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Naturally Advanced Technologies Inc · SB-2/A · On 5/9/03

Filed On 5/9/03 5:25pm ET · SEC File 333-102081 · Accession Number 1017951-3-100

  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 5/09/03  Naturally Advanced Tech Inc       SB-2/A                 3:83                                     Online Data Link Ltd/FA

Pre-Effective Amendment to Registration of Securities by a Small-Business Issuer · Form SB-2
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: SB-2/A      Amendment No. 2 for Form SB-2                         77    384K 
 2: EX-5.1      Opinion of Devlin Jensen                               5     24K 
 3: EX-23.1     Consent of Accountants                                 1      5K

SB-2/A · Amendment No. 2 for Form SB-2
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Activewear Industry, The Additional Information Describing Securities Aggregated Option/SAR Exercises During the Most Recently Completed Financial Year and Financial Year-End Option/SAR Values A Hemptown Friendly Tomorrow Business Combinations under British Columbia Law Calculation of Registration Fee Certain Relationships and Related Transactions Changes in Control Common Stock Company Overview Compensation Committee Interlocks and Insider Participation Compensation of Directors Competition Description of Business Description of Securities Determination of Offering Price Dilution Directors and Executive Officers Directors, Executive Officers, Promoters and Control Persons Disclosure of Commission Position on Indemnification for Securities Act Liabilities Disclosure Regarding Forward-Looking Statements Ellis Foster Employee Pension, Profit Sharing Insurance or Other Retirement Plans Employment Agreements Enforceability of Civil Liabilities Against Foreign Persons Environmental Matters Environmental Regulation Exchange Controls Executive Compensation Exhibit Index Exhibits Family Relationships Financial Statements Governmental Regulations Hemptown's Target Markets Hemptown Way, The Indemnification of Directors and Officers Interest of Named Experts and Counsel Involvement in Certain Legal Proceedings Legal Proceedings Long Term Incentive Plans - Awards in Last Fiscal Year Management and Financial Controls Management's Discussion and Analysis for the Year Ended December 31, 2001 Management's Discussion and Analysis for the Year Ended December 31, 2002 Management's Discussion and Analysis or Plan of Operation Market for Common Equity and Related Stockholder Matters Modifications, Subdivisions and Consolidations under British Columbia Law Offering, The Option/SAR Grants Other Expenses of Issuance and Distribution Overview Penny Stock Regulation Plan of Distribution Pooling Agreement Preferred Stock Proposed Compensation Prospectus Summary Recent Sales of Unregistered Securities Reports to Security Holders Risk Factors Security Ownership of Certain Beneficial Owners Security Ownership of Certain Beneficial Owners and Management Security Ownership of Management Selling Security Holders Signatures Significant Employees Summary Financial Data Summary Information and Risk Factors Taxation The Activewear Industry The Hemptown Way The Offering Trade Regulatory Environment Undertakings Use of Proceeds Warrants and Warrant Units Why Hemp? 2001 Performance Equity Plan
1	1st Page
2	Calculation of Registration Fee
4	Disclosure Regarding Forward-Looking Statements
6	Summary Information and Risk Factors
"	Prospectus Summary
"	Company Overview
"	Selling Security Holders
7	The Offering
8	Summary Financial Data
"	Risk Factors
11	Use of Proceeds
"	Determination of Offering Price
"	Dilution
15	Plan of Distribution
16	Legal Proceedings
"	Directors, Executive Officers, Promoters and Control Persons
"	Directors and Executive Officers
19	Significant Employees
"	Family Relationships
"	Involvement in Certain Legal Proceedings
20	Security Ownership of Certain Beneficial Owners and Management
"	Security Ownership of Certain Beneficial Owners
21	Security Ownership of Management
22	Changes in Control
"	Description of Securities
"	Common Stock
23	Preferred Stock
"	2001 Performance Equity Plan
"	Warrants and Warrant Units
24	Business Combinations under British Columbia Law
"	Modifications, Subdivisions and Consolidations under British Columbia Law
"	Additional Information Describing Securities
"	Penny Stock Regulation
25	Interest of Named Experts and Counsel
"	Disclosure of Commission Position on Indemnification for Securities Act Liabilities
"	Certain Relationships and Related Transactions
"	Description of Business
26	Why Hemp?
27	The Activewear Industry
28	Competition
29	Trade Regulatory Environment
"	The Hemptown Way
30	A Hemptown Friendly Tomorrow
34	Hemptown's Target Markets
"	Governmental Regulations
35	Environmental Regulation
"	Reports to Security Holders
"	Enforceability of Civil Liabilities Against Foreign Persons
36	Management's Discussion and Analysis or Plan of Operation
"	Overview
"	Management's Discussion and Analysis for the Year Ended December 31, 2002
38	Management's Discussion and Analysis for the Year Ended December 31, 2001
39	Environmental Matters
40	Management and Financial Controls
"	Market for Common Equity and Related Stockholder Matters
43	Pooling Agreement
44	Exchange Controls
45	Taxation
46	Executive Compensation
"	Aggregated Option/SAR Exercises During the Most Recently Completed Financial Year and Financial Year-End Option/SAR Values
47	Option/SAR Grants
48	Proposed Compensation
"	Employment Agreements
"	Long Term Incentive Plans - Awards in Last Fiscal Year
"	Employee Pension, Profit Sharing Insurance or Other Retirement Plans
49	Compensation of Directors
"	Compensation Committee Interlocks and Insider Participation
"	Financial Statements
51	Ellis Foster
72	Indemnification of Directors and Officers
"	Other Expenses of Issuance and Distribution
73	Recent Sales of Unregistered Securities
74	Exhibits
75	Undertakings
76	Signatures
77	Exhibit Index

SB-2/A 1st Page of 77 TOC Top Previous Next Bottom Just 1st
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form SB-2/A No. 2

REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

Hemptown Clothing Inc.
----------------------
(Name of small business issuer in its charter)

[Download Table]

British Columbia, Canada 2300 98-0359306
------------------------ ---------------------------- ----------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)

1307 Venables Street, Vancouver, British Columbia, Canada, V5L 2G1
Phone: (604) 255-5005 Fax: (604) 255-5038
---------------------------------------------
(Address and telephone number of principal executive offices)

1307 Venables Street, Vancouver, British Columbia, Canada, V5L 2G1
------------------------------------------------------------------
(Address of principal place of business or intended principal
place of business)

Devlin Jensen, 2550 - 555 West Hastings, Vancouver,
British Columbia, Canada, V6B 4N5
Attention: Mike Shannon
Phone: (604) 684-2550 Fax: (604) 684-0916
----------------------------------------------
(Name, address and telephone number of agent for service)

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date
of this Registration Statement

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, check the following box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering. []

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration number of the earlier effective registration statement for
the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]

SB-2/A 2nd Page of 77 TOC 1st Previous Next Bottom Just 2nd

CALCULATION OF REGISTRATION FEE

[Enlarge/Download Table]

----------------------------------------------------------------------------------------------------------
Title Of Each Class Of Number of Shares Proposed Maximum Proposed Maximum Amount of
Securities To Be To Be Registered Offering Price Aggregate Offering Registration
Registered Per Share Price Fee
----------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------
Common stock held by
selling security holders 2,085,534 $0.50 (1) $1,042,767.00 $84.46
----------------------------------------------------------------------------------------------------------
Shares of common stock
underlying outstanding 200,000 $0.25 $50,000 $4.05
warrants and warrant 150,000 $2.00 $300,000 $24.30
units
----------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------
Total: 2,435,534 varying prices $1,392,767 $112.81 (2)
----------------------------------------------------------------------------------------------------------

(1) There is no current market for the securities and the price at
which the shares held by the selling security holders will be
sold is at a price of $0.50 per share for outstanding common
stock, and $0.25 per share for the common stock underlying the
outstanding warrants and $2.00 per share for the common stock
underlying the outstanding warrant units, until our securities
are quoted on the OTC Bulletin Board (or other specified
market) and thereafter at prevailing market prices or privately
negotiated prices.

(2) Previously paid by electronic transfer.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL
THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF
1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT
TO SAID SECTION 8(a), MAY DETERMINE.

Page 2

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PROSPECTUS Subject to Completion, Dated May 9, 2003

The information contained in this prospectus is subject to completion or
amendment. A registration statement relating to these securities has
been filed with the Securities and Exchange Commission. These securities
may not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any state in which an
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of that state.

HEMPTOWN CLOTHING INC.

2,085,534 shares of common stock to be sold by
certain selling security holders
200,000 shares of common stock issuable upon the exercise
of outstanding warrants
150,000 shares of common stock issuable upon the exercise
of outstanding warrant units

This prospectus relates to the offer and sale of 2,085,534 shares of our
common stock, 200,000 shares of our common stock issuable upon the
exercise of outstanding warrants, and 150,000 shares of our common stock
issuable upon the exercise of outstanding warrant units. The selling
security holders will offer and sell the shares of outstanding common
stock at a price of $0.50 per share, the shares of common stock
underlying the outstanding warrants at a price of $0.25 per share, and
the shares of common stock underlying the outstanding warrant units at a
price of $2.00 per share, until our securities are quoted on the OTC
Bulletin Board (or other specified market) and thereafter at prevailing
market prices or privately negotiated prices. This registration
statement is intended to register the resale of 2,085,534 shares of our
common stock, 200,000 shares of our common stock underlying the
outstanding warrants, and 150,000 shares of our common stock underlying
the outstanding warrant units.

There has been no market for our securities and a public market may not
develop, or, if any market does develop, it may not be sustained.

The shares will become tradable on the effective date of this prospectus.
The selling security holders will receive the proceeds from the sale of
their shares and we will not receive any of the proceeds from the sales.

THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
CONTAINED IN THE PROSPECTUS BEGINNING ON PAGE 4.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is May 9, 2003.

Page 3

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TABLE OF CONTENTS

Summary Information and Risk Factors . . . . . . . . . . . . . . . . . .3
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Company Overview. . . . . . . . . . . . . . . . . . . . . . . . . .3
Selling Security Holders. . . . . . . . . . . . . . . . . . . . . .3
Summary Financial Data. . . . . . . . . . . . . . . . . . . . . . .5
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Disclosure Regarding Forward-Looking Statements. . . . . . . . . . . . .8
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Determination of Offering Price. . . . . . . . . . . . . . . . . . . . .8
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Selling Security Holders . . . . . . . . . . . . . . . . . . . . . . . .8
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 12
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Directors, Executive Officers, Promoters and Control Persons . . . . . 13
Directors and Executive Officers. . . . . . . . . . . . . . . . . 13
Significant Employees . . . . . . . . . . . . . . . . . . . . . . 16
Family Relationships. . . . . . . . . . . . . . . . . . . . . . . 16
Involvement in Certain Legal Proceedings. . . . . . . . . . . . . 16
Security Ownership of Certain Beneficial Owners and Management . . . . 17
Security Ownership of Certain Beneficial Owners . . . . . . . . . 17
Security Ownership of Management. . . . . . . . . . . . . . . . . 18
Changes in Control. . . . . . . . . . . . . . . . . . . . . . . . 19
Description of Securities. . . . . . . . . . . . . . . . . . . . . . . 19
Description of Securities . . . . . . . . . . . . . . . . . . . . 19
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 19
Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . 20
2001 Performance Equity Plan . . . . . . . . . . . . . . . . 20
Warrants and Warrant Units . . . . . . . . . . . . . . . . . 20
Business Combinations under British Columbia Law . . . . . . 21
Modifications, Subdivisions and Consolidations under
British Columbia Law. . . . . . . . . . . . . . . . . . . . 21
Additional Information Describing Securities . . . . . . . . 21
Penny Stock Regulation . . . . . . . . . . . . . . . . . . . 21
Interest of Named Experts and Counsel. . . . . . . . . . . . . . . . . 22
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Certain Relationships and Related Transactions . . . . . . . . . . . . 22
Description of Business. . . . . . . . . . . . . . . . . . . . . . . . 22
Why Hemp? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
The Activewear Industry . . . . . . . . . . . . . . . . . . . . . 24
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Trade Regulatory Environment. . . . . . . . . . . . . . . . . . . 26
The Hemptown Way. . . . . . . . . . . . . . . . . . . . . . . . . 26
A Hemptown Friendly Tomorrow. . . . . . . . . . . . . . . . . . . 27
Hemptown's Target Markets . . . . . . . . . . . . . . . . . . . . 31
Governmental Regulations. . . . . . . . . . . . . . . . . . . . . 31
Environmental Regulation. . . . . . . . . . . . . . . . . . . . . 32
Reports to Security Holders . . . . . . . . . . . . . . . . . . . 32
Enforceability of Civil Liabilities Against Foreign Persons . . . 32
Management's Discussion and Analysis or Plan of Operation. . . . . . . 33
Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Management's Discussion and Analysis for the Year Ended
December 31, 2002. . . . . . . . . . . . . . . . . . . . . . . . 33
Management's Discussion and Analysis for the Year Ended
December 31, 2001. . . . . . . . . . . . . . . . . . . . . . . . 35

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Environmental Matters . . . . . . . . . . . . . . . . . . . . . . 36
Management and Financial Controls . . . . . . . . . . . . . . . . 37
Business Risks and Future Outlooks. . . . . . . . . . . . . . . . 37
Certain Relationships and Related Transactions . . . . . . . . . . . . 37
Market for Common Equity and Related Stockholder Matters . . . . . . . 37
Pooling Agreement . . . . . . . . . . . . . . . . . . . . . . . . 40
Exchange Controls . . . . . . . . . . . . . . . . . . . . . . . . 41
Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . 43
Aggregated Option/SAR Exercises During the Most Recently Completed
Financial Year and Financial Year-End Option/SAR Values. . . . . 43
Option/SAR Grants . . . . . . . . . . . . . . . . . . . . . . . . 44
Proposed Compensation . . . . . . . . . . . . . . . . . . . . . . 45
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . 45
Long Term Incentive Plans - Awards in Last Fiscal Year. . . . . . 45
Employee Pension, Profit Sharing Insurance or Other Retirement
Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Compensation of Directors . . . . . . . . . . . . . . . . . . . . 45
Compensation Committee Interlocks and Insider Participation . . . 46
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 46
Indemnification of Directors and Officers. . . . . . . . . . . . . . II-1
Other Expenses of Issuance and Distribution. . . . . . . . . . . . . II-1
Recent Sales of Unregistered Securities. . . . . . . . . . . . . . . II-2
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-3
Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-4
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-5
Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . II-6

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SUMMARY INFORMATION AND RISK FACTORS.

