ACKRELL CAPITAL CHAPTER VII Capital Markets for Cannabis Companies In addition, an increasing number of direct lenders are participating in the private debt markets for cannabis-related companies. These lenders represent an important capital source for the industry, as typical forms of debt capital, such as bank financing, remain unavailable to most companies. As in other industries, debt financing is typically available only to those companies having meaningful cash flow or tangible assets to secure the debt. While the number of lenders is increasing, there is still a relative scarcity of debt capital available to the cannabis industry, which can lead to a higher debt cost of capital of 200-500 basis points or more for cannabis-related companies, as compared to companies in other industries. The following chart illustrates the type of debt that may be available to cannabis-related companies, representative terms of such debt, and the types of companies that may be able to access debt in the private markets. Debt Financing Alternatives for Cannabis-Related Companies Cost of Capital Senior Low Double Digits 9 ARestiie ive ) Type of ’ Type of Debt > =< Securitization Borrowers: . \ (if secured): \ Cultivators ( Land ( Lease puildinas Extractors Financing au g Dispensaries uipmen Mid-teens j quip Product Manufacturers err AJR ll Inventory Debt i | Convertible _ High-teens to 20%+ Less Restrictive Debt _ = Final Thoughts As stated previously, valuations and stock price fluctuations in the cannabis industry continue to be driven more by expectations for the cannabis industry in general than by individual company funda- mentals. Today, in the public markets, trading volumes are too low, trading prices are too volatile and operating histories are too limited to place any reliance on current valuation levels in the cannabis industry. We believe that this dynamic will continue until cannabis-related companies have matured and start to realize meaningful revenue, profitabi