Canadian Securities Exchange Magazine • November 2022 by Canadian Securities Exchange

NOVEMBER 2022

SPECIAL FEATURE

Cannabis THE

An Exclusive Interview with Beau Whitney, Founder of Whitney Economics

ISSUE

GROWING UP QUICKLY

How leading cannabis companies are proving rapid adaptation is critical for growth and maturation in this industry Spotlights on CSE CFO Mary Anne Palangio and Director of Issuer Engagement Barrington Miller

Define your IPO journey In a highly competitive and regulated environment, you have to navigate a multitude of critical steps to go public – and you need the right advisors to be successful.

Our initial public offering advisors are your source for essential financial and regulatory expertise in becoming a publicly traded company. Be confident you meet the various requirements of all stakeholders involved in your go-public process with the help of MNP’s experienced IPO advisors. Contact us today to learn more about how to define and design your go-public journey. David Danziger, CPA, CA Senior Vice President, Assurance, National Leader of Public Companies david.danziger@mnp.ca | 416.515.3923 Jas Chahal, CPA, CA National Leader, Transaction Accounting Advisory Services (TAAS) jas.chahal@mnp.ca | 289.293.2371

MNP.ca

IN THIS ISSUE

Cannabis lC el ht

e rli

c Ba

t at

rin

E AL

I LD

vi Le

T rs ve i R

I UL

THE CANNABIS ISSUE

Iri

i ov nc

A PH

er st

en Or

CONTENTS

LETTER FROM THE EDITOR | 6

PUBLISHER Sparx Publishing Group Inc.

MARKET LEADERS | 8

Meet some of the world's largest publicly-traded cannabis companies by market capitalization SPOTLIGHT ON

BARRINGTON MILLER | 10 CSE’s Director of Issuer Engagement shares his thoughts on the current trends, challenges and opportunities of this dynamic industry

sparxpg.com For advertising rates and placements, please contact advertising@sparxpg.com

INTERVIEW WITH

BEAU WHITNEY | 12

Beau Whitney, Founder of Whitney Economics, provides insight on important trends in global cannabis markets

TUNE IN | 16 Catch up on what's happening in the capital markets with the latest content from CSE TV TRULIEVE CANNABIS | 18

Staying true to proven growth plans and core values turns Trulieve into a cannabis powerhouse

IM CANNABIS | 22

Early mover status drives growth in multiple legal cannabis markets

CRESCO LABS | 26 Top-tier house of brands acquires a major retail network and sets its sights on becoming number one CURALEAF HOLDINGS | 30 Cannabis industry leader sees multiple growth opportunities in US home market and overseas MARIMED | 34

More US growth in the works for this consistently profitable cannabis company

INNOCAN PHARMA | 38 Combining cannabinoids and cutting-edge science to deliver drugs on target CANNABIS COMPANIES

LISTED ON THE CSE | 42 CSE-listed cannabis companies continue to set the pace in this ever-evolving sector

GROUP PUBLISHER Hamish Khamisa EDITOR-IN-CHIEF James Black EDITORS Peter Murray Libby Shabada ART DIRECTOR Elisabeth Choi DESIGNER Nicole Yeh WRITERS Uttara Choudhury Emily Jarvie Andrew Kessel Sean Mason Peter Murray Libby Shabada ILLUSTRATOR Annik Lemire FREE DIGITAL SUBSCRIPTION Published by Sparx Publishing Group on behalf of the Canadian Securities Exchange. To receive your complimentary subscription, please visit go.thecse.com/Magazine and complete the contact form. To read more about the companies mentioned in this issue, visit blog.thecse.com or proactiveinvestors.com

SPOTLIGHT ON

MARY ANNE PALANGIO | 43

Exploring the capital markets and cannabis sector from a finance lens with CSE CFO Mary Anne Palangio

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

Letter from the Editor Since launching just under a decade ago, the agility of the commercial cannabis industry has been nothing short of remarkable. From building out infrastructure and scaling up production (quite literally) from the ground up, to navigating constantly shifting legislative landscapes, to maneuvering through a global pandemic and the resulting economic volatility, the cannabis industry is well-equipped to handle change. As the global leader in publicly-listed cannabis securities, the Canadian Securities Exchange is acutely aware of just how nimble the various stakeholders in the industry have had to be in the face of these multifaceted challenges. Our time spent connecting in person with countless industry leaders and business operators, including at the Benzinga Cannabis Capital Conference earlier in the year, only reinforces our view that the current conditions faced by the cannabis industry are a reflection of its maturation and something that will be important to the long-term success of the industry. But don’t just take our word for it. In this issue of our magazine, which goes to press just ahead of one of the longest-running cannabis business conferences, MJBizCon, we’ve brought together leaders from six of the most influential CSE-listed cannabis companies, whose total market cap exceeds C$8 billion, as well as industry experts, to provide their perspectives on how the cannabis industry can maneuver through the current market conditions and where they see the industry going. With the global opportunity in cannabis still continuing to take shape, the CSE is also adjusting course to ensure we can continue to support CSE-listed issuers, in the cannabis sector and beyond, well into the future. Heading into the end of the year, we look forward to even more opportunities to engage with cannabis entrepreneurs, and we are especially excited to provide news of our own evolution. New features like our senior-tier listing capabilities, CSE Book 2 and CSE IQ platform for listed issuers are just a few examples of investments that we’ve put into place to enable the Exchange to support and service the growth ambitions of all firms listed with us, regardless of size. Despite the backdrop of uncertainty, we’re entirely confident in the resilience and resourcefulness of the cannabis community to navigate through the current and yet-to-beidentified challenges. Having spent as much time with entrepreneurs as we have, regardless of the sector, one thing always shines through: when the going gets tough, the tough get going. And based on the perspectives shared by the leaders in this issue, we’re ready and excited for wherever they go next.

James Black Editor-in-Chief james.black@thecse.com

ON THE WEB

CSE TV Stay up to date on the latest news and trends in the capital markets. Join our community of subscribers who tune in to CSE TV for behind-the-scenes content about growing industries like cannabis, and much more. Subscribe now: go.thecse.com/CSETV

THE CANNABIS ISSUE

THE EXCHANGE FOR ENTREPRENEURS PODCAST Listen to in-depth conversations with thought leaders and innovators on Season 2 of The Exchange for Entrepreneurs Podcast. You can find it on Apple Podcasts, Google Play, Spotify, Stitcher, YouTube, and iHeartRadio. Tune in: blog.thecse.com/cse-podcasts

WWW.CSELAW.CA 416.519.6886 100 Bass Pro Mills Drive, Vaughan, Ontario, L4K 1X5

MARKET LEADERS The CSE’s top cannabis companies by market capitalization as of September 7, 2022.

CURA GTII

VERANO HOLDINGS CORP.

TRUL

TRULIEVE CANNABIS CORP.

CCHW TER JUSH

Market Capitalization: $4,928,568,208

GREEN THUMB INDUSTRIES INC.

VRNO

CURALEAF HOLDINGS INC.

CRESCO LABS INC.

Market Capitalization: $2,604,608,434

Market Capitalization: $2,250,674,237

Market Capitalization: $1,352,866,682

COLUMBIA CARE INC. TERRASCEND CORP. JUSHI HOLDINGS INC.

THE CANNABIS ISSUE

Market Capitalization: $3,455,986,479

Market Capitalization: $999,464,319

Market Capitalization: $576,629,369

Market Capitalization: $438,701,948

FFNT

4FRONT VENTURES CORP.

PLTH

PLANET 13 HOLDINGS INC.

Market Capitalization: $407,447,479

Market Capitalization: $400,666,224

AYR.A

AYR WELLNESS INC.

BYND

BYND CANNASOFT ENTERPRISES INC.

BHSC

BIOHARVEST SCIENCES INC.

MGRO

MUSTGROW BIOLOGICS CORP.

GDNS

GOODNESS GROWTH HOLDINGS INC.

RVV

Market Capitalization: $314,398,415

REVIVE THERAPEUTICS LTD.

Market Capitalization: $175,093,179

Market Capitalization: $152,149,843

Market Capitalization: $142,706,787

Market Capitalization: $135,215,240

Market Capitalization: $119,422,031

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

You were recently featured on High Times magazine’s High Times 100 of 2021 list. What stands out to you about this group of fellow influencers?

SPOTLIGHT ON

BARRINGTON MILLER CSE’s Director of Issuer Engagement shares his thoughts on the current trends, challenges and opportunities of this budding industry.

Speaking personally, what fascinates you about the cannabis industry? So many things. For one, being on the front lines of a brand-new industry that promotes health and well-being, has diversity and inclusion hardwired into its thesis, creates jobs and economic growth and has become fully legal (in Canada). It’s exciting to be at a stock exchange that is responsible for the merging of this industry into capital markets in North America and internationally – it’s literally a once-in-a-lifetime moment.

