease liability, a $35,000 mortgage renewal fee, and the repayment of $361,578 of loans.

Commitments and contingencies

A summary of undiscounted liabilities and future operating commitments as at September 30, 2023, are as follows:

****	Total	Within 1 year	2 - 5 years
Maturity analysis of financial liabilities	$	$	$
Accounts payable and accrued liabilities	11,898,011	11,898,011	-
Lease liability	147,641	30,197	117,444
Mortgage payable	3,975,038	428,400	3,546,638
Government loan	60,000	-	60,000
	16,080,690	12,356,608	3,724,082

Contingencies

On March 15, 2023, the Company was served with a civil claim filed in the Supreme Court of British Columbia pursuant to the Class Proceedings Act, R.S.B.C. 1996, c. 50 alleging that the Company's press release of February 22, 2023 misstated certain material facts which mislead the plaintiff in the claim. The suit also names the Company's subsidiary ALI. and the Company's Chief Executive Officer. The Company denies the allegations in the claim and specifically that the press release was misleading. No specific amount of damages is claimed.

OFF-BALANCE SHEET ARRANGEMENTS

The Company had no off-balance sheet arrangements that are not disclosed above as at September 30, 2023, and as at the date of this MD&A.

TRANSACTIONS BETWEEN RELATED PARTIES

Key management personnel are those having the authority and responsibility for planning, directing, and controlling the Company. There were no loans to key management personnel or directors, or entities over which they have control or significant influence at September 30, 2023 and December 31, 2022.

During the nine months ended September 30, 2023, no options were granted to Officers and Directors (2022 - nil).

The following related parties transacted with the Company or Company-controlled entities during the nine months ended September 30, 2023 and the year ended December 31, 2022:

• George Routhier was a former Director. He is the owner of Pipedreemz Inc., which provided advisory services to the Company. He resigned on June 23, 2022.

• Michael Forbes is a Director and the Company's President and CEO. He was appointed on April 29, 2021 and is the owner of MDC Forbes, which provides CEO services to the Company.

• Donald Dinsmore is a former Director and former COO of the Company. He was appointed on April 29, 2021 and left the Company on March 24, 2022.

• Oliver Foeste was the Company's CFO until January 1, 2023. He is the Managing Partner of Invictus Accounting Group LLP which provided the Company with CFO, accounting, and tax services.

• Paul Morgan is a Director of the Company. He was appointed on July 14, 2021.

• Smoke Wallin is a Director of the Company. He was appointed on May 16, 2022.

• Lachlan McLeod was appointed CFO of the Company on January 1, 2023 and was an employee of Fehr & Associates CPA ("F&A"), which provided accounting services to the Company. On June 2, 2023, the Company hired Mr. McLeod as an employee and the F&A agreement was subsequently terminated.

The aggregate value of transactions, excluding share-based payments, with key management personnel and directors and entities over which they have control or significant influence during the nine months ended September 30, 2023 and 2022 were as follows:

Nine months ended September 30	2023	2022
	$	$
Donald Dinsmore	-	104,863
Fehr & Associates	106,949	-
Invictus Accounting Group LLP	-	239,491
Lachlan McLeod	36,695	-
MDC Forbes Inc.	75,750	92,750
Pipedreemz Inc.	-	3,001
	219,394	440,105

As at September 30, 2023 and December 31, 2022, the Company had an outstanding accounts payable balance with related parties as follows:

	September 30, <br>2023	December 31,<br>2022
	$	$
Fehr & Associates	10,080	-
Invictus Accounting Group LLP	12,915	13,884
MDC Forbes Inc.	26,088	62,427
Michael Forbes	-	20,000
Pipedreemz Inc.	-	3,350
	49,083	99,661

All related party balances are unsecured and are due on demand without interest and incurred in the normal course of business.

The transactions with the key management personnel and directors are included in operating expenses as follows:

(a) Consulting fees and professional fees

Included CEO services by Michael Forbes, charged to the Company via MDC Forbes Inc., accounting services of the Company's former CFO, Oliver Foeste, charged to the Company via Invictus Accounting Group LLP, and accounting services of the Company's CFO, Lachlan McLeod, charged to the Company via F&A. During the nine months ended September 30, 2023, the Company incurred a placement fee of $52,500 to employ Lachlan McLeod directly and terminate the F&A agreement.

