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[CANNABISCANADA]

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Friends,

In what was literally the slowest week for industry news since we launched New Cannabis Ventures six years ago, a report from cannabis data analytics firm BDSA caught our attention. The August edition of its Essential Cannabis Insights addressed a topic of great interest to investors: Who are the leading cannabis brands?

BDSA discussed the overall market leader as Cresco Cannabis based on the first half of the year's data across 9 states in its coverage: Arizona, California, Colorado, Illinois, Maryland, Massachusetts, Nevada, Oregon and Pennsylvania. BDSA indicated that Cresco Cannabis was the leading overall brand in both Illinois and Pennsylvania. In the other states, private companies led in most markets, with the exception of Massachusetts, where GTI's Rythm was the best-selling brand. By category, GTI was the best-selling flower brand, while Cresco Cannabis leads in dabbables. The other category leaders are private companies. The report indicated that brand leadership is most impacted by vape performance. It also highlighted the importance of a California presence, given the size of that market.

Some strong brands are emerging, and we agree with BDSA that California is a great place for one to build a brand given its size and also its heritage. We think it's still very early days, but one brand that has emerged from California is Cookies. According to BDSA, it is the most popular brand in Nevada. The company has licensed its brand for a retail store in Nevada to GTI, and it has licensing partnerships with GAGE Cannabis in Michigan and with TerrAscend in New Jersey as well a few other states. A strong commitment to genetics and authenticity are at the foundation of its appeal.

Several other companies have expanded from California into other markets through brand licensing. Just within the past month, we have interviewed Kristi Palmer of Kiva and Imelda Walavalkar of Pure Beauty, who have both been expanding methodically through partnerships. In July, we interviewed Mark Ainsworth of Lowell Farms, which recently partnered with Ascend Wellness to launch pre-rolls into Illinois and Massachusetts. The company disclosed the financial arrangement, with Lowell Farms receiving a 15% of wholesale royalty in this case.

Of course, California won't be the genesis of all great brands. We interviewed Nancy Whiteman of Wana Brands, the top brand in Colorado according to BDSA, in July. Her company has introduced its brand through licensing into not only several other states but also into Canada through a partnership with Indiva. We also interviewed Christine Smith of Oregon's Grn earlier this month, where she discussed how the company has expanded its leading edibles brand into Arizona, Nevada and Oklahoma.

The largest cannabis operators understand the long-term potential payoff from branded products. Over time, as cannabis flower becomes more commoditized, branded products, whether they are premium flower or pre-rolls or derivative products like concentrates and edibles, will protect companies from pricing pressure. The still nascent beverage category has seen a strategic investment by GTI into Cann and the recent pending acquisition by Ayr Wellness of Cultivauna, which sells Levia Cannabis Infused Seltzer in Massachusetts, for $20 million. Curaleaf acquired vape brand Select in 2020 and has been introducing it along with its new categories into its markets. Several MSOs have licensed particular brands for some of the markets in which they operate.

Companies have also positioned themselves to enable brands to enter new states. This is Flower One's business model in Nevada, and TILT Holdings has announced several deals in its three states of operation.

Looking ahead, we expect to see an increasing interest by large cannabis operators in locking up brands through licensing or purchase. We anticipate that brands in California and other western states are the most likely to be the targets of the buyers