Cannabis Investment Report – Market Outlook and Business Solutions (Dec 2017)

CKRELLE I’ L Cc aX P T I ¢ > Cannabis Investment Report | December 2017 should seek to develop strong relationships with a large number of dispensary operators, directly or through a distributor, in order to obtain preferred shelf placement. FDA Approval: Risk, Time and Expense. Assuming that cannabis-derived drugs will eventually be permitted to be sold in the United States, considerable time and expense will be spent by manufac- turers to obtain FDA approval and bring approved products to market. There is no guarantee that investments of significant time and money into research, development and clinical trials will result in FDA approval of cannabis products. Product Liability Claims. Companies may be exposed to various product liability claims associated with human consumption of cannabis products. Consumer claims that products cause injury or ill- ness, include inadequate instructions for use or warnings concerning health risks, or cause possible side effects or interactions with other substances may be expensive to defend or settle. Consumer Products Outlook We believe that there are significant market opportunities for well-recognized brands to develop in various categories of consumer products, particularly in flower, concentrates, edibles and vaporizers. In addition, we believe that there are opportunities for companies targeting niche applications for the pet industry. Many companies will struggle to create strong brands because the consumer products segment generally has low barriers to entry and is currently oversaturated. As the cannabis industry and legal environment develop, we expect that national brands will emerge from companies with large mar- keting budgets, operational scale and reputations for quality, and that large alcohol, tobacco, consumer products and pharmaceutical companies will play a larger role in this segment. = Business Solutions The business solutions segment of the cannabis industry comprises business software, such as seed- to-sale tracking solutions, and business services, such as legal, compliance, operational consulting and financial services. Software and services providers in this segment generally do not “touch the plant” and do not require cannabis-related permits or licenses. Business Software Software solutions tailored to the cannabis industry are present throughout the cannabis supply chain. Although solutions from other manufacturing and retail industries are used in the cannabis industry, industry-specific solutions are emerging as some of the most popular. Some companies provide point solutions that target bottlenecks in the supply chain, while others offer broad platforms that consoli- date multiple capabilities. Industry-specific software applications exist and are being developed in the following areas: cultivation cycle management; concentrate production management; infused product manufacturing management; product testing and compliance; retail operations (including point-of- sale, inventory, tax reporting and compliance solutions); mobile, e-commerce and delivery applica- tions; supply-chain management; customer relationship management; and management reporting and business intelligence. 56 © 2017 Ackrell Capital, LLC | Member FINRA/SIPC HOUSE_OVERSIGHT_024692