#1ALERTA 69 DEPARTMENT OF BUSINESS REGULATION ENTRANCE Cannabis in Rhode Island: Issues and Considerations Matthew Santacroce, Deputy Director, Department of Business Regulation Erica Ferrelli, Chief, Office of Cannabis Regulation Presentation to the RI Cannabis Control Commission | 09.22.2023 RHODE ISLAND#2Agenda 1. Program background and overview 2. Operating Overview - Office of Cannabis Regulation (OCR) organizational and financial highlights 3. The Rhode Island Cannabis Act – legislative highlights and implementation to-date 4. Market trends 5. Emergent regulatory and policy considerations for the Cannabis Control Commission | 2 RHODE ISLAND#3Program Background and Overview • Rhode Island's medical marijuana program ("MMP") was established by the General Assembly upon passage of The Edward O. Hawkins and Thomas C. Slater Medical Marijuana Act in 2005. Rhode Island is now one of 36 states in the U.S. with some form of a medical marijuana program; it is currently jointly administered by the Office of Cannabis Regulation ("OCR") at the Department of Business Regulation and the RI Department of Health (“RIDOH”), with RIDOH holding primary responsibility for registering patients and licensing third party testing labs and DBR chiefly responsible for all other aspects of program administration, oversight, regulation, and enforcement. • See RIGL Sec. 21-28.6 et seq. | 3 RHODE ISLAND#4Cannabis Legalization in the U.S. WA MT ND MN ME OR ID SD WY VT NY WI MI MA NJ IA PA NE NV OH MD IL UT IN DE 00 CO KS MO WV VA KY CA AK 27 AZ OK NM HI TN AR AR SC MS AL GA LA TX Recreational/Medical Medical None Rules vary in each jurisdiction, check state and local laws. CBD only states not included. Created with Datawrapper FL As of August 2023. NC Source: https://mjbizdaily.com/map-of-us-marijuana-legalization-by-state/ RHODE | 4 ISLAND#5Program Background and Overview • Currently, OCR administers six different license and registration types under the Act - totaling ~20,000 licenses or registrations in total. The following table breaks these down by type and quantity as of August 2023 (note that MMP patients register with RIDOH). Rhode Island Cannabis Licenses and Registrations: Key Figures as of August 2023 Compassion Centers Cultivators 7 licensed for both medical and hybrid sales O 5 vertically integrated (can grow and sell) O 2 retail-only 2 pending 60 licensed Registered patients Registered caregivers Plant Tags 1 pending 11,299 958 as of August 2023 5,481 active plant tag sets as of August 2023 Key person and staff 1,297 (compassion centers and cultivators combined) as of August 2023 registration cards | 5 RHODE ISLAND#6• Program Background and Overview Further detail on license types, quantities, and fee amounts: License Type Current Number Compassion Center 7 Cultivator: Micro (<2,500 SF) 15 Cultivator: Class A (2,500-5,000 SF) 25 Cultivator: Class B (5,001-10,000 SF) 20 Hemp: Grower/Handler Dual 3 Hemp: Handler 2 Consumable CBD Retail 18 Annual Fee $500,000 $5,000 $20,000 $35,000 $2,500 (biennial) $2,500 (biennial) $500 | 6 RHODE ISLAND#7Program Background and Overview Rhode Island's medical marijuana program has evolved in meaningful ways since its establishment some 15 years ago. At a high level, these changes have aimed to introduce and enforce rigorous standards around patient access, product availability and quality, adherence to state and local law enforcement protocols, and professionalization of the burgeoning cannabis industry in Rhode Island. 