THE CANNABIS ISSUE

That was a real honour. High Times has secured their place in the world of cannabis, and they continue to be a strong voice for the plant. In their list, I liked the approach they took in looking at diversity and the industry as a whole. There are activists, patients, actors, multimillion dollar companies, entrepreneurs, startups and those of us in the capital markets all alongside each other.

As the cannabis sector continues to evolve, what do you hear from capital markets professionals and executives about the current state of the industry? A wave of consolidation continues to envelop the industry while various challenges permeate. Regionally, I’m hearing the number of dispensaries far exceeds the demand in Canada, leading to unprecedented amounts of unpackaged cannabis getting destroyed. Raising capital also continues to prove challenging. In the US, federal legalization is “five years away from being five years away,” and cannabis stakeholders eagerly wait for the CLIMB or SAFE Banking acts to get passed. Meanwhile in Europe, it lags behind North America, continuing to hum along.

You often host The Exchange for Entrepreneurs Podcast as well as other interviews and conversations. What do you enjoy the most about doing the podcast? For The Exchange for Entrepreneurs Podcast, I’m able to ask the questions that I genuinely don’t know the answer to – questions that, coincidentally, are often the same

ones our audience has. No two interviews are alike. I have a curious nature, so learning about industries, companies and the people behind the scenes scratches that itch. It’s also rewarding to help show another side of an issuer; it adds another layer of understanding beyond sell sheets and PowerPoints.

You also host Tech Tuesdays, a CSE TV series, which has directly resulted in a few financings for CSE-listed companies. Can you speak a little about that? We have a lot of internal discussion around programming, but there are two underlying goals: to be the place for thought leadership in a particular area or field and to help raise the profile of the company so that others learn about their story, which, in turn, could lead to a direct investment. This is exactly what has happened, and I couldn’t be happier with that result.

What are you most excited about in 2022 in the cannabis sector and beyond? That’s easy: the return to in-person events. The cannabis community is a very embracing one. It’s a sector that is supposed to be work but often doesn’t feel like it – perhaps it’s having the plant as the focal point and all things extend outwards from that. Plus, the events are often in exciting places, like Miami, Las Vegas, New York and Jamaica. In terms of the cannabis sector itself, I’m most interested to see how the industry continues to evolve, the positive effects it can have on health care and how it will look when it becomes truly global, including import, export, the evolving science, R&D and efficacy. And even beyond that, I’m excited about the unlocking of the full potential of the plant. We’ve only scratched the surface.

Coverage Solutions Uniquely Calibrated to Cannabis

Empowering Businesses

Risk Management

Claims Advocacy

Policy Spotlight: Directors & Ofﬁcers (D&O)

Corporate directors and officers lead their companies in many ways, including business development, fund allocation, regulation compliance, etc. Going public requires companies to manage many moving parts, plus exposes executives to loads of scrutiny and lawsuits, making public D&O insurance a top priority. D&O insurance protects the company and its executives and Public D&O in particular, relies heavily on a company’s risk tolerance and budget. AlphaRoot provides specialized expertise and experience in providing D&O insurance services through our industry-leading team for companies based in North America. A growing market means there is a growing focus on specialty commercial insurance services for businesses. Given the regulatory framework of Cannabis, it presents numerous nuances for a company's D&O program. AlphaRoot has finalized a strategic partnership with Baldwin Risk Partners (NASDAQ: BRP). AR is the sole cannabis and psychedelic's arm of - a rapidly growing Top 20 brokerage in the country, with a national presence, including over 100 offices in 18 states and over 700,000 clients across the U.S. and internationally. We believe AlphaRoot’s partnership with BRP presents numerous strategic synergies to continue building what we hope will be considered the very best, cannabis and psychedelic-focused insurance distribution firm of the future.

About AlphaRoot

AlphaRoot is a full-service insurance brokerage that focuses exclusively in the cannabis, hemp, CBD, and psychedelic industries. We work with companies across the entire supply chain, ancillary providers and ﬁnancial services companies that have an appetite for these highly regulated industries.

AlphaRoot Leadership

Isaac Bock Eric Schneider Managing Director Managing Director isaac@alpharoot.com eric@alpharoot.com

AN EXCLUSIVE INTERVIEW WITH

BEAU WHITNEY

We spoke with Beau Whitney, Founder of Whitney Economics, about data-driven trends in global cannabis markets. This interview has been edited for length and clarity.

What does Whitney Economics do, and what’s your background in the cannabis space? Whitney Economics provides cannabis-centric economic data, analysis and consulting services to folks in this space globally, either on the adult-use and medical side or on the hemp side. There’s so little data out there that’s really reliable, so my firm goes out, tracks down what’s good and what’s bad, vets it, then we produce customized and general reports. We offer that as a service to the cannabis industry. We’re based out of Portland, Oregon, which is one of the meccas of cannabis going back generations. I just happened to enter the space about eight years ago by chance. I was teaching an economics course at the university level, and a student mentioned the cannabis industry, piquing my curiosity. However, I do have experience in the cannabis industry. I was the COO of a cannabis-related company that had ownership in Canada but operations in the US. We were fortunate enough to be one of the first, if not the first, to go public on the CSE. 12

THE CANNABIS ISSUE

What trends are you seeing globally, as far as cannabis? Countries are seeing economic opportunities with cannabis. Cannabis is generically defined: it could be industrial cannabis, medical cannabis, adult-use or lifestyle cannabis. Regardless of how you define it, countries are seeing the potential in terms of climate change, alternative fuels, a way to reduce healthcare expenditures or to gain access to hard currencies, like in some countries in Africa. For various reasons, different countries are seeing the economic benefits of deploying legal cannabis, and the pace of that deployment is starting to accelerate. You’re starting to see it on practically every continent now, and I’ve been fortunate enough to have access to those countries. I’ve been providing data and insights, and, hopefully, some sound guidance to help them transition from an illegal regulatory environment to a legal one. Now, let’s talk about North America. When I first started looking into the Canadian market, it was right in the run-up toward their legalization and deployment. You could see the writing on the wall: the massive amount of planned capacity and installed capacity. I think, at that time, the Canadian firms were positioning themselves to enter the US market in a big way, but the timing was off, unfortunately. All that planned capacity and supply needed to go somewhere because, of course, it was greater than the total amount that could be consumed in the Canadian domestic market. Companies started looking for other opportunities. You started seeing partnerships in South Africa, Germany and the European Union, but even with those partnerships, it wasn’t enough to satisfy or consume all that

supply. Unfortunately, this is what is happening. Now, contrast that to the United States. I think it’s a joke around the US that cannabis federal legalization is five years away. That’s been the mantra for eight years now. As a result of that lack of federal legalization, each state has had to deploy its individualized markets, where you have to set up an entire infrastructure: the supply, the product manufacturing, the retail, the regulations and all that. What I’m seeing in the United States is that those states that legalized early, like Oregon, Colorado or Washington, are starting to peak. They’ve satisfied about as much demand as they can unless they do something like adjust their taxation, make greater access or lower the price. Where the market is moving in the United States is more toward these emerging states that are just now starting to deploy their legal programs, like New York or New Jersey, which have just legalized. They’re just starting to stand up their regulatory programs, but it’s going to take a while for them to really hit their stride. New York is a market to keep a close eye on; it seems to be the bellwether culturally, spiritually and economically for cannabis – it’s at the intersection. Can you speak a little more on this? Well, you’ve got New York, Massachusetts and Florida on one side; Pennsylvania is a pretty enticing market as well once they transition away from medical and into adult-use. However, don’t underestimate the power of California on the west coast. It’s a huge market. It’s like there’s a battle of the brands between California and New York, and there’s significant brand loyalty going on, would you say?

My firm put together a supply report that looks at legal and illicit supply from the canopy perspective, as well as from greenhouse and indoor and outdoor, and we have a full picture of the entire supply of cannabis in the United States. There’s this massive export market out of California that satiates the demand in New York, Florida and elsewhere. It’s interesting that while California, Oregon and Colorado are really good at cultivation, on the east coast, the real skill set there is on the distribution and retail side. I think as the market matures and there’s full federal legalization, or at least some interstate commerce is allowed, you’ll see supply from the west being distributed in the east. So, this is all illegal market, all gray market, or whatever you want to call it? Yes. In 2021, there was roughly US$25 billion in legal sales, but that’s out of about a $105 billion total market. That $80 billion dollars or so in 2021 was satisfied through illicit or legacy channels. It sounds like the legacy market isn’t going away. My firm has calculated the elasticity of demand, and consumers are willing to pay a premium to do things in the legal market, but they’re not willing to pay too much of a premium. They like the idea of tested goods of relatively safe products, brands and some type of control. If the pricing differential between the legal market and the illicit market is too great, they’ll remain in the illicit market. This is really, really predictable. I was able to analyze multiple states where there was a pricing change or a change in taxes, and what that would do to the legal sales. I was able to nail those numbers almost exactly — that’s how predictable it is.

