Rahul Gupta, director of the Office of National Drug Control Policy (ONDCP), discussed the rescheduling efforts during an interview with the Mo News Podcast that was posted on Tuesday.

“We’ve had, when it comes to marijuana, failed policies for more than half a century, because of which way too many lives have been upended,” he said. “We have had a failed approach where we have so many people incarcerated because of it and so many people, their lives have been basically destroyed.”

Gupta aligned himself with President Joe Biden’s position that nobody should be jailed over marijuana possession or use, pointing out that such a conviction can impact housing and job opportunities.

Moving marijuana from Schedule I to Schedule III of the Controlled Substances Act (CSA), as the administration is proposing, would not legalize cannabis, however. So people could still face those collateral consequences, even for simple possession, if it is merely reclassified. However, as Gupta pointed out, the reform will remove certain research barriers that could potentially streamline drug development.

“A New Approach on Marijuana & The Fight Against Fentanyl – A Conversation With the US Drug Czar”

Listen to @DrGupta46 discuss the Biden-Harris Administration’s latest efforts to address the nation’s overdose epidemic and save lives https://t.co/NMi9xA2TnN

— ONDCP (@ONDCP) May 28, 2024

“We’ve got to make sure that we are following science and analyzing substances for potential benefit, especially with the data that exists,” he said, adding that with a Schedule III designation, “there will be drugs that will be developed that will have to go through [Food and Drug Administration (FDA)] approval process and all of that.”

“But it does allow the recognition of the medical uses,” he said. “More importantly, it also allows the opening of research. It’s critical because the research for over half a century has been lacking significantly in this field to see the current and more benefits in the future—more product developments. We may have new products that may be able to help with or cure diseases.”

“It also will help people with chronic conditions like cancer or chronic pain or others as well,” he said, adding that under Schedule I, it’s a “catch-22 situation” where people are seeking more research to demonstrate the medical utility of cannabis but face obstacles to conducting such research.

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“There will be systems in the future that will be developed that will probably be less expensive and more legal, you can say, in that sense, because it will be through a Schedule III regime that will be there,” he said.

Of course, the idea that companies will prioritize cannabis-derived drug development with a Schedule III reclassification is only a theoretical possibility. FDA has already approved synthetic THC and CBD-based medications for certain conditions, and it’s possible that the reduced research barriers could lead to additional approvals down the line. But it is unlikely that FDA would approve marijuana in botanical form as a prescription drug, so the products available in commercial markets would continue to be illegal and unapproved for interstate commerce.

A report published by the Congressional Research Service (CRS) earlier this month also clarified that further action from FDA would be needed before marijuana products become available by prescription.

Gupta oversimplified the idea of marijuana’s potential availability as a prescription drug in another recent interview. And he’s also mistakenly suggested that rescheduling would address the “racial disparity” in cannabis enforcement.

One of the more confusing parts of Gupta’s latest interview came when he was asked whether Congress should follow the lead of states and federally legalize marijuana. The ONDCP director didn’t directly answer the question but said part of Biden’s reasoning for orchestrating the administrative scheduling review was because “he did wait on Congress, and movement did not happen.”

Tune in to hear my conversation with @Mosheh on recent actions our Administration has taken to strengthen public health and crack down on illicit drug trafficking across the nation. https://t.co/1RxzRkRJa7

— Rahul Gupta (@DrGupta46) May 28, 2024

As the White House has repeatedly clarified, Biden does not support federal marijuana legalization, even if he backs the right of states to set their own cannabis policies. He hasn’t publicly said that the scheduling review directive was a response to congressional inaction; rather, he’s characterized it as an example of fulfilling a campaign promise.

“Of course, Congress has the ability to move forward in any way it wants to,” Gupta said. “But at the same time, we just can’t stay still because too many lives are at stake, both from the criminal justice system and also from the benefits of it.”

“It’s important that, as an administration, we’re doing what can be possible from administration standpoint,” he said. “It’s both evidence-guided, as well as guided by law that currently exists to take this process on and ensure that we’re doing everything possible when it comes to, again, this policy that has been in place for decades and decades and has not helped the American people.”

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Marijuana Moment is tracking more than 1,500 cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.

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A former drug czar who served under President Barack Obama recently took a sharply different position on marijuana rescheduling than Gupta. Former ONDCP Director Gil Kerlikowske recently said that cannabis is “not medicine” and that rescheduling was “all Big Cannabis.”

“This isn’t people my age that are just old hippies that want to open up a pot shop somewhere” Kerlikowske said on the podcast of former U.S. Rep. Mary Bono (R). “This is a huge business like Big Tobacco. Absolutely.”

Meanwhile, the proposed rule to federally reschedule marijuana was officially posted last week, kicking off a public comment period that’s expected to elicit a major response from supporters and opponents of cannabis reform.

Marijuana reform advocates and stakeholders have made clear that they intend to leverage the opportunity, with some planning to support the reclassification while others intend to call for descheduling cannabis altogether. Prohibitionists are expected to oppose the incremental policy change and seek to keep marijuana in Schedule I, and there’s also a looming threat of litigation.

While DOJ will take all public comments submitted by July 22 into consideration as it weighs the reform, it said in the notice that one of the topics its especially interested in hearing about is the “unique economic impacts” of the rescheduling proposal given that state-level legalization has created a “multibillion dollar industry” that stands to benefit from possible federal tax relief under the reform.

On Capitol Hill, Senate Majority Leader Chuck Schumer (D-NY) and colleagues have reintroduced legislation to federally legalize cannabis and impose certain regulations. The bill’s prospects are dubious in the current divided Congress, however.

Meanwhile, the top Democrat in the U.S. House said that the Biden administration’s move to reschedule marijuana is a “step in the right direction,” but it should be followed up with congressional action such as passing the legalization bill Schumer filed.

In a recent interview with Fox News, former DEA Administrator Asa Hutchinson said it “absolutely looks like” the agency will follow through with moving marijuana from Schedule I to Schedule III under the CSA.

Biden has separately issued two rounds of mass pardons for people who’ve committed federal marijuana possession offenses. Again, a Schedule III reclassification would not legalize cannabis or free people still incarcerated over cannabis.

During his run for the presidency, Biden pledged to move cannabis to Schedule II—a stricter category compared to what’s been proposed by his administration.

Biden Finally Acknowledges His Marijuana Pardons Did Not Expunge Records After Repeatedly Claiming They Did

Across Hawaii, state-legal cannabis use was the leading cause of gun permits being denied (40.7 percent), with mental health issues responsible for about a quarter of rejections and domestic violence disqualifying about 7 percent.

That said, a relatively small portion of firearm registrations were rejected by law enforcement last year. Of 23,528 applications processed during 2023, only 519—about 2.2 percent—were denied.

Of the rejected applications, 211 resulted from medical marijuana. Those denials included not only patients currently enrolled in the state program but also former patients. As the AG report notes, “police departments allow former patients to apply for firearms no less than one year after the expiration of their medical marijuana card.”

Under federal law, being an “unlawful user” of a controlled substance, including marijuana, means a person cannot legally buy or possess a gun.

Notably, the report showed that rejection rates varied significantly by region. In Kauai County, for instance, just 0.2 percent of applications were denied in 2023, compared to about 6.9 percent in Hawaii County, which comprises the Big Island.

Of 332 denials in Hawaii County last year, 191—about 57.5 percent—were due primarily to medical marijuana.

Hawaii County Police Chief Benjamin Moszkowicz said he was initially surprised by the disparity.

“I got this report the same day that it was released out to the general public, and I immediately had kind of some of those same questions, like why are we denying so much more than the other counties?” he told Hawai’i Public Radio (HPR). “So in this particular set of circumstances, most of our application denials center around medical marijuana applicants.”

Hawaii County was unique in the state, Moszkowicz explained, because other counties didn’t consider a medical marijuana permit disqualifying if it’s been expired for a year or more. Hawaii County, by contrast, had considered a past permit an automatic disqualifier.

As of Monday, Hawaii County has reportedly stopped automatically denying firearm applications from people whose medical marijuana enrollment lapsed more than a year ago.