(b) Wages and salaries

Included services provided by Lachlan McLeod as CFO and Donald Dinsmore as former COO.

(c) Share-based payments

During the nine months ended September 30, 2023, stock options with a fair value of $138,713 were granted to Smoke Wallin.

PROPOSED TRANSACTIONS

As at September 30, 2023, the Company had no proposed transactions.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the condensed interim consolidated financial statements requires management to make judgements, and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, revenues and expenses. Management continually evaluates these judgements, estimates and assumptions based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates and judgements which may cause a material adjustment to the carrying amounts of assets and liabilities.

The areas which require management to make critical judgments include:

Going concern

The condensed interim consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The assessment of the Company's ability to source future operations and continue as a going concern involves judgment. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. If the going concern assumption was not appropriate for the consolidated financial statements, adjustments to the carrying value of assets and liabilities, the reported expenses and the condensed interim consolidated statement of financial position would be necessary. Such adjustments would be material.

Impairment of property and equipment

Property and equipment are reviewed for indicators of impairment at each reporting period end or whenever events or changes in circumstances indicate that the carrying amount of an asset exceeds its recoverable amount. The recoverable amount of an asset is the higher of its fair value, less costs to sell, and its value in use. If the carrying amount of an asset exceeds its recoverable amount, an impairment charge is recognized immediately in profit or loss by the amount by which the carrying amount of the asset exceeds the recoverable amount. If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the lesser of the revised estimate of recoverable amount, and the carrying amount that would have been recorded had no impairment loss been recognized previously.

The information about significant areas of estimation uncertainty considered by management in preparing the condensed interim consolidated financial statements is as follows:

COVID-19 estimation uncertainty

The coronavirus pandemic continues to have global impacts on workforces, economies, and financial markets. It is not possible for the Company to predict the duration or magnitude of any adverse effects that the pandemic may have on the Company's business or ability to raise funds. As of the date of the condensed interim consolidated financial statements, COVID-19 has had minimal impact on the Company's ability to conduct its operations but may impact the Company's ability to raise funding should restrictions related to COVID-19 be expanded in scope.

Inventory

The Company reviews the net realizable value of, and demand for, its inventory regularly to provide assurance that recorded inventory is stated at the lower of cost or net realizable value. Factors that could impact estimated demand and selling prices include competitor actions, supplier prices, government regulations, and economic trends.

The weighted average costing method uses estimates in the allocation of direct and indirect inputs in the production of multiple product categories. These estimated allocations could be impacted by variations in manufacturing yields in production.

Useful lives and depreciation of property and equipment and intangible assets

The depreciation methods and useful lives reflect the pattern in which management expects the assets' future economic benefits to be consumed by the Company. Judgments are required in determining these expected useful lives.

Goodwill and intangible asset impairment

Management uses estimates in determining the recoverable amount of intangible assets and goodwill. The determination of the recoverable amount for the purpose of impairment testing requires the use of significant estimates, such as:

• future cash flows;
• terminal growth rates; and
• discount rates.

Management regularly evaluates these estimates and assumptions. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Judgment is also applied in choosing methods of amortizing intangible assets that management believes most accurately represent the consumption of those assets and are most representative of the economic substance of the intended use of the underlying assets. A change in the estimate would result in a change in the amount of amortization and, as a result, a charge to net loss recorded in the period in which the change occurs, with a similar change in the carrying value of the asset in the condensed interim consolidated statement of financial position.

Valuation of receivables

The Company recognizes an impairment loss allowance for expected credit losses on trade accounts receivable using a probability-weighted estimate of credit losses. In its assessment, management estimates the expected credit losses based on actual credit loss experience and informed credit assessment, taking into consideration forward-looking information. If actual credit losses differ from estimates, future earnings would be affected.

Valuation of share-based payments

The Company uses the Black-Scholes option pricing model for valuation of share-based payments. Option pricing models require the input of subjective assumptions including expected price volatility, risk-free interest rate, and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company's expenses and reserves.

CHANGES IN ACCOUNTING STANDARDS

Accounting standards issued but not yet effective

Certain pronouncements have been issued by the IASB or IFRIC that are effective for accounting periods beginning on or after October 1, 2023. The Company has reviewed these updates and determined that many of these updates are not applicable or consequential to the Company and have been excluded from discussion within these significant accounting policies.

