Ackrell Capital Cannabis Investment Report predicts federal legalization timeline

ACKRELL CAPITAL Cannabis Investment Report | December 2017 The Path to Federal Legalization We believe that the variable which will most impact the future size of the U.S. legal cannabis mar- ket is the federal legalization process. How and when federal legalization occurs will impact other primary drivers of the market, including the number of eligible consumers, penetration rates and consumer spending. We predict six developments relating to federal legalization: (1) the U.S. Food and Drug Administration (FDA) will begin approving individual pharmaceutical-grade drugs derived from cannabis; (2) more states will adopt medical cannabis laws; (3) more states will adopt recre- ational laws; (4) the FDA will adopt routine approval procedures for drugs with extracts of low-THC/ high-CBD cannabis varieties; (5) the FDA will adopt routine approval procedures for drugs with extracts of high-THC cannabis varieties; and (6) cannabis parts and derivatives will be removed from the CSA schedules (either incrementally, starting with CBD, or all at once) and will be fully legal for medical and recreational purposes. (We expand on these predicted developments in Chapter IV, U.S. Legal Landscape.) We do not predict that these developments necessarily will occur in the order presented. We do expect some of them to develop in parallel, and none of them depends fundamentally on any other. For example, Congress could cause development (6) at any time by passing legislation that removes cannabis from the CSA schedules and establishes Path to Federal Legalization a national framework for recreational and medical . The U.S. Food and Drug Administration will cannabis regulation. Developments (1) through (3) begin approving individual pharmaceutical- | largely reflect incremental developments within grade drugs derived from cannabis. the existing legal environment. We do not expect . More states will adopt medical cannabis developments (4), (5) or (6) to occur during the laws. current presidential term, but we believe that there . More states will adopt recreational laws. is a reasonable chance development (4) could begin wp: & | _ The FDA will adopt routine approval within the next five years and development (5) procedures for drugs with extracts of _——e low-THC/high-CBD cannabis varieties. believe it could take up to 10 years or more before could occur within two years thereafter. In total, we the federal legalization process reaches development (6) and cannabis becomes fully legal under federal law. For our market estimates, we assume (i) devel- opment (4) begins in 2023, (ii) development (5) saecaned tenanhacen sche dnlesara will follows two years thereafter and (iti) development be fully legal for medical and recreational (6) occurs by 2027 and cannabis becomes fully purposes. legal in the United States. . The FDA will adopt routine approval procedures for drugs with extracts of high-THC cannabis varieties. . Cannabis parts and derivatives will be We believe that federal legalization will trigger rapid growth in the U.S. market, propelled by interstate commerce, access to the federal banking sys- tem and acceleration of the cannabis-derived pharmaceuticals market. A change in the federal status of cannabis in the United States will not only drive U.S. market growth, but should provide a significant catalyst to the market worldwide. The following graph illustrates the timeline of our predicted developments and the estimated impact on the U.S. legalized cannabis market. As discussed on page 175, readers are cautioned to not place undue reliance on our predictions or estimates. Almost certainly, our predictions and estimates will prove inaccurate in some respects. 6 © 2017 Ackrell Capital, LLC | Member FINRA/SIPC HOUSE_OVERSIGHT_024642