PROSPECTUS SUMMARY

This summary provides a brief overview of key aspects of this offering
and our company. Because this is only a summary, it does not contain all
of the information that may be important to you. You should read the
entire prospectus carefully, including "Risk Factors" and our financial
statements and the related notes, before making an investment decision
regarding our common stock. References herein to "we", "us", "our", or
"Hemptown" refer to Hemptown Clothing Inc.

Company Overview

Hemptown is a development-stage company with limited current operations
and net losses aggregating approximately $(425,121) up to December 31,
2002. Hemptown is an activewear manufacturer that specializes in the
manufacture of T-shirts, ball caps, and other select activewear products
with the main source of material coming from hemp. Hemp is a centuries
old plant that is hardy, strong and grows largely pest free. The common
sense advantages of this rugged crop are many, and they extend right
through the value chain. Benefits to the farmers include little
requirement for pesticides, high climate adaptability and improved soil
quality. We intend to move market share from cotton products to our
55/45% blend of hemp/cotton products which reduces pollution from
pesticides and synthetic fertilizers by more than half, while maintaining
a comfortable, cost efficient garment. Currently, we are manufacturing
the finished product in both Canada and in China.

We were incorporated under the laws of the Province of British Columbia,
Canada on October 6, 1998 and have a December 31 fiscal year end.

Our mailing address is 1307 Venables Street, Vancouver, British Columbia,
Canada, V5L 2G1 and our telephone number is (604) 255-5005.

Selling Security Holders

This prospectus relates to the registration for resale of 2,085,534
shares of our common stock, 200,000 shares of our common stock issuable
upon the exercise of outstanding warrants and 150,000 shares of our
common stock issuable upon the exercise of outstanding warrant units.
Our outstanding securities are held by 30 security holders. The selling
security holders will offer and sell the shares of outstanding common
stock at a price of $0.50 per share, the shares of common stock
underlying the outstanding warrants at a price of $0.25 per share and the
shares of common stock underlying the outstanding warrant units at a
price of $2.00 per share, until our securities are quoted on the OTC
Bulletin Board (or other specified market) and thereafter at prevailing
market prices or privately negotiated prices. We will not receive any
proceeds from the sale of the securities by the selling security holders,
other than the exercising of outstanding warrants and warrant units, if
any.

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[Enlarge/Download Table]

THE OFFERING

Number of shares of common stock outstanding 11,714,535 shares. This number does not
prior to this offering include shares reserved for issuance upon
exercise of outstanding stock options,
warrants, warrant units, or piggyback
warrants.

Number of shares of common stock outstanding 12,064,535 shares. This number assumes
after this offering the exercise of all outstanding warrants
and warrant units to purchase in aggregate
350,000 shares of our common stock.

Common stock offered by selling security 2,435,534 shares. This figure includes
holders 2,085,534 shares of common stock already
issued and held by certain selling security
holders, the 200,000 shares of common stock
issuable upon the exercise of outstanding
warrants held by a selling security holder
and the 150,000 shares of common stock
issuable upon the exercise of outstanding
warrant units held by a selling security
holder.

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Summary Financial Data

The following table summarizes the consolidated financial data for our
business for the years ended December 31, 2002, 2001 and 2000. You
should read the following summary financial data together with
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and our Consolidated Financial Statements and the
corresponding notes thereto, appearing elsewhere in this prospectus.

[Enlarge/Download Table]

Statement of Operations(1)
Year ended December 31,
2002 2001 2000

Revenues $ 497,409 $ 126,068 $ 39,014
Gross Margin 108,633 38,507 6,596
Net Loss (270,970) (94,391) (40,998)
Basic and Diluted Earnings (Loss) Per Share (.02) (.01) (.01)

[Download Table]

Balance Sheet
December 31,
2002 2001 2000

Cash $ 125,454 $ 75,640 $ 24,770
Current Assets 464,490 145,200 45,962
Total Assets 504,709 155,013 50,843
Current Liabilities 167,020 31,185 23,758
Total Liabilities 167,485 81,644 109,773
Shareholders' Equity (Deficiency) 337,224 73,369 (58,930)

(1) Unless otherwise indicated, all references to "$" or dollars in this
prospectus refer to United States Dollars. As of December 31, 2002, the
exchange rate was U.S. $1.00 for $1.5800 Canadian Dollars.

RISK FACTORS

Before you invest in our common stock, you should be aware that such an
investment involves various risks, including those described below. You
should carefully consider these risks as well as all of the other
information contained in this prospectus before making a decision to
invest in our common stock. As a consequence of any of the following
risks, our business, financial condition and operating results could be
adversely affected. As a result, the trading price of our common stock
could decline, and you could lose all or part of your investment.

WE HAVE INCURRED LOSSES AND NEED TO RAISE CAPITAL TO CONTINUE OUR
OPERATIONS AND GROWTH AND IF WE ARE UNABLE TO SECURE SUCH FINANCING, WE
MAY NOT BE ABLE TO EXPAND OUR BUSINESS AND MAY EVEN NOT BE ABLE TO
SUPPORT OUR OPERATIONS

We have never been profitable and historically have relied solely on
funds raised by the issuance of shares of our common stock to fund our
development. We have incurred losses totaling $(425,121) up to December
31, 2002 and are currently operating at a loss. We may need to seek
capital by way of an offering of our equity securities, an offering of
debt securities, or by obtaining financing through a bank or other
entity. We have not established a limit as to the amount of debt we may
incur nor have we adopted a ratio of our equity to debt allowance. If we
need to obtain additional financing, there is no assurance that financing
will be available from any source, that it will be available on terms
acceptable to us, or that any

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future offering of securities will be successful. If additional funds
are raised through the issuance of equity securities, there may be a
significant dilution in the value of our outstanding common stock. We
could suffer adverse consequences if we are unable to obtain additional
capital which would cast substantial doubt on our ability to continue our
operations and growth.

WE MAY FACE CASH FLOW SHORTAGES DUE TO THE BENEFICIAL CREDIT TERMS WE
MAKE AVAILABLE TO OUR CUSTOMERS AS COMPARED TO OUR SUPPLIERS, WHICH
REQUIRES US TO HAVE AN INFUSION OF CASH OR ELSE WE MAY HAVE TO CURTAIL OR
CEASE OPERATIONS

Due to the shorter credit terms made available to us from the raw
material providers from whom we buy product, as compared to the credit
terms made available by us to our customers, we, from time-to-time,
require infusions of cash in order to maintain our preferential
buying/purchasing terms with our suppliers. Such cash flow needs are also
affected by the timing of large purchases by us, which we make from
time-to-time to take advantage of favorable pricing opportunities. To
date, we have satisfied these cash requirements by private sales of our
equity securities. We continue to seek financing to provide us with
liquidity to meet our future needs. There is no assurance that we will
be able to obtain such financing on commercially reasonable terms, or
otherwise, or that we will be able to otherwise satisfy our short-term
cash flow needs from other sources in the future.

The Company is young, and relatively poorly financed. If a large
purchaser of the Company's goods failed to pay, the Company would be put
in a difficult financial position from which it may not be able to
recover.

OUR SUCCESS DEPENDS ON THE ABILITY OF OUR FABRIC PRODUCERS WITH WHOM WE
HAVE BUSINESS ARRANGEMENTS TO PROVIDE RAW MATERIALS ON A CONSISTENT BASIS
IN ORDER FOR US TO CONTINUE OPERATIONS

We depend on a small number of overseas fabric producers to provide the
raw material from which we make our products. Failure to maintain
continuous access to this raw material would have a materially adverse
affect on our business, including possibly requiring us to significantly
curtail or cease our operations. Fabric producers may experience
equipment failures and service interruptions, over which we have no
control, which could adversely effect customer confidence, our business
operations and our reputation.

THERE IS NO CURRENT TRADING MARKET FOR OUR SECURITIES AND IF A TRADING
MARKET DOES NOT DEVELOP, PURCHASERS OF OUR SECURITIES MAY HAVE DIFFICULTY
SELLING THEIR SHARES

There is currently no established public trading market for our
securities. We can give no assurance that an active trading market in
our securities will develop or, if developed, that it will be sustained.
We intend to apply for admission to quotation of our securities on the
OTC Bulletin Board and, if and when qualified, we intend to apply for
admission to quotation on the NASDAQ SmallCap Market. If for any reason
our common stock is not listed on the OTC Bulletin Board or a public
trading market does not otherwise develop, purchasers of the shares may
have difficulty selling their common stock should they desire to do so.
No market makers have committed to becoming market makers for our common
stock and it is possible that none will do so.

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THE SHARES AVAILABLE FOR SALE IMMEDIATELY BY THE SELLING SECURITYHOLDERS
ALONG WITH SHARES AVAILABLE PURSUANT TO RULE 144 COULD SIGNIFICANTLY
REDUCE THE MARKET PRICE OF OUR COMMON STOCK, IF A MARKET SHOULD DEVELOP

If a market should develop for the shares of our common stock, the market
price could drop if a substantial amounts of shares available for public
sale without any increase to our capitalization are sold in the public
market or if the market perceives that such sales could occur. After a
one-year holding period our restricted shares of common stock will become
eligible for trading, pursuant to Rule 144, without any additional
payment to us or any increase to our capitalization. Of the 11,714,535
shares of common stock currently outstanding, 2,085,534 shares of the
common stock are being registered for sale. Our affiliates will be
subject to the limitations of Rule 144, including its volume limitations
in the sale of their shares. An aggregate of 5,303,005 (45.3%) of the
outstanding shares of our common stock are held by officers, directors,
affiliates and entities controlled by them and are subject to the
limitations of Rule 144. A drop in the market price could adversely
effect holders of our common stock and could also harm our ability to
raise additional capital by selling equity securities.

WE RELY ON VENDORS AND INDEPENDENT DISTRIBUTORS WHO ARE NOT UNDER OUR
CONTROL AND IF SUCH VENDORS OR INDEPENDENT DISTRIBUTORS INCREASE COSTS TO
US, THEN WE MAY NOT BE ABLE TO CONTINUE OPERATIONS

We have relied on and will continue to rely on vendors and independent
distributors who are not employees of ours, to distribute, market and
sell our products. We have no long-term contractual relationship with
these vendors and distributors. While we believe that vendors and
distributors will continue to provide their services, there can be no
assurance that the vendors and distributors will be available in the
future, and if available, will be available on terms deemed acceptable to
us. Any such delay or increased costs could have a materially adverse
effect on our business.

THE CONCENTRATION OF OWNERSHIP OF THE SHARES OF OUR COMMON STOCK MAY
DISCOURAGE PURCHASES OF OUR COMMON STOCK BY PERSONS WHO MIGHT OTHERWISE
SEEK TO GAIN CONTROL OF US

Our executive officers and directors, together with entities affiliated
with them, currently beneficially own in excess of 45% of our outstanding
common stock, and they are able to exercise a controlling influence over
the election of our directors and other matters requiring stockholder
approval, including change of control transactions. The effect of such
management control could be to delay or prevent any change of our
management control.

SINCE A MAJORITY OF OUR OFFICERS AND DIRECTORS RESIDE OUTSIDE OF THE
UNITED STATES, IT MAY BE DIFFICULT, IF NOT IMPOSSIBLE, FOR AN INVESTOR TO
ENFORCE A JUDGMENT FROM A UNITED STATES COURT BASED ON UNITED STATES LAW
IN A CANADIAN COURT AGAINST US OR OUR OFFICERS OR DIRECTORS

We are a company incorporated under the laws of the Province of British
Columbia, Canada. A majority of our directors and officers reside in
Canada. Because all or a substantial portion of our assets and the
assets of these persons are located outside the United States, it may be
difficult for an investor to sue, for any reason, us or any of our
directors or officers outside the United States. If an investor was able
to obtain a judgment against us or any of our directors or officers in a
United States court based on United States securities laws or other
reasons, it may be difficult, if not impossible, to enforce such judgment
in Canada. We have been advised by our Canadian counsel that there is
doubt as to the enforceability, in original actions in Canadian courts,
of liability based upon the United States Federal securities laws and as
to the enforceability in Canadian courts of judgments of United States
courts obtained in actions based upon the civil liability provisions of
the United States Federal securities laws. Therefore, it may not be
possible to enforce those actions against us or any of our directors or
officers.

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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes "forward-looking statements". For example,
statements included in this prospectus regarding our financial position,
business strategy and other plans and objectives for future operations,
and assumptions and predictions about future demand for our services and
products, supply, costs, marketing and pricing factors are all
forward-looking statements. When we use words like "intend,"
"anticipate," "believe," "estimate," "plan" or "expect," we are making
forward-looking statements. We believe that the assumptions and
expectations reflected in such forward-looking statements are reasonable,
and are based on information available to us on the date of this
prospectus. We cannot, however, assure you that these assumptions and
expectations will prove to have been correct or that we will take any
action that we may presently be planning. We have disclosed certain
important factors that could cause our actual results to differ
materially from our current expectations under "Risk Factors" and
elsewhere in this prospectus. You should understand that forward-looking
statements made in connection with this offering are necessarily
qualified by these factors. We are not undertaking to publicly update or
revise any forward-looking statement if we obtain new information or upon
the occurrence of future events or otherwise.

Use of Proceeds.

The shares of common stock covered by this prospectus are to be sold by
our shareholders and other than $50,000 we may receive if all of the
outstanding warrants are exercised and $300,000 we may receive if all the
outstanding warrant units are exercised, we will not receive any proceeds
from such sales.

Determination of Offering Price.

Our shares are not currently traded on any national market.

The shares of common stock covered by this prospectus are to be sold by
our security holders. The price at which our selling security holders
will sell their shares of our common stock at prior to being listed on
the OTC Bulletin Board (or other specified market) is set out hereinbelow
under the heading "Plan of Distribution". Once our common stock is
listed on the OTC Bulletin Board (or other specified market), then our
selling security holders will sell their shares at the prevailing market
prices or privately negotiated prices.