Moszkowicz also said that three quarters of applicants who were initially denied over past medical marijuana enrollments were eventually approved “after returning with documentation from a doctor or counselor saying they were no longer adversely affected,” according to HPR.

“I don’t think we were doing anything wrong by denying people’s applications under that section and asking them to, you know, basically redeem that right by providing what the statute suggests. But at the same time, because such a large percentage of those people were able to get that documentation so quickly, actually, we changed our policy,” Moszkowicz told the outlet. “So in the last day or two, we’ve changed our policy and our practice to align with the other counties. And that’s a direct result of this report.”

Overall, gun registrations are significantly up in Hawaii in recent decades.

“Firearm registration activity increased dramatically over the course of the 24 years for which these data have been systematically complied and reported,” the AG’s office said in a press release. “From 2000 through 2023, the number of statewide permit applications processed annually increased by 262.6%, the number of firearms annually registered leapt by 280.5%, and the number of firearms annually imported climbed 263.4%.”

The U.S. Supreme Court is expected to decide soon whether to hear a government appeal of a circuit court ruling that found the federal firearm restriction violates the Second Amendment.

That ruling came from the U.S. Court of Appeals for the Fifth Circuit, which examined the federal statute known as Section 922(g)(3) that prevents someone who is an “unlawful user” of an illegal drug from buying or possessing firearms. The circuit court found the policy unconstitutional as applied to a man who faced a conviction after admitting to having used cannabis while in possession of a gun.

Some states have passed their own laws either further restricting or attempting to preserve gun rights as they relate to marijuana. Last month, for example, a Pennsylvania lawmaker introduced a bill meant to remove state barriers to medical marijuana patients carrying firearms.

Colorado organizers are also working to qualify a prospective state ballot measure that would remove a barrier around the issuance of concealed handgun permits, specifying that whether someone is an “unlawful user of or addicted to marijuana” should be determined “only as provided in state law and regulations.”

At the federal level, enforcement of the rule against gun purchases or ownership by marijuana users has been inconsistent. Attorneys for President Joe Biden’s son Hunter Biden, for example, who’s been charged by the Department of Justice (DOJ) with illegally owning a firearm while a user of illegal drugs, have argued that millions of marijuana users in legal states already own guns.

The younger Biden’s legal team has alleged that even the prosecutor on the case has acknowledged that “an ordinary citizen would not be prosecuted for this offense,” which they argued “is borne out by DOJ’s policy and statistical evidence.”

While people who use cannabis are barred from owning firearms under the law, a little-notice FBI memo from 2019 that recently surfaced shows that the federal government generally does not consider it a violation of the law for medical cannabis caregivers and growers to have guns.

The statute behind the prohibition has been challenged in a number of federal courts in recent years, with more than one judicial body determining that the restriction is unconstitutional. DOJ has steadfastly defended the ban, however, contending that medical marijuana patients and everyday consumers pose unique dangers to society that justify withholding Second Amendment rights.

Last year, for example, the Justice Department told the U.S. Court of Appeals for the Third Circuit that historical precedent “comfortably” supports the restriction. Cannabis consumers with guns pose a unique danger to society, the Biden administration claimed, in part because they’re “unlikely” to store their weapon properly.

The federal government has repeatedly claimed that those analogues provide clear support for limiting gun rights for cannabis users. But several federal courts have separately deemed the marijuana-related ban unconstitutional, leading DOJ to appeal in several ongoing cases.

The Justice Department asserted similar points during oral arguments in a separate but related case before the U.S. Court of Appeals for the Eleventh Circuit in October. That case focuses on the Second Amendment rights of medical cannabis patients in Florida.

Attorneys in both cases have also touched on a U.S. Court of Appeals for the Fifth Circuit ruling from August, Daniels v. United States, that found the ban preventing people who use marijuana from possessing firearms is unconstitutional, even if they consume cannabis for non-medical reasons.

DOJ had already advised the Eleventh Circuit court that it felt the ruling was “incorrectly decided,” and the department’s attorney reiterated that it’s the government’s belief that “there are some reasons to be uncertain about the foundations” of the appeals court decision.

The U.S. District Court for the Western District of Oklahoma also ruled in February that the ban prohibiting people who use marijuana from possessing firearms is unconstitutional, with the judge stating that the federal government’s justification for upholding the law is “concerning.”

In U.S. District Court for the Western District of Texas, a judge ruled in April that banning people who use marijuana from possessing firearms is unconstitutional—and it said the same legal principle also applies to the sale and transfer of guns.

In August, meanwhile, ATF sent a letter to Arkansas officials saying that the state’s recently enacted law permitting medical cannabis patients to obtain concealed carry gun licenses “creates an unacceptable risk,” and could jeopardize the state’s federally approved alternative firearm licensing policy.

Shortly after Minnesota’s governor signed a legalization bill into law in May, the agency issued a reminder emphasizing that people who use cannabis are barred from possessing and purchases guns and ammunition “until” federal prohibition ends.

In 2020, ATF issued an advisory specifically targeting Michigan that requires gun sellers to conduct federal background checks on all unlicensed gun buyers because it said the state’s cannabis laws had enabled “habitual marijuana users” and other disqualified individuals to obtain firearms illegally.

Attorneys for Hunter Biden, who has been indicted on a charge of buying a gun in 2018 at a time when he’s disclosed that he was an active user of crack cocaine, have previously cited the court ruling on the unconstitutionality of the federal ban, arguing that it applies to their client’s case as well.

Republican congressional lawmakers have also filed bills that focus on gun and marijuana policy.

Rep. Brian Mast (R-FL), co-chair of the Congressional Cannabis Caucus, filed legislation last May to protect the Second Amendment rights of people who use marijuana in legal states, allowing them to purchase and possess firearms that they’re currently prohibited from having under federal law.

Senate Majority Leader Chuck Schumer (D-NY) committed to attaching that legislation to a bipartisan marijuana banking bill.

Meanwhile, Mast also cosponsored a separate bill from Rep. Alex Mooney (R-WV) that would more narrowly allow medical cannabis patients to purchase and possess firearms.

One place where the matter is particularly relevant is Jersey City, New Jersey, where Mayor Steven M. Fulop (D) is suing over a state policy that allows police officers to use marijuana while off duty.

That challenge, however, has sparked pushback from two police officers, who’ve since sued Jersey City over what they say is a politically motivated move by Fulop in service of a future gubernatorial campaign. A police union has also asked the judge in the city’s case to throw out the lawsuit, calling it “pure hogwash.”

Back in Hawaii, following the failure of a Hawaii bill to legalize cannabis for adults earlier this year, Gov. Josh Green (D) said last month that he has “a possible solution” to the issue: vastly expanding the state’s existing medical marijuana system to allow people to register based on any health concern rather than needing to have one of a specific list of conditions.

“This would make it very available—that’s marijuana—for those who choose it in their lives,” the governor said in an interview with Hawaii News Now, “and it would still keep kids safe, which has been everyone’s priority.”

At the same time, Green reiterated his support for full recreational legalization.

“I think for adults who can responsibly use marijuana, it should be legal,” he said.

The governor’s comments came immediately following House lawmakers’ decision to kill a Senate-passed cannabis legalization bill in April. That same month week, the Senate also voted to scuttle a separate measure that would have expanded the state’s existing marijuana decriminalization law.

In April 2023, meanwhile, Hawaii’s legislature approved a resolution calling on the governor to create a clemency program for people with prior marijuana convictions on their records.

Biden Drug Czar Says Marijuana Rescheduling Will Have ‘Historic Impact,’ But Overstates Effects On ‘Racial Disparity’ In Criminalization

You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We post this and all of the newsletters on our website here.

Friends,

This newsletter warned three weeks ago to not dive into Canadian LPs. The New Cannabis Ventures Canadian Cannabis LP Index was up 16.4% year-to-date at the time. It has pulled back 8.5% since 5/09, and it is now up 6.5% year-to-date :

The warning was most specifically for Canopy Growth and Tilray Brands. Canopy Growth has been the worst performer of the larger Canadian LPs since the warning, dropping 12.8%. It is still up in 2024 by 68.1%, which is a lot more than the overall market as well as the Canadian Cannabis LP Index. In May, the stock has dropped a stunning 42.2%.