2005: MMP created by RI General Assembly • • 2013: Decriminalization of possession of small amounts (<1 oz.) • 2016: Licensed cultivation program established • 2019: Legislation enacting compassion center expansion from three to nine (six new; one per regulatory zone) • October 2021: Administrative lottery held to award six new compassion center licenses • 2018, 2019, 2020: Adult use legalization proposed by Gov. Gina M. Raimondo • 2021, 2022: Adult use legalization proposed by Gov. Dan McKee • May 2022: Rhode Island Cannabis Act passed by General Assembly and signed into law • December 2022: Adult use sales begin in Rhode Island, placing RI among 23 states plus D.C. with legal adult-use sales | 7 RHODE ISLAND#8AURRILLVILLE FOSTER CLOCESTER ZONE 3 WOONSOCKET NORTH SMITHFIELD ZONE 1 SCITUATE Regulatory Zones + Compassion Center locations HOPKINTON COVENTRY WEST GREENWICH EXTER RICHMOND WESTERLY CHARLESTOWN CUMBERLAND LINCOLN SMITHFIELD CENTE NORTH PAWTLICK PROVIDERE JOHNS ZONE 2 ENCE CC licensed pre-2022 Newly licensed CC Licensure in process CRANSTON EARRINGTON ZONE 4 EAST GREENWICH WARWIC NORTH KINGSTOWN ZONE 5 SOUTH KINGSTOWN NEW L SHORCHAM ZONE 6 JAMESTOWN BRISTOL ZONE 6 MIDDLETOWN NEWPORT TIVERTON LITTLE COMPTON MEDICAL MARIJUANA COMPASSION CENTER LOTTERY AND LICENSE ZONES PURSUANT TO 230-RICR-80-05-1 THE MEDICAL MARIJUANA PROGRAM REGULATIONS#9RI Office of Cannabis Regulation: Operating Overview • The Office of Cannabis Regulation was created by statute in the FY 2020 enacted budget • . At present, OCR (not including the CCC) has 20 authorized FTE, 14 of which are currently filled or pending recruitment OCR operations are supported by a $5.4M total budget (FY24 enacted) all of which is restricted receipts (adult use and medical receipts combined) DEPARTMENT OF BUSINESS REGULATION OFFICE OF THE HEALTH INSURANCE COMMSSIONER (SEE NOTE 1) FINANCIAL SERVICES CENTRAL MANAGEMENT INSURANCE BANKING SECURITIES COMMERCIAL LICENSING STATE BUILDING OFFICE DIRECTOR Matthew Santacroce DEPUTY DIRECTOR BOARD OF ACCOUNTANCY Note 1 - DBR Insurance Division provides support to Office of Health Insurance Commissioner LEGAL SERVICES LEGAL ADM GAMING & ATHLETICS OFFICE OF THE STATE FIRE MARSHAL FIRE SAFETY CODE BOARD OF APPEALS & REVIEW OFFICE OF CANNABIS REGULATION | 9 RHODE ISLAND#10DEPARTMENT OF BUSINESS REGULATION OFFICE OF CANNABIS REGULATION Current State: August 2023 Total Budgeted FTE: 20.0 Filled/Pending Recruitment: 14.0 Vacant: 6.0 Pending Recruitment Sr. Econ. Policy Analyst Matthew Santacroce Deputy Director Erica Ferrelli Chief, Office of Cannabis Regulation Vacant Principal Economic & Policy Analyst Peter Squatrito Chief of Inspections Hannah Pfeiffer Legal Counsel Carter Wells Sr. Economic and Policy Analyst Cynthia Miller Investigative Auditor Sarah Ouch Econ. Policy Analyst Christopher Mahoney Chief Public Protection Inspector Derek Ducharme Chief Public Protection Inspector Lisa Crenca Chief Implementation Aide Liz Beaven Administrative Officer Kevin Kretchman Chief Public Protection Inspector Amy Devereaux Administrative Officer Vacant Chief Public Protection Inspector x4 Jacob Crisafulli Licensing Aide Vacant Licensing Aide EXHIBIT F Pamela Toro DBR Legal Services Administrator#11DEPARTMENT OF BUSINESS REGULATION OFFICE OF CANNABIS REGULATION Future State Pending Recruitment Sr. Econ. Policy Analyst Legal Counsel Kimberly Ahern, Chair Cannabis Control Commission Commissioner R. Jacquard | Commissioner L. Oduyingbo CFO Admin Officer x2 Administrator, Cannabis Office Unclassified - Governor Appointment w/ Senate Advice + Consent Erica Ferrelli Chief, Office of Cannabis Regulation Vacant* Principal Economic & Policy Analyst Peter Squatrito Chief of Inspections Hannah Pfeiffer Legal Counsel Carter Wells Sr. Economic and Policy Analyst Cynthia Miller Investigative Auditor Sarah Ouch Econ. Policy Analyst Total Budgeted FTE (including existing Cannabis Office, Commissioner, Administrator, support staff): 25.0 Christopher Mahoney Chief Public Protection Inspector Derek Ducharme Chief Public Protection Inspector Kevin Kretchman Chief Public Protection Inspector Vacant Chief Public Protection Inspector x4 Lisa Crenca Chief Implementation Aide Liz Beaven Administrative Officer Amy Devereaux Administrative Officer Jacob Crisafulli Licensing Aide EXHIBIT F Vacant Licensing Aide#12• Operating Overview: IT system implementation OCR has recently completed a major IT implementation that was initiated in late 2020. • At that time, Rhode Island lacked a functional seed to sale track and trace system - a basic tool of cannabis