Amendments to IAS 1 - Presentation of Financial Statements

In October 2022, the IASB issued amendments to IAS 1, Presentation of Financial Statements titled Non-current liabilities with covenants. These amendments sought to improve the information that an entity provides when its right to defer settlement of a liability is subject to compliance with covenants within 12 months after the reporting period. These amendments to IAS 1 override but incorporate the previous amendments, Classification of liabilities as current or non-current, issued in January 2020, which clarified that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Liabilities should be classified as non-current if a company has a substantive right to defer settlement for at least 12 months at the end of the reporting period. The amendments are effective January 1, 2024, with early adoption permitted. Retrospective application is required on adoption. We do not expect these amendments to have a material effect on our financial statements.

FINANCIAL RISK MANAGEMENT

Financial instruments - fair value

The Company's financial instruments consist of cash, trade receivables, deposits, accounts payable and accrued liabilities, mortgage payable, and government loan, all of which are classified as and measured at amortized cost.

As at September 30, 2023, the carrying values of cash, trade receivables, deposits, loans payable and accounts payable and accrued liabilities approximate their fair value because of the short-term nature of these instruments.

Financial instruments - risk

The Company's financial instruments are exposed to certain financial risks, including credit risk, liquidity risk and interest rate risk.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to fulfill its contractual obligations.

The Company is exposed to credit risk through its cash balances held in financial institutions and trade receivables. The maximum exposure to credit risk is equal to the carrying value of such financial assets.

The objective of managing credit risk is to minimize potential losses on financial assets. The Company assesses the quality of its counterparties, taking into account their credit worthiness and reputation, past performance and other factors. The Company has recognized a provision for expected credit losses on its trade receivables.

Cash is only deposited with or held by institutions of high credit worthiness.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with its financial liabilities. The Company manages its liquidity risk by reviewing on an ongoing basis its cash position and if required raises funding through additional share capital issuances or debt financing.

As at September 30, 2023, the Company had a cash balance of $1,780,686 and current liabilities of $11,914,166 (December 31, 2022 - $1,013,867 and $12,660,207 respectively).

Interest rate risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company's mortgage payable and lease liabilities carry fixed interest rates and as such, the Company is not exposed to interest rate risk.

Economic dependence

Economic dependence risk is the risk of reliance upon a select number of customers which significantly impact the financial performance of the Company. During the nine months ended September 30, 2023, three customers represented approximately 82% of the Company's revenue (2022 - 83%). These significant customers represent certain provincial distributors.

OUTSTANDING SHARE DATA

The Company's authorized share capital consists of an unlimited number of voting common shares without par value. The Company had the following securities outstanding as at September 30, 2023 and the date of this MD&A:

	September 30,<br>2023	Date of thisMD&A
	#	#
Common shares	55,970,547	55,970,547
Stock options	2,870,000	2,870,000
Warrants	122,727	-
Fully diluted securities	58,963,274	58,840,547

During the year ended December 31, 2022, the Company had the following share transactions:

a) On April 29, 2022, 10,000,000 common shares related to the amended agreement between the Company and former owners of Phyto BrandCo were returned to treasury and cancelled for no consideration.

RISKS AND UNCERTAINTIES

The Company operates in a rapidly changing environment that involves risks and uncertainties and as a result, management's expectation may not be realized for a number of reasons. An investment in the Company's common shares is speculative and involves a high degree of risk and uncertainty. The current regulatory uncertainty poses additional risks and uncertainties which may materially affect management's expectations.

Regulatory risks

The industry in which the Company operates requires compliance with federal, provincial, and local laws and regulations, which could include, among others, laws and regulations relating to cannabis, controlled substances, personally identifiable information, wage and hour restrictions, health and safety matters, consumer protection and environmental matters. The Company's business objectives are contingent upon, in part, compliance with regulatory requirements enacted by these governmental authorities and regulatory bodies and obtaining all regulatory approvals, where necessary, for the delivery of its services and the services delivered by those regulated professionals within its network. The Company cannot predict the time required to secure all appropriate regulatory approvals for such services. Compliance with such laws and regulations may be costly and a failure to comply with such laws and regulations could result in fines, penalties, litigation and other liability that could materially adversely affect the Company.

Furthermore, although the operations of the Company are currently carried out in accordance with all applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner which could limit or curtail the Company's ability to conduct its business, including the development of new or existing markets and products. The Company has little or no control over potential changes to laws or regulations that may affect its business. Changes in applicable laws and regulations are unpredictable and could have a material adverse effect on the business, results of operations and financial condition of the Company.

