💸 The Tape

Cannabis Twitter had a caffeine spike yesterday after Rep. Matt Gaetz claimed that the Drug Enforcement Administration is actively drafting the final rule to move marijuana to Schedule III and that it will be completed “ASAP.” For a market starved for federal movement, that kind of statement travels fast. Investors perk up, operators start gaming tax scenarios, and pundits dust off their “post-280E margin expansion” slides.

But before we start engraving “Schedule III achieved” on commemorative plaques, a reality check is warranted.

First, Gaetz’s assertion — while notable — is not the same as an official DOJ or DEA confirmation. The Controlled Substances Act rulemaking process is procedural, bureaucratic, and legally sensitive. A final rule doesn’t exist until it is formally issued, cleared through required channels, and published. Until then, we are still in the realm of political commentary, not regulatory fact.

Second, history tells us the DEA is not exactly known for moving swiftly — or enthusiastically — on cannabis reform.

Under the Biden administration, the agency repeatedly signaled institutional resistance. From drawn-out reviews to narrow interpretations of research access, the DEA has often operated as a brake pedal rather than an accelerator on cannabis policy. Its institutional posture has long leaned toward enforcement conservatism, not reform leadership. Even during prior reform pushes, the agency has been criticized for procedural slow-walking, strict manufacturing caps for research cannabis, and maintaining tight control over licensing and scheduling decisions.

In short: the DEA’s historical role in cannabis has been more gatekeeper than facilitator.

That context matters. Even if a draft rule is in motion internally — and it may well be — the path from drafting to finalization includes legal vetting, interagency coordination, and the ever-present risk of political or procedural delay. Agencies often write rules that sit, get revised, or face pushback before daylight.

There’s also the legal durability factor. Any final rescheduling decision will almost certainly face scrutiny, potential litigation, and political challenge. The DEA is acutely aware of this. That tends to make agencies more cautious, not faster.

For the cannabis industry, the message is clear: this is progress chatter, not progress closure.

Schedule III would be a material shift — unlocking relief from 280E tax burdens, reshaping research pathways, and altering the tone of federal engagement. But until the final rule is officially signed, issued, and published, companies should treat this as a developing narrative, not an operational certainty.

Optimism is justified. Victory laps are premature.

The DEA may be writing. Markets may be hoping. Politicians may be talking.

But in cannabis reform, nothing counts until it’s in black and white in the Federal Register.

📈 Dog Walkers

$OILS.CSE ( 0.0% ) Reports Fiscal 2025

Nextleaf Solutions just delivered the kind of financial reset small-cap cannabis investors rarely see executed this cleanly: margin expansion, operating discipline, and a near-elimination of net losses — all in the same fiscal year.

For FY2025, the company reported gross revenue of $14.96M and net revenue of $11.26M, but the real story sits below the top line. Nextleaf’s net loss shrank by 88.6% year over year, falling to just $162,944, while the business swung to positive EBITDA of $522K from a loss the year prior. Even more importantly, operating cash flow turned positive at $208K — a crucial signal for a processing-focused operator in a capital-tight market.

Profitability Through Mix, Not Hype

Revenue dipped modestly versus FY2024, but earnings quality improved. Gross margins expanded from 23% to 25%, driven by a strategic shift away from bulk distillate and toward higher-margin consumer packaged goods (CPG). Management leaned into SKU rationalization, disciplined pricing, and supply chain efficiency, a playbook more common in mature CPG than cannabis.

Translation: less commodity exposure, more brand-driven margin.

A temporary disruption in British Columbia tied to BCLDB labor action introduced some Q4 volatility, but performance elsewhere kept the year intact.

Commercial Execution Gaining Traction

Nextleaf didn’t just cut costs — it expanded intelligently.

• Entered Québec via Glacial Gold oils and white-label extracts

• Launched Yard, a new recreational extracts brand targeting next-gen hardware demand

• Added 20+ new SKUs, bringing the portfolio to 45 active products

• Built the largest national assortment of balanced / high-CBD vape formats

The company’s strength remains ingestibles and wellness-forward extracts. Best sellers continue to be Glacial Gold THC 10 Softgels, Balanced 10:10 Softgels, and Max Strength CBD 200 Oil — formats aligned with repeatable, dosage-controlled use rather than novelty.

That consistency supports a positioning increasingly rare in Canadian cannabis: trust-based brand equity rather than promotional churn.

Operational Discipline Showing

Operating expenses fell 21% YoY, with management emphasizing tighter working capital control and a focus on cash conversion. For a processor in a pricing-compressed environment, positive operating cash flow plus EBITDA signals a genuine inflection rather than accounting optics.

2026: From Stabilization to Expansion

With the base stabilized, Nextleaf’s FY2026 plan shifts toward growth:

• International export strategy with commercial partners

• Scaling the Nextleaf Distribution Facility

• National sales agency onboarding to improve Ontario and Prairie presence

• ERP-driven digital transformation

• Establishing Yard as a national extracts brand

• Expanding share in oils and softgels

In short, 2025 was about fixing the income statement.
2026 is about leveraging the cleaner platform.

Bottom line: Nextleaf isn’t chasing volume — it’s building a margin-first extracts business that’s starting to behave like a disciplined CPG operator. In today’s cannabis capital markets, that’s not flashy — it’s valuable.

🗞️ The News

📺 YouTube

Virginia Moves Forward on Adult-Use Cannabis Sales | TTB Powered by Flowhub

What we will cover:

✅ Former Congressman Matt Gaetz just set off a bomb today in the cannabis industry. Gaetz tweeted out that the DEA is drafting a rule to reschedule cannabis, and are moving it ASAP.

Is there some truth to this?

In our latest Trade to Black podcast, presented by Flowhub, host Shadd Dales and Anthony Varrell will break down this this announcement, along with several other key developments in the cannabis industry.

We start in Virginia, where lawmakers have approved legislation to legalize regulated adult-use cannabis sales. The bill outlines a framework for retail licensing, possession limits, and state oversight, signaling renewed momentum after years of stalled implementation. If finalized, Virginia would move from partial legalization into a fully functioning adult-use market.

Next, we look at Hawaii, where a state-commissioned report estimates that legalizing adult-use cannabis could generate roughly $90 million in monthly sales, with tourism expected to play a significant — though complex — role. The findings highlight both economic opportunity and regulatory challenges unique to island markets.

We then shift to a major cultural signal: the largest entertainment arena in the U.S. partnering with cannabis businesses to sell THC beverages at concerts and sporting events. This move reflects broader consumer trends toward alcohol alternatives and represents another step toward mainstream cannabis normalization.