regulatory bodies across the world - and was processing every license and registration manually on paper applications. • With the support of DOIT, OCR procured two vendors to deliver solutions in both of these domains. METRC, a well- known seed-to-sale system that is used in most other adult use states (including Massachusetts) went live for licensees in December of last year, roughly concurrent with the onset of adult use sales. . On the licensing side, MTX Inc. delivered a Salesforce-based licensing portal that combines commercial licensing, patient registration, home-grow plant registration, and employee registration into one integrated portal that also communicates with METRC. The system is now live and functioning well. Altogether, the project budget was around $2.5M over the FY23-24 period and has tremendously improved the business operations and enforcement/compliance capacity of OCR. RHODE 12 ISLAND#13>metrc Licensees Active Inactive Dashboard Industry | Investigations ▾ Enforcement Taxation Reports |- Admin Illustrative METRC Dashboard - Vertically Integrated Compassion Center Support ▼ Cindy Miller | Rhode Island A▾ + Credentialed 11/04/2022 11/04/2022 License No. Facility MMPCC00 MMPCC00 Current Name Status : Type Granted Expires Active Cultivator Redacted Active Compassion Center Summary Details Owners Notifications Related Employees EES History Locations Strains Items Waste Packages Prod. Batches Lab Samples Proc. Val. Samples Product Destruction Daily Sales Sales Receipts Tag Orders Tags History Tag Q1A42A0100000004000000108 Src. H's Src. Pkg's Runtz Muffin 1A42A0300000004000000492 12/6/2022 FL4B Enforcement Notes Jurisdictions Permissions Permissions A + Src Pj's Location Item Category Item Strain Quantity P.B. No. Lab Testing A.H. Date Rcv'd E D MED Fulfillment OG Kush Infused Pre-Roll Infused Pre- Rolls OG Kush THC 0 ea Trace TestPassed No 12/15/2023 03/21/2023 Yes No Test Samples Q1A42A0100000004000000106 1A42A0300000004000000318 Retail Vault Mama Mia CO2 Wax 0.5g Concentrate 15 ea TestPassed No 12/06/2023 03/21/2023 ON No NO (each) Trace No Test Samples Q1A42A0300000004000000557 1A42A0300000004000000318 REC- Fulfillment Mama Mia CO2 Wax 0.5g Concentrate (each) 18 ea Trace TestPassed No 12/06/2023 03/21/2023 No No Test Samples ► Q1A42A0300000579000000970 1A42A0100000323000000433 REC- Fulfillment SW Ruby 1:1 Tinctures 10 ea 1A42A0100000323000000433 TestPassed No 08/29/2023 Trace No No Test Samples Tincture HAPI Capsules Q1A42A01000003E9000000259 1A42A01000003 E9000000256 Retail Vault 2 - 10pk of 50mg Capsules Edible 20 ea hapicapsules 50mg082323 NotSubmitted No 08/28/2023 08/28/2023 No O Trace No Test Samples Q1A42A01000003E9000000260 1A42A01000003E9000000249 MED - Fulfillment HAPI X Del's Tangerine Edible 48 ea delstangerine082223 Trace NotSubmitted No 08/28/2023 08/28/2023 No No Test Samples Q1A42A01000003E9000000261 1A42A01000003E9000000250 MED - Fulfillment HAPI X Del's Pink Lemonade Trace Edible 96 ea delspink082223 NotSubmitted No 08/28/2023 08/28/2023 No No Q1A42A01000003E9000000262 1A42A01000003E9000000251 MED - Fulfillment HAPI X Del's Lemonade Edible 98 ea delsyellow082223 NotSubmitted No 08/28/2023 08/28/2023 No ON ON Test Samples Trace No Test Samples Trace Q1A42A03000003E9000000268 (multi-package) Retail Vault 2 HAPI Capsules Edible 300 ea hapicapsules 10mg82323 NotSubmitted No 08/28/2023 08/28/2023 No No Test Samples HAPI Capsules Trace Q1A42A03000003E9000000269 1A42A01000003E9000000256 Retail Vault 2 - 10pk of 50mg Edible 40 ea hapicapsules50mg082323 NotSubmitted No 08/28/2023 08/28/2023 No No Test Samples Capsules Q1A42A03000003E9000000270 1A42A01000003E9000000249 REC- Fulfillment HAPI X Del's Tangerine Trace Edible 146 ea delstangerine082223 NotSubmitted No 08/28/2023 08/28/2023 No No Test Samples#14Testing: Background and Current State • In partnership with RIDOH, OCR has worked since early 2021 to phase in a robust enforced testing regime for Rhode Island's regulated cannabis market. At present, the following tests are required for cannabis products