The option price for the employee incentive plan was determined by using
the same price that investors were willing to pay for our shares of
common stock during a recent private offering. See "Recent Sales of
Unregistered Securities".

Dilution.

The shares of our common stock covered by this prospectus are to be sold
by our security holders. We are not selling any common equity through
this registration. Therefore, this item is not applicable to us.

Selling Security Holders.

On May 1, 2003, there was 11,714,535 shares of our common stock issued,
839,000 shares of our common stock issuable upon the exercise of
outstanding stock options, of which all options granted have vested,
200,000 shares of our common stock issuable upon the exercise of
outstanding warrants, 150,000 shares of our common stock issuable upon
the exercise of outstanding warrant units, 900,000 shares of our common
stock issuable upon the exercise of warrant units that have been allotted
but not issued as they have not

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been earned at this time, and 1,050,000 shares of our common stock
issuable upon the exercise of piggyback warrants which will be issued if
the warrant units, of which 150,000 have been issued and 900,000 which
have been allotted but not issued, are exercised. The warrant units will
be earned by two certain companies under certain loan agreements whereby
for every US$2.00 lent to Hemptown by one of the companies, that certain
company will receive one warrant unit. However, the two certain
companies do not have any obligation to loan funds to Hemptown under such
loan agreements. In addition, Hemptown has the right to refuse to accept
any loans from either company. Each warrant unit consists of a right to
purchase one share of our common stock for US$2.00 per share plus one
piggyback warrant. Each piggyback warrant consists of a right to
purchase one share of our common stock for US$4.00 per share. A warrant
unit holder has three years from the date of issue of the warrant unit to
exercise the warrant units and one year from the exercise of the warrant
units to exercise the piggyback warrants. As of May 1, 2003, our
outstanding securities were held by 30 security holders.

The 887,000 stock options that were granted by us to nine of our security
holders on November 23, 2001, were subject to the following vesting
provisions: (i) the vesting period began on June 1, 2002; (ii) on June 1,
2002, 1/12 of the options issued to a security holder will vest; and
(iii) an additional 1/12 of the options will vest on the first of each
subsequent month. An additional 80,000 stock options were granted by us
to Mr. Joel Solomon on May 23, 2002, of which all of these stock options
vested on March 8, 2003, and expired on March 23, 2003. However, Mr.
Joel Solomon exercised all 80,000 of his stock options on March 22, 2003
prior to their expiry. On February 13, 2003, 48,000 of the 50,000 stock
options that were granted on November 23, 2001 to Mr. David Solomon were
cancelled.

All of our security holders with the exception of Messrs. Ken Lelek,
Helen Hrescak, William Nikolai, Susan Jeske, Tim Lelek, Diane Friesen,
Kevin Friesen, Troy Taillon, Shawn Lelek, David Lukinuk, Joel Solomon,
Chris Zacharias, Michelle McQueen, and Renewal Partners have entered into
a pooling agreement dated the 8th day of April, 2002 aggregating
9,199,001 shares of our common stock. The pooled shares of common stock
were deposited with an escrow agent, United Capital Securities Inc. Of
the 9,199,001 shares of our common stock being pooled, only 850,000 of
the pooled shares are being registered for sale herein on behalf of
certain selling security holders. For details with respect to the
release of the pooled shares - See "Market for Common Equity and Related
Stockholder Matters - Pooling Agreement".

All of the selling security holders' shares registered hereby will become
tradable on the effective date of the registration statement of which
this prospectus is a part.

The following table sets forth as of May 1, 2003:

* the name and address of each selling security holder;
* the number of shares of our common stock beneficially owned;
* the number of shares of our common stock being offered herein;
* the relationship of the security holder to Hemptown;
* the percentage of shares of our common stock owned prior to the
offering, and
* the amount and percentage of shares of our common stock owned after
the offering.

[Enlarge/Download Table]

Number of Number of Percentage of Amount and
shares shares stock owned percentage of
Name & beneficially offered Relationship prior to the stock owned after
address owned(1) herein to Hemptown offering(2) the offering(3)
------- -------- ------ ----------- ----------- ---------------

Lukinuk, David 15,000 15,000 None (*)% Nil (*)%
1561 Griffiths Pl.
Kelowna, B.C.
V1Z 2T7

Friesen, Diane 41,000(4) 7,000 Employee (*)% Nil (*)%
111 W. 11th Ave.
Vancouver, B.C.
V5Y 1S8

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Drake 418,400(5) 218,400 None 3.51% 200,000 (1.68%)
Enterprises Ltd.
6125 Patrick St.
Burnaby, B.C.
V6P 5Z9

Amoretto, Frank 585,067 585,067 None 5.00% Nil (*)%
6125 Patrick St.
Burnaby, B.C.
V5J 3B7

Friesen, Kevin 41,000(6) 22,000 Employee (*)% Nil (*)%
111 W. 11th Ave.
Vancouver, B.C.
V5Y 1S8

Hopkins, Jim 585,067 585,067 None 5.00% Nil (*)%
10729 Chestnut Pl.
Surrey, B.C.
V4N 1W4

Hrescak, Helen 20,000 20,000 None (*)% Nil (*)%
4776 Collingwood St.
Vancouver, B.C.
V6S 2B4

Jeske, Susan 2,000 2,000 None (*)% Nil (*)%
111 W. 11th Ave.
Vancouver, B.C.
V5Y 1S8

Lelek, Ken 1,086,499(7) 45,000 None 9.27% 1,041,499 (8.89%)
4670 Piccadilly S.
West Vancouver, B.C.
V7W 1J7

Lelek, Shawn 10,000 10,000 None (*)% Nil (*)%
2129 Matheres Avenue
West Vancouver, B.C.
V7V 2H3

Lelek, Tim 10,000 10,000 None (*)% Nil (*)%
306-1489 Marine Drive
West Vancouver, B.C.
V7T 1B8

Lelek, William 150,000 150,000 None 1.28% Nil (*)%
4670 South Piccadilly Road
West Vancouver, B.C.
V7W 1J7

Nikolai, William 2,000 2,000 None (*)% Nil (*)%
603-1818 W. 6th Ave.
Vancouver, B.C.
V6J 1R6

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Phillips, Leslie 400,000 400,000 None 3.41% Nil (*)%
1201-150 E. Kieth Rd.
North Vancouver, B.C.
V7L 1T8

Renewal Partners 92,000(8) 12,000 None (*)% Nil (*)%
610-220 Cambie St.
Vancouver, B.C.
V6B 2M9

Taillon, Troy 2,000 2,000 None (*)% Nil (*)%
6188 Waltham Ave.
Burnaby, B.C.
V5H 3V1

(*) Represents less than 1% of our outstanding shares of common stock.
(1) These figures includes all of the shares of our common stock
beneficially owned by such individual including all options and
outstanding warrants that are exercisable within 60 days of May 1,
2003.
(2) This represents the percentage of shares of our common stock owned
by the security holder as at May 1, 2003. In calculating this
percentage, all options and warrants exercisable within sixty days
were included in the denominator, as applicable for each individual.

(3) Individual security holders may or may not choose to sell some or
all of their securities at their discretion any time after the
registration is complete. These figures assume the sale of all of
the shares offered by the selling security holders.
(4) This figure includes 7,000 shares of our common stock held directly
by Mrs. Friesen, 22,000 shares of our common stock held by Mr. Kevin
Friesen, Mrs. Friesen's husband, 4,000 shares of our common stock
underlying options held directly by Mrs. Friesen and 8,000 shares of
our common stock underlying options held directly by Mr. Friesen.
(5) This figure includes 218,400 shares of our common stock held
directly by Drake Enterprises Ltd. and 200,000 warrants whereby each
warrant entitles the holder to purchase one share of our common
stock at an exercise price of US$0.25 per share. The beneficial
owners of Drake Enterprises Ltd. are Donna Taylor and Suzanne
MacDonald, both of Vancouver, British Columbia.
(6) This figure includes 22,000 shares of our common stock held directly
by Mr. Friesen, and 7,000 shares of our common stock held by Mrs.
Diane Friesen, Mr. Friesen's wife.

(7) This figure includes 45,000 shares of our common stock held directly
by Mr. Lelek and 1,041,499 shares of our common stock held by
Imperial Trust of which Mr. Lelek is the beneficial owner.
(8) This figure includes 12,000 shares of our common stock held directly
by Renewal Partners and 80,000 shares of our common stock held
directly by Mr. Joel Solomon of Vancouver, British Columbia, who is
the beneficial owner of Renewal Partners.

The following table sets forth as of May 1, 2003:

* the name and address of each selling security holder;
* the number of shares of our common stock beneficially owned;
* the number of shares of our common stock underlying outstanding
warrants and warrant units being offered herein;
* the relationship of the security holder to Hemptown;
* the percentage of shares of our common stock owned prior to the
offering; and
* the amount and percentage of shares of our common stock owned after
the offering.

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[Enlarge/Download Table]

Number of Number of Percentage of Amount and
shares warrant shares stock owned percentage of
Name & beneficially offered Relationship prior to the stock owned after
address owned(1) herein to Hemptown offering(2) the offering(3)
------- -------- ------ ----------- ----------- ---------------

Drake 418,400(4)(5) 200,000 None 3.51% 218,400 (1.83%)
Enterprises Ltd.
1450 S.W. Marine Dr.
Vancouver, B.C.
V6P 5Z9

McQueen, 300,000(6) 150,000 None 2.50% 150,000 (1.25%)
Michelle
404-150 Alexander St.
Vancouver, B.C.
V6A 1B5

(*) Represents less than 1% of our outstanding shares of common stock.
(1) These figures includes all share of our common stock beneficially
owned by such individual and assumes the exercise of all outstanding
warrants and the exercise of all outstanding warrant units.
(2) This represents the percentage of shares of our common stock owned
by the security holder as at May 1, 2003, assumes that all
outstanding warrants have been exercised, that all outstanding
warrant units have been exercised and that all piggyback warrants
that are to be issued upon exercise of the warrant units have been
issued and exercised. In calculating this percentage, all shares of
our common stock underlying the warrants, warrant units and
piggyback warrants were included in the denominator, as applicable
to such individual.
(3) Individual security holders may or may not choose to sell some or
all of their securities at their discretion any time after the
registration is complete. These figures assume the sale of all of
the shares of our common stock underlying the warrants or warrant
units offered by the selling security holders.
(4) This figure includes 218,400 shares of our common stock held
directly by Drake Enterprises Ltd. and 200,000 warrants that were
issued to Drake Enterprises Ltd. on October 17, 2002. Each warrant
entitles the holder to purchase one share of our common stock at an
exercise price of US$0.25 per share.
(5) The beneficial owners of Drake Enterprises Ltd. are Donna Taylor and
Suzanne MacDonald, both of Vancouver, British Columbia.
(6) This figure includes 150,000 warrant units that were issued to Ms.
McQueen on October 17, 2002, and 150,000 piggyback warrants which
form part of the warrant units.

Plan of Distribution.

We are registering 2,435,534 shares of our common stock covered by this
prospectus on behalf of the selling security holders, which includes
2,085,534 shares of our common stock already issued and held by the
selling security holders, 200,000 shares of our common stock issuable
upon the exercise of outstanding warrants and 150,000 shares of our
common stock issuable upon the exercise of outstanding warrant units. We
will not receive any proceeds from the sale of any shares by the selling
security holders. We will pay the costs and fees of registering our
common stock, but the selling security holders will pay any brokerage
commissions, discounts or other expenses relating to the sale of their
common stock.

The shares owned by the selling security holders are being registered
pursuant to Rule 415 of the General Rules and Regulations promulgated
under the Securities Act of 1933, which Rule pertains to delayed and
continuous offerings and sales of securities. In regard to the selling
security holder's shares offered under Rule 415, we have made certain
undertakings in Part II of the registration statement of which this

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prospectus is a part pursuant to which, in general, we have committed to
keep this prospectus current during any period in which offers or sales
are made pursuant to Rule 415.

Sales of the securities by affiliates of Hemptown are subject to the
volume limitations imposed by Rule 144 even after registration of such
securities. An affiliate who holds unrestricted securities may sell,
within any three month period, a number of our shares that does not
exceed the greater of one percent of the then outstanding shares of the
class of securities being sold or, if our securities are trading on the
NASDAQ Stock Market or an exchange at some time in the future, the
average weekly trading volume during the four calendar weeks prior to
such sale.

The selling security holders will offer and sell the shares of
outstanding common stock at a price of $0.50 per share, the shares of
common stock underlying the outstanding warrants at a price of $0.25 per
share and the shares of common stock underlying the outstanding warrant
units at a price of $2.00 per share, until our securities are quoted on
the OTC Bulletin Board (or other specified market) and thereafter at
prevailing market prices or privately negotiated prices.

In effecting sales, brokers and dealers engaged by the selling security
holders, may arrange for other brokers or dealers to participate.
Brokers and dealers may receive commissions, discounts or concessions for
their services from the selling security holders or, if any such
broker-dealer acts as agent for the purchaser of such shares, from such
purchaser, in amounts to be negotiated. These commissions or discounts
are not expected to exceed those customary in the types of transactions
involved.

The selling security holders and any broker-dealer or agent involved in
the sale or resale of the common stock may qualify as "underwriters"
within the meaning of Section 2(a)(11) of the Securities Act of 1933, as
amended, and a portion of any proceeds of sale and the broker-dealers' or
agents' commissions, discounts, or concessions may be deemed to be
underwriters' compensation under the Securities Act.

In addition to selling their shares of our common stock under this
prospectus, the selling security holders may transfer their common stock
in other ways not involving market makers or established trading markets,
including directly by gift, distribution, or other transfer; and the sale
of such shares may be made by such transferees in the public securities
markets by delivery of this prospectus to the buyers in such
transactions. However, if the transferee received the shares of our
common stock subsequent to the effective date of this registration
statement, then such transferee must be named as a selling security
holder in a prospectus supplement.

We have informed the selling security holders that the anti manipulation
provisions of Regulation M promulgated under the Securities Exchange Act
of 1934, as amended, may apply to the sales of their shares offered by
this prospectus, and we have also advised the selling security holders of
the requirement for delivery of this prospectus in connection with any
sale of the common stock offered by this prospectus.

