ACKRELL CAPITAL Cannabis Investment Report | December 2017 FDA Approval of Cannabis-Derived Pharmaceuticals The FDA’s first-ever approval of a cannabis-derived pharmaceutical may occur in 2018. The FDA has previously approved several drugs with chemically synthesized cannabinoids or cannabinoid-like compounds, but has never approved a drug derived from the cannabis plant. In October 2017, U.K.-based GW Pharmaceuticals submitted a New Drug Application (NDA) to the FDA for Epidio- lex, an oral formulation of cannabis-derived cannabidiol, or CBD, intended to treat severe forms of childhood epilepsy. (GW Pharmaceuticals also manufactures Sativex, a mouth spray used for treatment of spasticity caused by multiple sclerosis; it includes THC and CBD derived from cannabis. Sativex was first approved for use in the United Kingdom in 2010, and has been approved for use in at least 30 countries, but not in the United States.) If the FDA approves Epidiolex, such a precedent could be followed by similar approvals in the United States for other cannabis-derived drugs and result in a significant increase in the medical use of cannabis by consumers. Commoditization of Cannabis Flower The supply of cannabis in the United States has increased considerably with expanded state legaliza- tion. This increase has started to dampen retail and wholesale prices in various markets. While retail prices vary across the country, an examination of the price per gram of cannabis flower, or “bud,” in the three largest states to implement recreational laws—Colorado, Oregon and Washington—reveals a downward trend. The following graph shows the average price per gram of cannabis flower in these three states since the beginning of 2016. Consumer Pricing Trends: Cannabis Flower Price per Gram $8.00 $7.50 $7.00 $6.50 $6.00 $5.50 $5.00 Jan16 Mari6 Mayi6 Jul16 Sep16 Nov16 Jan17 Mar17 May17 Jul17 = Sep 17 Source: BDS Analytics 10 © 2017 Ackrell Capital, LLC | Member FINRA/SIPC HOUSE_OVERSIGHT_0246