Let’s switch gears a little bit. There are a number of ESG mandates that are out there. How does ESG tie into multi-state operators, and when valuing these multi-state operators, what trends are you seeing? The whole concept of environmental, social and governance (ESG) is just starting to take off. I think the infrastructure is starting to be developed and promulgated so that people can understand what this is. There is compelling data out there that shows if firms are environmentally conscious, have programs associated with social equity and social justice, have good governance and a board that values these concepts, these companies generally have greater success in the marketplace. It’s almost as though there’s a multiplier associated with it. I haven’t calculated that multiplier quite yet, but there’s a multiplier that shows if you have ESG programs, then it’s going to benefit not only the company but the investors and the stakeholders in that firm. Some of the environmental impacts of adult-use and medical are pretty significant. Those are mandated by the regulators, like plastic packaging. However, there are paths where if adult-use companies team up with plant-based plastic companies, especially in the hemp industry, then they can combine their resources and address the environmental issues while standing up both sides of the THC industry. There are lots of opportunities. Now that there’s an awareness out there of ESG, there’s a greater sensitivity toward environmental and social issues. I think now you’re starting to see opportunities present themselves in the marketplace. Is this economic data contributing to the liberalization of cannabis policy in the United States?

I think right now there’s been little data in the United States at the federal level. There are North American Industrial Classification System (NAICS) codes, which help track the flow of goods and services throughout the US economy. Because cannabis is federally illegal, there are really no NAICS codes, and if there are, they’re general in nature. It’s very difficult to track the flow of goods and services throughout the economy, but when you do dig into the data — like my team who does this great, diligent work — you can see the trends and opportunities that exist. I mentioned my supply report earlier. I had a team of analysts at my firm look at the legal canopy of the US by state. We could identify how much output is associated with that canopy and whether they’re in an over-supply or an under-supply position. What that would tell investors is, “Well, if you’re oversupplied, prices are going to go down, margins are going to be compressed, and maybe that’s not a state that you want to invest in.” That’s how we’re using data to help investors and policymakers: through a model that basically says, “Here are the number of licences that you need in a given state to satisfy the demand at various stages of your ramp.” A lot of this stuff helps not only investors be set up better for success, but it’s also helping regulators do a better job of not getting into those disadvantaged positions in the first place. Over the past few years, what data points have shifted as our understanding of the cannabis industry has evolved? I think data has been used to more effectively look at public safety and serve as a tool for law enforcement. In that sense, there has been a little more control over the industry, but it’s also helped assuage the fears of a lot of the opponents of

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

cannabis legalization. For example, I’ve been presenting data on crime statistics around deploying cannabis in a community, and there’s some evidence that shows while there may be some criminal elements, crime in those areas actually goes down when there are security measures involved. Through legal reform, the closure rate of hard crimes increases as they’re increasingly solved. Data is starting to become more standardized, and it’s beneficial to help articulate what the issues are associated with legalization. Sure, there may be negative impacts, but often people don’t understand the impacts that are positive in nature. Once they see the data, they’re a little bit more open toward reform. That’s the role that data has played and how it’s evolved over time. When it comes to your services, is there any person or group who’s reached out to you, or tried to employ your services, who you didn’t see coming? There have been some multinational corporations, for example, that said, “Hey, we’ve been following your work for a long time. We want to engage in a deep dive analysis” — that’s important for their businesses, either through investment, acquisition analysis, market analysis or market entry strategies. I’ve been starting to get some of the large multinational firms coming on board. Whenever that happens, I give the team a call and I say, “You made this happen.” A lot of the hard work has gone in thanks to these folks that have been on my team for a while. They work hard, and I try to celebrate those successes with them. Additionally, there’ve been some surprises from left field as well on the negative side. Some people may not like the fact that I take a neutral position. I don’t advocate for 14

THE CANNABIS ISSUE

any set policy or take a position on legalization. When I do this analysis, it can sometimes rub people the wrong way. But when people are sending both positive and negative feedback, I think I might be doing something right. There have been instances where I’ve explained that I’ll do the analysis and present the results as I see based on the data, but I’m not going to bias it for their goals. For most folks, they’re fine with this — they’ll say that’s what they want. For some, however, they’ve said they want me to change the messaging or bias it in favour of them. That’s when I tell them that I’m sorry but I won’t do it. I’m always upfront at the beginning of an engagement, and if people don’t want that, then I’m happy not to engage with them, quite frankly. What are your competitors and peers like? Do they reach out to you? Do you collaborate? Or do you just stay in your own lanes? I try to share my data and insights with everybody, regardless if they’re a competitor or not. I think it only strengthens the industry, the data and the narrative. I try to collaborate as much as possible. There are some groups that keep things behind a paywall. I do with some of my data as well, but generally, I’m pretty open. However, the real hardcore competitive spirit is not quite there yet in the cannabis industry. We need to collaborate. Some people have specialized in other areas, so there are some swim lanes being developed, but I tend to be more, “Here’s what the data says now, and here’s what it’s looking like for your future.” That’s what’s differentiating me right now. There’s not a whole lot of data folks out there that make these predictions about the future. They tend to say what happened in the past and what’s going on in the current environment.

You wrote a paper in 2021. Let’s talk a little bit about that. What were some of the findings? There have been a lot of reform proposals in the US Congress and internationally, but not a lot in terms of what the industry has to say about this stuff. What I did was put out a business condition survey to as many licensed operators in the US as I could get hold of. We got an overwhelming response. Now, we’re trying to do it every quarter, similar to what I contribute to some of the mainstream economic groups that I’m a member of throughout the US and internationally. People want business conditions predictions. What was interesting was that in the United States, there wasn’t a whole lot of profitability being gleaned from the cannabis industry. It’s a counternarrative. Everybody thinks that people are rolling in the dough, but in fact, they’re actually struggling. Part of the struggle is operational efficiency, but a majority of the struggle is based upon federal policy and a lack of access to financial services and access to stock markets. That’s why the CSE has been so great in terms of providing that service to those that otherwise don’t have access to financial services. It’s a tremendous service that you are providing, and it shows up in the data. Another concern was heavy taxation. This has been a narrative throughout the industry for a number of years, but there’s never been any data behind it. That was the goal of my firm: to go out, talk to people, get the data, roll it up and then publish it. I gave the report out for free to anybody that really wanted it, including policymakers, regulators, operators and investors in the space. There are concerns about a recession in the United States and

in Canada. What is the role that the recession will have on the cannabis industry? And, more importantly, what is the role that inflation will have, or is having? I generally run counter-narrative on this. Right at the beginning of the pandemic, there were a lot of discussions around how the cannabis industry was going to collapse, how the demand was going to go away, and how all the 18-yearold service providers were going to become unemployed, and they weren’t going to be able to afford their cannabis. And so, in May 2020, I published a report that talked about how the cannabis industry would hold up during a recession, and a lot of the predictions that I made actually rang true. I said that demand would go up or at least be stable. The demographics were such that there would be less of an impact due to the displaced workers and the like. Now that we’re coming out of the pandemic and there’s talk of recession and we’re experiencing this high level of inflation, the narrative is how high inflation is going to negatively impact the cannabis demand, and I’m not seeing that. What I’m seeing is that there is a return to the normal demand patterns associated with return to work — essentially, 2019 patterns. During the lockdowns, people were consuming a lot more cannabis and buying more. That was what was driving the demand up in some instances. In some states, there was an increase of 35% year over year, and it was sustained for two years. Now that people are back to work or school, that demand is coming back down to normal levels because people don’t have the opportunity to consume as much. There has also been deflation in the cannabis industry at the product level due to oversupply

and hyper-competition. Then there are maturing markets in the east; they’re starting to normalize, and prices generally come down once the programs normalize, and there’s actually deflation. The only thing where we’re not seeing deflation is in pre-rolls, but for everything else, we’re seeing deflation. And I’ve analyzed the market, and only a small portion of that demand destruction is actually associated with higher inflation. Where inflation has impacted the cannabis industry is in the startup area. The trades, construction, electricians, greenhouse providers and HVAC have seen rapid inflation of 25% to 40% for those materials that are required during build-out. So, while consumers are seeing moderate to lower prices, they’re trading down a little bit. There’s not as much impact on the demand. But it’s going to start showing up in the deployment of these new programs. And so, demand may be suppressed in New York, New Jersey, Pennsylvania, Florida, Ohio or Michigan as a result of them not being able to either afford to get their operations up and running, or they won’t be able to afford the financing that’s required to pay for those higher priced goods and services. I think that’s where inflation will have the biggest bite. It’s not in the existing markets, it’s in those future markets as they try to ramp but won’t be able to do so because of the highest startup costs. That’s interesting about the prerolls. Can you speak a little on the data at the point of sale? There’s some good data out there at the point of sale, and people are starting to share that data. It’s important for operators to understand where the market’s going. I can help with that to

understand where the market’s going and the types of clientele at the retail level you’re servicing. Because one retail operation may be a flower store, and a mile down the road, there may be an oil shop, and they’re much different clientele. What we’ve done at Whitney Economics is look at the type of consumer archetypes in each location. And then we’re trying to help retailers reposition their inventory, their purchasing strategies and their pricing strategies to cater to the clients that go to their shops, rather than just having a general plan for inventory and a general plan for pricing and discounting. A lot of money is being left on the table that shouldn’t be and that needs to be tightened up. And so, I’ve got models on that as well. We can help retailers become more efficient and profitable and have greater inventory turns and greater use of their money. And they won’t be having to destroy tons and tons of unprocessed, unpackaged material. Yes, and it’s tons and tons. I was just in Germany giving a speech, and they’re deploying legal cannabis. Part of the German model has been to have some domestic capacity and then backfill any additional demand via imports. I thought that would be beneficial to Canadian suppliers because they’ve already established those relationships early in 2017 or 2018, and they could backfill. Right now, however, the way that the German canopy is, they’re going to need a whole lot of help in the next two or three years as they stand up their program. That’s an opportunity for Canadian suppliers to establish those relationships in Germany and then provide that short-term supply relief that they’re going to need desperately — they’re about 200,000 kilos short of their demand just in the first year alone.