Legal Proceedings.

There are currently no legal proceedings involving Hemptown Clothing Inc.
We are not aware of any proceedings being contemplated by any
governmental authority.

Directors, Executive Officers, Promoters and Control Persons.

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth, as of May 1, 2003, the name, age and
position of our directors and executive officers.

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NAME AGE OFFICES HELD
---- --- ------------

Jerry Kroll 41 Chairman of the Board, CEO, President
Jason Finnis 31 Director, COO, Secretary, Treasurer
Larisa Harrison 30 Director, VP Administration
Robert Edmunds 44 Director, CFO, Principal Accounting Officer
Lesley Hayes 40 Director, VP Communications

The Directors hold their positions until the next annual general meeting
of Hemptown's shareholders or until their successors are duly elected and
qualified. Hemptown's executive officers serve at the pleasure of the
Board of Directors.

The backgrounds of our directors and executive officers are as follows:

JERRY KROLL, Vancouver B.C. From 1989 to Present, Mr. Kroll owned and
operated Ascend Sportmanagement Inc. as an Indycar Race Driver Agent and
Sponsorship Manager. Mr. Kroll travelled extensively throughout North
America and Australia with the Championship Auto Race Teams Series (CART)
as Agent for several race drivers in Indy, Indy Lights and Toyota Formula
Atlantic including Michael Valiante, Bill Lester, Scott Dixon, Guy Smith,
Greg Moore, Scott Goodyear, Buddy Lazier, Stefan Johansson, Trevor
Seibert, Dominic Dobson, Scott Sharp, Ross Bentley, Curtis Spicer,
Payton-Coyne Racing, Jim Hall Racing, Tony Bettenhausen Motorsports,
PacWest Racing, Arciero Wells Racing, Project Indy Racing and others.
Corporate clients of Ascend Sportsmanagement Inc. have included SmarTire
Systems Inc., Century 21, Uniglobe Travel, Agfa Film\Bayer, Rain-X
(Unelco), Royal Oak Charcoal, PowerBar Foods, Pepsi, 7-Eleven Stores, CH
Products, Nova Chemicals, STP/First Brands, Tissot Swiss Watches, McCain
Foods, Northern Telecom, Leaf Canada (Jolly Rancher), Moet and Chandon
Champagne, Land Rover Canada, Molson Breweries, Glentel Communications,
Esso, The Royal Canadian Mint, Holiday Inn, The Jim Pattison Group, Deans
Knight Capital Management Ltd., and Merlin Beverages. Experience
includes International Tradeshows and displays, Team, Sponsor and Media
Relations, Advertising co-promotions, Corporate Sales Networking,
Communications, Strategic Marketing and Career Planning, and Financial
Projections and Planning. In 1996, Mr. Kroll was a partner in
International Karting Circuit Ltd., a 25,000 sq. ft. indoor kart racing
facility, which was the first indoor kart track in western Canada. Mr.
Kroll held the position of Vice-President of Marketing. Also in 1996,
Mr. Kroll was the Owner, President, General Manager and Director of
Marketing and Sponsorship of Vancouver International Air Races and
Airshow Ltd. Through this company, Mr. Kroll produced and stages on
August 17 and 18, 1996 at Boundary Bay, Delta, British Columbia, Canada's
first ever airplane race, which featured 16 International Formula One
Aircraft racing wing tip to wing tip at 500 km/h at just 35 feet off the
ground, around a 3 mile oval. This event attracted over 15,000
spectators and 31 Sponsor Companies, becoming one of Delta's largest ever
events. Experience includes all negotiations with Transport Canada,
Corporation of Delta, Police, Fire and Engineering, Boundary Bay Airport
Corp., International Formula One Air Racing Association, and all
suppliers and contractors. Mr. Kroll managed relations with media,
volunteers, vendors, and local residents to assist in accommodating the
requirements of Transport Canada. From 1998 to Present, Mr. Kroll has
been involved in Hemptown as a Co-Founder, CEO, President and Director.
Hemptown is an environmentally friendly manufacturer of clothing
products. Mr. Kroll has broad marketing experience including wholesale
and retail companies, as well as a background in the operation of
franchise systems. From 1999 to Present, Mr. Kroll has been the Project
Coordinator for Active Mountain Entertainment Inc., which owns Active
Mountain Raceway located in Merritt, British Columbia, a 280 acre
International calibre motorsports park for major events. From 2001 to
Present, Mr. Kroll has been the President and C.E.O. of Corbin Moptors
Vancouver, Inc., a Canadian licensee of all electric, 3 wheeled commuter
vehicles being organized for production in Canada.

JASON FINNIS, Vancouver B.C. From 1998 to Present, Mr. Finnis has been
involved in Hemptown as a Co-Founder, C.O.O., Secretary, Treasurer and a
Director. Mr. Finnis has been responsible for all aspects of this start
up apparel manufacturing company. Mr. Finnis has established ties with
U.S. based and International fabric suppliers and dye houses. He ensured
quality control from raw materials to finished goods. Mr. Finnis was
responsible for ensuring legal compliance in textile labeling and
construction. He established a local skilled manufacturing base capable
of producing more than 50,000 garments/month. Mr. Finnis negotiated
pricing, delivery times, and payment terms with local subcontracted
companies. Mr.

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Finnis grew domestic and international sales of Hemptown's products
through a multi faceted sales approach including internet, telephone, and
trade shows. He identified unique sales strategies with consumers to
convince them of the additional value of Hemptown's products. In late
1999, Mr. Finnis oversaw the implementation of a Chinese production
office. He negotiated exclusive contracts with all key production
personnel. Product pricing, payment terms and quality control were also
directly supervised Mr. Finnis. Mr. Finnis negotiated extended payment
terms without the need for Letters of Credit with certain suppliers in
2002. In addition to the above, Mr. Finnis is responsible for organizing
all domestic and international trade show appearances and was
instrumental in growing Hemptown's sales by 400% per year. In 1998, Mr.
Finnis established ties with the Canadian Federal Government and through
working with the Department of International Trade and Foreign Affairs
was able to eliminate the tariffs on imported hemp fabric saving Hemptown
10% on its raw material expenditures. Mr. Finnis has been a sought after
speaker at many North American universities and conferences speaking on a
wide variety of business and industrial hemp related topics. Mr. Finnis
attended the University of Victoria in the Faculty of Fine Arts, and
possesses broad experience in apparel manufacturing, marketing and sales.

LARISA HARRISON, Vancouver B.C. Ms. Harrison has been the Vice President
of Administration and a Director of Hemptown since December 15, 2000.
Ms. Harrison has been working in the hemp clothing industry since 1995.
Ms. Harrison was instrumental in creating the growth in demand for
Hemptown's products over the past years. Ms. Harrison possesses
extensive experience in the apparel industry, network administration, and
graphic design. From May 1998 to February 1999, Ms. Harrison was the
Production and Sales Assistant for Jana International. In this position,
Ms. Harrison acted as a liaison between customers and oversaw production
facilities for this multimillion-dollar apparel company. She was
responsible for overseeing garment production from purchase order
generation, notion and sample approval, order generation and invoicing
via internal systems and EDI, ensuring all productions conformed to
vendor compliance agreements with large retail department stores, and
ensuring proper financial instruments in place before orders were
delivered. She was also responsible for managing sales representatives
in all major Canadian territories, distributing sample packs, and
generation of monthly commissions reports. From February 1998 to 2002,
Ms. Harrison was self-employed under Larisa Harrison Consulting as an
Administrative Consultant. Ms. Harrison provided database development
for Macintosh networks including consultation with business owners,
design, programming, implementation, production of operations manuals,
and staff training. She also provided network administration services
including phone and on-site technical support, network troubleshooting,
and implementation of automated back-up systems. In addition, Ms.
Harrison offered bookkeeping services including preparation of monthly
financial statements, Accounts Payable, monthly sales analysis, payroll,
and co-ordination or year-end reviews with companies accounting firm.
She also reviewed and redesigned company forms and procedures. During
this time Ms. Harrison's primary clients included Dr. Braun Inc. and
Vancouver Laser and Skin Care Centre Inc., Western Canada's first and
largest Hair removal clinic where she performed the above duties as well
as converting their offices from a paper chart system to virtually
paperless charting system that tracked patient charts, customer lead
tracking, sales tracking, customer schedules and payments, and marketing
consulting on local advertising campaigns and promotions. Other
companies Ms. Harrison provided work for include Vinyl by Design and
Ecosource Paper. Ms. Harrison is a graduate of the University of
Victoria with a Fine Arts degree from the School of Music.

ROBERT EDMUNDS, C.A., Calgary, AB. Mr. Edmunds has been the C.F.O.,
Principal Accounting Officer and a Director of Hemptown since December
15, 2000. Mr. Edmunds duties and responsibilities include oversight of
financial statement preparation, preparation of forecasts and proforma
statements and reporting to the Board of Directors. Mr. Edmunds devotes
approximately 10% of his time to his duties and responsibilities as
C.F.O. of Hemptown. From 1992 to 1999 Mr. Edmunds was the sole
proprietor of R.S. Edmunds, Chartered Accountant, a public accounting
practice providing accounting and financial consulting services to a
variety of small and medium size businesses and individuals in Western
Canada. Mr. Edmunds is a director of No Drama Media Corp. a private
business consultancy. In 1999 and 2000 No Drama Media Corp. provided
contract accounting services for the production and distribution of the
IMAX feature length motion picture, "Extreme". These services included
preparation of accounts and financial statements and oversight of
external audits. From 2000 to present No Drama Media Corp. has provided
contract services to NETeller Inc., an online payment processing system.
Mr. Edmunds serves as NETeller's contract C.F.O. and oversees the
accounting department, has designed and implemented the

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accounting system and is responsible for financial statement preparation.
This contract accounts for approximately 90% of Mr. Edmunds time. Mr.
Edmunds attended the University of Calgary and received a Bachelor of
Commerce Degree with Distinction in 1981. In addition, Mr. Edmunds
received his Chartered Accountant designation in Alberta in 1992.

LESLEY HAYES, Calgary, AB. Ms. Hayes has been the Vice President of
Communications and a Director of Hemptown since December 15, 2000. Form
1987 to 1992, Ms. Hayes was the founder and President of Electraslide
Corporation. Electraslide provided corporate communication services to
medium and large size companies in Western Canada. Ms. Hayes'
responsibilities included marketing, business development, production and
management of a staff of 8. In 1992, Electraslide merged with Vicom
Multimedia Inc. and Ms. Hayes became a Vice President, General Manager,
Calgary and Director of Vicom. Her responsibilities included management
of the Calgary operation and development, marketing and management of new
products. Ms. Hayes left Vicom in 1997. From 1997 to 1999 Ms. Hayes was
the founder and President of Capital Influence Investor Relations. This
investor relations consulting practice provided strategic planning,
marketing and front line investor relations services to a diverse range
of clients listed on the TSE and CDNX. Ms. Hayes delivered front line
and strategic services to clients in the real estate, manufacturing,
mining and corporate communications sectors. From 1999 to 2002 Ms. Hayes
was the Practice Manager, Creative Services of Burntsand Inc. (TSE: BRT).
Her role was to design and build a new department and revenue stream for
the company. Her responsibilities and duties also included marketing and
partner relations for Western Canada and delivery of client engagements
in L.A., Houston, Vancouver, New York and Calgary. Ms. Hayes also led an
internal project to upgrade, redesign and 'webify' all internal Burntsand
systems and processes including the roll out of the Balanced Scorecard.
From 2002 to Present Ms. Hayes has been a Director of No Drama Media Inc.
providing business consultancy services. Ms. Hayes also provides
contract facilitation and training in the U.S. and Canada through the
International Young Entrepreneur Organization ("YEO"). Ms. Hayes has
been a member of the Calgary Chapter of YEO for over 10 years, and served
on the Calgary Board for YEO for 5 years. Ms. Hayes has been a Director
of Tyler Resources Ltd. (TSE:TYS) and Northern Abitibi Mining Corp.
(TSE:NAI) from 1997 to present. Ms. Hayes attended the Alberta College
of Art in 1983 taking courses in Visual Communications as well as
attended Sheridan College in 1984 taking courses in Computer Graphics.

SIGNIFICANT EMPLOYEES

There are no other "significant" employees other than those mentioned.

FAMILY RELATIONSHIPS

Larisa Harrison and Jason Finnis are currently engaged to be married,
with no current date set for the marriage.

Lesley Hayes and Robert Edmunds are married.

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

There are no legal proceedings pending, or that have occurred in the past
five years that are material to an evaluation of the ability or integrity
of any persons listed herein as an Officer, Director, or significant
employee.

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Security Ownership of Certain Beneficial Owners and Management.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets out all persons (including any "group", but
excluding management) who is known to us to be the beneficial owner of
more than 5% of our outstanding common shares.

[Download Table]

Name and address of Number of Percentage of
beneficial owner shares owned(1) shares owned(2)
---------------- --------------- ---------------

Frank Amoretto 585,067 5.00%
6125 Patrick St.
Burnaby, B.C.
V5J 3B7

Imperial Trust 1,086,499(3) 9.27%
C/o David Pedlow
19th Floor
W. Georgia St.
Vancouver, B.C.
V6C 3H4

Jim Hopkins 585,067 5.00%
10729 Chestnut Pl.
Surrey, B.C.
V4N 1W4

Ken Lelek 1,086,499(4) 9.27%
4670 Piccadilly S.
West Vancouver, B.C.
V7W 1J7

Plato Trust(5) 841,499 7.18%
C/o David Pedlow
19th Floor
W. Georgia St.
Vancouver, B.C.
V6C 3H4

Socrates Trust(6) 991,499 8.46%
C/o David Pedlow
19th Floor
W. Georgia St.
Vancouver, B.C.
V6C 3H4

Techconic Trust(7) 841,499 7.18%
C/o David Pedlow
19th Floor
W. Georgia St.
Vancouver, B.C.
V6C 3H4

(1) These figures include all of the shares of our common stock
beneficially owned by such individual.

