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COWEN COLLABORATIVE INSIGHTS February 25, 2019 Vapor While vapor remains the major market share gainer across adult use cannabis, CBD only offerings are much smaller, but represent a solid growth segment. Over the next two years, we believe the category can generate over $350 mm in revenues, with upside if consumer adoption of this particular form factor resembles the adult use market for THC, or the growing popularity of nicotine vapor. We benchmark the market opportunity against the U.S. e-cigarette category, which we are forecasting to grow ~32% in 2019 and ~27% in 2020, resulting in revenues surpassing $11 bn in 2020. In addition to e-commerce, we believe there will be distribution channel overlap with e- cigs, with a focus on vape shops and convenience stores (as opposed to just dispensaries). If vapor generates $360 mm in revenues in 2020, that would result in an implied market share of 3.2%, roughly 10% of JUUL’s current U.S. market share. Figure 95 Vapor Will Be Smaller, But Can Grow To Almost $400 MM Figure 96 Our E-Cig Model Assumes Revenues Of ~$11 BN By 2020 U.S. CBD Vape Sales ($ in mm) U.S. E-Cigarette Sales ($ in bn) $12.0 $11.1 $400 I $360 $350 I $10.0 $8.7 $300 : eeu 56.6 $250 ] $200 I 96.0 $150 I 64.0 $3.6 $100 I I $2.0 $50 I $0 $0.0 2018 2019E 2020E 2017 2018 2019E 2020E Source: Cowen and Company Source: Cowen and Company The below scenario analysis shows that every 50 bps of market share capture is worth ~$56 mm in revenues. While we are forecasting CBD vape to be ~3% of the market, we believe there is upside to these numbers and that strong consumer adoption can result in revenues surpassing $500 mm. Figure 97 $360 MM In Revenue Implies A ~3% Share Of The Category 2020 Market Share Scenario Analysis Market Share Absolute Sales ($ in mm) Source: Cowen and Company COWEN.COM 51 HOUSE_OVERSIGHT_024867