💬 The Cannabis ETF MSOS traded down (18%) on yesterday’s SAFE Banking news—Cresco Labs ⬇️ (17.6%), Trulieve ⬇️ (17.1%), Curaleaf ⬇️ (16.7%), Verano ⬇️ (15.3%) and GTI ⬇️ (12.1%).

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🌿 Industry

Natalie Fertig @natsfert

What's next? 2023. We'll see what Cannabis Caucus Co-chair @RepDaveJoyce can get done in a GOP House, and if the bipartisan group of Senators (incl Schumer and Daines) who got this cannabis deal together in this Congress are game to simply put the same deal forward in the next.

Cannabis Reform Dead In Congress After Objections From Republicans.

Congress won’t include any cannabis provisions in its year-end spending package, dooming the chances of an overhaul of marijuana laws for the foreseeable future. Not only will Congress fail to legalize marijuana this year, lawmakers couldn’t even agree to include a modest anti-crime cannabis reform as part of a $1.7 trillion government funding bill set to pass this week. Though it had nine Republican cosponsors, the cannabis banking bill lacked the kind of broader bipartisan support it needed to catch a ride on a government funding bill. It’s possible that it could have passed with a stand-alone vote, but Democrats had failed to schedule one. With Republicans set to take control of the House next month, the chances of any significant legislation, including marijuana reform, becoming law are likely slim to none.

Headset Cannabis trends in 2022: A year in review. The past year has been a tumultuous time in the cannabis industry, with slowdowns in topline sales and uncertainty in the market. However, as always in cannabis, there are plenty of reasons to be hopeful for the future. New states legalized adult-use and medicinal cannabis, existing markets continued to grow, and the winds of federal policy appear to be blowing in a favorable direction. As the year draws to a close, Heaset takes a look back at how sales trends have shifted over 2022. The report examines the broad changes among the most key cannabis sales metrics tracked at Headset such as pricing trends, shifts in cannabis product categories, and demographic preferences.

Report takeaways:

Cannabis sales growth has slowed down in 2022
Most Canadian markets saw positive growth in 2022
Shifts in category sales performance hint at a broad scale move in consumer purchasing behavior away from wellness and symptom treatment, and towards portable and shareable products
Infused Pre-Rolls continue to grow in US and reach prominence in Canada
Average item prices have decreased in both countries, but more significant declines have been observed in US markets
Topline sales growth depended entirely on changes in total transaction volume. Average basket sizes decreased in all cannabis markets over the past year
In the US, Gen Z was the only age group to see sales growth over the past year. In Canada, Female Gen X customers had stand out performance

New York Governor Hochul Unveils Licensed Cannabis Dispensary Verification Tool. Governor Kathy Hochul today unveiled a "New York State Licensed Cannabis Dispensary" verification tool that will be posted in the windows of legally licensed retail dispensaries, which are set to begin opening before the end of this year. The designation will ensure consumers know they are buying from a dispensary regulated by New York State. A universal symbol on each product sold will also show that it is up to standards set by the state. The combination provides consumers certainty that they have acquired a tested, regulated product.

Washington state’s cannabis sales slowed this year for the first time since adult-use sales began in 2014. Retail marijuana sales declined 8% from 2021 to 2022, a loss of about $120 million in revenue, The Seattle Times reported. Headset found that the frequency of marijuana purchases at retail stores and the money people are spending has been declining in those states since the summer of 2021. “What you’re seeing as a ‘dip’ is really sales returning to normal growth as more people returned to in-person work,” said Brian Smith, Washington State Liquor and Cannabis Board.

Former execs of Canadian cannabis producer CannTrust acquitted in ‘quasi-criminal’ case. Three former executives of CannTrust, including its ex-CEO, have been acquitted of all charges after the case collapsed this week. The charges came from a nearly two-year joint investigation by the Ontario Securities Commission (OSC) and Royal Canadian Mounted Police (RCMP) after a whistleblower alerted Canada’s cannabis regulator in 2019 about five “unlicensed” cultivation rooms the company had been operating since 2018. Peter Aceto, the company’s CEO at the time of the alleged incidents, had been charged with fraud and making false or misleading statements to the OSC and to the market, among other purported infractions. Mark Litwin, formerly a director of the company, and Eric Paul, a former CannTrust chair, faced fraud and insider trading charges, among others. The Financial Post newspaper reported that a key witness had testified a week earlier in the Ontario Court of Justice that he was mistaken about using the term “unlicensed” to describe “noncompliant” cannabis growing areas in the company’s Pelham greenhouse. The key witness’ confusion over the terms “unlicensed” and “noncompliant” apparently caused the OSC to concede there was no reasonable prospect of conviction.