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(2) This represents the percentage of the shares of our common stock
owned by the security holder as of May 1, 2003.
(3) This figure includes 1,041,499 shares of our common stock held
directly by Imperial Trust and 45,000 shares of our common stock
held by Mr. Ken Lelek of Vancouver, British Columbia, who is the
beneficial owner of Imperial Trust.
(4) This figure includes 45,000 shares of our common stock held directly
by Mr. Lelek and 1,041,499 shares of our common stock held by
Imperial Trust of which Mr. Lelek is the beneficial owner.
(5) The beneficial owner of Plato Trust is Jasvindar Singh of Vancouver,
British Columbia.
(6) The beneficial owner of Socrates Trust is Patrick Smith of
Vancouver, British Columbia.
(7) The beneficial owner of Techsonic Trust is Julia Raeder of
Vancouver, British Columbia.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets out the security ownership of all of our
directors and officers and assumes the exercise of each directors and
officers stock options which have vested and are exercisable within 60
days.

[Download Table]

Name and address(1) Number of Percentage of
of beneficial owner shares owned(2) shares owned(3)
------------------- --------------- ---------------

Robert Edmunds 675,000(4) 5.68%

Jason Finnis 2,450,000(5) 20.31%

Larisa Harrison 2,450,000(6) 20.31%

Lesley Hayes 675,000(7) 5.68%

Jerry Kroll 2,878,005(8) 24.21%

Executive Officers and 6,003,005(9) 48.35%
Directors as a Group (5 persons)

(1) The address for delivery for all management is C/O Hemptown Clothing
Inc., 1307 Venables Street, Vancouver, British Columbia, V5L 2G1

(2) These figures include all of the share of our common stock
beneficially owned by such individual and any of the shares of our
common stock underlying the options granted to these individuals
which have vested and are exercisable within 60 days from May 1,
2003.
(3) This represents the percentage of the shares of our common stock
owned by the security holder as at May 1, 2003, and in calculating
this percentage, all options which have vested and are exercisable
within 60 days of May 1, 2003 have been included in the denominator,
as applicable to such individual.

(4) This figure includes 500,000 shares of our common stock held
directly by Mr. Edmunds, 125,000 shares of our common stock
underlying options which have vested and are exercisable within 60
days held directly by Mr. Edmunds, and 50,000 shares of our common
stock underlying options which have vested and are exercisable
within 60 days held directly by Ms. Lesley Hayes, Mr. Edmunds' wife.
(5) This figure includes 2,100,000 shares of our common stock held
directly and jointly by Mr. Finnis and Ms. Larisa Harrison, Mr.
Finnis' fiance who lives in the same household, 175,000 shares of
our common stock underlying options which have vested and are
exercisable within 60 days held directly by Mr. Finnis, and 175,000
shares of our common stock underlying options which have vested and
are exercisable within 60 days held directly by Ms. Larisa Harrison.
(6) This figure includes 2,100,000 shares of our common stock held
directly and jointly by Ms. Harrison and Mr. Jason Finnis, Ms.
Harrison's fiance who lives in the same household, 175,000 shares of
our common stock underlying options which have vested and are
exercisable within 60 days held directly

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by Mr. Finnis, and 175,000 shares of our common stock underlying
options which have vested and are exercisable within 60 days held
directly by Ms. Larisa Harrison.
(7) This figure includes 500,000 shares of our common stock held
directly by Mr. Edmunds, Ms. Hayes' husband, 125,000 shares of our
common stock underlying options which have vested and are
exercisable within 60 days held directly by Mr. Edmunds, and 50,000
shares of our common stock underlying options which have vested and
are exercisable within 60 days held directly by Ms. Lesley Hayes.
(8) This figure includes 2,703,005 shares of our common stock held
directly by Mr. Kroll and 175,000 shares of our common stock
underlying options which have vested and are exercisable within 60
days held directly by Mr. Kroll.
(9) This figure includes: (i) 500,000 shares of our common stock held
directly by Robert Edmunds and 175,000 shares of our common stock
underlying options which have vested and are exercisable within 60
days held directly and indirectly by Mr. Edmunds and Ms. Hayes; (ii)
2,100,000 shares of our common stock held directly and jointly by
Jason Finnis and Larisa Harrison and 350,000 shares of our common
stock underlying options which have vested and are exercisable
within 60 days held directly and indirectly by Mr. Finnis and Ms.
Harrison; and (iii) 2,703,005 shares of our common stock held
directly by Jerry Kroll and 175,000 shares of our common stock
underlying options which have vested and are exercisable within 60
days held directly by Mr. Kroll.

CHANGES IN CONTROL

There are no arrangements that management is aware of that may result in
a change in control of the Company.

Description of Securities.

DESCRIPTION OF SECURITIES

We are authorized to issue 100,000,000 shares of our common stock. The
following is only a summary of provisions of the shares of our common
stock. It is not complete and may not contain all the information that
an investor should consider before investing in shares of our common
stock. One should carefully read our memorandum and articles of
association, which is included as an exhibit to the registration
statement containing this prospectus.

Common Stock

As of May 1, 2003, we had 26 shareholders of record with 11,714,535,
shares of our common stock issued and outstanding. The holders of our
common stock are entitled to one vote per share for each share held on
all matters to be voted on by shareholders, including election of
directors. A quorum for a general meeting shall be two members or proxy
holders representing two members, or one member and a proxy holder
representing another member personally present at the commencement of the
meeting. The holders of our common stock are entitled to receive
dividends when, as and if declared by our board of directors out of
legally available funds. In the event our company is liquidated,
dissolved or wound up, the holders of our common stock are entitled to
share pro-rata in all assets remaining available for distribution to them
after payment of all liabilities. Upon us becoming a reporting issuer,
the holders of our common stock will not have any preemptive rights.

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Preferred stock

We are not authorized to issue shares of preferred stock; however, there
are provisions of British Columbia law that permit a company's board of
directors, without shareholder approval, to issue shares of preferred
stock with rights superior to the rights of the holders of shares of
common stock. As a result, shares of preferred stock could be issued
quickly and easily, adversely affecting the rights of holders of shares
of common stock and could be issued with terms calculated to delay or
prevent a change in control or make removal of management more difficult.

2001 Performance Equity Plan

On November 23, 2001, we authorized the issuance of 887,000 options to
purchase 887,000 shares of our common stock to certain employees and
directors. On May 23, 2002, we authorized and granted an additional
80,000 options to a consultant, Mr. Joel Solomon. The options are
administered by our board of directors which determines the persons to
whom awards will be granted, the number of awards to be granted, and the
specific terms of each grant.

Awards consist of non-qualified stock options which may be considered as
"incentive" stock options under Section 422 of the Internal Revenue Code
of 1986, as amended. For all options issued on November 23, 2001 to
directors, officers, employees and consultants, the vesting period began
on June 1, 2002. On June 1, 2002, 1/12 of the options issued to such
individual vested, and then an additional 1/12 vests on the first of each
subsequent month. The strike price for all of the options issued is
$0.50 per share. The options granted on November 23, 2001 will expire on
November 30, 2011.

For the 80,000 options that were granted to Mr. Joel Solomon on May 23,
2002, 100% of these options vested on March 8, 2003 and had an expiry of
March 23, 2003. However, on March 22, 2003, Mr. Joel Solomon exercised
all of his 80,000 options at $0.50 per share for total proceeds to
Hemptown of $40,000.

On February 13, 2003, 48,000 of the 50,000 stock options granted by us to
Mr. David Solomon, which were part of the 887,000 options granted on
November 23, 2001, were cancelled.

Therefore, as of May 1, 2003, we have 839,000 options issued and
outstanding. None of our shares underlying the 839,000 outstanding stock
options granted by us are being registered herein for sale by the certain
security holders.

Warrants and Warrant Units

As of May 1, 2003, we had one warrant holder, Drake Enterprises Ltd., one
outstanding warrant unit holder, Michelle McQueen, and two potential
warrant unit holders, Bigger Bite Holdings Ltd. and Purchase Holdings
Ltd. The 200,000 warrants that were issued to Drake Enterprises Ltd.
provide it with the right to purchase 200,000 shares of our common stock
at a price of US$0.25 per share.

We issued the current warrant unit holder, Michelle McQueen, 150,000
warrant units on October 17, 2002. With respect to the two potential
warrant unit holders, Bigger Bite Holdings Ltd. and Purchase Holdings
Ltd., up to a further 900,000 warrant units may be issued on August 20,
2004, with 450,000 warrant units to Bigger Bite Holdings Ltd. and 450,000
warrant units to Purchase Holdings Ltd., if such warrant units are
earned. The warrant units will be earned by the two certain companies
under certain loan agreements, whereby for every US$2.00 lent to Hemptown
by one of the companies, that certain company will receive one warrant
unit. However, the two certain companies do not have any obligation to
loan funds to Hemptown under such loan agreements. In addition, Hemptown
has the right to refuse to accept any loans from either company.

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Each warrant unit consists of a right to purchase one share of our common
stock for US$2.00 per share plus one piggyback warrant. Each piggyback
warrant consists of a right to purchase one share of our common stock for
US$4.00 per share. A warrant unit holder has 3 years from the date of
issue of the warrant units to exercise the warrant units and 1 year from
the exercise of the warrant units to exercise the piggyback warrants.
The date of issue of the warrant units to Bigger Bite Holdings Ltd. and
Purchase Holdings Ltd., if any, will be August 20, 2004.

Business Combinations under British Columbia Law

Under the COMPANY ACT (British Columbia), certain business combinations,
including mergers or reorganization or the sale, lease, or other
disposition of all or a substantial part of a company's assets, must be
approved by at least 75% of the votes cast by shareholders or, in certain
cases, holders of each class of shares. Shareholders may also have a
right to dissent from the transaction, in which case, a company would be
required to pay dissenting shareholders the fair value of their shares
provided they have followed the required procedures. The COMPANY ACT
(British Columbia) also provides that a transaction such as a share
exchange must be approved by a majority of minority shareholders.

Modifications, Subdivisions and Consolidations under British
Columbia Law

Under the COMPANY ACT (British Columbia), amendment of certain rights of
holders of a class of shares, including common stock, requires the
approval of not less than 75% of the votes cast by the holders of those
shares voting separately as a class at a special meeting. With respect
to the modification of a class of shares rights, the COMPANY ACT (British
Columbia) gives such holders of that class of shares the right to dissent
from such amendment and to require the company to pay them the then fair
value of their shares.

Additional Information Describing Securities

Reference is made to our memorandum and articles of association which are
available for inspection at our offices or which can be viewed through
the EDGAR data base at http://www.sec.gov as exhibits to this
registration statement on Form SB-2.

Penny Stock Regulation

Penny stocks generally are equity securities with a price of less than
$5.00 per share other than securities registered on certain national
securities exchanges or listed on the NASDAQ Stock Market, provided that
current price and volume information with respect to transactions in such
securities are provided by the exchange or system. The penny stock rules
impose additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and
accredited investors (generally those with assets in excess of $1,000,000
or annual income exceeding $200,000, or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must
make a special suitability determination for the purchase of such
securities and have received the purchaser's written consent to the
transaction prior to the purchase. Additionally, for any transaction
involving a penny stock, unless exempt, the rules require the delivery,
prior to the transaction, of a disclosure schedule prescribed by the SEC
relating to the penny stock market. The broker-dealer also must disclose
the commissions payable to both the broker-dealer and the registered
representative and current quotations for the securities. Finally,
monthly statements must be sent disclosing recent price information on
the limited market in penny stocks. Because of these penny stock rules,
broker-dealers may be restricted in their ability to sell our common
stock. The foregoing required penny stock restrictions will apply to our
common stock until our common stock reaches and maintains a market price
of $5.00 or greater.

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Interest of Named Experts and Counsel.

There are no agreements contingent upon the filing of this registration
statement, and no one will receive a direct or indirect interest in us as
a result of this registration of securities.

The validity of the issuance of the shares of our common stock offered
hereby has been passed upon for us by Devlin Jensen, Barristers and
Solicitors, 2550 - 555 West Hastings Street, Vancouver, B.C., V6B 4N5.

The audited financial statements of Hemptown as at December 31, 2002,
2001 and 2000, appearing in this prospectus and registration statement
have been prepared by Ellis Foster, Chartered Accountants, as set forth
in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given on the authority of such firm as experts
in accounting and auditing.

Disclosure of Commission Position on Indemnification for Securities Act
Liabilities.

Our articles of association authorize indemnification of every person who
is or was a director of Hemptown or is or was serving at our request as a
director of another corporation of which we are or were a shareholder.
The board of directors may determine whether or not to indemnify any
person who is or was an officer, employee, agent, or person working to
the benefit of Hemptown against all costs, charges and expenses actually
incurred by him.

The directors may cause us to purchase and maintain insurance for the
benefit of any person who is or may be entitled to indemnification as
mentioned above against any expense or liability from which he is or may
be so entitled to be indemnified and may secure such right of
indemnification by mortgage or other charge upon all or any part of our
real and personal property, and any action taken by the board will not
require approval or confirmation by our shareholders.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers, or
controlling persons of Hemptown pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than our payment of expenses incurred or paid by a director,
officer or controlling person of Hemptown in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we
will, unless in the opinion of our counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by us is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.

Certain Relationships and Related Transactions.

There are no transactions or proposed transactions during the last two
years to which we were a party, in which any director, executive officer,
or a family member of any director or executive officer had or is to have
a direct or indirect material interest exceeding $60,000.

Description of Business.

Hemptown Clothing Inc. was incorporated under the laws of British
Columbia, Canada on October 6, 1998. The current corporate structure is
a private company, incorporated under the COMPANY ACT (British Columbia).

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We currently market and sell a line of Hemp/cotton active wear: T-shirts,
sweat shirts, and ball caps to wholesalers for imprinting as well as
directly to consumers. Consumer awareness, acceptance and demand for
this product are just beginning to grow.

As of December 31, 2002, we were dealing with 250 retailers and 6
distributors located in both Canada and the U.S. with no single purchaser
accounting for more than 8% of our overall business. With these existing
avenues of distribution, we had sales of $497,409 for the year ended
December 31, 2002, which generated a net loss of $(270,970). Management
estimates that we will be able to turn our inventory approximately 4
times per year under current conditions.