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

TUNE IN

Discover the latest news, trends, and innovations in the capital markets with the CSE.

CSE INTERVIEWS FROM CANNABIS EVENTS Hear from CSE CEO Richard Carleton as he discusses the cannabis industry, including the sector’s evolution, the latest trends and the hemp side of the industry. Catch up on Richard’s interviews from recent cannabis industry events like Benzinga Capital Conference and MJ Unpacked with our playlist on CSE TV.

WEEKLY MARKET RECAP Looking for the latest stock market updates? During our Weekly Market Recap, the CSE’s Anna Serin and Bruce Campbell from StoneCastle Investment Management review interesting and impactful stock market stories in a fun, digestible episode. Head over to CSE TV on YouTube to watch it on Fridays.

TECH TUESDAYS THE EXCHANGE FOR ENTREPRENEURS PODCAST Join the CSE and a range of industry experts on The Exchange for Entrepreneurs Podcast, where we discuss the latest issues and trends shaping the capital markets today. In our recent episodes, we’ve discussed Indigenous communities and business, investing in AI, and more. Tune in on Apple Podcasts, Google Play, Spotify, Stitcher, YouTube, and iHeartRadio.

THE CANNABIS ISSUE

Tune in to Tech Tuesdays to meet cutting-edge technology companies and discuss the latest innovations in the capital markets. Recently, we’ve discussed innovations in healthcare treatment, including cancer, musculoskeletal conditions and women’s health. Jump in and catch up on the latest episodes on CSE TV.

MORE CONTENT ON CSE TV Watch new episodes and replays by subscribing to our YouTube channel: youtube.com/CSETV

COMPANY PROFILE

Trulieve Cannabis Staying true to proven growth plans and core values turns Trulieve into a cannabis powerhouse By Emily Jarvie

THE CANNABIS ISSUE

rulieve Cannabis (CSE:TRUL) is one of the cannabis industry’s major success stories, with many of its biggest achievements occurring in the four years since it became a publicly traded company. The Trulieve team focused on innovating and leading Florida’s medical cannabis market at first and then expanded into new jurisdictions, the prudence of its strategy confirmed by strong profitability. Importantly, this seed-to-sale, fully integrated multi-state operator is also making a mark by supporting the communities it calls home and championing cannabis policy reform. As Trulieve Chief Executive Officer Kim Rivers explains, community and advocacy have been at the heart of the brand since the beginning. In one example, Gadsden County, a majority-minority community in northern Florida where Trulieve built its first cultivation facility, has seen the company grow to become its leading employer, according to Rivers. “We’ve had a material impact on the jobless rate there and pride ourselves on the difference we’ve made in that community,” Rivers says. “That story has been repeated in other communities that we’ve gone into, particularly on the cultivation and manufacturing side of the business.” Since its launch in 2015, Trulieve has expanded quickly, now operating more than 4 million square feet of cultivation and processing capacity, more than 175 dispensaries and with operations in 11 states. The company is the largest medical cannabis operator in Florida, having recently celebrated the sixth anniversary of its first retail sale in the state, and is a top player in its other core markets of Pennsylvania and Arizona. As it grows, the company has been able to keep its values of community and advocacy at the forefront by entering into new markets with specific characteristics. “Where we chose to make investments and how we chose

to go into a community is thoughtful and purposeful,” Rivers explains. “It allows us opportunities to have a deeper connection with the communities, customers and patients that we serve.” In addition to Trulieve’s internal community-focused initiatives, such as its supplier diversity program, the company works with a range of organizations, including the Epilepsy Foundation and veteran’s and children’s initiatives. Rivers also highlights the support of individuals qualifying for expungement of low-level cannabis offenses. Among

retail network,” she says. “That gives us the ability to build more durable relationships with the customer and have more control over the customer journey.” This approach is clearly working, with the company reporting strong Q2 2022 results despite a challenging macroeconomic backdrop, including pressure on the company’s wholesale segment. Trulieve reported a 49% year-overyear revenue increase in the quarter to US$320.3 million, including a 3% rise in retail revenue to $298.6 million. “We’re proud to see strong

“

It allows us opportunities to have a deeper connection with the communities, customers and patients that we serve. — RIVERS

other benefits, expungement provides these individuals the opportunity to remove the conviction from their record, to participate in the industry and to vote to influence future cannabis policy. A combination of customer focus and financial discipline has allowed Trulieve to thrive where other cannabis companies have not, Rivers notes. “We made the decision early on to focus on branded products through branded retail, and we’re not shy or hesitant about growing our scale in both supply chain as well as our

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

Kim Rivers

Chief Executive Officer

Company

Trulieve Cannabis Corp.

CSE Symbol TRUL

Listing date

September 25, 2018

Website

trulieve.com

THE CANNABIS ISSUE

customer loyalty continue in the first half of the year,” says Rivers. The company also posted a 17% EBITDA increase to $110 million and finished the quarter with $181.4 million in cash. The success of Trulieve’s approach is also evidenced by its expansion of operations into other markets, including Arizona, California, Massachusetts and Pennsylvania. Almost one-third of the company’s retail operations were located outside of Florida as of the end of the second quarter. While Rivers notes that each new market has unique challenges due to differing regulations, Trulieve has found many aspects of its Florida business model to be transferrable, including operating and manufacturing procedures and market analysis. According to Rivers, the company has been thoughtful in terms of how it can share resources across its broader platform and gain efficiencies where possible, citing the company’s nutrient program as an example. Currently, the company is unable to transport cannabis products across state lines, but it can transport nutrients, and its nutrient blends are used across all of

its sites in the US. “We also do a good bit of our research, development and innovation work in Florida because we have the ability to do that at scale,” she says. Rivers also points to the company’s team as a key strategic advantage. “We have individuals who have operated within our Florida market and been a meaningful part of our scaling of operations from when we were initially three stores to now more than 100 stores in the state,” says Rivers. “Being able to take these lessons and apply learnings across different markets has been invaluable.” For Trulieve, the year 2022 is about organic growth, as more states enhance their medical cannabis programs and pivot toward recreational use. Rivers says the company has focused on its branded products and branded retail while optimizing the portfolio of Arizona-based Harvest Health & Recreation, which the company acquired in a $2.1 billion allstock deal in October 2021. As part of that effort, Trulieve divested non-core assets and operations, one recent example being the decision to discontinue wholesale operations in Nevada. “Sometimes it’s just as important what you don’t do as what you do,” Rivers says. “The goal is to enter 2023 as a stronger

company positioned for the opportunities we see ahead of us.” Despite recent remarks by political leaders in support of cannabis policy to cover state banking or criminal justice, Rivers notes that progress around cannabis reform on a federal level has been slow. However, she remains hopeful that the encouraging discussions will morph into actual policy. “It’s very apparent that this is a popular issue due to the amount of conversation that it is getting before the midterm elections,” says Rivers. One particularly important jurisdiction for Trulieve going forward is the southeast US. Rivers says the company has been “very bullish” on this region, citing recreational cannabis initiatives in Maryland as just one reason.

Another key area for growth is recreational cannabis opportunities in the company’s home state of Florida, which already has an 800,000-patient-strong medical cannabis market. Trulieve backs the Smart and Safe Florida Act, a proposed constitutional amendment that would allow the recreational use of cannabis by people aged 21 or older in Florida. The company is hoping it will appear on Florida’s November 2024 ballot. Trulieve has contributed $5 million to help get the proposed amendment on the ballot. “That will be a massive catalyst for our industry and certainly for our business, with 21 million residents in Florida and up to 130 million tourists visiting the state a year,” Rivers concludes. “We think our strategy will continue to serve us well in emerging markets as they develop but certainly also as the landscape on the federal side transforms.”

