ACKRELL CAPITAL Cannabis Investment Report | December 2017 The California State Treasurer’s Cannabis Banking Working Group—a panel convened by Califor- nia State Treasurer John Chiang that includes representatives from the cannabis industry and financial institutions, and government tax collection, law enforcement and regulatory agencies—issued a report in November 2017 on the cannabis industry’s banking challenges. In the report, the State Treasurer's Office stated that the cannabis industry’s lack of access to banking services is one of the biggest threats to the success of the state’s recreational cannabis law, which is scheduled for implementation starting in January 2018. Based on the working group’s findings, the State Treasurer’s Office recommended the following four actions: 1. Implementation of safer, more effective, and scalable ways to handle the payment of taxes and fees in cash that minimize risks to stakeholders. 2. Development by the State of California and local governments of a data portal of compliance and regulatory data to be made available to financial institutions that bank cannabis businesses. 3. Conduct a feasibility study of a public bank or other state-backed financial institution that provides banking services to the cannabis industry. 4. Establish a multistate consortium of state government representatives and other stakeholders to pursue changes to federal law in order to remove the barriers to cannabis banking. The State Treasurer’s Office also stated it was apparent that a definitive solution to the cannabis banking quandary will remain elusive until the federal government removes cannabis from its official list of dangerous drugs or the U.S. Congress approves safe harbor legislation protecting financial insti- tutions that serve cannabis businesses from federal penalties. Federal Securities Law The U.S. securities markets and industry participants are regulated principally under two federal laws: the Securities Act of 1933