The company reported its fiscal Q4 yesterday, and the numbers were close to expectations. The debt-load is huge, and the cash flow from operations is still negative. The only thing really going up is the share-count.

In February, Canopy Growth was the focus of this newsletter when it reported its fiscal Q3 results. This was before the stock surged, as it was down 21% year-to-date at the time. This newsletter, which suggested that Canopy Growth could go away, pointed to the unattractiveness of the money-losing operations. We did not say to buy it at the time, though we did suggest that perhaps large shareholder Constellation Brands would step in and acquire the rest of it. The stock wasn’t attractive then, and it is even less so now at this higher price.

I have shared that my model portfolio at 420 Investor has a lot of Organigram and Village Farms. They both trade below tangible book value. Canopy Growth trades at 3.3X, which makes no sense at all. The company continues to generate adjusted EBITDA losses. I have shared a target for year-end with my subscribers that is below $2.

For those that are excited by their plans to fully acquire Acreage Holdings, Jetty Extracts and Wana Brands, the NASDAQ still has not given the company the greenlight on the deal. I think that if Canopy Growth can buy the American cannabis companies and retain its NASDAQ listing, others will soon follow.

Over the past year, the NCV Global Cannabis Stock Index has gained 22.4%. Canopy Growth has gained just 1.0%. As the news that the DEA had been asked by the Department of Health & Human Services to reschedule cannabis hit in late August, Canopy Growth soared despite the company would receive no benefit from this move. This recent run started before the news hit that the DEA is actually recommending a move from Schedule 1 to Schedule 3:

The market seemed to figure out how bad Canopy Growth is, sending it to a new all-time low in March. The recent rally fell short of reaching the level hit in September. While the stock is down sharply from its recent peak, it is still overly expensive. Investors should consider selling the stock to buy other Canadian LPs or other cannabis stocks.

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most important content from this week:

Exclusives

Florida Medical Cannabis Patient Growth Falls Again

Financial Reports

Canopy Growth Q4 Revenue Slips Sequentially

M&A

Cansortium to Buy Canopy Growth Spin-Off RIV Capital

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Sincerely,

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Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

The House on Thursday voted 261–108 to send the legislation to a conference committee following an earlier vote to reject sweeping Senate-made changes to the bill.

Several representatives who back legalization urged colleagues not to sign off on the new Senate provisions just to get the broad reform enacted.

“Instead of rushing to pass a bill that we all know is flawed, let’s reject this amendment and insist on making better policies for our constituents,” Rep. Heath Howard (D) said before the House floor vote. “We will only get one chance to create a well regulated market for adult-use cannabis, and it’s important we get it right.”

“I know the vast majority of my constituents want legalized cannabis,” added Republican Kevin Verville (R). “They want it in New Hampshire and they want it sooner than later. But this is not the right approach for us.”

The House last month passed an earlier version of the bill, HB 1633, which the Senate later made sweeping changes to via major amendments from Sen. Daryl Abbas (R) and Senate President Jeb Bradley (R), among others. Bradley, who himself opposes legalization, repeatedly said that if the legislation had the votes to pass, he intended to tailor it more to his and the governor’s liking.

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Some House lawmakers urged colleagues to grit their teeth and sign off on the Senate version of the bill, warning that supporters of legalization are missing an opportunity to skip a conference committee and send the proposal immediately to Gov. Chris Sununu (R).

Rep. Andrew Prout (R), for example, said he was confident the system that would be created by the Senate-amended legislation “will either work, and be better than driving to any of our neighbors” or that “there will be the political will to fix it in a future term.”

All of the states bordering New Hampshire have already legalized marijuana.

Sununu has indicated he’d support the bill with the Senate changes but would oppose the measure as passed by the House. He said this week that if the House passed the bill with the Senate’s changes, he’d sign it.

“I think the Senate version is OK,” Sununu told NH Journal. “They put some other stuff in there that I wasn’t necessarily looking for, but they’re not deal breakers.”

But if House lawmakers “want to make significant changes,” the governor added, “then it’s not going to pass. It’s that easy.”

One factor worrying some advocates is that the Republican candidates likely to replace Sununu when his gubernatorial term expires early next year have signaled that they’d oppose the reform. That means a failure to legalize marijuana this session could delay the policy change indefinitely.

Because the House and Senate have now passed different versions of the legislation, it next proceeds to a conference committee consisting of lawmakers from both chambers.

While finding compromise is panel’s the ostensible goal, reform advocates expect the bicameral committee will be set up to kill the bill, at least on the Senate side. Bradley, the Senate president, will not only pick the members of the committee from that chamber, but he also indicated this week that he might appoint himself to the panel.

Abbas told Marijuana Moment earlier this week that he’s “not optimistic” the bill “would survive a committee of conference.”

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Marijuana Moment is tracking more than 1,500 cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.

Learn more about our marijuana bill tracker and become a supporter on Patreon to get access.
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Sununu, for his part, has said that while he personally opposes legalization, he believes the policy change is “inevitable.”

Polls indicate that upward of 70 percent of New Hampshire voters support legalizing and regulating marijuana.

While HB 1633 was initially introduced by Rep. Erica Layon (R), the Senate changes shifted its core regulatory approach to one discussed late last year by a state commission on legalization chaired by Abbas. Though that body ultimately failed at its charge of crafting legislation to enact the reform, Abbas and others in the Senate incorporated a number of provisions that were raised during discussions last year.

Layon previously said she would speak out on the floor against the Senate changes, but she did not participate at all in Thursday’s debate.

In comments to Marijuana Moment after the floor vote, she said she was surprised by how overwhelming the chamber’s 252–117 vote against concurrence was.

“I am shocked,” Layon said. “I thought it was going to be a lot closer, with a possibility of concurring, but the fact that it was defeated by such a large margin just really surprised me.”

As for what to expect in the conference committee, she said: “I’m gonna go into it optimistic, but I don’t really expect much to come from it.”

Layon noted that the Senate still needs to approve forming the bicameral committee, and then members need to actually meet. “It’s possible they may not even show up to a conference,” she said. “Then there needs to be unanimous agreement on the result of the conference committee.”

If the committee does undertake its work in earnest, its job will be to reconcile two complex bills that differ significantly on regulatory structure, criminal justice, licensing, personal possession and THC limits, tax rates, medical marijuana and sundry other issues.

As passed by the Senate, the bill would allow 15 franchise stores to open statewide. Purchases would incur a 15 percent “franchise fee”—effectively a tax—that would apply to both adult-use and medical marijuana purchases. Though stores would be privately run, the government would control their look, feel and operations. The Liquor Commission would have the authority, for example, to set final prices on cannabis products.

Marijuana possession wouldn’t become legal until 2026, once the state’s licensed market is up and running.

The proposal would limit each municipality to only a single cannabis retail establishment unless it’s home to more than 50,000 people, though only two cities in the state, Manchester and Nashua, meet that threshold. Local voters would also need to pre-approve the industry in order for businesses to open in that jurisdiction.

Adults could possess up to two ounces of marijuana under the Senate plan. Home cultivation of cannabis for personal use would remain illegal, and the state’s Cannabis Control Commission would have the authority to enforce that provision.

Smoking or vaping marijuana in public would be a violation on the first offense and an misdemeanor for second or subsequent offenses within five years, a charge that could carry jail time. Consuming cannabis in other forms in public—for example, drinking an THC-infused beverage—would carry no punishment, unlike open container rules around alcohol.

The bill would also outlaw consumption of cannabis by any means, including edibles, by any driver or passenger of a vehicle being driven in any way. That would also be an unclassified misdemeanor with the potential for jail time.

The version of the bill passed by the House in April, by contrast, would legalize through a so-called “agency store” model proposed by Layon, in which the state would oversee a system of privately run stores, with strict limits on marketing and advertising. That version also includes a higher personal possession limit of four ounces and a lower, 12 percent fee on purchases. Further, medical marijuana would be been exempt from the state surcharge, and personal possession would become legal immediately.