“The goal is to

enter 2023 as a stronger company positioned for the opportunities we see ahead of us. — RIVERS

ABOUT THE AUTHOR

Emily Jarvie began her career as a political journalist in Australia. After she relocated to Canada, she worked as a psychedelics journalist, reporting on business, legal and scientific developments before joining Proactive in 2022. Emily has worked as a reporter in Australia, Europe and Canada.

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

COMPANY PROFILE

IM Cannabis Early mover status drives growth in multiple legal cannabis markets By Uttara Choudhury

IM Oren Shuster

Co-Founder and Chief Executive Officer

Company

IM Cannabis Corp.

CSE Symbol IMCC

Listing date

November 5, 2019

Website

imcannabis.com

Cannabis (CSE:IMCC) CoFounder and Chief Executive Officer Oren Shuster believes that entrepreneurs have to trust their “gut instincts” and follow the data to make good business decisions. Earlier in his career, Shuster had co-founded with Rafael Gabay the Ewave software group, which was thriving with over 1,000 employees. Nevertheless, when the subject of medical cannabis came up during a meeting, Shuster’s instincts nudged him toward exploring its potential. “We started the Ewave technology group, and I quickly focused on healthcare technology. I've been one of the pioneers in developing web-based electronic medical records, radiology management and telemedicine solutions. But one day, a man talked to me about medical cannabis,” says Shuster. “As an entrepreneur, it got my attention, so I spoke with patients and doctors and collected data and feedback on medical cannabis. A light bulb went off in my head; I knew I had to do it – there’s something significant here for patients.” With decades of experience in technology and medical ventures, Shuster then pivoted to co-found IM Cannabis, or IMC, in Israel. In 2010, IMC sold its first batch of premium flower. The company is an outlier, and in a very good way, with operations in Israel, Canada and Germany, the world’s three largest federally legal markets.

THE CANNABIS ISSUE

Where most people see problems, entrepreneurs such as Shuster tend to see opportunity. “A lot of cannabis companies went to Malta, as it was easy, but we went to Germany. A tough or challenging environment didn’t matter, as we have a strategic approach to Europe – not opportunistic,” says Shuster. Germany legalized the medical use of cannabis in 2017. Shuster’s early push into the regulated German medical cannabis market has positioned IMC for high-octane growth as Europe’s largest economy presses ahead with plans to legalize cannabis for recreational use. German lawmakers are expected to introduce a draft bill on recreational cannabis legalization by the end of this year, according to media reports. “We’ve laid our foundation in Germany, currently one of the largest medical cannabis markets in the world, which is expected to rapidly expand as the German government enacts broad regulatory reform of cannabis use,” says Shuster. Undoubtedly, Germany legalizing cannabis for recreational use will be a seismic move for Europe. Tiny Luxembourg and Malta have given the go-ahead for people to grow and consume cannabis, but Germany is the continent’s biggest market. Currently, IMC operates in Germany through its fully licensed EU-GMP subsidiary Adjupharm GmbH, which has built a logistics centre that allows it to repackage products. With the completion of the logistics centre,

IMC has doubled its footprint in Germany to 8,000 square feet, upgraded its production facilities, and increased its storage capacity to seven tons of cannabis. “IMC has a very clear strategy. What we’ve done is built the supply chain which starts with premium products in Canada going to our state-of-the-art EU-GMP facility in Germany. We are building it as the hub for the EU market,” explains Shuster. “We are in the best position to take a leadership position in the massive European market of 750 million people.” In Germany, the IMC Hindu Kush strain has been a strong seller, helping make Adjupharm GmbH a top 10 cannabis company in the country. Adjupharm has initiated product licence applications to prepare for the launch of new high-quality THC products in the fourth quarter of this year and first quarter of 2023. “We entered the Canadian market because we needed premium products for Germany and Israel. Our cannabis capacity in Canada is about 15,000 pounds (6,804 kilograms) annually, and we are not yet at full capacity. It’s all premium, indoor-grown Canadian cannabis,” notes Shuster. “We are growing locally and selling in the Canadian market while supplying our other global markets. We’re also buying premium products from Canadian growers.” IM Cannabis offers cannabis flower and strain-specific cannabis extracts under the

IMC brand, plus dried flower, pre-rolls and pressed hash offerings under the WAGNERS and Highland Grow brands. IMC serves both medical and recreational consumers in Canada. IMC has launched a slew of new products in Canada in response to high demand for its WAGNERS and Highland Grow brands, which hold top-three spots in the premium and ultra-premium segments in Ontario, according to sales data from the Ontario Cannabis Store (OCS).

“

IMC has a very clear strategy. What we’ve done is built the supply chain which starts with premium products in Canada going to our state-of-the-art EU-GMP facility in Germany. We are building it as the hub for the EU market. — SHUSTER

CANADIAN SECURITIES EXCHANGE MAGAZINE NOV E MB E R 2022

The WAGNERS pre-roll catalog at the OCS has expanded with the launch of Tiki Rain, Blue Lime Pie and TRPY ZLRP pre-rolls. Two new 3.5g dried flower stock keeping units (SKUs) – Tiki Rain and Purple Clementine – were launched in addition to an expansion of the concentrate portfolio, with the introduction of soft black hash and 3.5g soap bar hash. New product rollouts include Frost Bite, Leviathan and Space Jagger, according to the company. “There are distinct advantages to being in different markets in diverse phases of maturity. The Canadian market is the most mature, fully legalized market with a variety of products. We’ve gained insights from being in an ultra-competitive market and can carry those insights to less mature markets,” says Shuster. IMC produces a full suite of distinct strains – Roma, Tel Aviv, London, Dairy Queen, Mango Mint, Lemongrass, Pecan Pie, Mimosa – and at least three different oils. The premium brands are aimed at high-end consumers and benefit IMC with premium pricing and higher margins. “Most of our products are premium and occupy the highest category, as consumers are willing to pay more for quality and artisanal brands,” says Shuster.

“There are distinct advantages to being in different markets in diverse phases of maturity. The Canadian market is the most mature, fully legalized market with a variety of products. — SHUSTER

THE CANNABIS ISSUE

While focusing on revenue growth, Shuster has also rigorously pursued cost and margin efficiencies at IMC. For its second quarter ended June 30, 2022, IMC reported C$23.8 million in revenue, a 114% increase from the same period in 2021. IMC sold 3,210kg of dried flower during the quarter, at an average selling price of $5.72 per gram, compared to 1,842kg for the comparable quarter in 2021, at an average selling price of $3.92 per gram. IMC chalked up the jump in revenue to more medical and recreational cannabis sold at higher

“We are seeing growth and a revenue run rate of almost $100 million annually. — SHUSTER

average selling prices per gram in Israel and Canada. The company’s gross profit, before fair value adjustments, was $5.6 million during the quarter, compared to $0.6 million in the second quarter of 2021. “At the end of Q2, we had $5.8 million in the bank. We’ve accelerated along the path to profitability with increased revenue, operational streamlining and a focus on cost reduction,” says Shuster. “We are seeing growth and a revenue run rate of almost $100 million annually.” IMC has launched its Canadian WAGNERS brand in Israel and plans to bring new medical cannabis products to the country later this year. IMC’s de facto company, Focus Medical Herbs, closed its Sde Avraham cultivation farm in Israel, resulting in cash cost savings of $2.5 million per year. It has also finalized the sale of SublimeCulture and restructured its operations in Canada, yielding $4 million in annual cash savings. A cautious risk-taker, Shuster has connected the dots of opportunity by building a diversified company with a global cannabis supply chain. “I take calculated risks. I never put all my eggs in one basket, which is why IMC is geographically diversified with operations in Israel, Canada and Germany,” says Shuster. “On legalization, we are primed to target new adult-use recreational cannabis markets in Germany and capture substantial market share across Europe.”

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

ABOUT THE AUTHOR

Uttara Choudhury is a Senior Journalist at Proactive and has reported on financial markets, foreign policy and business from North America, Asia and Europe. She has worked for Agency France Presse, Forbes India, Business Standard and the Financial Times in London. Uttara is a contributing author of “Bazaar at Work: Women Who Write Their Own Rules,” published by Harper’s Bazaar.

COMPANY PROFILE

Cresco Labs Top-tier house of brands acquires a major retail network and sets its sights on becoming number one By Andrew Kessel

resco Labs (CSE:CL) Chief Executive Officer Charlie Bachtell believes that when it comes to cannabis, brands matter just as much as in any other industry. Branding Cresco’s retail stores Sunnyside, rather than simply using the parent company name, is but one example of this concept at work. There are 51 Sunnyside stores across seven states, all brightly coloured and selling products in packaging that would be right at home on the shelves of Whole Foods or CVS.

THE CANNABIS ISSUE

Different Cresco Labs products have their own unique branding too, depending on their target audience. There’s the namesake Cresco, the flagship “excellent everyday cannabis,” packaged in sleek, matte-coloured containers. Then there’s Mindy’s, a line of restaurant quality edibles made in collaboration with a James Beard award-winning chef. The packaging has a deep red colour and black cursive font – it looks indulgent. It’s a Cresco Labs product just the same, but it has a totally different identity.