available for sale in our state: Product Type Flower Extracts, resins, concentrates Infused products (edibles, e.g.) Required Tests Potency, microbiological, water activity, heavy metals, pesticides Potency, heavy metals, pesticides, residual solvents (if solvent-based extraction method) Potency RHODE 14 ISLAND#15Testing: Background and Current State • Testing regimes such as this one are an important feature of every regulated cannabis market in the country, ensuring the safety, quality, and reliability of products available for sale for medical and adult-use customers. As a practical matter, passing test results are required to be associated to each product in the state's seed-to-sale tracking system (METRC) before it can be made available for sale to a retail customer. OCR has historically worked very closely with RIDOH on the enforced testing program - RIDOH is the agency that both issues the regulations relating to enforced testing and licenses the state's cannabis testing laboratories (of which there are three). • In response to industry concerns and emerging best practices, RIDOH and OCR have worked together to revise the testing regulations to bring our state into closer alignment with Massachusetts and other adult-use states, particularly with respect to allowable thresholds for certain pesticides. PUREVITA LABS REGULATORY COMPLIANCE TESTING PUREVITA LABS / 153 JAMES P MURPHY INDUSTRIAL HIGHWAY WEST WARWICK RI 02893 / PH: 401- 293-4534 RI LICENSE #: LTM0003 CERTIFICATE OF ANALYSIS PRODUCED: JUL 27, 2023 SAMPLE: BILLY IDLE PREMIUM PRE-ROLLS (PRE-ROLL) CLIENT: IDSP LLC D/B/A RI FINEST GARDENS BATCH: PASS CANNABINOID OVERVIEW TOTAL THE: BATCH NO.: 6.19.23 MATRIX: PRE-ROLL CATEGORY: FINISHED PLANT SAMPLE ID: PVL-2307-0271 COLLECTED ON: JUL 24, 2023 RECEIVED ON: JUL 24, 2023 BATCH/SAMPLE SIZE: 2200 UNITS & UNITS RECEIVED BY: BYRON ACEVEDO PACKAGE SIZE: 1 G TOTAL CBD: TOTAL CANNABINOIDS: CULTIVATOR INFO CULTIVATOR IDBP, LLC D/B/A RI FINEST GARDENS LICENSE MMP CV 0005 MEDICINAL CLASS B GROWER BATCH RESULT: PASS POTENCY TESTED METALS PASS MICROBIAL PESTICIDES PASS PASS WATER PASS SOP-2.4: CANNABINOID PROFILE BY UHPLC-DAD / ANALYST: JOSHUA VANVOORHIS, DATE: JUL 26, 2023 CBCA LIMIT 32.6 % - 100% 37.766% ANALYTE LIMIT AMT AMT LOD/LOQ (m/s) REGULATED ANALYTE AMT AMIT LOD/LOQ Img/g) REGULATED CBC ND ND 0.401/2.26 X THC ND ND 0.519/2.26 0.276 % CBD ND 2.76 mg/g ND 0.401/2.26 THE 0.275/2.26 THCA CBDA - 100 LOQ 0.221/2.26 THEY CBDV ND ND 0.389/2.26 THCVA 1.62 % 16.2 mg/z 35.3 M ND <LOQ 9.791/2.26 353 mg/g 0.330/2.26 NO 0.231/2.26 LOQ 0.362/2.26 CBDVA NO ND 0.362/2.26 x TOTAL THC ** 32.6 M 326 mg/s CBG <LOQ LOQ 0.344/2.26 CBGA 8.570 M CBN ND 5.90 mg/g ND 0.20312.26 0.400/2.26 X X TOTAL CBD ** CBD/RKG ARTHC/PKG LOQ <LOQ ND 16.2 mg (C8DA X 0.877) + CBD (THCA X 0.877) + THC ** TOTAL CBD TOTAL THC THE DATA REPORTED ON THIS CERTIFICATE WAS PRODUCED USING THE STRICT QUALITY CONTROL GUIDELINES OUTLINED IN REGULATION 216- RICR-60-05-6. I ATTEST THAT EACH ANALYSIS HAS BEEN REVIEWED FOR ACCURACY USING THE APPROPRIATE QUALITY CONTROL STANDARDS FOR EACH METHOD, UNLESS OTHERWISE STATED IN THE QC NOTES OR SAMPLE NARRATIVE SECTIONS AT THE BOTTOM OF THIS REPORT, SOP'S WERE FOLLOWED WITHOUT DEVIATION AND QUALITY CONTROL SAMPLES PERFORMED WITHIN THE SPECIFICATIONS ESTABLISHED BY THE LABORATORY. THE DATA PRESENTED HERE IN, APPLIES ONLY TO THE PRODUCTS LISTED IN THIS REPORT REPORTS CANNOT BE REPRODUCED RESULTS CERTIFIED BY: STUART J PROCTER, PHD LAB DIRECTOR, PUREVITA LABS JUL 27, 2023 Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore. 15 RHODE ISLAND#16The Rhode Island Cannabis Act Domain Licensing Governance Possession and Sales Key Provisions Facilitates the transition of existing MMP compassion centers into hybrid adult-use status effective 12/1/22. 9 total (7 are licensed currently). 