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ACKRELL
CAPITAL
Cannabis Investment Report | December 2017

Nonetheless, we believe that California’s state-legal market may double from an estimated $3.2 billion
in 2017 to approximately $6.5 billion in 2018.

Canada has assumed the role of a global leader of cannabis legalization. Although Canada’s legal
cannabis market is presently limited to medical cannabis, it is currently the largest federally legal can-
nabis market in the world, estimated at $1.5 billion in 2017. In April 2017, a proposed recreational
law was introduced in the Canadian parliament; the proposed Cannabis Act would allow adults to pur-
chase cannabis from federally licensed producers and to possess and share cannabis with other adults.
The Cannabis Act is widely expected to be approved in some form by the Canadian parliament by mid-
2018. If approved, Canada would be the largest country in the world to legalize recreational cannabis
on a national level, and we believe that the implementation of the Cannabis Act would significantly
expand the size of Canada’s overall market. Canada has demonstrated that by providing a national
legal framework for cannabis, companies operating legally within the industry have had a clear “first to
market” advantage, allowing them to raise significant amounts of capital and to pursue domestic and
international expansion opportunities.

If these recreational laws stimulate demand, as expected, and are otherwise viewed as successful, we
expect more U.S. states and additional countries to follow suit with similar laws. In the United States,
legislatures in eight states (Arizona, Delaware, Florida, Michigan, New Jersey, Ohio, Rhode Island and
Vermont) are expected to introduce ballot measures or explore regulatory frameworks for recreational
cannabis in 2018.

Cannabis Consumer Experience Goes “Mainstream”

Cannabis consumer product companies and retailers are rapidly evolving to meet the needs of the
“mainstream” cannabis consumer. Cannabis consumers are no longer limited to smoking flower with
joints, pipes or bongs, but have their choice of an increasing variety of products, including concen-
trates, infused products and topicals. Products coming to market increasingly address the attributes
demanded by the modern consumer—greater discretion, ease of use, product safety and accurate
dosing. To attract more mainstream customers, companies have responded to these demands with
increasingly sophisticated packaging and advertising.

Where a consumer purchases a product can be as important as the product itself. In the United States,
cannabis dispensaries play a critical role by providing consumers with access to a wide variety
of products and “high-touch” education and sales services. Merchandising and branding have become
more prominent as dispensaries increasingly seek to provide consumers with an experience similar to
other mainstream retail shopping experiences. In 2018, we see an opportunity for cannabis dispensaries
to drive consumer penetration and mainstream acceptance of cannabis by establishing storefronts in
malls and other high-profile retail locations.

In 2018, we believe that product innovation and advancements in cannabis varieties, concentrates,
infused products, vaporizing technology and cannabis-derived pharmaceutical products will drive
consumer adoption and spending. However, because numerous product categories have low barriers
to entry, we expect a significant influx of cannabis brands that will aggressively compete for limited
display space in dispensaries. We also believe product differentiation and availability will be more
prevalent in legalized cannabis markets and will drive consumer transition from illegal to legal markets.

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© 2017 Ackrell Capital, LLC | Member FINRA / SIPC

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