Bachtell emphasizes the importance of a house of brands strategy rather than what he calls a “branded house” where everything is named for the company itself. Consumers are loyal to brands they trust, and you cultivate that trust by speaking to your target audience. “One thing we realized very early is that the cannabis consumer is very wide and varied,” Bachtell says. “You’ve got your 21-year-old male college student, but you’ve also got your 63-yearold grandmother. They’re effectively walking to the same store to buy the same product, but they want it to look and feel very differently from each other.” The dedication to brand differentiation is paying off. Cresco Labs had the top branded product portfolio in the second quarter, according to cannabis sector analytics firm BDSA, including the top portfolio of branded flower, the top portfolio of branded concentrates, the second-highest portfolio of branded vapes and a top five portfolio of branded edibles. The company grew even stronger in March when it announced a

“You've got your 21-yearold male college student, but you’ve also got your 63-year-old grandmother. They’re effectively walking to the same store to buy the same product, but they want it to look and feel very differently from each other. — BACHTELL

definitive agreement to acquire what Bachtell refers to as “the largest engine of value creation in the industry,” New York-based Columbia Care. Once complete, the acquisition will bring 131 facilities (99 dispensaries and 32 cultivation and manufacturing locations) into the Cresco Labs family in one fell swoop. The transaction is expected to close around year-end. Creating scale in the US cannabis industry is a challenge, in no small part because regulations vary from state to state. Most cannabis companies, Cresco Labs included, generate 75% of their revenue from their three biggest states, according to Bachtell. But with Columbia Care under the umbrella, Bachtell expects to have eight states contributing at least US$100 million to the top line in 2023. That’s significant diversification. “We are matching the most productive perstore retail operating model with one of the largest combined retail store platforms in the industry,” Bachtell explained on the company’s earnings call to review the second quarter. “We are creating an unmatched diversification and balance of revenue by geography and by channel.” Speaking of geography, Cresco Labs is number one in market share in Illinois, Pennsylvania and Massachusetts. The goal is to be top three in every state where the company operates.

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

Charlie Bachtell Chief Executive Officer

Company

Cresco Labs Inc.

CSE Symbol CL

Listing date

December 3, 2018

Website

crescolabs.com

THE CANNABIS ISSUE

Bachtell is based in Illinois, where before he co-founded Cresco, he was general counsel for a mortgage company. He started that job in 2007, just in time for the housing market to be engulfed by the Great Recession. The mortgage industry went from relatively unregulated to highly regulated overnight, Bachtell says, and those in the business had to figure out how to navigate rapidly shifting sands. When a colleague suggested they get into the cannabis business in 2013, Illinois was just about to pass a law legalizing medical cannabis. Bachtell was skeptical it would be a good fit for him, but then he saw the legislation. As it turned out, mortgage banking and cannabis sales have something in common.

“We are creating an unmatched diversification and balance of revenue by geography and by channel. — BACHTELL

“I read the bill, and it was as well-drafted and thorough as legislation that was geared toward that banking industry through the last five years of crazy regulatory and legislative initiatives,” he says. “I felt like I had read this book before.” What Bachtell realized then is that cannabis would never be less regulated than it was at the time. Especially if federal legalization eventually became law, cannabis would develop into a consumer product whether the industry knew it then or not. The cannabis industry, according to Cresco, can be broken down into four verticals: cultivation and manufacturing, building consumer brands, distributing those brands onto as many shelves as possible, and retail locations. The goal is to excel at all four, but Cresco is prioritizing the middle two. That’s the way the wind is blowing, according to Bachtell. For example, if cannabis products do end up on the shelves of your local pharmacy, that makes brands more important than brick and mortar retail stores.

Illinois also became the first state to require that products be packaged in childproof containers. That cemented the importance of packaging in what Cresco Labs considers its mission to this day: normalizing, professionalizing and revolutionizing cannabis. “If Illinois was going to require you to put it in a container, then that becomes your CocaCola can, your Budweiser bottle, your Marlboro cigarette pack, your Tylenol box,” Bachtell explains. “However you want to think about cannabis, it just became a consumer product good.” Bachtell is the first to admit that the cannabis business is complicated. With all manner of different state regulations and federal legalization not yet realized, it’s not an easy industry to navigate. But it’s where Bachtell feels he belongs. “I knew what the industry needed at that time, which was somebody to come in that had been through this kind of chaos before and knew how to normalize and professionalize an industry that people were concerned about.” Investors are concerned too, he says, and fatigued by the lack of federal progress. Cannabis companies can’t trade on the New York Stock

Exchange or Nasdaq while cannabis is federally illegal, and there is no shortage of OTC-traded companies jockeying for position. But Bachtell believes Cresco Labs can become the most important company in cannabis. With a vibrant house of brands, and an acquisition that more than doubles the company’s retail footprint, the mortgage lawyer turned cannabis CEO looks to have collected all the pieces to the puzzle.

“I knew what the industry needed at that time, which was somebody to come in that had been through this kind of chaos before and knew how to normalize and professionalize an industry that people were concerned about. — BACHTELL

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

ABOUT THE AUTHOR

Andrew Kessel covers technology, cannabis and other market sectors for Proactive out of its office in New York. He previously worked as a fact-checker for both PolitiFact and Guideposts, covered higher education for the Columbia Missourian and interned at Rolling Stone magazine. Andrew earned his Bachelor of Journalism from the University of Missouri in 2017.

COMPANY INTERVIEW

Curaleaf Holdings Cannabis industry leader sees multiple growth opportunities in US home market and overseas By Peter Murray

THE CANNABIS ISSUE

he cream always rises to the top when given time, and this is precisely what is happening in today’s increasingly global cannabis industry. Leading the way are strong management teams leveraging decades of collective experience to forge companies that are profitable, growing and shaping the future of the business. And with governments still on a lengthy quest to find the right balance of rules and regulations, opportunity exists no matter where one looks. Topping a recent table of public cannabis company revenues is Curaleaf Holdings (CSE:CURA), which reported US$337.6 million in sales, representing sequential growth of 7.8%, for the quarter ended June 2022. While the cannabis sector is well off its valuation highs, Curaleaf, with a market capitalization of C$4.725 billion, has performed better than most. In a recent discussion with Canadian Securities Exchange Magazine, newly minted Curaleaf Chief Executive Officer Matt Darin shared his thoughts on corporate culture, balancing revenue among multiple business lines and where he sees growth opportunities today and in the future. Matt, you were named CEO in May of this year but have actually been with Curaleaf for over two years now, previously heading operations in some key regions for the company. What excites you about taking the top role, and what is your vision for Curaleaf?

Although I’ve been in the industry for over nine years, I wake up in the morning energized by the incredible opportunities and challenges of our unique industry. Cannabis legalization is spreading throughout the world, and I’m very bullish on the future of the industry in the US and abroad.

My vision for Curaleaf is to be the global industry leader focused on people and culture, operational excellence and delivering quality brands and products at scale. I am inspired by the passion, knowledge and commitment of our 6,000plus team members – the opportunity to lead our amazing team excites and humbles me. Curaleaf ﬁnished Q2 with a total of 135 retail locations and nearly 2,200 wholesale partner accounts. That’s a lot of business to keep up with. What are some of the lessons learned along the way in building the company to this scale?

The biggest lesson I’ve learned is the importance of people and culture, especially in the rapidly evolving cannabis industry. I have experienced the highs and lows of cannabis, and with the right leaders in place, all challenges can be overcome. Alternatively, without great functional leaders and a healthy culture, long-term sustained success is almost impossible. There is no playbook for scaling a global cannabis company, which makes the opportunity both exhilarating and challenging. Retail revenue accounted for 75% of sales in Q2. What is the optimal balance among all of your revenue-generating activities, and why?

We expect our wholesale channel to grow as new markets transition to adult-use, new dispensary licences open in markets like Illinois and as we continue to invest in innovative products and brands. That said, the importance of vertical integration and a strong retail presence in key markets has never been clearer – our early efforts to build a robust national footprint were part of our long-term strategy, and we’ve seen that pay off. Our retail business will continue to be a growth driver as we open new locations in strategic markets and as markets mature. Having a diverse revenue mix is important to sustain the fluctuations in supply and demand.

“My vision for Curaleaf is to be the global industry leader focused on people and culture, operational excellence and delivering quality brands and products at scale. — DARIN

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

Matt Darin

Chief Executive Officer

Company

Curaleaf Holdings Inc.

CSE Symbol CURA

Listing date

October 20, 2015

Website

curaleaf.com

Curaleaf’s most recent investor presentation mentions “several levers” to improve proﬁtability and cash ﬂow. What are those levers, and what can you get out of pulling them?