Additionally, governmental regulations affect taxes and levies, healthcare costs, energy usage and labor issues, all of which may have a direct or indirect effect on the Company's business and its clients or suppliers. Changes in these laws or regulations, or the introduction of new laws or regulations, could increase the costs of doing business for the Company, or its customers or suppliers, or restrict the Company' actions, causing the Company to be materially adversely affected.

Laws, regulations and guidelines relating to controlled substances

The Company is not currently undertaking any activities involving controlled substances, nor does it intend to undertake any activities regarding controlled substances at this time. However, as a holder of a Controlled Substance Dealer's Licence issued by Health Canada, the Company is subject to regulatory and statutory obligations relating to controlled substances. The Controlled Drugs and Substances Act is Canada's federal drug control statute. Controlled substances are categorized into eight Schedules based upon their perceived danger. Schedule 1 substances, including cocaine and coca leaves, are deemed to have the highest potential for abuse and carry the most severe penalties for violations - the severity of the penalties decreases for subsequent scheduled substances. Most psychedelics are Schedule 3 substances, including psilocybin. The CDSA generally prohibits all uses of controlled substances unless an exemption is granted under Section 56 of the CDSA or the regulations allow otherwise, including through a clinical trial. The Canadian Minister of Health can grant exemptions under Section 56 of the CDSA to use controlled substances if it is deemed to be necessary for a medical or scientific purpose or is otherwise in the public interest.

Despite the general prohibition on controlled substances, the Food and Drug Regulations and Narcotics Control Regulations allows authorized persons to obtain a dealer's licence to possess, produce, sell, import/export, and transport certain controlled substances. These regulations contain strict requirements as to the handling of controlled substances, including where the controlled substance is stored and processed, who has access to the controlled substance, who may purchase or receive the controlled substance, and the types of activities that may be performed using the controlled substance. These regulations provide a framework for expanding and monitoring the legal use of controlled substances in Canada as well as, importantly, issuing licences to dealers such as the Company's Dealer's Licence. However, amendments to current laws and regulations governing the importation, distribution, transportation and/or production of controlled substances, or more stringent implementation thereof could have a substantial adverse impact on the Company. Local, provincial, and federal laws and enforcement policies concerning controlled substances are changing rapidly and will continue to do so for the foreseeable future.

Should the Company choose to engage in permitted activities as authorized by its Dealer's Licence at a later date, the Company's operations will be required to be conducted in strict compliance with the laws and regulations regarding its activities with controlled substances. The Company does not have any direct or indirect involvement with the illegal selling, production or distribution of any substances in the jurisdictions in which it operates and does not intend to have any such involvement at this time. However, a violation of any applicable laws and regulations, such as the CDSA, could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings initiated by the government entities in the jurisdictions in which the Company operates, private citizens or criminal charges. Any such violations could have a material adverse effect on the business, results of operations and financial condition of the Company.

Reliance on licences

The Company's ability to produce and sell cannabis products in Canada is dependent on maintaining its licences with Health Canada. All of the Company's licences are, or will be, subject to ongoing compliance and reporting requirements. Failure to comply with the requirements of the licences, to maintain its licences, and to renew the licences after their expiry dates would have a material adverse impact on the business, financial condition and operating results of the Company.

If the Company opts to pursue commercialization strategies involving the permitted activities pursuant to its Dealer's Licence, the Company's ability to engage in such permitted activities will depend on maintaining its Dealer's Licence with Health Canada. Failure to comply with the requirements of the licence, to maintain its licence, and to renew the licence after its expiry date may have a material adverse impact on the business, financial condition and operating results of the Company.

Should Health Canada not extend or renew existing licences, renew existing licences on different terms, or refuse applications for new licences, the business, financial condition and operating results of the Company would be materially adversely affected.

Fluctuating Prices of Raw Materials

The Company's revenues are largely derived from the production, sale and distribution of agricultural products or products related to the growth of such agricultural products. The price of production, sale and distribution of these products will fluctuate widely and is affected by numerous factors beyond the Company's control, including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities and increased production due to new production and distribution developments and improved production and distribution methods. The effect of these factors on the price of the Company's products and, therefore, the economic viability of any of the Company's business, cannot accurately be predicted.

