Letter From the President

Dear Shareholders and Investors,

I hope that everyone is having a great summer so far, especially in the context of what we hope to be the waning days the pandemic. We are pleased to announce that we have engaged Canaccord Genuity Corp. to assist in our go-public RTO and concurrent private placement. We have announced a private placement of up to CDN$7.5 million in units at $0.85/unit. The units will consist of one common share of Hemptown and one full warrant exercisable at $1.15 per share for 24 months. 

We consider the pricing of the issue and the full warrant to be a fair price based on the current market environment. Our goal is taking the Company public to provide our existing shareholders and debt holders with liquidity, as well as to enable the Company to use its shares as liquid currency to pursue our long-stated goal of consolidating the areas of the industry where we perceive it is moving, versus where it is now. We have spent considerable time and resources building a list of candidates who would make considerable contributions to our business through their various distribution channels. 

For context, the primary cause of delay of the Company’s public listing has been directly related to the Company completing its audited financial statements for the years ended December 31, 2019 and 2020, as well as a review of the March 31 and June 30, 2021 financial statements. The audit of the 2019 acquisitions of L2F, LLC (the farming operation), and the asset purchase of Kirkman Group Inc. (the manufacturing business), have required more time and cost to complete than originally anticipated. Management has no reason to believe there are any material issues related to the audit and anticipates that the audit will be complete with the next 45 days. 

In order to expedite the process, and streamline the financial reporting process, the Company recently recruited a new VP of Corporate Finance, Tariq Rahim. Tariq is a Chartered Professional Accountant who brings extensive experience as Controller of Tokyo Smoke Brands, a high-growth Cannabis startup where he built and led the finance function from scratch (acquired by Canopy Growth Corp. for CAD$269.2 million in 2018) and most recently Financial Controller of Nobul, a high growth Cannabis startup.

Management believes sales and distribution, combined with branding and marketing, are the keys to the hemp and cannabis industry going forward. The funds raised will be invested into marketing and branding the Company’s many CPG products, including the recent launch of our five flavors of hemp smokeables, designed to disrupt the $870 billion tobacco industry. Hemptown’s current repeat customer demographic is 87% male, where 80% are using the product as a tobacco smoking cessation tool, and the 20% balance are consuming our products as an alternative to THC consumption.  

We believe there is now enormous potential to sell to younger demographics, who have developed a widely publicized nicotine dependency, driven by the popularity of vaping-flavored Juul nicotine products, which are now banned. The FDA is also considering banning menthol cigarettes, which account for 30% of the cigarette market.

Our Hemp Stix are shaped like regular tobacco cigarettes, but are made using 100% CBD and CBG hemp, produced with a traditional cigarette machine. The filters have a flavored “pop capsule” that will mirror the flavors that drove the popularity of Juul, without the purported poisonous chemicals and otherwise addictive nicotine constituents. There are currently very few regulations pertaining to flavored hemp smoke, and even better, no excise taxes.

While I do doubt this opportunity will last forever, we believe this is an opportunity to build a truly national brand in the hemp and cannabis industry, that doesn’t exist at this time. Having a nationally recognized brand known for quality and compliance should provide Hemptown with a competitive market advantage over the competition once recreational THC becomes federally legal in the United States. We will need to invest capital into brand marketing, education and social platforms. We have included below the latest brand mood board for our smokeable products, which will be marketed under the Hemptown Naturals Brand.

HT Naturals Inc., dba Hemptown Naturals, a is 97% owned subsidiary of the Company. We have sold 3% of the HT Naturals Inc. at USD$1.40 per share through a Regulation CF offering, raising approximately USD$1 million in gross proceeds of the USD$1.07 million allowable limit to date.

Another exciting initiative which the Company has been working on since the beginning of the year is building a “bonding curve”, which is similar to selling a royalty, but leveraging a blockchain and crypto-based token. The model is known as distributed finance, or DeFi, i.e. crypto! We are building the curve with BitSaphhire, a team of developers based in Kosovo, and are now in the process of auditing our smart contract. Once complete, the Company will be issuing an ERC-20 compliant token, which we have dubbed the “Hemptown Toke”. These tokens will represent a royalty on future Hemptown revenue and will trade based on the market outlook. We believe the same market demographic we are selling our smokeable products to will also be our main investor class in both the Hemptown Toke and the Company’s common shares, which will trade on the TSXV under the symbol HEMP. 

On the CPG side of our business, Kirkman Group, the Company’s wholly-owned nutraceutical manufacturing facility in Portland, Oregon, has met and exceeded its financial goals for 2020, bringing in USD$7.1 million in unaudited gross revenue. Rob Fenty, the COO of the operation, has commented that in 2020 we reduced unnecessary operational expenses to follow lean operating principles, while in 2021 switching gears to focus on driving accelerated profitable growth, making a bigger contribution to Hemptown’s bottom line. 

We appreciate all the continued support that our shareholders and investors have given us this year as we work towards a public listing. If you have any questions, please do not hesitate to reach out directly to the Company at the contact info provided. Have a great rest of the summer!

Best regards,
“Michael Townsend”
President, Director and Co-Founder

About Hemptown Organics Corp.Hemptown is a diversified, industry leading cannabinoid company delivering a diverse product offering across the value chain, in multiple sales channels, to meet the growing global demand for cannabinoid-based products. State of the art cultivation in Oregon’s Rogue Valley, FDA-licensed and cGMP certified product manufacturing, and a strong management team with Fortune 500 experience, including Kellogg’s, Nike and Intel, are the pillars for Hemptown’s growth model as the Company pushes into the consumer-packaged goods sectors with top quality white label and branded product lines for the consumer market. For more information, visit www.hemptownusa.com. 

Hemptown Investor Relations

John Martin

jmartin@hemptownusa.com

1-833-436-7896

Hemptown Sales and General Inquires

info@hemptownusa.com

1-888-CBG-NOW1 (1-888-224-6691)

Disclaimer for Forward-Looking Statements

This letter contains forward-looking statements that involve various risks and uncertainties regarding future events. Such forward-looking statements are based on current expectations of management, involve a number of risks and uncertainties, and are not guarantees of future performance. These statements generally can be identified by the use of forward-looking words such as “may”, “should”, “will”, “could”, “intend”, “estimate”, “plan”, “anticipate”, “expect”, “believe” or “continue”, or the negative thereof or similar variations. Forward-looking statements in this letter include statements regarding the RTO; financing arrangements; proposed amendments to the debentures; and Hemptown’s strategic and marketing plans for the future. Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties and other factors that may cause actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results or events to differ materially from current expectations include general market conditions, significant business, competitive, political and social risks and other factors beyond the control of the Company. The Company expressly disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.

None of the securities issued in the proposed RTO and related financings will be registered under the United States Securities Act of 1933, as amended (the “1933 Act”), and none may be offered or sold in the United States absent registration or an applicable exemption from the 1933 Act.  This letter shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of the securities, in any state where such offer, solicitation or sale would be unlawful.