Hemptown Announces LOI for Proposed Qualifying Transaction with Spectre Capital Corp.



Hemptown Organics Corp. (the “Company” or “Hemptown”), a privately held British Columbia company, is pleased to announce it has entered into a letter of intent (the “LOI”) with Spectre Capital Corp. (TSXV:SOO.P) (“Spectre”), a capital pool company listed on the TSX Venture Exchange (the “Exchange”), in relation to the acquisition (the “Transaction”) of all the issued and outstanding securities of Hemptown by Spectre. The Transaction, once complete, is expected to result in the reverse takeover of Spectre and will constitute Spectre’s Qualifying Transaction under Policy 2.4 – Capital Pool Companies of the Exchange (the “CPC Policy”).

“We are excited to announce this next step in the growth of Hemptown as we work towards a public listing that will enable Hemptown to further execute on its M&A strategy, with the ultimate goal of becoming the ‘P&G’ of the cannabinoid industry. Access to the capital markets has been an important part of our growth as a company, and a public listing is expected to further enable Hemptown to grow through investment and acquisition,” said Eric Gripentrog, CEO of Hemptown.

The Transaction

Subject to final determination based upon legal, tax and other financial advice obtained by the parties, Spectre and Hemptown intend to complete the Transaction by way of a plan of arrangement under the Business Corporations Act (British Columbia) (the “Plan of Arrangement”), whereby Spectre will acquire all of the securities of Hemptown to form the resulting issuer (the “Resulting Issuer”). As part of the Plan of Arrangement, it is expected that (i) Spectre will complete a share consolidation on the basis of one (1) new Spectre common share for every two and a half (2.5) old Spectre common shares (the “Consolidation”), (ii) post-Consolidation Spectre common shares will be exchanged for Hemptown common shares on a one-for-one basis (“Resulting Issuer Common Shares”) and (iii) Spectre will create a new class of class A shares (“Resulting Issuer Class A Shares”) that will be exchanged on a one-for-one basis for, and be economically equivalent, to the existing class A shares of Hemptown. Any outstanding securities of Hemptown which are convertible or exchangeable into common shares or class A shares of Hemptown, unless earlier converted or exchanged in accordance with their terms, are expected to become convertible or exchangeable into Resulting Issuer Common Shares or Resulting Issuer Class A Shares, as applicable, and otherwise continue to be governed in accordance with their terms.

The completion of the Transaction will be subject to a number of conditions, including but not limited to, the parties successfully entering into a definitive agreement in respect of the Transaction, receipt of all necessary approvals, including the approval of the Exchange, the creation of the new Resulting Issuer Class A Shares, completion of a financing (the “Financing”) on terms to be determined and completion of satisfactory due diligence by Spectre. There can be no assurance that the Transaction will be completed on the terms proposed in the LOI or at all.

The Transaction will not be a Non-Arm’s Length Transaction (as defined under the CPC Policy), and as a result, it is anticipated that the approval of the shareholders of Spectre to the Transaction will not be required. However, depending on the ultimate structuring of the Transaction, Spectre may be required to obtain shareholder approval under corporate law to approve certain matters ancillary to the Transaction, including in connection with a plan of arrangement. A finder’s fee of up to 400,000 Resulting Issuer Common Shares may be payable to certain finders on Closing. Apart from the Bridge Loan (as defined below), no advances or other consideration are expected to be paid by Spectre to Hemptown in advance of closing of the Transaction.

Bridge Financing

Pursuant to the terms of the LOI, Spectre intends to lend $200,000 to Hemptown (the “Bridge Loan”). The use of the Bridge Loan proceeds will be subject to prior approval by Spectre’s management and the Exchange and the Bridge Loan will be secured by a general security agreement covering Hemptown’s assets and a promissory note. The Bridge Loan will be forgiven upon closing of the Transaction. If the Transaction does not complete for any reason, the Loan will be repayable by Hemptown on demand by Spectre.

Other Matters

A comprehensive press release with further particulars relating to the Transaction, including, without limitation, information respecting the Resulting Issuer’s business, financial results and leadership composition will follow in accordance with the policies of the Exchange.

Trading in Spectre’s common shares has been halted in compliance with the policies of the Exchange and will remain halted pending the review of the Transaction by the Exchange and satisfaction of the conditions of the Exchange for resumption of trading. It is likely that trading in Spectre’s common shares will not resume prior to the closing of the Transaction.

A disclosure document respecting the Resulting Issuer and the Transaction will be prepared and filed in accordance with the policies of the Exchange. Spectre intends to seek a waiver of the sponsorship requirement for the Qualifying Transaction from the Exchange.

Spectre has supplied all information contained in this news release with respect to Spectre and the Company and its directors and officers have relied on Spectre for any such information.

This press release is not an offer of securities for sale in the United States. The securities described in this press release have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the U.S. Securities Act of 1933, as amended) absent registration or an exemption from registration. This press release 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 jurisdiction where such offer, solicitation, or sale would be unlawful.

Completion of the Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority shareholder approval. Where applicable, the Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed Transaction and has neither approved nor disapproved the contents of this press release.

About Spectre

Spectre is a capital pool company governed by the policies of the Exchange. Spectre’s principal business is the identification and evaluation of assets or businesses with a view to completing a Transaction.

About Hemptown

Hemptown is a diversified cannabinoid company delivering a wide product offering across the value chain, and 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 leadership team with Fortune 500 experience are the pillars for Hemptown’s growth model as it 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.

For further information, please contact:

Hemptown Investor Relations
John Martin

Hemptown Sales and General Inquires

This news release contains statements that are “forward-looking information” as defined under Canadian securities laws (“forward looking statements”). These forward-looking statements are often identified by words such as “intends”, “anticipates”, “expects”, “believes”, “plans”, “likely”, or similar words. Specifically, this news release includes forward looking statements regarding the potential Transaction, the advancing of the Bridge Loan, the Financing, the entering into of a definitive agreement, the payment of any finder’s fees and the closing of the Transaction and the timing for those events. The forward-looking statements reflect the Company and Spectre’s respective management’s expectations, estimates, or projections concerning future results or events, based on the opinions, assumptions and estimates considered reasonable by management at the date the statements are made. Although the Company and Spectre believe that the expectations reflected in the forward-looking statements are reasonable, forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on forward-looking statements, as unknown or unpredictable factors could cause actual results to be materially different from those reflected in the forward looking statements. Among the key factors that could cause actual results to differ materially: whether the parties are successful in negotiating and entering a definitive agreement for the Transaction, whether they are able to obtain all necessary regulatory approvals for the Transaction and whether they are able to satisfy the listing conditions for the listing of the Resulting Issuer Common Shares on the Exchange; whether they are able to complete the Financing; and whether they are able to obtain all shareholder and third party consents necessary to complete the Transaction. The forward looking statements may be affected by risks and uncertainties in the business of Spectre, including those described in Spectre’s amended and restated final prospectus dated Feb. 12, 2020, filed with the British Columbia Securities Commission, the Alberta Securities Commission and the Financial and Consumer Affairs Authority of Saskatchewan and available on www.sedar.com.

Except as required under applicable securities legislation, the Company undertakes no obligation to publicly update or revise forward-looking information.


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