Can X CBD Processing Corp Corporate Update Q2 2020

Dear Shareholder,

The current environment has been without any exaggeration challenging – proper communication channels and support are key during this time. We navigated through a Cannabis and CBD correction (not entirely unpredicted) and carried on right into a Pandemic which was not part of our risk assessment.

As you know based on our shareholder updates - CanX was about to ramp into production when the COVID pandemic started in February/ March. As a result our Canadian technical team had to leave Romania and was only able to return this week when we finally got written confirmation from Romanian customs that our technical director would be able to enter the country again– we are pleased to report he has safely arrived in Romania this past Saturday and does not need to quarantine.

We remain optimistic that the CBD market will continue in a viable yet consolidated form in the European Union. CanX was always positioned as an extractor and wholesaler hence avoiding direct exposure to the Novel Foods regulations. However the Novel Foods Act while bringing accountability and stability to a new industry has slowed the growth of the retail market and prevented the bigger pharmaceutical players from entering the CBD market in the short term - as such we see a much more opaque and fragmented market than initially forecasted.

While our facility was closed from mid-March to mid-June, we focused on the implementation of our marketing plan, sponsored two virtual industry events, and strengthened our board by adding Greg Hall, Jon Sharun and Bogdan Draghia.

Mr. Hall has 40 years’ experience in venture capital and corporate finance. Currently President of Water Street Assets Inc.

Jon Sharun is Chairman and Managing Partner at a private equity and venture advisory firm. He has extensive experience in business development and asset management.

Bogdan Draghia is the founding partner of Draghia Advocates in Montreal acting as our corporate counsel with considerable legal and business experience in Romania.

In addition, we appointed a new CFO, and transitioned our books and records to Partum Advisory Services Corp. Partum is a well-known advisory firm and is assisting us in finalizing our audit and getting listed on the CSE. We would like to thank Norm Yurik for his service to CanX on the board level up until this point and we look forward to a continued, healthy working relationship.

We further continued to refine our SOPs, implemented a Gas Chromatography system to provide in-house lab testing capabilities. CanX further executed on its tolling agreements – proving the viability and profitability of the concept of extraction as a service (EaaS). We structured the respective agreements differently to accommodate the broadest scope and show flexibility in our approach. Both agreements prepay our OPEX of 2000EUR/ ton of extraction and have either a

derivative split after extraction of 50/50 and or the option to sell derivatives back to our customers by the KG between 750 and 1250 EUR. This will have a dynamic revenue impact as the genetics in Europe improve, we will be able to deliver more derivatives to our customers and in turn achieve a higher price per ton extracted while the cost of extraction remains constant.

The purpose of Mathew’s trip to Romania is to continue where we left off in March; finish training of the Romanian team for independent operation, commence production and most importantly deliver analysis certificates/ COAs on our product and extract the biomass we have in storage from our 2019 harvest. This is the single most important deliverable to obtain final POs.

CanX Biomass Calculation:

With regards to our own biomass from the 2019 cultivation program - after we cleaned and separated the material we arrived at approximately 75tons of extraction ready biomass at around 1% CBD (conservatively) The products we manufacture sell for around 4000EUR – 6000EUR/KG - lets stick to the bottom end of the spectrum – additional refinement encapsulation downstream formulation changes the metrics in our favor.

75tons X 1% at 75% efficiency @ 4000EUR/ KG = 2.25m EUR

CanX recently sponsored the Prohibition Partners virtual event – one of the leading Cannabis and Hemp conferences in Europe. The event was well organized which sets a positive tone for future events to replace the traditional trade shows we are all used to. It became noticeably clear however that the landscape has changed; many players have left, ceased business, or pivoted to other ventures and big LPs have retraced back to North America to focus on tidying up their backyards. Our promo video that was played throughout the event can be found here:

https://www.youtube.com/watch?v=Jw7Fffn5RVU&t=8s

The recent market turmoil has provided us with the opportunity to establish ourselves as a relevant European player regarding Tolling (EaaS – Extraction as a Service), extraction and wholesale distribution. With regards to the tolling process we are currently working on several contracts – paid trials have been signed. One of the contracts is with Aurora Hemp Europe/ Agropro and the other with Agroin Grain out of Bulgaria. Aurora has delivered several tons of biomass for a trial with the potential for a 500 tons contract. Agroin is sending us 20 tons of biomass (for separation and extraction) with the potential for a follow-up contract for the 2020 season and the balance of biomass they have in inventory. The European extraction market has been fraught with overpromises and under delivery – hence our clients move rather cautiously into new engagements. We are convinced that we will meet and exceed their expectations – which will now be validated by finally being able to provide product COAs within the next few weeks.

Tolling Calculation:

AURORA HEMP EUROPE – 1-3ton trial @ 2000EUR per ton to cover our OPEX and an additional 1000EUR/ KG of full spectrum Oil. Aurora has a total of 500t at 1.5% CBD to extract:

500t x 2000EUR = 1mEUR OPEX Covered
500t *1.5% at 75% efficiency would yield 5625 KG of Full Spectrum Oil
This would then be sold back to AURORA at 5.625m EUR if they choose to not further refine (pills, sublinguals, tinctures....).

We are constantly working on growing our CBD sales pipeline and have signed several NDAs with European companies. With regards to wholesale buyers we have AURORA/ Agropro as one of the few large players left in Europe – notwithstanding pharma companies entering – and we have been able to build a solid relationship with their team. In addition, we just signed an NDA with Medipharm, and signed on with a variety of hemp and CBD brokerages/ exchanges. We also have recently presented our portfolio of products to Europharm GmbH in Germany – a multinational pharmaceutical distributor. We are in active discussion with Pharma Hemp, Hempflax and Flower One as well as Khiron and Herbolea, British Cannabis and Farmaceutica to name but a few. We have also entered in brokerage agreements with Alt-Nativ and HSC Europe – All of the above groups are eagerly awaiting our COA (Certificates od Analysis) to move forward with the corresponding purchase orders,

Prices in the EU (excluding Isolates) have been stable ranging as from 4-6.5k EUR wholesale for Broad Spectrum Oils in bulk – in pill form (we have a GMP pill machine capable of producing 15,000 pills per hour) the prices can reach upwards of 10,00EUR/KG especially when produced from a GMP, HACCP and ISO 22000 compliant facility.

On behalf of everyone at CanX, we appreciate the support received from our shareholders. Should you have any questions, please don’t hesitate to reach out via email at philipp@canxcbd.com or via telephone at +1 778-896-7445.

Sincerely,

Philipp Fuhrmann Chief Executive Officer +1 (778) 896 7445