The House bill, like the Senate version, would not allow home cultivation of cannabis.

The Senate changes led supporters of the reform to disagree on how the House should proceed. Advocates with the state ACLU chapter and the Marijuana Policy Project (MPP), who poured hours into lobbying lawmakers on the bill, said the revised proposal represented an imperfect but nevertheless important reform in New Hampshire, urging House lawmakers to accept the Senate changes and move the legislation along.

Other advocates, however, including the New Hampshire Cannabis Association (NHCann) and the bill’s lead sponsor, Layon, argued the House shouldn’t sign off on the amendments, even if that meant derailing the bill.

New Hampshire lawmakers worked extensively on marijuana reform issues last session and attempted to reach a compromise to enact legalization through a multi-tiered system that would include state-controlled shops, dual licensing for existing medical cannabis dispensaries and businesses privately licensed to individuals by state agencies. The legislature ultimately hit an impasse on the complex legislation.

Bicameral lawmakers also convened the state commission tasked with studying legalization and proposing a path forward last year, though the group ultimately failed to arrive at a consensus or propose final legislation.

The Senate defeated a more conventional House-passed legalization bill last year, HB 639, despite bipartisan support.

Last May, the House defeated marijuana legalization language that was included in a Medicaid expansion bill. The Senate also moved to table another piece of legislation that month that would have allowed patients and designated caregivers to cultivate up to three mature plants, three immature plants and 12 seedlings for personal therapeutic use.

After the Senate rejected the reform bills in 2022, the House included legalization language as an amendment to separate criminal justice-related legislation—but that was also struck down in the opposite chamber.

This story has been updated.

Lawmakers Push To Let VA Doctors Recommend Medical Marijuana And End THC Testing For Federal Job Applicants

Photo courtesy of Chris Wallis // Side Pocket Images.

At a campaign event in Philadelphia on Wednesday, where Biden and Vice President Kamala Harris made their pitch to Black voters ahead of the November election, the president said, “I’m keeping my promises that no one should be in jail merely for using or possessing marijuana.”

“I pardoned thousands of people incarcerated for the mere possession of marijuana—thousands. A promise made and a promise kept,” he said. “And their records should be expunged as well, I might add.”

Biden has repeatedly touted the mass cannabis pardons he granted, signaling the campaign’s understanding of the popularity of marijuana reform. But in the past, he’s falsely suggested that the pardons did expunge records—making the claim during his State of the Union address this year, for example—when that’s not the case.

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As the Office of the Pardon Attorney explained, an expungement is a “judicial remedy that is rarely granted by the court and cannot be granted within the Department of Justice or by the President.”

And as the Congressional Research Service (CRS) explained in a November 2022 report, “the pardon may not remove all legal consequences of marijuana possession, because it does not expunge convictions.”

“Moreover, some collateral consequences of marijuana-related activities do not depend on a person being charged with or convicted of a [Controlled Substances Act] violation,” it said.

A pardon, meanwhile, simply represents formal forgiveness. While it doesn’t seal records, the Justice Department has been distributing certificates to eligible people who apply for the largely symbolic document.

Biden might have adjusted his rhetoric to reflect the realities of the clemency action, but he hasn’t indicated that he’s willing to offer relief for offenses beyond simple possession. In fact, he’s specifically said that growing or distributing cannabis is “a different deal.”

To that end, there are still people in federal prison over non-violent marijuana offenses. And advocates have pushed the Biden administration to do more, including keeping his key cannabis campaign pledge to decriminalize marijuana.

While he didn’t mention it in his speech on Wednesday, Biden has also taken credit for directing an administrative review into marijuana scheduling that recently resulted in DOJ formally proposing to move cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA).

That wouldn’t decriminalize or legalize marijuana, but it would recognize the plant’s medical utility and relatively low abuse potential for the first time in over 50 years. It would also let state-licensed marijuana businesses take federal tax deductions and remove certain research barriers.

The proposed rule to federally reschedule marijuana was officially posted last week, kicking off a public comment period that’s expected to elicit a major response from supporters and opponents of cannabis reform.

While DOJ will take all public comments submitted by July 22 into consideration as it weighs the reform, it said in the notice that one of the topics its especially interested in hearing about is the “unique economic impacts” of the rescheduling proposal given that state-level legalization has created a “multibillion dollar industry” that stands to benefit from possible federal tax relief under the reform.

The White House drug czar, Rahul Gupta, has also discussed the rescheduling move multiple times in the past couple weeks, framing it as a “historic” reform that could open the door to cannabis-based drug development. However, he’s also inflated the impact of a Schedule III reclassification, at one point suggesting it would address racial disparities in marijuana enforcement.

The Biden-Harris campaign has also drawn a contrast between the marijuana policy actions of their administration and that of former President Donald Trump, pointing out that DOJ under his administration rescinded federal cannabis enforcement guidance that generally laid out a policy of non-interference with legal marijuana states.

New Hampshire Marijuana Legalization Bill Headed To Conference Committee After House Rejects Senate Amendments

Canopy Growth Reports Fourth Quarter and Fiscal Year 2024 Financial Results; Q4 FY2024 Net Revenue increased 7% year-over-year, or 16% excluding divested businesses

• Storz & Bickel® delivered its best Q4 revenue quarter, with net revenue increasing 43% as compared to Q4 2023
• Canada medical cannabis net revenue increased 16% in Q4 FY2024 and 10% in FY2024 year-over-year
• Canada cannabis Cost of Goods Sold decreased by 54% in FY2024 versus FY2023
• Following recent balance sheet actions, the Company has no material debt obligation due until March 2026¹

SMITHS FALLS, ON, May 30, 2024 /PRNewswire/ – Canopy Growth Corporation (“Canopy”, “Canopy Growth” or the “Company”) (TSX: WEED) (NASDAQ: CGC), a world-leading cannabis company dedicated to unleashing the power of cannabis, today announced its financial results for the fourth quarter and fiscal year ended March 31, 2024 and the filing of an annual report on Form 10-K, including the audited consolidated financial statements for the fiscal year ended March 31, 2024 and the unqualified report thereon of the Company’s independent registered public accounting firm. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.

Highlights

• Storz & Bickel^® net revenue in Q4 FY2024 increased 43% as compared to Q4 FY2023 driven by strong sales of the new Venty portable vaporizer.
• Canada cannabis net revenue in Q4 FY2024 increased 4% as compared to Q4 FY2023 led by a 16% increase in the Canada medical cannabis business.
• Total Cost of Goods Sold (“COGS”) decreased by 45% in FY2024 and Canada cannabis COGS decreased by 54% year-over-year, driven by the cost reduction actions.
• Consolidated Gross Margins increased to 27%, an improvement of 4,600 basis points year-over-year in FY2024, with Canada cannabis, International markets cannabis and Storz & Bickel all posting higher Gross Margins year-over-year.
• Operating loss from continuing operations of $229 MM in FY2024. Adjusted EBITDA loss was $59 MM in FY2024, representing an improvement of 72% year-over-year, driven primarily by revenue growth and successful cost reduction actions taken to date.
• Cash, cash equivalents, and short-term investments of $203 MM at March 31, 2024. Benefiting from balance sheet strengthening actions completed subsequent to the end of FY2024, the
• Company has no material debt due until March 2026.

“In Fiscal 2024 we fortified Canopy’s foundation for future growth. With a resolute focus on cannabis, we have momentum and are poised to seize the opportunity presented by continued regulatory developments in Germany and the United States. Entering FY2025, Canopy has growing businesses in all of the world’s most attractive cannabis markets, a leading portfolio of high-impact brands, and a rapidly developing U.S. ecosystem.”

David Klein, Chief Executive Officer

“We have made remarkable progress and delivered dramatic reductions in expenses, cash burn, and debt over the past year. These efforts have significantly enhanced our financial stability and moved us toward achieving positive Consolidated Adjusted EBTIDA. With no material debt maturing until 2026, Canopy is equipped to capitalize on growth opportunities and enhance shareholder value.”