In addition, the current economic environment may result in significant inflationary pressures for the price of the Company's inputs and labour, which could have a material effect on the Company's business, financial condition or results of operations. The Company may not be able to fully offset such higher costs through price increases. The Company's inability or failure to do so could harm its business, financial condition and results of operations.

Industry volatility

The cannabis industry and businesses ancillary to and directly involved with cannabis businesses are undergoing rapid growth and substantial change, which has resulted in an increase in competitors, consolidation and formation of strategic relationships. Acquisitions or other consolidating transactions could harm the Company in a number of ways, including by losing strategic partners if they are acquired by or enter into relationships with a competitor, losing customers, revenue and market share, or forcing the Company to expend greater resources to meet new or additional competitive threats, all of which could harm the Company's operating results. As competitors enter the market and become increasingly sophisticated, competition in the Company's industry may intensify and place downward pressure on retail prices for its products and services, which could negatively impact its profitability.

Although the Company currently has no intention of pursuing any activities under its Dealer's License, should the Company choose to engage in permitted activities as authorized by its Dealer's Licence in the future, the Company may face challenges related to the relatively new and rapidly evolving commercial environment relating to controlled substances, including managing a complex and highly regulated supply chain, developing and scaling operations, attracting and retaining talent necessary to perform the permitted activities under the conditions imposed by the Dealer's Licence and other regulatory restrictions, and the public perception of controlled substances. Since the industry for controlled substances is still in a very early stage in Canada, there are significant risks that any expenditures in developing a business that relies in part on commercialization of its Dealer's Licence will not result in profitable operations.

Ongoing need for financing

The Company's ability to continue operations will be largely reliant on its continued attractiveness to equity investors. The Company is expected to incur operating losses as it continues to expend funds to develop its business operations. Even if its financial resources are sufficient to fund its current operations, there is no guarantee that the Company will be able to achieve its business objectives. The continued development of the Company will require substantial additional financing. The failure to raise such capital could result in the delay or indefinite postponement of current business objectives or the going out of business. The primary source of funding available to the Company will consist of equity financing. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favorable. In addition, from time to time, the Company may enter into transactions to acquire assets or the shares of other corporations. These transactions may be financed wholly or partially with debt, which may temporarily increase the Company's debt levels above industry standards.

Ongoing costs and obligations

The Company's efforts to grow its business may be costlier than the Company expects, and the Company may not be able to increase its revenue enough to offset its higher operating expenses. The Company may incur significant losses in the future for a number of reasons and unforeseen expenses, difficulties, complications and delays, and other unknown events. If the Company is unable to achieve and sustain profitability, the market price of the common shares may significantly decrease.

Competition

The cannabis production industry is competitive in all of its phases. The Company will face strong competition from other companies in connection with such matters. Many of these companies have greater financial resources, operational experience and technical capabilities than Adastra. As a result of this competition, the Company may be unable to maintain its operations or develop them as currently proposed, on terms it considers acceptable or at all. Consequently, the revenues, operations and financial condition of the Company could be materially adversely affected.

Because of the early stage of the industry in which the Company operates, the Company may face additional competition from new entrants. If the number of users of cannabis products in Canada increases, the demand for products will increase and management expects that competition will become more intense as current and future competitors begin to offer an increasing number of diversified products. To remain competitive, the Company will require a continued high level of investment in research and development, marketing, sales and client support. The Company may not have sufficient resources to maintain research and development, marketing, sales and client support efforts on a competitive basis which could materially and adversely affect the business, financial condition and results of operations.

Proprietary and intellectual property rights

The Company's ability to compete may depend on the superiority, uniqueness and value of any intellectual property and technology that it may develop. To the extent the Company is able to do so, to protect any proprietary rights of the Company, the Company intends to rely on a combination of patent, trademark, copyright and trade secret laws, confidentiality agreements with its employees and third parties, and protective contractual provisions. Despite these efforts, any of the following occurrences may reduce the value of any of the Company's intellectual property:

• Patents in the cannabis industry involve complex legal and scientific questions, and patent protection may not be available for some or any products; the Company's applications for trademarks and copyrights relating to its business may not be granted, and, if granted, may be challenged or invalidated;
• Issued patents, trademarks and registered copyrights may not provide the Company with competitive advantages; the Company's efforts to protect its intellectual property rights may not be effective in preventing misappropriation of any of its products or intellectual property;
• The Company's efforts may not prevent the development and design by others of products or marketing strategies similar to or competitive with or superior to those the Company develops;
• Another party may assert a blocking patent and the Company would need to either obtain a licence or design around the patent in order to continue to offer the contested feature or service in its products; or
• The expiration of patent or other intellectual property protections for any assets owned by the Company could result in significant competition, potentially at any time and without notice, resulting in a significant reduction in sales. The effect of the loss of these protections on the Company and its financial results will depend, among other things, upon the nature of the market and the position of the Company's products in the market from time to time, the growth of the market, the complexities and economics of manufacturing a competitive product, and regulatory approval requirements, but the impact could be material and adverse

Key personnel

If the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the market. The Company's success has depended and continues to depend upon its ability to attract and retain key management, including the Company's CEO, CFO and technical experts. The Company will attempt to enhance its management and technical expertise by continuing to recruit qualified individuals who possess desired skills and experience in certain targeted areas. The Company's inability to retain employees and attract and retain sufficient additional employees or engineering and technical support resources could have a material adverse effect on the Company's business, results of operations, sales, cash flow or financial condition. Shortages in qualified personnel or the loss of key personnel could adversely affect the financial condition of the Company, results of operations of the business, and could limit the Company's ability to develop and market its products. The loss of any of the Company's senior management or key employees could materially adversely affect the Company's ability to execute the Company's business plan and strategy, and the Company may not be able to find adequate replacements on a timely basis, or at all. The Company does not maintain key person life insurance policies on any of the Company's employees.

Product liability

As a processor and distributor of products designed to be ingested by humans, the Company faces an inherent risk of exposure to product liability claims, regulatory action, and litigation if its products are alleged to have caused significant loss or injury. Previously unknown adverse reactions resulting from human consumption of cannabis or other products alone or in combination with other medications or substances could occur. As a processor and distributor and of such products or in its role as an investor in or service provider to an entity that is a manufacturer, distributor and/or retailer of adult-use of such products, the Company may be subject to various product liability claims, including, among others, that the product caused injury or illness, include inadequate instructions for use or include inadequate warnings concerning possible side effects or interactions with other substances.

A product liability claim or regulatory action against the Company could result in increased costs, could adversely affect the Company's reputation with its clients and consumers generally, and could have a material adverse effect on the business, results of operations, financial condition or prospects of the Company. There can be no assurances that the Company will be able to maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to maintain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of the Company's potential products or otherwise have a material adverse effect on the business, results of operations, financial condition or prospects of the Company.

Reputational risk and negative public opinion

Damage to the Company's reputation can result from the actual or perceived occurrence of any number of events, including any negative publicity, whether true or not. As a distributor of cannabis, which was previously a controlled substance in Canada, and as a holder of a Dealer's Licence permitting certain activities relating to substances currently classified as controlled substances, there is a risk that the Company's business may attract negative publicity due to association of such products or substances with violence and criminal activities. There is also a risk that the actions of other licence holders, permitted retailers or other companies and service providers in the cannabis industry or entities authorized to deal with controlled substances, including those in the cannabis industry with whom the Company has or will enter into agreements with, may negatively affect the reputation of the industry as a whole and thereby negatively impact the Company's reputation.

The increased usage of social media and other web-based tools used to generate, publish and discuss user-generated content and to connect with other users has made it increasingly easier for individuals and groups to communicate and share negative opinions and views in regard to the Company's activities and the industry in general, whether true or not. The Company does not ultimately have direct control over how the Company, the cannabis industry, or the controlled substance licensing regime is perceived by others. Reputational issues may result in decreased investor confidence, increased challenges in developing and maintaining community relations and present an impediment to the Company's overall ability to advance its business strategy and realize on its growth prospects, which could have a material adverse effect on the Company's business, financial condition or results of operations.

Litigation

The Company may become subject to litigation, including for possible product liability claims, which may have a material adverse effect on the Company's reputation, business, results from operations and financial condition. The Company may be named as a defendant in a lawsuit or regulatory action. The Company may also incur uninsured losses for liabilities, which arise in the ordinary course of business, or which are unforeseen, including, but not limited to, employment liability and business loss claims. Any such losses could have a material adverse effect on the Company's business, results of operations, sales, cash flow or financial condition.

