CanX CBD Shareholder Update Q1

CanX CBD Shareholder Update Q1

With some delay we are happy to present this quarterly Shareholder Update. Q1, 2021 has been an eventful one with the European CBD market showing signs of growing up, CanX entering the Japanese CBD markets and Novel Foods kicking into high gear – finally some regulation!

While I had a personal family event of a positive Covid 19 - which had me knocked down for nearly a week - I am very pleased to see that our Romania operations are continuing to run self-sufficiently and the team there is doing an excellent job keeping manufacturing on track. With the vaccinations now imminent we hope to resume travel and finally add some physical tradeshow exposure during Q2/Q3 of 2021 – it’s time to leverage our amazing infrastructure we have been building in Eastern Europe.

CanX is excited to have signed a distribution and supply agreement with Farmceutica PLC which will allow us to produce CBD derivatives based on Farmceuticas toxicology studies and Novel Foods application - initially with the FSA (UK) and later rolling out throughout Europe – We expect this process to allow latent CBD market participants (FMCG, CPGs…) to enter the CBD space within a solid legal framework which will in turn allow us to leverage our infrastructure for increased distribution and really capitalize our manufacturing know-how.

Towards the end of Q1 our partner out of Bulgaria has concluded tolling contracts on our behalf for over 25 tons of material to be processed into shelf stable derivatives, commencing immediately in Q2 of 2021. Along with processing for these clients, we are also upselling our raw materials and formulations services helping our clients enrich their products with our pure >99% CBD Isolate.

The tolling agreements have been essential in keeping our CAPEX and OPEX under control – biomass is delivered free of charge and the extraction OPEX is usually paid for by our clients - a derivative split is agreed upon post extraction which leads to a very profitable ZERO Cost of Goods Sold on derivatives from tolling.

Overall, we are seeing an increase in order volume, both on the wholesale/ B2B product sales side as well as an increase in tolling (extraction service agreements). During Q1, 2021 CanX concluded supply agreements with multiple B2B clients mainly physical and online retail in Southern Romania and Eastern Europe displacing some of our European competitors. The initial order volumes are small, however our products are starting to receive great feedback and we expect orders to increase over time.

In February we strengthened our business development team by adding Mr. Mark Wingate who is currently based in Portugal. Originally from the UK, Mark has extensive experience in international B2B sales. In the past he has worked for E-liquid Solutions expanding their European e-liquid sales channels and EOS Scientific working on CBD Novel Food application projects and vape and CBD skin care products.

Mark is responsible for business development in Central and Western EU handling the bulk sales of CBD derivatives, finished goods and our tolling extraction services for farmers. He is also developing and building the distribution base for several new products for the vape and cosmetics market.

Alongside Mr. Wingate we added Bartosz Stankiewicz to our team. A Polish citizen currently residing in The Netherlands. Mr. Bartosz is a graduate of the International Business Academy Kolding, in Denmark with a degree in International Sales and Marketing Management. He is the founder of several successful brands and eCommerce platforms, in the past he has been involved in various projects in the sports and education industry in The Netherlands and Croatia. Bartosz is responsible for the business consulting for CanX including marketing, product development, and business development in Central and Eastern EU.

On a final and perhaps most exciting note we have also ventured into the Japanese market which is forecasted to become the second-largest CBD market in Asia with a scale of EUR 635 million, for a total CBD market value of EUR 1.7 billion by 2026. With the opening of a local representative office in Tokyo in January 2021, headed by Christopher Shioya, a business development and marketing professional with decades of proven track record in healthcare, IT and entertainment industries, we are well-positioned to start marketing our products directly in the rapidly growing, highly regulated Japanese CBD market from Q2, 2021 onward.

CanX was able to leverage its extraction platform in Europe to accommodate the regulatory requirement of CBD isolates to be extracted from stalk (not flower, branches and leaves) – given that our facility runs on Ethanol and has the required throughput. Our government submission of the MHLW was well received, and first commercial samples have arrived in Japan. We are currently working on several distribution partnerships in Japan – and a favorable pricing aspect for CBD isolate alongside relatively high barriers to entry and requirements towards the extraction throughput put us in a unique position – stay tuned for an update!

Finally, during the reporting period we made considerable progress regarding our audit for 2019/ 2020 which is now nearly completed including an inventory observation in Romania. Furthermore, our prospectus to finally put our IPO plans into action is being finalized and will be ready for submission to the BCSC as soon as the numbers from both audits are reconciled.

In that context CanX is looking to conduct a small working capital raise to satisfy listing requirements and move the process along to achieve liquidity for our shareholders - please contact me directly or through your referring broker if you are interested in participating.

In summary a turbulent quarter with some remaining headwinds but some major industry tailwinds and an infrastructure that is receiving appreciation from European constituents.

Thank you for your continued support,

Philipp Fuhrmann

+1(778) 896 7445