Judy Hong, Chief Financial Officer

Original press release

Published by NCV Newswire

The NCV Newswire by New Cannabis Ventures aims to curate high quality content and information about leading cannabis companies to help our readers filter out the noise and to stay on top of the most important cannabis business news. The NCV Newswire is hand-curated by an editor and not automated in anyway. Have a confidential news tip? Get in touch.

Cansortium and RIV Capital Announce Business Combination

• Combined Company’s footprint will provide access to Florida, New York, Texas, and Pennsylvania, with significant growth potential and future regulatory catalysts in all four states
• Combined Company expected to leverage Cansortium’s robust operating expertise as well as RIV Capital’s ~US$66 million¹,² cash balance, strengthening both its operating and financial position
• Transaction has the support of ScottsMiracle-Gro, which intends to exchange its existing convertible notes in RIV Capital for a new class of non-voting Exchangeable Shares of Cansortium at closing, eliminating US$175 million³ of debt

TAMPA, Fla., May 30, 2024 (GLOBE NEWSWIRE) — Cansortium Inc. (CSE: TIUM.U) (OTCQB: CNTMF) (“Cansortium”), a vertically integrated, multi-state cannabis company operating under the FLUENT brand, and RIV Capital Inc. (CSE: RIV) (OTC: CNPOF) (“RIV Capital”), a vertically integrated cannabis company operating the EtainTM brand in New York, are pleased to announce that they have entered into a definitive arrangement agreement (the “Arrangement Agreement”) pursuant to which Cansortium will acquire all of the issued and outstanding Class A common shares (the “RIV Capital Shares”) of RIV Capital in exchange for Cansortium Shares (as defined below) (the “Transaction”).

Under the terms of the Arrangement Agreement, RIV Capital shareholders (the “RIV Capital Shareholders”) will receive 1.245 of a common share of Cansortium (the “Cansortium Shares”) in exchange for each RIV Capital Share held. Upon closing of the Transaction, shareholders of Cansortium (the “Cansortium Shareholders”) are expected to hold approximately 51.25% of the combined business of Cansortium and RIV Capital (the “Combined Company”) and the RIV Capital Shareholders and The Hawthorne Collective, Inc. (“The Hawthorne Collective”), together, are expected to hold approximately 48.75% of the Combined Company, each on a fully diluted basis.

_{¹Cash balance of RIV Capital as of March 31, 2024.
²All references to “$” in this news release are to United States dollars.
³Based on gross proceeds received in U.S. dollars upon issuance of the convertible notes. The convertible notes are denominated in Canadian dollars with a total outstanding principal amount of approximately C$219.7 million.}

Key Transaction Highlights

• Positioned in Key U.S. Markets: The Combined Company will be geographically diversified across the eastern U.S., spanning four key states (Florida, New York, Texas and Pennsylvania), positioning the Combined Company to cover approximately 25% of the U.S. population. These limited license markets in which the Combined Company is expected to hold a strong position have well-staged regulatory catalysts in the near and medium term.
• Bolstering Balance Sheet: The Combined Company is expected to be well capitalized with a pro forma cash balance of approximately US$74 million as of March 31, 2024, in a capital scarce environment, in order to enable the Combined Company to fund highly accretive growth. The Hawthorne Collective’s intended exchange of its existing convertible notes in RIV Capital for a new class of non-voting exchangeable shares of Cansortium will eliminate US$175 million of debt, which is expected to fundamentally transform the Combined Company’s balance sheet.
• Operational Efficiencies: Cost synergy opportunities are estimated to be approximately US$5-10 million annually over the next few years, which are expected to be realized from anticipated cultivation, processing and operating efficiencies, corporate integration and eliminating duplicative public company costs in the Combined Company.
• Strategic Partnerships: Strategic relationship with The Scotts Miracle-Gro Company (“ScottsMiracle-Gro”) (NYSE: SMG) through its investment in RIV Capital via its wholly-owned subsidiary, The Hawthorne Collective and through innovative growing products sold by its wholly-owned subsidiary, The Hawthorne Gardening Company (together with The Hawthorne Collective, “Hawthorne”). The Hawthorne Collective intends to exchange its existing convertible notes in RIV Capital for a new class of non-voting exchangeable shares of Cansortium at closing, further strengthening and reinforcing its relationship with the Combined Company.
  Scalable Talent-Base: Expanded talent-base through the combination of Cansortium and RIV Capital management and operating personnel. The Combined Company will seek to leverage
• Cansortium’s operating expertise and best practices across its footprint.

Upon closing of the Transaction, the Combined Company is expected to operate in four of the largest states by population in the U.S. – Florida, New York, Texas, and Pennsylvania – creating a strategic operating footprint with significant potential growth opportunities in the years ahead. Operations in these states will be comprised of 8 cultivation and processing facilities and 42 retail dispensaries.

The Combined Company will operate under the Cansortium name and the Cansortium Shares will continue to trade on the Canadian Securities Exchange (the “CSE”) under the symbol “TIUM.U” and on the OTCQB Venture Market under the symbol “CNTMF”. Upon closing of the Transaction, it is expected that the Combined Company will be headquartered in Tampa, Fla., which is the current location of Cansortium’s corporate offices, and Robert Beasley, the current Chief Executive Officer of Cansortium, will act as Chief Executive Officer of the Combined Company.

Management Commentary

“The plan to bring together these two companies with core strengths in key growth states is expected to position us to drive near-term synergies, capitalize on opportunities for long-term value creation while continuing to provide high-quality service to customers who call Florida and New York home with the FLUENTTM brand experience.” said Robert Beasley, Chief Executive Officer of Cansortium. “Upon consummation of the Transaction, we believe the Combined Company will be able to leverage balance sheet liquidity and the ability to opportunistically allocate capital to growth initiatives building upon the strength of our existing operating platform, in addition to a pathway for Cansortium to lead in New York’s emerging adult-use market. As a Combined Company, we will continue to focus on growth and profitability while relying on our core principles in cultivation, operating efficiencies and inventory optimization to deliver strong cash flows for shareholders.”

William Smith, Executive Chair of Cansortium, said, “I view joining forces with RIV Capital as a natural progression in the expansion of Cansortium. With the addition of the New York cannabis market, Cansortium is expected to hold the distinction of operating in 4 of the 5 highest population states in the U.S. following the closing of the Transaction. Additionally, the resources and market expertise that are expected to be leveraged from RIV Capital and Hawthorne will help position Cansortium to capitalize on the inevitable regulatory changes expected in the U.S. cannabis industry.”

Mike Totzke, interim Chief Executive Officer and Chief Operating Officer of RIV Capital, said, “The Combined Company will enable RIV Capital to deliver on its vision of becoming an established multi-state operator, capable of deploying capital for strategic investments beyond New York. In an environment where state-issued cannabis licenses are limited, Cansortium opens doors in important growth markets in the U.S. Additionally, Cansortium has a proven operating model that can bring efficiencies and economies of scale to RIV Capital’s cultivation and dispensary operations.”

“Through its relationship with RIV Capital, Hawthorne has used its research and development capabilities to recommend innovative growing products to support in the buildout of EtainTM and adult-use in New York, and we look forward to providing continued support to this exciting, larger platform,” said Chris Hagedorn, President of Hawthorne and director of RIV Capital. “Hawthorne and ScottsMiracle-Gro are fully supportive of the deal, and we expect that the Combined Company will unlock value drivers to the benefit of our shareholders as well as those of RIV Capital and Cansortium.”