We are seeing significant gross margin expansion opportunities with our focus on a vertical mix across our 136 retail locations. In the second quarter, 65% of our retail revenue came from our own brands including Curaleaf, Select and Grassroots. This is a continued focus as our innovation pipeline develops new products in all key categories. Additionally, we have implemented business optimization strategies to consolidate operations, improve supply chains and invest in automation to reduce operating expenses. Curaleaf ’s long-term strategy has proven to be successful. We have leading market share in many key markets, and we continue to identify new opportunities to improve our operational efficiencies and profitability as we scale. Tell us about international opportunities and Curaleaf’s strategy to take advantage of them. Outside the United States, you are in eight European countries and Israel. Do any of these markets make a particularly outstanding contribution?’

With a total addressable market in Europe estimated at US$230 billion, the international opportunity is accelerating, and Curaleaf is the only MSO with a meaningful presence. Germany is drafting adult-use legislation this year and will be the largest driver of growth in Europe. We recently closed on our acquisition of Four 20 Pharma, a leading cannabis operator in Germany.

THE CANNABIS ISSUE

“With a total addressable market in Europe estimated at US$230 billion, the international opportunity is accelerating, and Curaleaf is the only MSO with a meaningful presence. — DARIN

Currently, the UK represents the largest contributor to our international business – we’ve had a 100% increase in active medical cannabis patients in the last six months. Although it’s a medical market still in its infancy, we have a market-leading position with year-over-year growth of 320%. The ability to import and export cannabis in Europe, along with the lack of 280E punitive taxes, makes Europe an extremely compelling growth opportunity for us in the coming years. Where are the primary opportunities that remain in the United States? Some markets you must have done most of what you can in, whereas others still present lots of growth potential.

Although the legal cannabis industry has progressed to a $25 billion-plus industry in the US, an estimated 75% of cannabis sales remain in the unregulated market. We will continue to see massive growth in the regulated market

as major states like Connecticut and New York implement adult-use, and as states like Florida, Pennsylvania, Maryland and Ohio place adultuse on the horizon. The rapidly growing South has untapped growth potential in states like Georgia, Texas, Alabama and the Carolinas for both medical and adult-use. We will continue to see significant growth in existing adult-use markets, including Illinois and New Jersey, as new dispensaries open and as more products and brands become available. Finally, we expect to see stabilization on the West Coast where supply and demand will rebalance, and strong companies with great quality products and retail experiences will capture opportunities in key markets like California and Colorado.

“Although the legal cannabis industry has progressed to a $25 billion-plus industry in the US, an estimated 75% of cannabis sales remain in the unregulated market. — DARIN

It’s impressive that Curaleaf has 180 products in development on the R&D front, and 20% of Q2 revenue came from products that had been on the market for 12 months or fewer. Some people probably think a company in this industry simply grows cannabis, labels it and sends it off to market. Curaleaf is obviously thinking well beyond those boundaries.

Innovation and product development has been a top strategic focus for Curaleaf dating back to our roots in the health and wellness industry. We have a state-of-the-art R&D facility in Massachusetts with over 25 scientists. The future is innovation, and we have invested and prioritized developing unique products, technologies and brands. A few recent highlights include our Plant Precision wellness line, X Bites gummies, proprietary Cliq vape pod system and Endless Coast Cannabis-Infused Seltzers. We see significant growth opportunities in these categories, while also continuing to focus on commercializing new products in the core categories of flowers, vapes, edibles and concentrates. We expect dispensary shelves to look a lot different five years from now and view this as one of the most exciting growth opportunities in the industry.

ABOUT THE AUTHOR

Peter Murray oversees a national editorial and broadcasting team as President of Proactive Canada. He spent several years managing the English news desk at Nikkei’s head office in Tokyo and has worked with research teams at Asian and European investment banks. Peter is based in Vancouver.

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

COMPANY INTERVIEW

MariMed More US growth in the works for this consistently profitable cannabis company By Sean Mason

onsumer demand for legal cannabis continues to grow in the US despite stalled legalization efforts at the federal level. Analytics company New Frontier Data, for example, projects US cannabis sales will hit US$57 billion annually by 2030, with that number possibly reaching $72 billion if 18 additional states permit adult recreational use. MariMed (CSE:MRMD) has developed into a premier seed-to-consumer multi-state operator with expertise in cultivation, production and dispensary operations. The company has a track record of sustainable revenue growth along with one of the strongest EBITDA margins in the industry, projecting $135 million to $140 million in revenue for 2022, as well as $35 million to $40 million in adjusted EBITDA. Canadian Securities Exchange Magazine recently spoke with MariMed President Jon Levine, who discussed the company’s growth prospects, how it plans to increase shareholder value and the ways in which US federal legalization efforts influence MariMed’s business.

What distinguishes MariMed from other US multi-state operators?

MariMed is a company that prides itself on its history and a leadership team with a strong track record of winning licences. We built this company over several years – first as advisors helping businesses win their applications and building out their facilities, and now as acquirers working to consolidate those businesses under the MariMed footprint. Today, we have a lot of team members and facilities with deep industry knowledge, including several members of our executive leadership team. Our CEO Bob Fireman, COO Tim Shaw and I have been working together in this industry for more than a decade. Why did you choose the states in which you operate, and do you have plans to expand to other states?

In the beginning, MariMed submitted applications in multiple states that were available for licensing and focused on getting those states up and running.

“We built this company over several years – first as advisors helping businesses win their applications and building out their facilities, and now as acquirers working to consolidate those businesses under the MariMed footprint. — LEVINE

THE CANNABIS ISSUE

Jon Levine

President

Company

MariMed Inc.

CSE Symbol

MRMD

Listing date July 12, 2022

Website

marimedinc.com

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

Kalm Fusion, Bubby’s Baked, and Vibations: High + Energy, which have all been very successful in each of the states in which they are presently distributed. We’re going to make them bigger and stronger, as well as expand them into additional states over the next several years. How do you intend to ﬁnance your growth plans?

We’re presently cash-flow positive and generating additional cash every month. So, we’ve been using cash flow from operations to expand at a slower rate. But with the current down market making equity issuance not the best option for shareholders, there are opportunities to borrow non-dilutive money at attractive rates given our financial strength and clean balance sheet. Now that MariMed has consolidated the businesses in Illinois, Massachusetts and Maryland, we are focused on expanding to the maximum allowable by law in each of those states. In Massachusetts, for example, we plan to add two more adult-use dispensaries to our fully vertical, seed-to-sale operation there. In Illinois, we recently added a cultivation-and-processing licence that,

“Now that MariMed has consolidated the businesses in Illinois, Massachusetts and Maryland, we are focused on expanding to the maximum allowable by law in each of those states. — LEVINE

THE CANNABIS ISSUE

once operational, will make us fully vertical in that high-growth state, and we also acquired a licence to build a fifth adultuse dispensary. Illinois allows operators to own and operate a maximum of 10 dispensaries, so we are also focused on adding an additional five to maximize our retail operations in that state. Additionally, we’re looking for other markets we can expand into that have limited licences and are within the larger regions we presently operate in. We can go in and do the same build out where we go fully vertical as quickly as possible. What are MariMed’s plans to enhance shareholder value?

We have an exciting future ahead of us. As I mentioned, we’re building out Illinois, Massachusetts and Maryland with additional locations. We’ve also recently won licences in Ohio and Connecticut. We’re also going to continue to expand into additional states through either acquisitions or through the licensing process. Then we’ll build them to be as fully vertical as quickly as possible. We’re also going to expand our branded products, including Betty’s Eddies,

What impact, if any, has the government’s inability to introduce federal cannabis legalization had on your business?

It’s a disappointment for MariMed because we would like to see some form of the SAFE Banking Act passed. That’s less important for our company, as our strong management team has learned how to operate within these tough confines of borrowing and banking abilities for over a decade. The SAFE Banking Act is really about helping smaller cannabis entrepreneurs that are more challenged in gaining fair and equitable access to capital.

“Over the next 12 months, we will open additional retail and cultivation facilities, generating more revenue, and increasing the number of consumers that can access our great brands. — LEVINE

We would love to see the SAFE Banking Act passed, and with the right amount of social equity reform included in it. But even with the continued delays at the federal level, MariMed can still operate efficiently and successfully. We’re going full steam ahead in building additional opportunities for our investors.

Our shareholders should expect MariMed to have a strong balance sheet with the ability to expand our cash flow and to borrow money at reasonable rates to accelerate the expansion of our business to get to the next level. We may be considered a small MSO, but we are going to become much bigger. In this market, we have a wonderful opportunity to continue to grow. I think our shareholders will benefit from patience and expect that we will continue to grow over the next several years.

Finally, what do your shareholders have to look forward to in the next 12 months?

Our investors should expect continued success and growth. Over the next 12 months, we will open additional retail and cultivation facilities, generating more revenue, and increasing the number of consumers that can access our great brands. We’ve been very successful over the last few years, and we’re going to continue that trend.