💵 Deals

RIV Capital Completes Final Closing of Etain Transaction. Under the terms of the transaction, RIV Capital paid the remaining purchase price through a combination of ~$42M in cash and issued 5,273,084 common shares in RIV Capital. Following the final closing, the former owners of Etain hold ~16% of the issued and outstanding common shares of RIV Capital. RIV Capital's long-term strategy is to build a leading multi-state operating and brand platform, with New York serving as the foundation. The Company intends to develop and expand new brands and products designed to resonate with the New York consumer, with plans to offer as one of its core brands Etain's popular product line, which will include new form factors and SKUs.

Fire & Flower Proposed Amendment to Debentures Held by Alimentation Couche-Tard and Postponement of Special Shareholders' Meeting. Fire & Flower has entered into an agreement to amend the $2.4M principal amount of unsecured convertible debentures held by an indirect wholly-owned subsidiary of Alimentation Couche-Tard, to extend the maturity date from June 30, 2023 to August 31, 2024.

Agrify Prices Public Offering, raising $8.7M. The combined public offering price for each share of common stock and accompanying two Common Warrants is $0.65, and the combined offering price for each Pre-Funded Warrant and accompanying two Common Warrants is $0.649, which equals the public offering price per share of the common stock and accompanying two Common Warrants, less the $0.001 per share exercise price of each Pre-Funded Warrant.

📄 Company Updates / Earnings

Dutchie Founders Sue the Company for Orchestrating a Coup. The complaint was filed derivatively on behalf of Courier Plus Inc. against Executive Chairman Timothy Barash and Board Directors Karan Wadhera, Wilder Ramsey, Gaurav Ahuja, and Thomas Linovitz. The case, which was filed under seal, is Ross Lipson et al. v. Timothy Barash, case number 2022-1135. Law360 wrote that the Lipsons “allege the defendants conspired in late November to remove the brothers from their officer positions, improperly appoint Linovitz as an independent director, and replace Ross Lipson with Barash as CEO.” They claim to have been ambushed at a board meeting held on November 28, “where the board quickly passed pre-drafted resolutions to terminate them ‘for cause,’ stripped them of their status as key stockholders, removed them from the board and amended a common stockholders’ voting agreement so that Barash could take control.” On Dec. 1, Dutchie announced that Barash was taking over as chairman and CEO and that the Lipsons had departed.

C21 Investments — Q3 Earnings Results. Revenue of $7.2M, up 0.4% sequentially (Nevada cannabis sales were down 14.7% Q/Q). Gross Margin of 54.2%. Adjusted EBITDA of $2.2M (30% EBITDA Margin), in line with the previous three quarters. Cash Flow from Operations of $1.5M. Cash of $2.3M.

Unrivaled Brands Successfully Opposes Yet Another Application for Emergency Relief by People’s California. People’s California filed its application for writ of possession on December 7, 2022. Two days later, People’s California sought, on an emergency basis, to advance the hearing for its writ of possession from May 8, 2023 to December 19, 2022. Unrivaled argued in its opposition that People’s California’s urgency is manufactured and that their demonstrated track record of litigation by ex parte should not be rewarded. The court ruled that the hearing date for the writ of possession be advanced only to March 6, 2023, apparently rejecting People’s California’s claim that it was entitled to immediate relief.

🏬 Retail

Sweet Flower opens Chico’s first dispensary. More than 300 people lined up for the opening, which Sweet Flower CEO Tim Dodd said has been in the works for two and a half years. This is the seventh dispensary in CA for Sweet Flower.

Glass House Brands Expands Retail Presence with New Farmacy Dispensary in Isla Vista. The Isla Vista store is in a prime location and, most importantly, a single license market, just blocks from UC Santa Barbara. GHB now has 8 dispensaries total.

Sunburn Cannabis opens fifth Florida in Jacksonville Beach, FL. The company plans to open a second Jacksonville dispensary in January. The company also intends to break ground on an initial 75,000-square-foot indoor garden and processing facility in Palm City, with plans to be fully operational by late 2023.

Schwazze Reaches 40 Dispensaries across Colorado and New Mexico. Schwazze closed the transaction to acquire certain assets of Lightshade, which included the adult use Lightshade dispensaries in Aurora and Denver. The consideration for the acquisition was $2.75M which was paid as all cash. R.Greenleaf's opened a new locaiton in Albuquerque, bringing the total number of New Mexico locations to 15.