Financial Highlights

Select financial highlights of the Transaction are currently expected to be⁴:

• 2023 pro forma revenue: US$105 million
• 2023 Cansortium Adjusted EBITDA⁵: US$27 million
• Cash and cash equivalents as of March 31, 2024: US$74 million
• Combined Company’s cash position net of debt as of March 31, 2024: US$5 million⁶
• Total steady state addressable market of the Combined Company’s footprint: US$13 billion⁷

_{⁴Unless otherwise stated, the pro forma financial information referred to in this news release, which gives effect to the Transaction as if it had closed on December 31, 2023, was prepared utilizing accounting policies that are consistent with those disclosed in the audited consolidated financial statements of Cansortium for the year ended December 31, 2023 and RIV Capital for the nine months ended December 31, 2023, and year ended March 31, 2023.
⁵Adjusted EBITDA is a non-IFRS measure. See “Non-IFRS Measures” section below.
Cash position net of debt is a non-IFRS measure. See “Non-IFRS Measures” section below. The cash position net of debt is equal to the cash balance of RIV Capital as of March 31, 2024, plus the cash balance of Cansortium as of March 31, 2024, less Cansortium’s outstanding debt of US$69 million as of March 31, 2024. Cansortium’s outstanding debt of US$69 million consists of a US$66 million senior secured term loan, a US$3.1 million convertible debenture and US$0.4 million of combined auto, equipment and insurance financing or loans and excludes employee retention tax credits related liability and the convertible note issued in conjunction with the resolution of the Smith Transaction. ⁶The cash position net of debt also assumes the closing of the Hawthorne Notes Exchange.
⁷Sum of Florida market size per BDSA June 2023 market forecasts, New York market size per MGP Consulting New York illicit Cannabis Market Absorption Analysis and Pennsylvania market size per MJBiz 2023 Factbook. Note, this amount does not ascribe value to the Texas market.}

Transaction Summary and Shareholder Approvals

The Transaction will be effected by way of a court-approved plan of arrangement pursuant to the Business Corporations Act (Ontario) (the “Arrangement”) requiring the approval of at least two-thirds of the votes cast by the RIV Capital Shareholders voting at an annual general and special meeting of shareholders to consider the Transaction, which is expected to be held in the third quarter of 2024. Certain of RIV Capital’s directors and officers and a significant shareholder holding an aggregate 20.2% of the RIV Capital Shares have entered into voting support agreements with Cansortium to, among other things, vote in favor of the Transaction.

The closing of the Transaction is subject to shareholder and court approvals, as well as the receipt of all required regulatory approvals, the closing of the Hawthorne Notes Exchange (as defined below), the completion of the Smith Transaction (as defined below), the requirement for RIV Capital to maintain a certain minimum cash balance as of a specified date prior to closing and the satisfaction of certain other closing conditions customary in transactions of this nature. For further details relating to the Hawthorne Notes Exchange and the Smith Transaction, see the “Concurrent Transactions” section below. The Arrangement Agreement includes customary provisions, including non-solicitation, “fiduciary out” and “right to match” provisions as well as a termination fee of US$3,000,000 payable by RIV Capital to Cansortium and a termination fee of US$5,000,000 payable by Cansortium to RIV Capital, in certain specified circumstances.

Assuming timely receipt of all necessary court, shareholder, regulatory and other third-party approvals, the closing of the Hawthorne Notes Exchange and the completion of the Smith Transaction and the satisfaction of all other conditions, closing of the Transaction is expected to occur in the fourth quarter of 2024.

A description of the Transaction will be set forth in the management information circular of RIV Capital (the “RIV Capital Circular”), which will be mailed to RIV Capital Shareholders and filed with the Canadian securities regulators on System for Electronic Document Analysis and Retrieval + (“SEDAR+”).

In connection with the Hawthorne Notes Exchange, which is expected to close on the business day prior to the closing date of the Transaction, Cansortium will hold an annual general and special meeting of shareholders (the “Cansortium Meeting”) where the Cansortium Shareholders will be asked to consider a special resolution authorizing an amendment to its articles of incorporation (the “Amendment Proposal”) to create a new class of non-voting exchangeable shares (the “Exchangeable Shares”). The Exchangeable Shares will not carry voting rights, rights to receive dividends or other rights upon dissolution of Cansortium, but will be convertible into Cansortium Shares on a one-for-one basis. The Amendment Proposal must be approved by at least two-thirds of the votes cast by Cansortium Shareholders voting at the Cansortium Meeting. Certain of Cansortium’s directors and officers and significant shareholders holding approximately 26.8% of the voting power of the issued and outstanding Cansortium Shares and proportionate voting shares have entered into voting support agreements with RIV Capital to, among other things, vote in favor of the Amendment Proposal.

A description of the the Amendment Proposal, the Smith Transaction, the Hawthorne Notes Exchange and the Hawthorne Exchange Agreement (as defined below) will be set forth in the management information circular of Cansortium (the “Cansortium Circular”), which will be mailed to Cansortium Shareholders and filed with the Canadian securities regulators on SEDAR+ at www.sedarplus.ca. The Cansortium Meeting is expected to be held in the third quarter of 2024 / concurrently with the meeting of shareholders of RIV Capital.

Approvals and Recommendation

The Transaction has been unanimously approved by the boards of directors of Cansortium (the “Cansortium Board”) and RIV Capital (the “RIV Capital Board”). The RIV Capital Board has unanimously determined, after receiving financial and legal advice along with the Independent Fairness Opinion (as defined below) and following the receipt and review of a unanimous recommendation of the RIV Capital Strategic Growth Committee, that the Transaction is in the best interests of RIV Capital and is fair to the RIV Capital Shareholders and the RIV Capital Board recommends that the RIV Capital Shareholders vote in favor of the Transaction.

Each of Moelis & Company LLC and INFOR Financial Inc. provided the RIV Capital Board with an opinion, dated May 29, 2024, to the effect that, as of the date of such opinion, the consideration payable pursuant to the Transaction is fair, from a financial point of view, to the RIV Capital Shareholders, in each case, based upon and subject to the respective assumptions, limitations, qualifications and other matters set forth in such opinions. Paradigm Capital Inc. provided the Cansortium Board with an oral opinion, dated May 30, 2024, to the effect that, as of the date of such opinion, the consideration being offered by Cansortium to the RIV Capital Shareholders pursuant to the Transaction, is fair, from a financial point of view, to the Cansortium Shareholders, based upon and subject to the respective assumptions, limitations, qualifications and other matters set forth in such opinion.

The Hawthorne Notes Exchange, including the Amendment Proposal has been unanimously approved by the Cansortium Board. The Cansortium Board unanimously determined, after receiving financial and legal advice, that the consideration payable pursuant to the Transaction and the exchange ratio applicable thereto is fair, from a financial point of view, to the Cansortium Shareholders, and the Cansortium Board recommends that the Cansortium Shareholders vote in favor of the Amendment Proposal.

None of the securities to be issued pursuant to the Transaction have been or will be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws, and any securities issuable in the Transaction are anticipated to be issued in reliance upon available exemptions from such registration requirements pursuant to Section 3(a)(10) of the U.S. Securities Act and applicable exemptions under state securities laws. This news release does not constitute an offer to sell or the solicitation of an offer to buy any securities.

Concurrent Transactions

Hawthorne Notes Exchange

In connection with the Transaction, Cansortium and The Hawthorne Collective have entered into a letter agreement (the “Notes Exchange Side Letter”), pursuant to which the parties have agreed that, on the business day immediately prior to the closing date of the Transaction, The Hawthorne Collective will exchange its existing unsecured convertible notes that were issued for an aggregate principal amount of US$175,000,000, including any accrued and unpaid interest, payable by RIV Capital, for Exchangeable Shares of Cansortium (the “Hawthorne Notes Exchange”). In connection with the Notes Exchange Side Letter, Cansortium and The Hawthorne Collective have agreed to enter into a notes exchange and protection agreement (the “Hawthorne Exchange Agreement”) prior to the closing of the Transaction, pursuant to which, among other things, the parties will complete the Hawthorne Notes Exchange. The Hawthorne Collective will be granted nomination rights with respect to the Cansortium Board, and for the period during which The Hawthorne Collective holds its Exchangeable Shares until it elects to convert such Exchangeable Shares into Cansortium Shares, The Hawthorne Collective will be granted pro rata participation rights in any future equity financings of Cansortium and Cansortium will agree to certain covenants in favor of The Hawthorne Collective. In addition, the Hawthorne Exchange Agreement will contain certain provisions that prohibit The Hawthorne Collective from converting its Exchangeable Shares into Cansortium Shares where such conversion would result in The Hawthorne Collective, together with any person or company acting jointly or in concert with The Hawthorne Collective having an aggregate beneficial ownership of, or control or direction over, directly or indirectly, over 19.99% of Cansortium’s issued and outstanding voting securities of Cansortium immediately after giving effect to such conversion, unless and until Cansortium has received the necessary shareholder approval in accordance with all applicable policies of the CSE.