We currently employ 6 full time employees and 1 part time employee. In
addition to the current staff, we can also call upon 26 independent
sewers and 2 cloth cutters, located in Vancouver, British Columbia, and
several more independent sewers and cutters in China. Additional sewers
and cutters are available as foreseeable demand warrants.

Our production and distribution currently takes place both in Vancouver,
British Columbia, Canada and in China. In Vancouver, we occupy 6,000
square feet of warehouse/office space in Vancouver at 1307 Venables
Street on a long-term lease. The lease is set to expire January 31,
2006. We pay CDN$5.61 per square foot, plus common fees for a monthly
rent of CDN$4,118.14. We have been granted a right of first refusal as
to the purchase of the building. We do not maintain offices in China,
although we do have an agent there.

The Vancouver premises serves as head office, a display showroom,
inventory storage, logo screening facilities, and shipping facilities.

We have obtained trademark protection for the name "Hemptown" within
Canada and the United States.

Currently, we have access to enough hemp fiber to produce upwards of one
million garments per month. Management expects this fiber availability
to increase over the next 12 months.

WHY HEMP?

Hemp is a centuries old plant that is hardy, strong and grows largely
pest free. The common sense advantages of this rugged crop are many, and
they extend right through the value chain. Benefits to the farmers
include little requirement for pesticides, high climate adaptability and
even improved soil quality. The processing and manufacturing steps also
are less environmentally taxing than those of many other fibers (notably
cotton), requiring less toxic chemicals and dyes to create finished
fabric. High quality consumer goods are the end result, as hemp yields a
fiber with four times the tensile strength and twice the abrasion
resistance of cotton. Hemp products are naturally resistant to mold,
mildew and UV rays.

A colorful and illegal cousin of hemp has created an historical
resistance to the product. Since 1998, this resistance has been reduced
through the legalization of industrial hemp growing in Canada.
Governments and consumers are beginning to recognize that there is as
much a connection between a poppy seed bagel and heroin as there is a
Hemp T-shirt and marijuana. However, the confusion is only beginning to
recede. Despite this confusion, hemp based products are legal for sale
throughout North America. Management considers it to be possible, but
unlikely that a North American government will choose to impose any hemp
specific regulation on this industry, except in the area of farming.

Cotton is simply not as eco-friendly as hemp. Each typical 100% cotton
T-shirt requires one-third of a pound of pesticide and synthetic
fertilizer to produce. (Sustainable Cotton Project, 1995). As a cleaner
crop, hemp has no such pesticide or synthetic fertilizer requirement.
Our 55/45% blend of hemp/cotton reduces this pollution by more than half,
while maintaining a comfortable, cost efficient garment. We intend for
our products to play an ever-growing role in the activewear industry.
Management sees an

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analogy to other products which eliminated environmentally damaging goods
such as CFC producing styrofoam in coffee cups, food packaging, etc., and
the toxic refrigerants in air conditioners and refrigerators. As with
these analogous products, we intend to promote the movement of market
share from cotton products, to a cleaner, better alternative.

Currently, industrial hemp is being grown in almost every Province in
Canada, primarily for food and cosmetic oil production. Hemp grows
easily in the Canadian climate, and when grown for textile, a secondary
revenue stream is available. When hemp is used for textile, only the
long fibers of the plant are required, which leaves the short, "woody"
fibers as a by-product. This surplus substance is ideal for the
production of fiberboard, paper and agricultural bedding.

Hemp is experiencing a renaissance. In a world made smaller with the
reach of technology, the adage "think globally, act locally" is becoming
a common way of thought. As the full costs of cotton production are
being realized and companies are being held responsible and accountable
(i.e. big tobacco) for all the environmental and health damage that they
do, the market is changing. Our goal is to help build this awakening
market space, and be positioned to supply this market - offering high
quality, eco-smart products to a global village. A business for the new
millennium, we intend to build on a strong and sustainable foundation,
leveraging the growing demands of an eco-aware consumer.

THE ACTIVEWEAR INDUSTRY

As of March, 2003, management has not become aware of any meaningful
competitors in the hemp active wear market. To the best of management's
knowledge, the only companies that are or have been involved in this
market are "mom-and-pop" operations that were likely not intended to be
grown into a large scale business. In the past, these small companies
have tended to go bankrupt for a variety of reasons. We appear to be the
only serious company to fill this market space and have the longest
operating history of any of the companies that management is aware of.
Many of the remaining "mom-and-pop" operations are beginning to purchase
their T-shirts from us.

We intend to gain market share in the active wear sector by converting
suppliers, distributors, retailers and the buying public from
environmentally unfriendly cotton products to eco-friendly hemp based
products.

Our primary focus is on sales of T-shirts, golf shirts and sweatshirts,
in "blank" form, to the wholesale imprinted activewear market. "Blank"
activewear is typically imprinted or embroidered with a logo, design or
character before it reaches the consumer. Activewear is either branded
or private label. Branded products reach consumers carrying the
manufacturer's label, whereas products sold on a private label basis
reach consumers carrying the brand name of the customer.

Based on publicly available information, we believe that sales of
imprinted T-shirts at the wholesale level in the United States were
approximately US$6.1 billion for 1997 and are believed to be growing at
an annual rate of 4-5%. Management believes that growth in the imprinted
activewear market has been driven primarily by:

* significant development of the entertainment/sports licensing and
merchandising businesses;
* substantial growth in the ad specialty business, for example,
corporate advertising;
* a greater use and acceptance of casual dress in the workplace;
* a growing consumer preference for apparel with a relaxed feel and
look;
* a substantial increase in tourism; and
* an increasing emphasis on physical fitness.

Over the past several years, casual wear has become increasingly
acceptable in a wider array of settings. In the workplace, for example,
many employers have adopted more flexible dress codes, resulting in
greater consumer demand for casual wear, including T-shirts, knit shirts
and sweatshirts. Based on publicly available information, management
believes that 90% of United States companies now allow their

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employees to wear casual clothing to work, either regularly or on special
occasions, as compared to 63% in 1992.

In addition, a growing emphasis on physical fitness has spurred a
substantial increase in sports participation and, as a result, has
created a heightened demand for activewear. For example, based on
published reports, from 1987 to 1996, the number of people in the United
States participating more than once in the ten most popular sports
increased by approximately 36.8 million. Furthermore, significant
improvements in activewear apparel, ranging from enhanced product
characteristics--pre-shrunk fabrics, improved fabric weight, blends and
construction--to increased product variety--including new sizes, colors
and styles--have enhanced consumer appeal. We believe these trends will
continue to generate demand for activewear products for the foreseeable
future.

The activewear market is characterized by low fashion risk compared to
many other apparel markets. While opportunity exists for product
innovations and differentiation, trends or fads generally do not drive
basic garment styles. The activewear industry is also characterized by
significant barriers to entry, including:

* substantial capital expenditures required for vertically-integrated
production;
* large investments in inventories and working capital;
* strong supplier relationships; and
* established customer relationships.

The wholesale imprinted activewear segment of the North American apparel
market includes a number of significant competitors, and the activewear
segment overall is extremely competitive. The primary competitors in
this market are Gildan Activewear Inc., based in Canada, and the major
U.S.-based manufacturers of basic branded activewear for the wholesale
and retail channels. These U.S. manufacturers include Anvil Knitwear,
Inc., the Bassett-Walker division of VF Corporation, the Delta Apparel
division of Delta Woodside Industries, Inc., Fruit of the Loom, Inc., the
Hanes Corporation division of Sara Lee Corporation, the Jerzees division
of Russell Corporation, Oneita Industries Inc., and Tultex Corporation.
Some of these manufacturers have moved the majority of their sewing
operations offshore to reduce operating costs by lowering labor costs.
There are other manufacturers of activewear outside the United States,
which may have substantially lower labor costs.

COMPETITION

The wholesale imprinted activewear segment of the North American apparel
market includes a number of large corporations, and the activewear
segment overall is extremely competitive. The primary competitors in the
North American activewear market are the major Canadian and U.S.-based
manufacturers of basic branded activewear for the wholesale and retail
channels. These manufacturers include Gildan Inc., Anvil Knitwear, Inc.,
the Bassett-Walker division of VF Corporation, the Delta Apparel division
of Delta Woodside Industries, Inc., Fruit of the Loom, Inc., the Hanes
Corporation division of Sara Lee Corporation, the Jerzees division of
Russell Corporation, Oneita Industries Inc., and Tultex Corporation. All
of these manufacturers are considerably larger and better funded than
Hemptown. These companies compete primarily on the basis of quality and
price. There are also many manufacturers of activewear outside North
America.

Because of our use of hemp and our message of environmental
responsibility, we are able to compete in the activewear market without
having to compete on price. Although price is a factor, our
differentiation of products provides a niche market in which we are able
to sell our products without having to compete directly with the much
larger corporations already established in the activewear market.

We are able to price our products reasonably competitively because of our
success in maintaining low production and operating costs. We accomplish
this by:

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* outsourcing to efficient, low cost sewing operations in China where
we benefit from competitive labor costs; and
* selling to the wholesale channel which enables us to use a small
sales force and avoid the costs and complexities of selling to the
retail channel.

We attend the same trade shows as the primary activewear competitors, and
sell to the same wholesale distributors, however, due to our niche
market, we do not compete directly. When a person is considering the
purchase of a Hemptown garment, there is a value added aspect in the
environmental message that allows us to charge more for a similar garment
than any of the activewear competitors that are offering only cotton and
synthetics in their garments.

There are a number of other small producers of hemp and hemp-blended
garments. Management is not aware of any serious competitors in this
niche area. Most of these competitors are small two or three person
operations. Many of these have begun purchasing from us as they are
unable to match our price due to their volume limitations. We are also
aware of some manufacturers of hemp and hemp-blended garments that have
focused on specialty clothing for activities such as yoga, hiking and
rock climbing. We do not consider these companies to be direct
competitors in our market.

TRADE REGULATORY ENVIRONMENT

The textile and apparel industries in both the United States and Canada
have historically received a relatively higher degree of international
trade protection than some other industries. However, this protection is
diminishing as a result of the implementation of trade agreements reached
in the last ten years. Taken as a whole, we believe that the current
regulatory trade regime is no more burdensome to us than to our
competitors.

THE HEMPTOWN WAY

Unlike cotton, working with hemp is still as much an art as it is a
science. Because production lines are still small relative to cotton,
and because of the diverse supply of raw material, hemp cloth is prone to
considerably more inconsistencies than cotton based cloth. The
inconsistencies can be in the weave, the color, the percentage of
shrinkage, as well as the shrink patterns.

As a result of these inconsistencies, we have invested a considerable
amount of time and effort into product research and development, as well
as developing close relationships with suppliers. In the fiscal year
ended December 31, 2002, we spent $5,889 on research and development. In
the fiscal year ended December 31, 2001, we spent $3,201 on research and
development. It is likely that the difficulties outlined above with
dealing with hemp material is the key reason many of the major producers
of cotton active wear have stayed away from this market. We believe that
years of "hands on" experience with hemp cloth will give us a competitive
advantage as the industry matures.

We currently have products manufactured both in Canada and in China.
When manufacturing in Canada, we import high quality hemp/cotton material
in bulk from several manufacturers, in Asia. Although there are several
dozen other suppliers of hemp material found in both Asia and Europe,
consistency can become an issue when comparing one supplier's product to
another. We intend to develop a relationship with one or two of our
current suppliers in order to obtain favorable payment terms and to help
establish consistency within the cloth.

The cloth, once delivered, is tested and cut for distribution to several
sewers who are paid by the item. We are currently working with 26
independent sewers in Vancouver who work at their own facilities and have
been producing a consistent product for us for several years. The
garment is then returned to our facilities in "blank" form. We then ship
the finished product in blank form, or, in several cases, a custom logo
will

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be applied at our facilities prior to shipping. Products that are
manufactured in Canada are mainly used to supply Canadian distributors.

When manufacturing our product in China, we oversee the manufacturing and
inspect the product prior to shipping. We have an agent in China that
ensures quality prior to shipment.

Our product line consists of the following core items, all marketed under
the Hemptown brand:

Hefty-Hemp T-Shirt - Manufactured imported 55% hemp/45% cotton jersey
fabric, the T-shirt (both long and short sleeve) serves as the
foundation of the current Hemptown line. In fiscal 2001, the
Hefty-Hemp T-shirt accounted for about 68% of our sales. The
T-shirt is produced in natural, black, burgundy, moss green,
and slate blue colors. It is easily customized with dye,
screen printing, or embroidery to meet the end user's needs.

Hemptown Sweatshirt - Manufactured from imported 55% hemp / 45% cotton
fleece fabric, the sweatshirt is a popular fall/winter item. In
fiscal 2001, the Hemptown Sweatshirt accounted for about 1% of
our sales. This product is produced in the natural blonde
color, and can also be customized easily with dye, screen
printing, or embroidery.

Hemptown Oxford Button-Down Shirt - Manufactured from imported 55% hemp /
45% cotton muslin fabric, the Oxford was introduced and
subsequently kept in our product line because of popular
demand. In fiscal 2001, the Hemptown Oxford Button-Down Shirt
accounted for about 10% of our sales. This product is produced
in the natural blonde color, as well as black and mocha.

Hemptown Baseball Cap - A seasonless classic, Hemptown Baseball caps are
produced from imported, woven 55%hemp / 45% cotton twill. In
fiscal 2001, this product accounted for about 7% of our sales.
Produced in natural and black, these six panel caps come
complete with metal eyelets and an adjustable strap. Custom
embroidery is easily applied to this product.

Hemptown Golf Shirt - The Hemptown Golf Shirt is produced from a 55% hemp
/ 45% cotton pique knit. In fiscal 2001, this product
accounted for about 4% of our sales. We have received
impressive consumer demand for the Hemptown Golf Shirt that
makes a significant addition to the Hemptown core line.

Hemptown Tote Shopping Bag - As a retail store promotion, the Hemptown
Tote Shopping Bag is a low cost item which offers a maximum
area for advertising screen prints. In fiscal 2001, this
product accounted for about 6% of our sales.