24 additional retail licenses distributed equally across 6 MMP regulatory zones; two licenses in each zones reserved for "social equity applicants" and worker-owned cooperatives, respectively. This will bring the total number of retail outlets in RI to 33 (9 hybrid/MMP + 24 new AU retail). Leaves methodology of license allocation to the Commission rules/reg Two-year moratorium on issuance of new cultivation/manufacturing licenses pending a market demand study by Commission. Introduces a new, three-member Cannabis Control Commission, as well as a Cannabis Office Administrator, to assume responsibility for regulation of adult-use and medical marijuana program. Transition from DBR/OCR to CCC triggered by the conclusion of formal adult-use rulemaking by CCC. During pendency of adult-use rulemaking, DBR/OCR maintains regulatory authority under "hybrid/transitional" authority spelled out in the Act. Creates a 19-member Cannabis Advisory Board made up of government and non-government stakeholders to advise Commission on policy/regulatory considerations (esp. parameters of social equity licensing and programming); programmatic expenditures associated with cannabis tax revenues; and to make recommendations generally, on the use, commerce, regulation, and effects of adult-use and medical marijuana in Rhode Island. Legalizes the possession of cannabis for adults 21 and over (1oz or equivalent on person; 10oz or equivalent in a residence). Provides for the sale of cannabis and cannabis products at MMP compassion centers approved for hybrid status by OCR; maximum of 1oz or equivalent per transaction. Permits personal recreational home-grow (three mature and three immature plants at a place of residence). RHODE 16 ISLAND#17The Rhode Island Cannabis Act (cont.) Domain Taxation Social Equity and Criminal Justice MMP Reforms Key Provisions Introduces a 20 percent total tax on retail sales: 7 percent Rhode Island state sales tax; 10 percent state cannabis excise tax; 3 percent local cannabis excise tax. 3 percent local tax distributed by the state to municipality where transaction occurred. Total tax rate roughly in line with current tax structure in Massachusetts. Reserves 2 licenses in each zone for social equity applicants and worker-owned cooperatives, respectively. Legislation defines social equity applicants broadly as applicants who have a.) been disproportionately impacted by criminal enforcement of marijuana laws, including individuals and/or their immediate family members convicted of nonviolent marijuana offences; or b.) applicants with ownership/control by individual(s) who have resided five of the past ten years in "disproportionately impacted areas." Leave significant discretion to Commission rules/regs to hammer out the details of these definitions and qualifications. Sets up a process for quasi-automatic expungement of nonviolent marijuana offenses through the Judiciary. Eliminates statutory fees for patient registration and plant tag registration Prohibits the allowability of out-of-state patient cards at RI compassion centers (on hold pending Commission action) | 17 RHODE ISLAND#18Market Trends: Total Sales Up 31%, AU Sales Up 75% YTD, Wholesale Transfers Up 155% Millions $12 $10 $8 $7.38 $7.10 $6 $9.67 $9.47 $9.17 $8.89 $8.74 $8.71 $7.03 $6.75 $6.40 $6.04 $5.63 $5.38 $4.26 $4.02 $4 $3.51 $3.50 $3.36 $3.19 $3.01 $2.98 $2.88 $2.61 $2.64 $2.25 $2.08 $1.73 $2 $1.37 $1.20 Sum of Total Sales Sum of Adult Sales Sum of Med Sales Sum of Wholesale 60 $0 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 18 RHODE ISLAND#19Market Trends: Flower and Pre-Rolls Dominate Units Sold by Product Type, Jan-Aug 2023 200 187 181 172 170 167 168 160 160 155 147 147 139 140 180 Thousands 120 100 80 60 60 40 40 20 20 0 81 80 108 131 120 72 66 64 61 58 48 48 48 ထု 47 41 10 5 2 Jan 25 25 11 23 38 33 12 11 12 9 9 7 7 2 11 2 1 1 1 11 2 11 Feb Mar Apr May 66 53 Sum of Concentrates Sum of Edibles ■Sum of Infused Non-Edible Sum of Pre-Packaged Bud Sum of Raw Pre-Rolls ■Sum of Infused Pre-Rolls Sum of Tinctures Sum of Topicals ■Sum of Vape Cart 15 13 13 13 10 11 2 1 1 2 11 1 21 Jun Jul Aug 19 RHODE ISLAND#20Snapshot of Selected Products MAMMOTH MAMMOTH Green Fire OG | 3.5g 1/8 oz $25.00 1 v ADD TO CART *Cannabis