Smith Transaction

In connection with the Transaction, Cansortium and certain of its affiliates and William Smith, a director and the Executive Chair of Cansortium, and certain companies controlled by Mr. Smith (together with Mr. Smith, collectively, the “Smith Group”), have entered into a termination agreement (the “Smith Transaction Termination Agreement”). The Smith Transaction Termination Agreement terminates the initial agreement, as amended, among the parties named therein (the “Initial Smith Transaction Agreement”), which provided that an aggregate of 30,250,000 Cansortium Shares (on an as converted basis) held by the Smith Group would be subject to a minimum price “floor” of US$0.40 (the “Floor”) until December 31, 2025 (the “Floor Expiration Date”), which entitled the Smith Group to an aggregate of up to US$12,100,000 in the event the Smith Group elected to sell its Cansortium Shares at a price that was below the Floor (the “Floor Entitlement”). Pursuant to the Initial Smith Transaction Agreement, if on or prior to the Floor Expiration Date, the Smith Group elected to sell some or all of its Cansortium Shares that were subject to the Floor, and the proposed purchase price of such Cansortium Shares was less than US$0.40 per Cansortium Share, then Cansortium could either purchase all or any portion of the Cansortium Shares proposed to be sold by the Smith Group for US$0.40 per Cansortium Share or elect to pay in cash the difference between US$0.40 per Cansortium Share and the actual sale price per Cansortium Share received by the Smith Group in such sale. Pursuant to the terms of the Smith Transaction Termination Agreement, upon consummation of the Arrangement, the Smith Group will no longer be entitled to the Floor Entitlement (and, in the interim, so long as the Smith Transaction Termination Agreement has not been terminated, the Smith Entities have agreed not to exercise the Floor Entitlement), and in consideration thereof, on closing of the Transaction, Cansortium will, among other things, issue to the Smith Group a 15% secured subordinate convertible note in an initial aggregate principal amount of US$6,500,000 payable three years from the date of issuance (the “Smith Convertible Note”). Upon issuance, the Smith Convertible Note will be guaranteed by, and secured by a junior lien on substantially all assets of, Cansortium and its subsidiaries, and will be subordinated in right of payment to prior payment in full of the Credit Agreement (and any “eligible refinancing” of the Credit Agreement). The Smith Convertible Note will be convertible, at the discretion of the Smith Group, into Cansortium Shares at a price of US$0.21 per Cansortium Share. Assuming full conversion of the Smith Convertible Note, including the full amount of the anticipated accrued interest over the life of the Smith Convertible Note, the Smith Group would be entitled to receive 44,880,952 Cansortium Shares, representing approximately 15% of Cansortium’s outstanding Cansortium Shares on a partially diluted basis based on the current number of non-diluted Cansortium Shares outstanding. For more information on the Initial Smith Transaction Agreement, see Cansortium’s news release dated December 22, 2022 and Cansortium’s material change report dated January 3, 2023 filed under Cansortium’s profile on SEDAR+ at www.sedarplus.ca.

The transactions contemplated by the Smith Transaction Termination Agreement (the “Smith Transaction”) constitutes a “related party transaction” as such term is defined in Multilateral Instrument 61-101 – Protection of Minority Securityholders in Special Transactions (“MI 61-101”). Cansortium has relied on the exemptions from obtaining a formal valuation and minority shareholder approval of the Cansortium Shareholders with respect to the Smith Transaction in accordance with sections 5.5(a) and 5.7(1)(a) of MI 61-101, as the fair market value of the Smith Convertible Note issuable in connection with the Smith Transaction does not exceed 25% of Cansortium’s market capitalization as determined in accordance with the provisions of MI 61-101. A special committee of independent directors of Cansortium formed for the purpose of reviewing, evaluating and considering the Smith Transaction (the “Special Committee”) has unanimously recommended that the Cansortium Board approve the Smith Transaction and, following the receipt and review of recommendations from the Special Committee, the Smith Transaction was approved by the Cansortium Board, with Mr. Smith having disclosed his interest in the Smith Transaction and abstaining from voting thereon. Cansortium did not file a material change report 21 days prior to the closing of the Smith Transaction as the details of the Smith Transaction had not been finalized at that time.

Bridge Financing and Bridge Note

In connection with the Transaction, RIV Capital US Corporation (“RIV Capital US”), a wholly-owned subsidiary of RIV Capital, has agreed to advance to Cansortium an interest-bearing bridge loan up to an aggregate principal amount of US$8,975,000 (the “Bridge Loan”). In consideration, Cansortium has agreed to issue a 10% unsecured convertible promissory note (the “Bridge Note”) to and in favour of RIV Capital US evidencing the Bridge Loan, which will mature, if not earlier converted or prepaid in accordance with its terms, May 1, 2025 (the “Maturity Date”), and is subordinated in right of payment to prior payment in full of the Credit Agreement (as defined below) (and any “eligible refinancing” of the Credit Agreement). The Bridge Note will automatically be convertible into Cansortium Shares upon the occurrence of certain events of default, and at the option of RIV Capital US on the business day immediately preceding the Maturity Date, in each case at a price of US$0.17 per Cansortium Share. In connection with signing the Arrangement Agreement, RIV Capital US will make an initial advance to Cansortium under the Bridge Loan in the amount of US$3,000,000.

Credit Agreement Amendment

In connection with entering into the Arrangement Agreement, Cansortium has obtained the consent of the Required Lenders under its senior secured term loan credit agreement dated April 29, 2021 (the “Credit Agreement”) to the Transaction and certain concurrent transactions in accordance with, and subject to the terms and conditions set forth in, an amendment to the Credit Agreement (the “Amended Credit Agreement”). Among other things, the Amended Credit Agreement provides that,

(a) upon consummation of the Arrangement, RIV Capital and its subsidiaries shall become loan parties under the Amended Credit Agreement and shall pledge their assets to secure the Amended Credit Agreement;

(b) the Consolidated Leverage Ratio (as defined in the Amended Credit Agreement), for purposes of triggering a prepayment of the loans under the Amended Credit Agreement, was amended to (i) 2.5:1.0 for fiscal quarter of the Borrower ending March 31, 2022 and each fiscal quarter thereafter prior to the fiscal quarter in which the Arrangement is consummated and (ii) 3.0:1.0 for the fiscal quarter in which the Arrangement is consummated and each fiscal quarter thereafter;

(c) the Consolidated Interest Coverage (as defined in the Amended Credit Agreement) covenant was amended to (i) 2:5:1:0 for period March 31, 2022 through the fiscal quarter immediately prior to the fiscal quarter in which the Arrangement is consummated and (ii) 1.2:1.0 for the fiscal quarter in which the Arrangement is consummated and each fiscal quarter thereafter;

(d) the Minimum Liquidity (as defined in the Amended Credit Agreement) covenant was amended to provide that (i) the quarterly Minimum Liquidity shall apply up to the fiscal quarter immediately prior to the fiscal quarter in which the Arrangement is consummated and (ii) commencing with the calendar month in which the Arrangement is consummated and each calendar month thereafter, Liquidity (as defined in the Amended Credit Agreement) shall be not less than US$10,000,000;

(e) on the Arrangement closing date, after giving effect to the Transaction and the pay-down required under the Amended Credit Agreement, pro forma Liquidity shall be not less than US$10,000,000;

(f) upon consummation of the Arrangement, Cansortium will prepay US$10,000,000 of the principal amount outstanding under the Amended Credit Agreement, together with accrued interest and the applicable Prepayment Premium (as defined in the Amended Credit Agreement) thereon (if applicable); and

(g) certain additional covenants events of default were added.

No fee was payable to the lenders in connection with the Amended Credit Agreement. A copy of the Amended Credit Agreement will be filed with the Canadian securities regulators on SEDAR+ at www.sedarplus.ca.