COVID-19 pandemic

The COVID-19 outbreak, and related government restrictions, continues to cause business disruptions across the entire global economy and society including impacts on certain supply chains, and cost of supplies and labour. The Company has taken various measures to prioritize the health and safety of its employees, customers and partners, including restricted work travel and site access, improved safety & hygiene, and the requirement of nonessential staff members to work remotely, as required. As a manufacturer of consumable and medicinal products, the Company's practice is to always operate consistently with global pharma-quality standards to the best of its abilities, with strict hygiene practices and mandated personal protective equipment. It is not possible for the Company to predict the duration or magnitude of any longer-term adverse effects that the pandemic may have on the Company's business or ability to raise funds. As of the date of this MD&A, COVID-19 has had minimal impact on the Company's ability to conduct its operations but may impact the Company's ability to raise funding should restrictions related to COVID-19 be expanded in scope.

Adastra Holdings Ltd.: Exhibit 99.3 - Filed by newsfilecorp.com

FORM 52-109FV2

Certification of Interim Filings

Venture Issuer Basic Certificate

I, Michael Forbes, Chief Executive Officer of Adastra Holdings Ltd., certify the following:

1. Review: **** I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Adastra Holdings Ltd. (the "issuer") for the interim period ended September 30, 2023.

2. No misrepresentations: **** Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3. Fair presentation: **** Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

DATE: November 29, 2023.

/s/Michael Forbes
Michael Forbes<br>Chief Executive Officer

NOTE TO READER

In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of

i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.

The issuer's certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate.  Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

Adastra Holdings Ltd.: Exhibit 99.4 - Filed by newsfilecorp.com

FORM 52-109FV2

Certification of Interim Filings

Venture Issuer Basic Certificate

I, Lachlan McLeod, Chief Financial Officer of Adastra Holdings Ltd., certify the following:

1. Review: **** I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Adastra Holdings Ltd. (the "issuer") for the interim period ended September 30, 2023.

2. No misrepresentations: **** Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3. Fair presentation: **** Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

DATE: November 29, 2023.

/s/Lachlan McLeod
Lachlan McLeod<br>Chief Financial Officer

NOTE TO READER

In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of

i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.

The issuer's certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate.  Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

Adastra Holdings Ltd.: Exhibit 99.5 - Filed by newsfilecorp.com

ADASTRA HOLDINGS REPORTS THIRD QUARTER RESULTS; DEMONSTRATING GROSS REVENUES OF $8.1M

LANGLEY, BC / ACCESSWIRE / November 29, 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 nine months ended September 30, 2023. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.

"In the third quarter of 2023, we achieved gross revenues of $8.1 million, marking a substantial 49% increase compared to the same period last year. This impressive growth is directly linked to an increase in throughput at our Langley facility. Although we observed a dip in sales from the second quarter of 2023 due to our strategic shift towards prioritizing our in-house brands over production for third-party licensed producers, we are confident in the long-term benefits of this transition. Our in-house brand, Endgame, is in high demand, consistently securing numerous best-selling SKUS on Headset. As we enter the last quarter of 2023, our commitment remains unwavering in delivering value to our stakeholders and capitalizing on the positive momentum we have generated. Notably, we're on track to approach nearly $40 million in annual sales, solidifying our position as a key player in the thriving cannabis industry."

Michael Forbes, Chief Executive Officer

Third Quarter 2023 Financial Highlights

● Gross revenues of $8.1M in the three month period ended September 30, 2023 ("Q3 2023"), compared to $5.5M in the three month period ended September 30, 2022 ("Q3 2022"), representing an increase of 49%, due to a significant increase in the throughput of the Langley facility.

● Gross profit of $2.2M in Q3 2023, compared to $1.6M in Q3 2022, representing an increase of 36%. 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 gross revenues decreased from 38% in Q3 2022 to 32% in Q3 2023.

● Net loss and comprehensive loss of $642K during Q3 2023, compared to $1.1M during the three month period ended June 30, 2023, a decrease of 40% quarter over quarter.

● During Q3 2023, the Company renewed its $3.5M mortgage with a maturity date of November 1, 2024. The mortgage bears interest at the greater of 11.49% or the prime rate plus 4.29% per annum, calculated monthly, for one year. The interest rate will increase to 15.99% or the prime rate plus 8.79% for the remainder of the term, unless it is renewed earlier.

● Operating expenses increased 27% from $2.1M during Q3 2022 to $2.6M during Q3 2023 which was the result of the Company's increased expenditures on advertising and promotion. The Company 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.