ABOUT THE AUTHOR

Sean Mason has been covering North American equity markets for more than 20 years, including for publications such as Investors Digest of Canada. He is a graduate of the University of Toronto and has successfully completed the Canadian Securities Course.

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

COMPANY INTERVIEW

InnoCan Pharma Combining cannabinoids and cutting-edge science to deliver drugs on target By Peter Murray

THE CANNABIS ISSUE

mart drug delivery systems that deliver medications to specific sites in the human body are on the leading edge of science. This type of biomedical engineering focuses on maximizing drug efficiency and minimizing possible side effects, while reducing the overall amount of medication used and frequency of treatment. Cannabinoids play a crucial role in regulating the immune system and have been shown to suppress inflammation through multiple anti-inflammatory pathways. Their high safety profile makes them an appealing alternative to many traditional drugs, according to Iris Bincovich, Chief Executive Officer of InnoCan Pharma (CSE:INNO). InnoCan is working to harness the unique qualities of cannabinoids and combine them with the latest in drug delivery systems. The goal is to deliver cannabinoids such as CBD so that more of it becomes available for the body to benefit from than with current platforms. Bincovich recently spoke with Canadian Securities Exchange Magazine about working with university researchers on the combination of cannabinoids and innovative delivery systems, as well as the direction in which the company’s technologies are heading. InnoCan recently reported the results of preclinical trials on dogs, using injections for both pain relief from osteoarthritis and for the treatment of epilepsy. What did you learn from these trials?

We learned that we can bring a substantially better bioavailability of CBD to the bloodstream. The low oral bioavailability of CBD in people, at 6.5% to 20% of administered dosage, is a result of first pass metabolism in the liver and considered to be variable and dependent on fasting and fed conditions. Together with The Hebrew University of Jerusalem, we’re developing injectable

“In both pathways, veterinary and human, we see a lot of potential for the LPT technology to improve patients' quality of life. — BINCOVICH

liposomal CBD formulations (LPT) that have already shown higher bioavailability of CBD and prolonged release to the bloodstream. In a recent study, we've learned that the LPT showed close to 100% bioavailability of CBD and prolonged release for at least four weeks after one LPT subcutaneous injection. In this preclinical trial, a dog with drug-resistant epilepsy was treated with InnoCan Pharma's LPT injections. The results demonstrated that the frequency and intensity of the dog's epileptic seizures decreased significantly. Since the last LPT injection, the dog has not had a seizure for over 10 weeks. In another preclinical trial, six dogs suffering from osteoarthritis and treated with oral analgesics, but still experiencing pain, were administered a single LPT subcutaneous injection in addition to their routine analgesics. CBD concentrations were observed for six weeks following the liposomal CBD injection in the dogs' plasma. Owners reported that the dogs' pain and wellbeing scores improved for several weeks after the injection. The results show that the LPT technology has the potential to provide additional analgesia in dogs suffering from pain.

Iris Bincovich

Chief Executive Officer

Company

InnoCan Pharma Corporation

CSE Symbol INNO

Listing date

September 24, 2019

Website

innocanpharma.com

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

You’re starting by treating dogs for these conditions, and eventually moving on to the human side?

We’re gathering data for this purpose. We chose a big animal model for developing a drug and a treatment model. And yes, the veterinary industry is a potential market whereas the regulatory barriers are marked for the human pharma side. In both pathways, veterinary and human, we see a lot of potential for the LPT technology to improve patients' quality of life. CBD-loaded exosomes (CLX) may hold the potential to regenerate cells. Could this work for conditions associated with the central nervous system?

Exosomes are small particles created when stem cells are multiplied. Lately, they are considered a very promising delivery platform for different molecules. The exosomes can be used as a delivery vehicle that can deliver cannabinoids to diverse target sites in the body.

THE CANNABIS ISSUE

“We’re collaborating with Ramot at Tel Aviv University to develop a revolutionary cannabinoid-loaded exosome technology that may hold the potential to provide a highly synergistic therapeutic effect. — BINCOVICH

Various cannabinoids were shown to protect neuronal cell death following their exposure to various oxidative stress damages. We’re collaborating with Ramot at Tel Aviv University to develop a revolutionary cannabinoid-loaded exosome technology that may hold the potential to provide a highly synergistic therapeutic effect. This effect utilizes the regenerative and anti-inflammatory properties of exosomes and cannabinoids to target various conditions associated with the central nervous system. What’s next for InnoCan?

The LPT platform development is now in the stage of collecting more safety and efficacy information, with a view toward human clinical trials. From Q4 2022 going into 2023, we will commence targeting pharma veterinary companies, especially in the companion animal arena for pain management and epilepsy drugs, to initiate negotiation of licensing agreements. In the three years since we went public, we’ve done an early exercise of warrants. Nearly

“In the three years since we went public, we’ve done an early exercise of warrants. Nearly 90% of our investors chose to exercise the warrants for total proceeds of C$9.2 million. — BINCOVICH

90% of our investors chose to exercise the warrants for total proceeds of C$9.2 million. We’re collaborating with leading scientific institutes, focusing on the development of the LPT and CLX drug delivery systems, to achieve our goals of presenting the market with more efficient and accurate delivery systems of cannabinoids to the body.

ABOUT THE AUTHOR

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

Do you want to build a better world? Marketing can make it happen.

Together, let’s create content to make the world better. Get in touch with us here: sparxpg.com

CANNABIS COMPANIES

LISTED ON THE CSE CSE-listed cannabis companies continue to set the pace in this ever-evolving sector

BYND

MRMD

MGRO

CURA

PLTH

BYND CANNASOFT ENTERPRISES

CRESCO LABS

CURALEAF HOLDINGS

GDNS

GOODNESS GROWTH HOLDINGS

GTII

GREEN THUMB INDUSTRIES

FFNT

4FRONT VENTURES

AAWH.U ASCEND WELLNESS HOLDINGS

THE CANNABIS ISSUE

AYR.A AYR WELLNESS

BHSC BIOHARVEST SCIENCES

IAN

MARIMED

MUSTGROW BIOLOGICS

PLANET 13 HOLDINGS

RVV

REVIVE THERAPEUTICS

TER

TERRASCEND

TRUL

IANTHUS CAPITAL HOLDINGS

TRULIEVE CANNABIS

JUSH

VRNO

JUSHI HOLDINGS

VERANO HOLDINGS

How did your career in finance begin? How did your journey bring you to the CSE?

SPOTLIGHT ON

MARY ANNE PALANGIO Exploring the capital markets and cannabis sector from a finance lens with CSE Chief Financial Officer Mary Anne Palangio.

After pursuing the Chartered Financial Analyst designation, I moved through progressively senior finance, technology and operations roles, including at two public companies – one of which I took public – and was invited to sit on the Board of the CSE where I chaired the Audit and Human Resources & Compensation committees. Knowing and appreciating the CSE and what it does for the capital markets from a director’s perspective made the decision to join as its CFO an easy one!

What’s the most important thing you’ve learned during your time with the CSE? After having been on the issuer side for several years, it has been great to learn more about the time and attention to detail on issuer applications and regulatory matters from the Exchange’s perspective. I’ve also gained valuable insights into trading and market data to round out my understanding of the CSE’s importance to the capital markets and issuers in Canada and beyond.

Which CSE accomplishment are you most proud of? The CSE started out to provide a modern and efficient alternative for companies looking to access the Canadian public capital markets, and through the dedication of the CSE team and its supporters, the CSE has delivered. In August, the Exchange surpassed the 800 mark for listed securities, a reflection of the CSE’s value and service for issuers and a liquid, reliable and highly regulated trading platform for investors in Canada and internationally.

“ In August, the Exchange surpassed the 800 mark for listed securities, a reflection of the CSE’s value and service for issuers.

How has the cannabis sector impacted the CSE’s business over the years? I am proud of how the CSE has supported the cannabis sector over the years, and I want to emphasize how important it is for us to have several of the world’s largest cannabis issuers listed on the Exchange. These issuers are a significant reason for the CSE’s updated policies and enhanced services that are tailored to companies of this size and maturity.

What are you most excited about in 2022 in the cannabis sector and beyond? In 2022 and beyond, I’m looking forward to the CSE’s updated policies coming into effect, the CSE’s ongoing support to the cannabis sector and the continued success and growth of the companies and investors in the cannabis sector.

CANADIAN SECURITIES EXCHANGE MAGAZINE NOVEMBER 2022

Four Episodes. One Incredible Month of Cannabis and Investing.

MEDIA PARTNERS

The Cannabis Investor Series provides a first-hand glimpse into current and hot-button topics from across the sector. Hear from 70 influential speakers who are helping shape this evolving industry as global acceptance of cannabis continues to rise. Topics from this four-week series include US legalization, cannabis culture and the capital markets, health and wellness, global markets, social equity, and much more.

Watch the full series on CSE TV now! YOUTUBE.COM/CSE_TV