We intend to focus on our ubiquitous core line of products, for the
foreseeable future. We will however, consider expanding the above core
imprintable product line when consumer demand warrants. Such ancillary
products may include jackets, button up shirts, shorts, pants, infant
wear and other products.

A HEMPTOWN FRIENDLY TOMORROW

Our main focus is the sale of activewear aimed directly at the imprinted
apparel market. Units are sold to value added distributors in this
market as blanks, ready to be customized as required.

A secondary focus of ours is to sell pre-printed apparel to the retail
market. The nature of our product lends itself perfectly to the active
lifestyle market such as skateboarding, snowboarding, rock climbing and
surfing. Professional graphic designers who are experienced in these
markets may be commissioned to design the branded retail apparel. Trade
shows specifically aimed towards the active lifestyle market and print
advertising to support these retailers have been used extensively.
Pre-printed items may also be

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targeted at large national retailers. Our market research indicates a
strong market interest by the retail sector for our products.

Internet sales and marketing are integral parts of our vision. We
recently engaged a firm to re-design the corporate web site
(www.hemptown.com) and to market the site effectively. E-commerce on
both retail and wholesale (password required) levels are important
aspects of the site as well as direct access to inventory and
manufacturing schedules for our authorized representatives. The retail
side of our website is functional, and the wholesale side of our website
is information and response only with non B2B direct order or inventory
access function yet. The B2B functions will be added if and when our
customers start demanding it. A simple Vendor Managed Inventory (VMI)
system may eventually be initiated to ensure our distributors never run
out of Hemptown product.

In addition to being positioned in a market that management expects to
increase exponentially over the next several years, we are aggressively
marketing ourselves in order to ensure that "Hemptown" is the premier
name in hemp activewear. The marketing initiatives currently being
planned by us include the following:

* We intend to capture mind and market share quickly and effectively
in the corporate activewear market by leveraging a network of
wholesalers with a unique and valued product offering. We are
working towards the development of a reliable order book of
recurring sales to wholesalers. This may be addressed by executing
effective co-marketing programs to increase market awareness and
acceptance for the hemp market and, more specifically, our products.

* We intend to implement a public relations strategy that leverages a
small media budget with existing interest and fascination with this
age-old product.

* We intend to use the Internet to enhance a full supply chain
communication, provide scalability and offer e-commerce advantages
to all our customers.

* We intend to make attendance at industry trade shows a priority. It
has been our experience that having a small but effective booth at
trade shows allows management and the sales team to meet with key
distributors, as well as retailers looking for the "next hot item".

Our primary marketing initiatives for our products are Imprinted
Sportswear Tradeshows and Industry Trade Magazines that cover all of
North America. Details of the tradeshows are available at
www.issshows.com.

Over the past years we have thoroughly explored many sales channels for
our core group of products. These have included: sports retailers and
manufacturers; boutique stores and small retail chains; department
stores; corporate active wear distributors (imprinted); Internet - direct
distribution.

A SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis has been
completed for each of these distribution channels, and an understanding
that has been gained of the financial, management and sales strategy
required to succeed in each.

Sportswear - Retail

Strengths: This market has a natural affinity for the hemp apparel
message. Snowboarders, mountain bikers, hikers, rock climbers and
other outdoor enthusiasts tend to have great concern for the
environment, and value the eco-friendly message these products have.
There is a large and growing market with favorable demographics and
no established market leader offering hemp apparel. Strength,
wearability, UV protection and mold/mildew resistance are valuable
qualities in athletic wear.

Weaknesses: This market has a fragmented supply chain, and a fickle
consumer. Current feedback in this market space from retailers and
distributors is that the products must be more 'sport specific' and
less costly.

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Opportunity: Hemptown Director Jerry Kroll is active in the sports
marketing industry, and can provide athlete relationships and
industry knowledge. This market is very trend/fashion conscious and
is likely to be early adopters of this hemp apparel.

Threats: This is a brand-dominated market, and investment is required to
build brand recognition. Good market foresight is required to
choose a market leader to private label/co-brand with.
Seasonal/sport specific and fashionable designs are required to gain
significant success in this market.

Boutiques and Small Retail Chains

Strengths: A number of small hemp/eco-friendly retail outlets have
gained a foothold across North America in the past few years. Their
clients tend to have great concern for the environment, and value
the eco-friendly message carried by these products. This is a niche
market where we have experienced promising early results. The
market is characterized by steady growth, favorable demographics and
no established market leader offering hemp apparel. The strong
eco-friendly message is very important in this market, as well as
the strength and wearability of the products. The gross margins can
be quite strong, averaging approximately 50%.

Weaknesses: A fragmented supply chain and a fickle consumer also
characterize this market. Expansion from a core group of products
may be required, and we may have to move towards the ever-changing
fashion/seasonal products.

Opportunity: There have been requests and purchase orders for an
expanded product line. Currently there are no established market
leaders. Additional partnerships with eco-friendly retail outlets
such as 'The Body Shop' and other leading retailers can also be
pursued.

Threats: Significant capital investment to build brand is required and
fashionable designs are vital to gain success in this market.
Seasonal products, designers and samples require larger investment
in inventory and have more risks. Co-branding and private label
manufacturing offer less barrier to entry.

Department Stores

Strengths: We believe that major retailers may be interested in having
us become a new supplier to them.

Weaknesses: This market requires ongoing design to keep up with fashion
trends. Margins are relatively slim.

Opportunity: Co-promotion and floor space in major national retailers
offers access to a mass market in a short time frame. The
legitimacy implied with presence in a department store can assist
with mass-market education and acceptance. Potential co-branding
with celebrities may provide a niche line for the retailer to offer.

Threats: Retailers are very powerful. Orders can be refused or
cancelled with little or no notice, and four product lines a year
would need to be produced and managed. More sophisticated
Information Technology systems would be required to manage the
information needed to remain profitable.

Corporate Activewear / Private Label

Strengths: This market has represented the best initial return on
investment for us. Strength, wearability, UV protection and
mold/mildew resistance are value-added differentiators in this
homogeneous market for activewear. This product is a unique
alternative to cotton in a market that is searching for new and
novel products to differentiate themselves from their competitors.

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Weaknesses: This market has a fragmented supply chain, and a distant end
consumer. Mass education is required to push the product through
the distributors to the end user. This market is very price
sensitive and requires a low cost point. There is minimal current
value and recognition in this market for the environmental
advantages of hemp. The stigma of hemp will likely require
education to recast it as a cleaner, better alternative to cotton.

Opportunity: In 1999 the US wholesale market for T-shirts was US $6
billion - and there were over 45,000 screen printers/embroiderers
operating in the U.S. Industry drivers and growth forecast is to
remain strong in coming years. The competitors are consolidating,
with fewer industry leaders offering very similar products. There
are no significant 'green' players currently in the market to take
advantage of a change in consumer awareness.

Threats: Investment is required to lower our product costs and determine
a market leader with which to private label and/or co-brand. A few
large players are dominating the cotton market with the largest
company representing 10% market share (10.7 million dozens). Focus
is on low cost producers and e-commerce advantages like Vendor
Managed Inventory (VMI) and Enterprise Resource Planning (ERP)
links.

Internet

Strengths: This market has a natural affinity for the retail hemp
apparel message as many of the so-called rebels who lead the online
revolution value the eco-friendly message these products carry. The
Internet distribution channel is growing exponentially, especially
within the demographics of those most likely to appreciate and
purchase our products. There is currently no established market
leader offering hemp apparel. Strength, wearability, UV protection
and mold/mildew resistance can be value-added features of what
management believes could be a trendy product line. Our existing
web site, www.hemptown.com offers product information and an
entry-level e-commerce section allowing customers to purchase our
apparel online at a reasonable cost.

Weaknesses: This market is large but unstructured. Internet marketing
strategies are just beginning to be understood and true e-commerce
can be expensive to implement unless volume warrants it. Shipping
costs can become a deterrent for people looking at small orders.

Opportunity: Growth figures in this medium are staggering. Effective
PR, 'viral' marketing and other low cost, creative strategies can
sometimes create very high ROI. Low scalability costs and high
volumes of potential customers are a very attractive combination.

Threats: Investment is required to build brand recognition. Many
Internet retailers have failed or are struggling to define a
profitable business model and current market skepticism is high in
the Internet market place.

We are currently focusing on the use of a small sales force to market our
products. Our sales staff is currently comprised of 20 commissioned
sales representatives and companies. We have enjoyed considerable
success through the attendance of trade shows where hundreds of leads can
be obtained. In addition, we also supply two major Canadian distributors
each with over 3000 customers. We currently have no backlog of orders
and we can fill all orders placed.

One of our long-term objectives is to vertically integrate our
organization. Hemp is currently being grown within every Province of
Canada. Unfortunately, there are currently no mills within Canada or the
US that create cloth from the hemp being farmed. We intend to vertically
integrate our business by expanding into the business of creating cloth
from raw hemp.

Since industrial hemp was re-legalized in Canada in 1998, it has
generated much interest from farmers and the Canadian Government.

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HEMPTOWN'S TARGET MARKETS

Our potential market is large, with several 'low hanging fruit' targets.
As a producer of eco-friendly promotional apparel, the market reach spans
from a consumer purchasing a single T-shirt from our website, to large
scale distributors who supply the screen printing and embroidery
industries and purchase in the hundreds of thousands of units.
Therefore, our main market segment is screen printers and embroidery
companies throughout North America. A comprehensive list of potential
sales targets is detailed below.

Distributors: This customer base purchases on a large scale and then
resells the blank products to value-added distributors. Established
market leaders such as Gildan, Fruit of the Loom, and Anvil promote their
products through these avenues.

Value-Added Distributors: This market includes companies that purchase
the blank products, customize them and resell to retail markets. For
example, the "No Fear" T-shirt company purchases blank T-shirts, prints
them, and then sells them to retailers. This market also includes screen
printers and embroidery companies who purchase blank product and then
customize them to individual requests. Some of these distributors will
also carry their own inventory of product.

Restaurants and Bar Wear: Virtually every bar and restaurant produces
logo apparel to promote their establishment.

Promotional Wear: T-shirts are a mainstay in the promotional apparel
segment. The unique aspect of our clothing is appealing to corporations
ranging from retail to manufacturing companies. We have experienced
success in this market and plan to continue expanding our market share.

Environmental Groups: The very nature of our merchandise lends itself
perfectly to this market. Companies with a mandate of protecting the
environment are obvious market targets. They can continue to market the
advantages of hemp as they promote 'their' hemp clothing.

Fundraising: Our products are well suited for environmentally conscious
schools, teams, and groups looking to raise funds for projects or
charities.

University/Colleges: Campus bookstores carry school logo apparel. The
eco-friendly message, coupled with school pride, make this a strong
potential market for our products.

Concerts/Sports: The environmental message offered by our product is
important to many groups, like music bands, while for others the
'subculture' message of the product is exploited. Sports teams may find
increased sales and interest in their promotional wear, through the
novelty of the hemp fabric products.

Product Licensing: From beverage producers to the film industry, the sale
of promotional products is licensed to individual companies. Combining
profitable license holding companies with our trendy and unique
Hefty-Hemp T-shirts is a market that has been addressed. We currently
have ties to several such companies and preliminary sales have gone well.

Consumer Direct: We have placed our product within the reach of millions
of consumers throughout the world by offering our products online.
Proper web site marketing and promotion would target this profitable
revenue stream.

GOVERNMENTAL REGULATIONS

Currently, we are not subject to any unique government regulations,
beyond that of any other garment manufacturer. Hemp apparel may be
manufactured, imported, and exported to and from the U.S. and Canada with
no special regulations. We must of course adhere to the Textile Labeling
Laws of North

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America which stipulate what information is to be included on the garment
tags and where those tags are to be located on the garment.

ENVIRONMENTAL REGULATION

Our operations are subject to various environmental and occupational
health and safety laws and regulations. We believe that we are in
compliance with the regulatory requirements of British Columbia. We will
continue to make expenditures to comply with these requirements, and we
do not believe that compliance will have a material adverse effect on our
business. As is the case with manufacturers in general, if a release of
hazardous substances occurs on or from our properties or any associated
offsite disposal locations, or if contamination from prior activities is
discovered at any of our properties, we may be held liable. While the
amount of such liability could be material, we endeavor to conduct our
operations in a manner that reduces such risks.

REPORTS TO SECURITY HOLDERS

We are not currently required to deliver an annual report to security
holders. None will be provided until such time as one is required. Once
we become a reporting issuer in the United States upon the effectiveness
of this registration statement and the filing of a Form 8-A, we will be
required to deliver an annual report to our stockholders prior to or with
the distribution of proxy materials relating to annual stockholder
meetings.

We have not previously filed reports with the Securities and Exchange
Commission, nor with any other securities regulator. However, once we
become subject to reporting requirements under section 13 or 15(d) of the
U.S. Securities and Exchange Act of 1934, as amended, we will be required
to file the following with the SEC: (i) quarterly reports on Form 10-QSB;
(ii) an annual report on Form 10-KSB; (iii) a Form 8-K to report the
occurrence of certain reportable events; (iv) preliminary and definitive
copies of our proxy statement and form of proxy to be submitted to our
stockholders; and (v) the annual report to stockholders.

Copies of this, and all future reporting materials filed with the SEC may
be obtained at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Information as to the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330. The SEC also
maintains an internet site that contains reports, proxy and information
statements, and other information regarding issuers that file
electronically at http://www.sec.gov. A direct link to Hemptown's
filings kept at the SEC's web site can be found on our web site at
http://www.hemptown.com.

ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN PERSONS

BECAUSE WE ARE A CANADIAN COMPANY, YOU MAY NOT BE ABLE TO ENFORCE CIVIL
LIABILITIES UNDER THE U.S. FEDERAL SECURITIES LAWS AGAINST US

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civil liability provisions of the Untied States Federal securities laws.
Therefore, it may not be possible to enforce those actions against us or
any of our directors or officers.

Management's Discussion and Analysis or Plan of Operation.

The following discussion is intended to provide an analysis of our
financial condition and should be read in conjunction with our financial
statements and the notes thereto. The matters discussed in this section
that are not historical or current facts deal with potential future
circumstances and developments. Such forward-looking statements include,
but are not limited to, the development plans for our growth, trends in
the results of its development, anticipated development plans, operating
expenses and our anticipated capital requirements and capital resources.
Our actual results could differ materially from the results discussed in
the forward-looking statements.

