Cannex Capital Holdings Inc. (CSE:CNNX) Overview

    The Largest Cannabis Cultivator and Processor in Washington State and entering California

    Cannex Group Holdings Inc. is a Canadian based public company with operations in licensed U.S. medical and recreational cannabis markets. The Company, through wholly-owned subsidiaries, provides real estate, management, financial and branding services and support to licensed cannabis operators. Cannex is focused on premium indoor cultivation, extraction, manufacturing and branding of edible and derivative products as well as retail operations. Importantly, the Company’s subsidiary, BrightLeaf Development LLC, owns the assets of the largest producer/processor in Washington State, Northwest Cannabis Solutions (NWCS). Cannex is also in the process of acquiring Jetty Extracts, one of the largest processors and extractors in California.

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    Cannex’s first U.S. asset, BrightLeaf Developments, through NWCS, has its products in more than 250 retailers and generated profits on sales of US$26.m in 2017. In comparison to the Canadian market, the Company produced more dried cannabis in 2017 than the second largest, Canada-focused producer, Aurora Cannabis, based on current production. During 2017, Cannex’s flagship BrightLeaf facility in Tumwater produced 331 grams/sq. ft. of cannabis in 2017, substantially exceeding the industry indoor average of 110 grams. In 2018, BrightLeaf plans to produce from two indoor cultivating facilities with a combined 30,000 sq. ft. and 19,000 kg/year capacity, equating to one of the highest yields in the industry at 633 grams/sq. ft.

    The Company is focused exclusively on cultivating premium quality flower but also processes its own trim for oils which go into the manufacturing of a wide range of value add products. But since demand for the Company’s edibles, and other derivatives products, cannot be fully met by processing its own trim, Cannex has also become the larger purchaser of cannabis, both trim and full flower plants, in Washington State.

    Company grown and purchased cannabis is processed at its Tumwater, Washington 40,000 sq. ft. facility, where a variety of extraction techniques, including volatile solvents and ethanol are used to create a pure molecular distillate which guarantees product consistency and reliability. A proportion of the facility is automated which reduces costs, improves yields and operating margin, not to mention produces better product consistency. Cannex’s focus on quality, yields and operationing efficiencies has made the Company a dominant leader in Washington State, which is generally considered one of the more saturated cannabis markets in the U.S. Today, BrightLeaf produces the Top 2 flowers and 7 of the Top 10 edibles in Washington, proving that its brand is established and popular amongst consumers.

    With the acquisition of Jetty Extracts, Cannex is currently expanding into California, one of the most important cannabis markets in the world. Jetty Extracts operates in Oakland, California, and its product was distributed to more than 600 California dispensaries in 2017. For reference, according to ArcView, California is anticipated to be the largest cannabis market in the U.S. with projected revenues of US$6.8 billion by 2021. Unlike Washington, where BrightLeaf acts as a wholesaler due to restrictions vertical integration, in California, Jetty Extracts has a distribution license, in addition to extraction, giving it access to 3x higher retail margins. In terms of quality, in 2017, Jetty won ‘Best Concentrates’ award based on a public vote from East Bay Express, solidifying their customer relationship and brand recognition. Jetty also has 50% ownership of the MindTricks edibles brand, which was featured in 2017 in Rolling Stone magazine and has consistent 5-star reviews on “weedmaps” as one of California’s best edibles.

    Cannex has already proven that they can operate profitably at scale. In 2017, the Company produced one million single serving child proofed edibles per month, almost 8,000kg of cannabis in the year, while managing more than 360 employees. With this assurance, Cannex aims to expand into two additional states and potentially into Canada by the end of 2018.

    In addition to Cannex’s strong balance-sheet, the Company also has a team with a successful track record and experience in capital markets and operations. The team consists of:

    • Anthony Dutton, CEO, who is the principal at Delu Corp., a strategic and advisory firm, and has more than 25 years in public markets and business development.
    • Tom Peters, Director, has more than 30-year experience in M&A advisory work and capital raising transactions.
    • Leo Gontmahker, President, has significant experience in cannabis facility design, operations, sales, branding, and marketing.
    • Roman Tkachenko, Director, is the CEO of Direct Source Seafood LLC, and has more than 14 years of experience in purchasing, sales and processing.

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