tax will be added at checkout. Hybrid THC: 18.39% Talaria MOTHER EARTH WELLNESS Calm Blueberry Gummies - 2:1 THC/CBN 10mg - 10pk $22.95 1 ADD TO CART Linity TALARIA Lavender OG | 1g 1g $10.00 1 v ADD TO CART *Cannabis tax will be added at checkout. Indica THC: 18.4% LIVITY Choco Cherry Haze 90U Fresh Frozen Rosin 1g $80.00 1 ✓ ADD TO CART *Cannabis and Sales tax will be added at checkout. Hybrid TAC: 91.78% O THC: 75.5% CBD: 0.14% O 20 RHODE ISLAND#21Market Trends: Summit (RISE) Top Retailer by $ Millions $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 $0.3 $0.50.50.3 |$0.4 $0$0.2 $0.7 $0 0 $0.6 $0.6 0,$50. 0$0.6 $0.6 Sales Totals by Dispensary (Jan-Aug 2023) $2.8 $2.6 $2.7 $2.6 $2.6 $2.6 $2.5 $2.4 $2.5 $2.4 $2.3 $282.2 $2.1 $2.0 $1.9 1-Jan Jan $1.9 $1.7 $1.5 $1.81 $1.4 $1.1 $1.0 $1.2 $1.1 $1.2 $1.1 $1.1 $101.01.0 $0.8 $0.7 $0.8 $0.7 $0.5 $0.1 Aura of Rhode Island, Inc. Greenleaf Compassionate Mother Earth Wellness, Care Center Solar Theraputics RI Sweet Spot Summit DBA RISE Ltd. Wellness, Ltd. Thomas C. Slater Compassion Center 21 ■1-Feb - Feb 1-Mar Mar ■1-Apr - Apr 11-May - May ■1-Jun - Jun ■1-Jul - Jul 11-Aug - Aug RHODE ISLAND#22Compliance and Enforcement: Approach and Highlights • At present, OCR's compliance and enforcement team involves inspections, audit, and legal functions. In general, our compliance and enforcement priorities include: • Compliance with seed-to-sale tracking requirements; • Material nondisclosure of financial, ownership, and/or investor interests; and . • Unlicensed distribution/transportation of regulated product. The typical OCR enforcement action is rooted in inspection findings, routine or targeted audits of METRC activity, and less. frequently, complaints from the industry or the general public. These are then investigated by audit and inspections staff with the input and guidance of legal personnel and senior management. • Material findings, to the extent they emerge, are considered internally before presentation to the licensee in question for further information and clarification. In recent years, violations have been resolved in concert with the licensees, and closed out by way of consent agreements and concurrent fines as authorized in the program regulations. • The Director of DBR maintains ultimate adjudicatory authority should licensees choose to contest violations/disciplinary actions; these cases proceed before an Administrative Hearing Officer per the rules of the Administrative Procedures Act. . For details on concluded OCR enforcement actions, see: https://dbr.ri.gov/office-cannabis-regulation/cannabis-enforcement- actions Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore. RHODE 22 ISLAND#23Emergent Regulatory and Policy Considerations RHODE ISLAND#24Market size and license consolidation • There is an emerging consensus among licensed entities in Rhode Island's cannabis market that supply of and demand for regulated cannabis products may be out of alignment. • It may be the case that there are too many licensed cultivators in Rhode Island's market at present and that some number of these may consolidate or wind-up operations absent a significant and sustained increase in consumer demand for regulated cannabis products in Rhode Island. . This is related to retail licensing considerations. At present, we have licensed seven retailers for both medical and adult-use sales; we expect this number to grow to nine by the end of this calendar year. The Rhode Island Cannabis Act, notably, would nearly quadruple the number of retail licenses in Rhode Island - to 34 total. . The market may not bear this number of retail outlets under the current demand conditions. • Moreover, issuance of the social equity and worker-owned cooperative licenses may be delayed due to the complex regulatory and program considerations laid out in the Act. RHODE 24 ISLAND#25Advertising • • There is a strong desire among both retailers and cultivators to loosen advertising restrictions for hybrid licensees in Rhode Island as soon as possible. Legislation