🌱 Product

Mary Jones Cannabis-Infused Syrups are arriving at Sweet Flower. This latest addition to the Mary Jones cannabis-infused beverage brand is available in the same fan-favorite Jones craft soda flavors as the Mary Jones 10mg and 100mg THC-infused sodas introduced over the last few months: Root Beer, Berry Lemonade, Green Apple and Orange & Cream. Each syrup flavor comes in a 4 fl oz glass bottle containing 100mg of THC for multiple servings. Sweet Flower is the exclusive launch partner for Mary Jones Syrups. All four flavors will debut at Sweet Flower locations in Studio City, West Hollywood, Culver City, Westwood, Chico and DTLA.

Garden Society launches new THCV-Rich Kiwi Lime Sauvignon Blanc Gummies. Using proprietary, fast-acting technology, these delicious edibles feature a special sour coating to complement the delightful flavors of kiwi, lime, and crisp sauvignon blanc and will provide the desired effect in around 15 minutes. They join Garden Society’s three additional flavors: Tart Cherry Pinot Noir, Peach Prosecco, and Sparkling Strawberry Rosé. Each has a varying blend of THC + CBD that provides the desired effect, from relaxing to uplifting.

Trulieve Exclusive Partnership in Florida with Connected Cannabis & AlienLabs. As part of the announcement, Trulieve is the exclusive provider of Connected Branded products throughout Florida. AlienLabs is well-known for its flower strains with a focus on top-shelf, exotic, indoor cannabis. Connected Cannabis offers high-quality cannabis by developing different cultivation techniques to create the strains they are now best known for in the California market.

Binske partners with InterCure for international expansion. Binske will provide the Company access to its IP, including genetics, formulations and know-how for cultivation and manufacturing of Binske-branded cannabis products at the Company's facilities. In addition, Binske will provide InterCure with IP relating to extraction formulations and the production of downstream products developed by "Binske", and will support InterCure's team with training of manufacturing and cultivation methods that are tailored for Binske’s exacting standards. Under the terms of the Agreement, InterCure will produce and distribute the Branded Products leveraging its international supply chain using the Company's medical cannabis-dedicated pharmacy chain.

4Front Ventures Expands Island Cannabis Co. Product Offerings in Massachusetts. The company launched multiple new product lines, including new Island Flower varieties, along with prerolls and mini prerolls in single-strain and infused varieties. The newly launched products will be available at the Company's Mission Dispensaries in Georgetown, Worcester, and Brookline, and are expected to roll out to 4Front's partner dispensaries across Massachusetts in the coming weeks.

🧔 People

Curaleaf adds Michelle Bodner and Shasheen Shah to Board. Bodner was engaged by Curaleaf as a consultant responsible for the Company's New York State license application. Since that time, Michelle has held multiple positions at Curaleaf including tenures as Board Member, first COO, and President and CEO of Curaleaf's New York and Florida operations. Shasheen Shah, CEO of Coherent Strategies Consulting and Coaching, is a leadership development coach and advisor to global executives and organizations.

MariMed appoints Jon Levine as interim CEO. As President, Levine has managed the day-to-day facets of MariMed’s operations, and as co-founder of MariMed, has the experience and knowledge of the Company’s innerworkings and growth strategy that are crucial at this juncture. The Board will conduct a process to identify a permanent CEO for MariMed, which may include external and internal candidates.

Audacious CFO Jon Paul departs. Paul has agreed to act in an advisory capacity during a transitionary period. The Company has found a replacement in Derrek Higgins, who is expected to be appointed CFO upon Board approval. Higgins previously served as CFO with Glass House Brands and Harborside.

🎙️ Interviews

TerrAscend Chairman Jason Wild | NCV

Holiday Specific Cannabis Products | High Rise

Brian Weiss on Covering the LA Cannabis Market | Muse by Clio

Method Man recalls quitting cannabis to film “How High” | Revolt

👋 Highly Objective is curated by Dai Truong, who leads Cannabis Investment Banking at Arlington Capital Advisors. Third-party information presented here and links to third-party content are for informational purposes only and are not intended as a recommendation, offer or solicitation for the purchase or sale of any financial instrument, security or investment. The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Linking to third-party sites in no way implies an endorsement or affiliation of any kind between Arlington Capital Advisors, LLC, or its affiliates and any third party. The information in this blog constitutes my own opinions (and any opinions posted by guest bloggers from time to time) and it should not be regarded as a description of services provided by Arlington Capital Advisors, LLC or any affiliate.

Highly Objective

❌ SAFE Banking excluded from final Omnibus…