2023 Year-to-Date Financial Highlights

● During the nine months ended September 30, 2023, cash provided by operating activities increased to $2.2M from operations from $106K during the nine months ended September 30, 2022.

● During the nine months ended September 30, 2023, the Company had free cash flow of $1.5M, compared to negative $221K during nine months ended September 30, 2022. ^(1)^

^(1)^ Free cash flow is a non-GAAP financial measure that is used to measure the Company's ability to generate value and grow the Company's business. Free cash flow is calculated as cash flow from operations less cash used in investing activities. Free cash flow is a non-GAAP financial measure used by management that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The most directly comparable measure to free cash flow calculated in accordance with IFRS is cash flows that are not related to financing activies. For more information on the reconciliation of free cash flow, please refer to the reconciliation table following this note.

	Nine months endedSeptember 30,
	2023	2022
Cash provided by operating activities	2,235,517	106,788
Cash used in investing activities	(761,695	(327,379
Free cash flow	1,473,822	(220,591

All values are in US Dollars.

Third Quarter 2023 Corporate and Business Highlights

● In-house brand, Endgame ranks 1st and 2nd of the best-selling concentrates and ranks 3rd of the best-selling vapor pens in Alberta, according to Headset^1^

● In-house brand, Endgame ranks 4th and 5th of the best-selling concentrates in British Columbia, according to Headset^2^

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^1^ Source: Headset Data, November 29, 2023

^2^ Source: Headset Data, November 29, 2023

● In-house brand, Endgame ranks 3rd of the best-selling vapor pens in Ontario, according to Headset^3^

● In Q3 2023, the following new SKUs for in-house brands were accepted for listing in: Ontario - 23; Alberta - 19; Manitoba - 17; Yukon - 11; Saskatchewan - 10; and British Columbia - 6.

Financial Statements & Management's Discussion and Analysis

This earnings press release should be read in conjunction with Adastra's interim financial statements for the three and nine months ended September 30, 2023 (the "Financial Statements") and the related management's discussion & analysis (the "MD&A"), which can be found on Adastra's issuer profile on the System for Electronic Document Analysis and Retrieval Plus ("SEDAR+") at www.sedarplus.ca.

About Adastra Holdings Ltd.

Adastra has become one of Canada's leaders in the supply and manufacturing of ethnobotanical and cannabis products for lawful adult-use. It serves medical markets and engages in forward-looking therapeutic applications. With cannabis concentrate products sold through retailers at more than 2,000 locations across Canada, Adastra's Phyto Extractions and Endgame Extracts brands are now well established with a solid distribution presence. As a Health Canada licensed facility, it specializes in extraction, distillation and manufacturing of a range of cannabis-derived products. Adastra partners with healthcare professionals and practitioners within the regulated environment to create products suitable for the medical cannabis market, with the ultimate aim of addressing the needs of patients. For more information, visit: www.adastraholdings.ca.

Contacts

Michael Forbes, CEO, Corporate Secretary & Director

(778) 715-5011

[email protected]

Cautionary Statement Regarding Forward-Looking Information

This news release includes certain "forward‐looking information" as defined under applicable Canadian securities legislation, including statements regarding the plans, intentions, beliefs and current expectations of the Company with respect to future business activities and operating performance. Forward-looking information is often identified by the words "may", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" or similar expressions and includes information regarding: the expected long-term benefits of the Company focusing on the Company's in-house brands; the Company's ability to continue to deliver value to its stakeholders; the Company's ability to be a key player in the cannabis industry; the availability of the Financial Statements and the MD&A on the Company's SEDAR+ profile; and expectations for other economic, business, and/or competitive factors.

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^3^ Source: Headset Data, November 29, 2023

Investors are cautioned that forward-looking information is not based on historical fact but instead reflects management's expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although the Company believes that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the Company. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: the  availability of a qualified workforce; regulatory and licensing risks; changes in consumer demand and preferences; changes in general economic, business and political conditions, including changes in the financial markets; reductions in the Company's retail space and store locations; the global regulatory landscape and enforcement related to cannabis, including political risks and risks relating to regulatory change; compliance with extensive government regulation; public opinion and perception of the cannabis industry; the impact of COVID-19; and the risk factors set out in the MD&A and the Company's management discussion and analysis for the years ended December 31, 2022 and 2021, which are available on the Company's profile on SEDAR+ at www.sedarplus.ca*.*

SOURCE: Adastra Holdings Ltd.