enacted earlier this year granted hybrid retail licensees the ability to advertise in a variety of media; however, cultivators have also expressed an interested in standalone advertising privileges. • The Commission should be ready to consider detailed advertising regulations in the near-term - a key objective will be balancing industry priorities with public health and public safety considerations. MOTHER EARTH WELLNESS- 21+ NEXT EXIT DISPENSARY THERE'S A NEW STATE FLOWER! RHODE RATHSKELLE JUNE 2023 SHOWS AURA 2022 SLAND CENTRAL FALLS PREMIER CANNABIS EXPERIENCE -Flower-Prerolls Concentrates Vapes Edibles Topicals 21- WITH VALID ID | IS+ MEDICAL HOURS MONDAY THURSDAY 930AM-7PM SATURDAY 9:30AM-8PM DAD LUNCH & DINNER MENUS FOUR BARS COLDEST BEER IN R Sh horseshoes, bocce, co& стоко OPEN WED THURS NOON-10PM FRI-SAT NOON-1AM SUN: NOON 10 PM ABA O Coach Road Overlestown, (401) 793-1000 thecharlestown.com FRE-2 SAT-3 SUN-4 FR-9 PURPLE HONEY SAT-10 SUN PAULA CLARE BAND SAKE TO THE WIDOK HOGES FR-16 CAY SAT-17 SUN FR-23 SAT-2 SUN-25 DAM-5PM LS RI 02863 FR-30 PURCH 25 RHODE ISLAND#26Events and social use In recent months, licensees have taken a significant interest in hosting and/or promoting public-facing events. Examples of this include the recent Coastal Cultivators Classic (organized by Mother Earth Wellness) and the 420 Sesh at Studio Lounge (organized by Aura of Rhode Island). • These events exist in a significant area of regulatory uncertainty - provided no sales/distribution activity is occurring, Rhode Island law and regulations neither expressly permit nor prohibit these types of events. As a result, OCR's approach has focused primarily on licensees' distribution, transport, and possession of licensed product and specifically the extent to which products are being transported off the licensed retail premises for sale or distribution at a non- licensed location. In the longer run, we would advise the Commission to consider the creation of an event license or permit to ensure proactive compliance with state and local laws and regulations. As is the case in other adult use states, these types of events will become more commonplace as time goes on and competition in the market continues to increase. 4.20.23 8PM-1AM AURA RHODE ISLAND 420 SESH AT STUDIO LOUNGE MAMMOTH Ture Ganja T OPP BONSAI BUDS ank's ERBS ZEN BLEND FARMS HANGAR 420 AKULTIVATIONCO R Finest SEALWITCH GARDENS THEDICINALT A H Lily B GMP HERECE CMS Carde Small Back Crab Camb SOUTH COUNTY CULTIVATORS TICKETS ARE NOW AVAILABLE ONLINE AND INSTORE AT WWW.AURAOFRI.COM | RHODE 26 ISLAND#27Social equity • As previously discussed, the enacted legislation contemplates a significant set-aside of retail licenses for so-called "social equity applicants," which is meant to include two broad categories of applicants: those who have been convicted of a nonviolent marijuana offense, or those who have or do reside in "disproportionately impacted areas" of Rhode Island. . • However, the Commission has responsibility for promulgating the precise definitions and boundaries of these qualifying criteria; the Cannabis Advisory Board is also empowered to make recommendations to the Commission on the same. . Without question, the exercise of spelling out social equity licensing program regulations is both substantively and politically complex - given the involvement of a stakeholder-led Advisory Board and the necessary act of drawing lines related to qualification. • What's more, many other states have faced litigation related to their social equity program rules among them Illinois, New York, Connecticut, and the City of Los Angeles. RHODE 27 ISLAND#28Novel cannabinoids and hemp-derived CBD and THC products A9 Edibles 49 Gummies A9 Baked Goods A9 Live Rosin 1:1 Select Spectrum In the past year, the unregulated market for hemp-derived products that contain CBD and/or THC has expanded dramatically. The 2018 Farm Bill created an unintended pathway for the commercial sale of these hemp-derived products since they are derived from plant material with