Financial and Legal Advisors

ATB Securities Inc. is acting as financial advisor to Cansortium and Paradigm Capital Inc. provided an independent fairness opinion to the Cansortium Board. Wildeboer Dellelce LLP and Shumaker, Loop & Kendrick, LLP are acting as Canadian and United States legal counsel, respectively, to Cansortium.

Moelis & Company LLC is acting as financial advisor to RIV Capital and provided a fairness opinion to the RIV Capital Board. INFOR Financial Inc. provided an independent fairness opinion to the RIV Capital Board (the “Independent Fairness Opinion”). Cassels Brock & Blackwell LLP and Goodwin Procter LLP are acting as Canadian and United States legal counsel, respectively, to RIV Capital.

Paul Hastings LLP and Goodmans LLP are acting as United States and Canadian legal counsel, respectively, to the Agent and the Required Lenders under the Credit Agreement.

Conference Call

Cansortium will host a conference call and live audio webcast today at 11:00 a.m. Eastern time to discuss the Transaction.

Date: Thursday, May 30, 2024
Time: 11:00 a.m. Eastern time
Toll-free dial-in number: (844) 763-8274
International dial-in number: (647) 484-8814
Conference ID: 10023540
Link: Cansortium Conference Call

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

The conference call will also be available for replay via the News & Events section of Cansortium’s investor relations website at https://investors.getFLUENT.com/.

About Cansortium

Cansortium is a vertically-integrated cannabis company with licenses and operations in Florida, Pennsylvania and Texas. The Company operates under the FLUENT brand and is dedicated to being one of the highest quality cannabis companies for the communities it serves. This is driven by Cansortium’s unrelenting commitment to operational excellence in cultivation, production, distribution and retail. The Company is headquartered in Tampa, Florida. For more information about the Company, please visit www.getFLUENT.com.

About RIV Capital

RIV Capital is an acquisition and investment firm with a focus on building a leading multistate platform with one of the strongest portfolios of brands in key strategic U.S. markets. Backed by in-house expertise and cannabis domain knowledge, RIV Capital aims to grow its own brands and partner with established U.S. cannabis operators and brands to bring them to new markets and build market share. RIV Capital established the foundational building blocks of its active U.S. strategy with its previously announced acquisition of EtainTM. Through its strategic relationship with The Hawthorne Collective, a subsidiary of ScottsMiracle-Gro, RIV Capital is The Hawthorne Collective’s preferred vehicle for cannabis-related investments not under the purview of other ScottsMiracle-Gro subsidiaries.

_{⁸Cansortium’s outstanding debt excludes employee retention tax credits related liability and the convertible note issued in conjunction with the resolution of the Smith Transaction. The cash position net of debt also assumes the closing of the Hawthorne Notes Exchange.}

Original press release

Published by NCV Newswire

The NCV Newswire by New Cannabis Ventures aims to curate high quality content and information about leading cannabis companies to help our readers filter out the noise and to stay on top of the most important cannabis business news. The NCV Newswire is hand-curated by an editor and not automated in anyway. Have a confidential news tip? Get in touch.

“Our findings indicate that administering 300-600 mg of nanodispersible CBD oral solution for 12 weeks is effective in treating mild to moderate anxiety disorders and associated depression and sleep quality disturbances,” authors wrote. “These findings align with the growing body of evidence indicating that CBD may have anxiolytic effects if administered for a longer duration, ranging from 4 to 12 weeks.”

The report, published this month in the Asian Journal of Psychiatry, was penned by a seven-person research team from Asha Hospital and Leiutis Pharmaceuticals LLP, both in India, and New Jersey-based Biophore Pharma Inc. All authors, the paper says, participated “as employees of or consultants to Leiutis Pharmaceuticals,” which funded the study.

Use of the CBD solution “showed therapeutic efficacy, excellent safety, and tolerability in treating not only mild to moderate anxiety disorders (primary end point of the study), but also associated depression and disturbances in sleep quality (Secondary endpoint of the study)” the paper says, “with no incidences of withdrawal anxiety upon dose tapering at the end of the treatment.”

“CBD oral solution was effective treating mild to moderate anxiety.”

“Our research supports the importance of investigating the potential effectiveness of nanodispersible CBD oral solution in treating other forms of psychiatry disorders,” authors wrote, “and exploring its possible applications in clinical practice.”

Participants in the study were split into either a CBD or control group. Those in the CBD group received 300 milligrams of CBD per day at first, which increased over time to 600 mg per day and was later reduced to 150 mg per day toward the end of the study period. Those in the control group received a placebo.

A test of generalized anxiety disorder, GAD-7, found drops in anxiety markers among participants who took CBD compared to the placebo group. Mean scores “gradually decreased in the CBD group from week 2 (visit 4), which continued till week 13,” the study says, noting that the “mean GAD-7 score for CBD arm at baseline was 11.8±1.52 and the score at the end of treatment (visit-9) was 4.8±1.60, at visit-10 (dose taper) was 3.7±1.27, and at end of study (visit-11) was 3.1±1.06.”

Among those who took the placebo, the mean anxiety scores hardly changed. “The mean GAD-7 score (SD) for placebo arm at baseline (visit-3) was 11.2±1.43 and the score at end of treatment (visit-9) was 11.8±1.73, at Visit-10 (dose taper) was 11.8±1.72, and end of study (visit-11) was 11.8±1.75,” according to the report.

Another test, the Hamilton Anxiety Rating Scale (HAM-A), found similar drops in anxiety measures in CBD participants compared to the placebo group.

“CBD was therapeutically safe with no serious adverse events, well tolerated, and effective for the treatment of mild to moderate anxiety disorders, as well as associated depression and sleep quality disturbances.”

“The mean HAM-A score for CBD arm at baseline (visit-3) was 18.9±2.62 and the score at end of treatment (visit-9) was 7.34±1.77, at visit-10 (dose taper) was 5.83±1.67, and at end of study (visit-11) was 4.57±1.39,” the study says, while “the mean HAM-A score (SD) for placebo arm at baseline was 18.2±2.75 and the score at end of treatment was 18.9±2.75, at Visit-10 (dose taper) was 19.0±2.84, and end of study (visit-11) was 18.9±2.95.”

Participants in the CBD group also had their dosages reduced near the end of the study period, and no immediate increase in their anxiety was observed.

“At Visit 10 (Week 12), the drug was tapered to 150 mg/day,” the report describes, “and at the end of the study, at Visit 11 (Week 13), there was no increase in anxiety scores.”

Separate research published earlier this year found that a component of marijuana, the terpene D-limonene, may help ease anxiety and paranoia associated with the psychoactive cannabinoid THC. That study found that subjects who vaporized limonene along with a dose of THC experienced less anxiety and paranoia compared to those who consumed THC alone.

Another substance, similar to the psychedelic LSD, was also recently awarded breakthrough therapy status by the Food and Drug Administration (FDA) for the treatment of generalized anxiety disorder. The drugmaker behind the substance, known as MM120, said at the time that it plans to hold an end-of-Phase 2 meeting with FDA in the first half of 2024 and begin a Phase 3 clinical trial in the second half of the year.

According to a media representative the drugmaker, MindMed, MM120 is “a tartrate salt form of lysergide, a synthetic drug commonly known as LSD.”

The breakthrough designation is the latest in a series of developments around psychedelic-based therapies. Late last year, FDA granted priority status to its review of MDMA-assisted therapy as a potential treatment option for post-traumatic stress disorder (PTSD). The agency has set a target date to make a determination by August 11, according to applicant Lykos Therapeutics (formerly named MAPS Public Benefit Corporation).

If the new drug application is ultimately approved, the Drug Enforcement Administration (DEA) would then need to reschedule MDMA accordingly. It would become the first psychedelic in history to be approved as a pharmaceutical, to be administered in tandem with talk therapy and other supportive services.

As for CBD and anxiety, a separate study earlier this year found that dogs receiving daily doses of CBD saw “significant reductions” in stress and anxiety related to car travel.

All 20 dogs involved in that study, published in the Journal of Animal Science, exhibited signs of stress and anxiety when riding in a car, but canines treated with CBD two hours before taking the trip showed meaningful improvements over a 24-week review period.

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Photo courtesy of Kimzy Nanney.