less than 0.3% THC on a dry-weight basis (the legal definition of hemp). However, recent technological advances have enabled the synthetic derivation of significant amounts of psychoactive Delta 8 and Delta 9 THC from hemp plant material, which are then sold primarily in ingestible product form (gummies, cookies, etc.) in a wide variety of unlicensed. retail settings across Rhode Island and the country. • This is an emergent public health and safety issue because, among other things: there are no limits on the amount of psychoactive THC in each package or unit; the products are very often un- or under-tested; the long-term health effects of hemp-derived synthetic THC are virtually unknown; and these products are being sold across the state at gas stations, convenience stores, etc. with no requirements for a minimum age to purchase. So HOMETOWN HERD RET Sour Bells Belt 150MG THC 12mg 49 + 277mg 48+ 4mg THCV +2mg THCP + 5mg 410 3 Pack, Sour Belt Blueberry Burst 300mg (10ct Bag) ★★★(3) $225.00 $191.25 Add to cart BUTTO Delta-9 Live Rosin Taffy (Tutti Frutti) (38) $35.00 Add to cart HOMETOWN HERD HOMETOWN HERO 10mg 49 10mg CBD Select Spectrum Gummies (Pineapple) ✯✯✯✯✯(154) $40.00 10mg 49 + 10mg CBD Select Spectrum Gummies (Mango) 賣賣賣賣賣(282) Add to cart $40.00 Add to cart Source: https://hometownherocbd.com/ HOMETOWN HERO HOMETOWN HERD REMED 300mg A9 Delta 9 Squares (Rainbow) ★★★(86) $40.00 10mg 49 +10mg CBD Select Spectrum Gummies (Strawberry) $40.00 (231) Add to cart Add to cart HOMETOWN HERD 150MG THC LIVE ROSIN GUMMIES ว BURY GRAND SALON AR CHICC: CIO-UNGH 5mg 49 +5mg CBD Delta-9 Live Rosin Taffy (Birthday Cake) ★★★(41) $35.00 Add to cart Delta-9 5mg Live Rosin Gummies + CBD (Blueberry) $20.00 (8) Add to cart 28 RHODE ISLAND#29Federal legalization Marijuana remains illegal at the federal level, creating a conflict with the dozens of states with legal medical and/or adult use cannabis regimes. In addition, cannabis businesses face a number of disadvantages related to access to capital, tax treatment, and jurisdictional confusion as a result of federal illegality. • Notably, it is currently illegal to transport cannabis for sale at retail or wholesale - meaning that every state's cannabis retail market is captive to the product grown and produced in that state. Obviously, federal action on this issue has been halting at best; in the near-term, it seems like the best chance for any federal action is the potential reclassification of cannabis under the Controlled Substances Act - though it is unclear the extent to which this would impact the permissibility of the interstate commerce of cannabis. • This particular change would represent an immediate and existential threat to licensed growers in our state as surplus inventory from Colorado, California, Oregon, and potentially Canada, Mexico, and/or Southeast Asia could flood the regulated market virtually overnight. • This is a long-run consideration but likely the one with the most significant risk to the domestic market in Rhode Island; the Commission should begin preparing for this eventuality within the next three to five years. The best prospect for near-term federal action remains passage of the SAFE Banking Act, which would make it easier for financial institutions to offer services like bank accounts and small business loans to companies in the cannabis industry. SAFE Banking has passed the House multiple times since 2019 but has yet to garner the necessary support in the Senate to become law. . Another recent notable federal development: FDA has recommended rescheduling of cannabis from Schedule I (heroin, LSD) to Schedule III (ketamine, anabolic steroids). Notably not a meaningful step towards outright federal legalization (interstate commerce) but would eliminate 280E tax disadvantage for cannabis businesses. Industry continues to advocate for total descheduling. RHODE 29 ISLAND#30Questions Matthew Santacroce Deputy Director, Department of Business Regulation Erica Ferrelli Chief, Office of Cannabis Regulation RHODE ISLAND