OVERVIEW

Hemptown Clothing Inc. ("Hemptown") is a Vancouver, Canada based importer
and distributor of hemp blend active wear for wholesale distribution. We
raised over $535,000 in private placement equity funding as well as
$50,000 in convertible debt financing during fiscal 2002, which enabled
us to continue to increased marketing efforts and increased inventory
levels to fulfill our growing sales. In comparison, we raised over
$225,000 in private placement equity funding in fiscal 2001, which was
instrumental in implementing our growth plans.

This management's discussion and analysis focuses on key statistics from
the Audited Financial Statements for the year ended December 31, 2002,
and pertains to known risks and uncertainties relating to the
manufacturing sector. Management knows of no known trend, events or
uncertainties that have or are reasonably likely to have a material
impact on our liquidity or revenues or income. The reported financial
information is indicative of future operating results and future
financial condition. This discussion and analysis of the financial
condition and results of operations of the Company should be read in
conjunction with our Financial Statements and related notes and material
contained in other parts of this registration statement. All monetary
amounts are expressed in US dollars.

MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2002

Results of Operations

[Download Table]

===================================================================================
YEAR ENDED YEAR ENDED % CHANGE
2002 2001

Revenues $ 497,409 $ 126,068 395%
Gross Margin $ 108,633 $ 38,507 282%
Net Loss $ (270,970) $ (94,391) 287%
Basic and Diluted Earnings
(Loss) per Share $ (0.02) $ (0.01)
==================================================================================

Revenues

For the year ended December 31, 2002, our gross revenues of $497,000
represented an almost fourfold increase of over the $126,000 recorded for
the previous year. Pursuant to the continued equity funding received
throughout fiscal 2002 and 2001, sales revenues have continued to
increase sharply as customer demand has been created through a higher
profile marketing presence and fulfilled through the maintenance of a
larger inventory base.

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Expenses

Cost of Goods sold for 2002 were $389,000 (78.2% of sales) compared to
$87,000 (69.5% of sales) for 2001. The corresponding gross margins were
$109,000 (21.8%) for 2002 compared with $39,000 (30.5%) for 2001. The
decrease in gross margin can be attributed predominantly to a more
aggressive sales pricing strategy to enhance market penetration.

Advertising and promotion expenses increased to $101,000 in 2002 compared
to $21,000 in 2001. This was a result of substantially increased trade
show attendance to build brand awareness for Hemptown Clothing Inc.,
combined with targeted promotions activities to educate imprint and
garment industry leaders about the advantages of the hemp fiber. Our
communications charges also increased as a result of increased
communications with US based contacts and customers.

Salaries and wages increased to $133,000 in 2002 from $41,000 in 2001.
This rise was a result of full year compensation paid to a number of key
employees in 2002 to support our substantially increased activities
versus only partial year compensation paid in 2001.

Legal and accounting fees in 2002 were $42,000 in 2002, up from $11,000
in 2001, predominantly due to additional professional fees associated
with Hemptown's public listing efforts.

Rent expense increased to $33,000 in 2002 from $23,000 in 2001 pursuant
to the terms of the lease agreement on our corporate headquarters. This
highly visible warehouse location in the heart of Vancouver's garment
district provides future flexibility for expansion and effectively
supports the operation through its current growth phase.

Earnings

Net Loss for the year ended December 31, 2002 totaled $(271,000), versus
$(94,000) recorded for the year ended December 31, 2001. Basic and fully
diluted loss per share amounted to $(.02) for 2002 versus $(.01) in 2001.
Cash flow from operations for the year ended December 31, 2002 totaled
$(443,000), versus $(133,000) in 2001. Significant investments in
marketing and infrastructure have created the losses in 2002 and 2001, as
we aggressively pursue creating market share for our hemp products.

Business Expansion

We began to expand our base of operations in 2001, as the private
placement funding received in the latter half of 2001 financed sufficient
inventory levels to support increased sales. This business expansion has
continued throughout 2002 with additional equity and debt funding
received being used to finance increased marketing efforts and the
requisite additions to infrastructure and inventory.

Capital Expenditures

Additions to capital assets for 2002 were $12,000 compared to $7,000 for
2001. The 2002 capital expenditures were made predominantly on the
Hemptown trademark and computer hardware additions whereas the 2001
capital expenditures were predominantly for production equipment and
leasehold improvements. There are no significant ongoing capital
commitments.

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Liquidity and Capital Resources

In 2002, our loss from operations resulted in cash outflows of
$(260,000), versus $(93,000) in 2001, the increase being substantially
attributable to our accelerated marketing activities to create brand
awareness for our products. An additional $(183,000) cash outflow on
working capital items was required in 2002 as compared to $(41,000) in
2001. In both years, these were predominantly due to requisite increases
in our inventory base and increased accounts receivables commensurate
with our accelerating sales activities.

Our investing activities resulted in cash outflows of $(26,000) in 2002,
up from $(7,000) in 2001, and were comprised solely of capital asset
purchases in both years.

Our current internal sources of liquidity are generated primarily through
our ongoing business operations. These include 30 to 90 day terms being
provided by our major suppliers in China, converting inventory into cash
and accounts receivable through sales, through ongoing systematic
collection of our accounts receivable, and by promoting prompt payment on
smaller orders which are normally due within 30 days by offering a 2%
discount if paid within 10 days. We are also in the process of getting
standing letters of credit in place for our largest accounts, such that
fulfilling these orders does not put a strain on our internal capital
resources. At fiscal year end 2002, we had no ongoing bank indebtedness,
although banking relationships have been established to facilitate
international purchases of raw materials and finished goods.

Our external sources of liquidity are primarily private placement equity
investments, and secondarily through the issuance of debt instruments.
In the latter half of 2001 we successfully completed private placements
totaling $225,000 that financed the initial inventory levels and
infrastructure required to support our increasing sales levels. In fiscal
2002, we raised an additional $535,000 in private placement equity
funding and $50,000 of convertible debt financing which has financed our
continued growth.

We are currently able to finance our ongoing level of basic operations
through our internal sources of liquidity as discussed, but we have been
and are substantially reliant on external investment to finance our
ongoing marketing requirements and growth in our operations. We have
sufficient capital resources to maintain operations at our current levels
until May 2004. We anticipate achieving profitability in the third
quarter of 2003.

MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2001

Results of Operations

[Download Table]

===================================================================================
YEAR ENDED YEAR ENDED % CHANGE
2001 2000

Revenues $ 126,068 $ 39,014 323%
Gross Margin $ 38,507 $ 6,596 584%
Net Loss $ (94,391) $ (40,998) 230%
Basic and Diluted Earnings
(Loss) Per Share $ (0.01) $ (0.01)
===================================================================================

Revenues

For the year ended December 31, 2001, our gross revenues of $126,000
represented a more than threefold increase of over the $39,000 recorded
for the previous year. Subsequent to the funding received in fiscal
2001, sales revenues increased sharply as customer demand could be met
with a larger inventory base.

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Expenses

Cost of Goods sold for 2001 were $87,000 (69.5% of sales) compared to
$32,000 (83.1% of sales) for 2000. This year over year decrease can be
attributed to reduced manufacturing costs resulting from increasing
volumes. Hemptown realized a gross margin of 30.5% for the year ending
December 31, 2001, compared to 16.9% for 2000.

Advertising and promotion expenses increased to $21,000 in 2001, compared
to $9,000 in 2000. This was a result of the efforts to educate imprint
and garment industry leaders about the advantages of the hemp fiber and
to build brand awareness for Hemptown Clothing Inc. Our communications
charges also increased as a result of increased communications with US
based contacts and customers.

Rent expense increased to $23,000 in 2001 from $4,000 in 2000 as we moved
from a small facility to a highly visible warehouse location in the heart
of Vancouver's garment district. This new location provides future
flexibility for expansion and effectively supports the operation through
its current growth phase. Salaries and wages increased to $41,000 in
2001 from $3,000 in 2000. This rise was a result of staff growing from a
part time effort in 2000 to a number of key employees in 2001 to support
our increased activities.

Earnings

Net Loss for the year ended December 31, 2001 totaled $(94,000), versus
$(41,000) recorded for the year ended December 31, 2000. Basic and fully
diluted loss per share amounted to $(0.01) for both 2001 and 2000. Cash
flow from operations for the year ended December 31, 2001 totaled
$(133,000), versus $(16,000) in 2000. Significant investments in
marketing and infrastructure have created the losses in 2001 and 2000, as
we aggressively pursue creating market share for our hemp products.

Business Expansion

We began to expand our base of operations in 2001, as the private
placement funding received in the latter half of 2001 financed sufficient
inventory levels to support increased sales.

Capital Expenditures

Additions to capital assets for 2001 were $7,000 compared to $5,000 for
2000. There are no significant ongoing capital commitments.

Liquidity and Capital Resources

At fiscal year end 2001, we had no ongoing bank indebtedness, although
banking relationships have been established to facilitate international
purchases of raw materials and finished goods. We are currently reliant
on external investment to finance ongoing operations, as we are not yet
operating profitably. In fiscal 2001, we successfully completed private
placements totaling $225,000 that financed the initial inventory levels
and infrastructure required to support our increasing sales levels.

ENVIRONMENTAL MATTERS

We operate with a high level of respect for protecting the environment
and are not aware of circumstances that would create any significant
financial responsibility for environmental matters.

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MANAGEMENT AND FINANCIAL CONTROLS

We maintain management and accounting policies, procedures and controls
that are sufficient, in the opinion of management, to result in reliable
financial reports and provide adequate controls over our assets.

BUSINESS RISKS AND FUTURE OUTLOOK

The demand for our products is largely dependent upon the level of
acceptance and understanding of the hemp fiber in the wholesale and
consumer sectors. Market size for hemp clothing products and our
relative share of this market will be affected by a number of factors,
which include general understanding and awareness, continuing growth in
environmental awareness, taxation and government regulations, and general
economic conditions. We are attempting to mitigate some of these risks
through education and employing well-known athletes and other celebrity
spokespeople to endorse our products.

As we continue to expand our operations internationally, we must be aware
of any inherent business risks associated with doing so. We have
attempted to mitigate these risks by establishing distribution channels
with partners who are familiar with the economic climate and have
experience in the regional jurisdictions being explored.

We believe our liability and property insurance is adequate and
consistent with common industry practice.

A significant and growing portion of our revenue is received in US
dollars and a substantial portion of the company's operating expenses is
incurred in Canadian dollars. As a result, a change in the value of the
Canadian dollar relative to the U.S. dollar could materially affect the
company's operating results. Foreign currency translation gains and
losses arising from normal business operations are credited to or charged
against income for the period incurred.

Certain Relationships and Related Transactions.

There have been no Related Transactions occurring in the last 2 years
that have been greater than US$60,000.

Market for Common Equity and Related Stockholder Matters.

There are currently no markets where our common equity is traded.

Except for director, officer, employee and consultant stock options, and
warrants issued to third parties as described elsewhere in this document,
there are no options, warrants to purchase, or securities convertible
into our common equity. On November 23, 2001, the Board of Directors
approved the issuance of 887,000 stock options to our directors, officers
and employees, which have all vested as of May 1, 2003 and have an expiry
of November 30, 2011. On May 23, 2002, the Board of Directors approved
the grant of an additional 80,000 stock options to a consultant, Mr. Joel
Solomon, which all vested on March 8, 2003 and had an expiry of March 23,
2003. However, on March 22, 2003, Mr. Joel Solomon exercised all of his
stock options at $0.50 per share for total proceeds to Hemptown of
$40,000. All of our stock options have a strike price of $0.50 per
share. Furthermore, on February 13, 2003, 48,000 of the 50,000 stock
options granted by us to Mr. David Solomon, which were part of the
887,000 options granted on November 23, 2001, were cancelled. Therefore,
as of May 1, 2003, we have 839,000 stock options issued and outstanding.

Our common equity that, as of May 1, 2003, could be sold pursuant to Rule
144 and are not being registered pursuant to this registration statement
would include shares issued to certain seed shareholders. The following
is a comprehensive list of those seed shareholders and their share
holdings as at May 1, 2003:

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Name Date Shares were Issued Holdings as at May 1, 2003
---- ----------------------- --------------------------

Edmunds, Robert April 9, 2001 500,000(1)

Finnis, Jason David &
Harrison, Larisa
Elizabeth July 29, 2000 2,100,000(2)

Imperial Trust April 9, 2001 and 1,041,449(3)
April 17, 2002

Kroll, Jerry July 29, 2000 2,703,005(4)

O'Day, Daniel Owen July 29, 2000 330,000

Plato Trust(5) April 9, 2001 841,499

Socrates Trust April 9, 2001 and 991,499(6)
April 17, 2002

Techsonic Trust(7) April 9, 2001 841,499

Weril Investments(8) July 29, 2000 200,000

(1) These 500,000 shares were initially issued on July 29, 2000 to
Jerry Kroll and then subsequently transferred to the Robert
Edmunds on April 9, 2001 at the founders price of $0.00001 per
share.
(2) Jason Finnis and Larisa Harrison were initially issued
2,170,000 of our shares on July 29, 2000 and then subsequently
transferred 70,000 shares to Jerry Kroll on April 9, 2001 at
the founders price of $0.00001 per share.

(3) Imperial Trust, which is beneficially owned by Ken Lelek of
Vancouver, British Columbia, purchased 841,499 shares of our
common stock from Jerry Kroll on April 9, 2001 and subsequently
transferred 400,000 shares. In addition, on April 17, 2002,
Imperial Trust purchased 600,000 shares of our common stock
from treasury at $0.25747 per share.

(4) Jerry Kroll was initially issued 6,499,000 of our shares on
July 29, 2000 and then subsequently transferred 500,000 shares
to Robert Edmunds, 841,499 shares to Imperial Trust, 841,499
shares to Plato Trust, 841,499 shares to Socrates Trust and
841,499 to Techsonic Trust on April 9, 2001 at the founders
price of $0.00001 per share.

(5) The beneficial owner of Plato Trust is Jasvinder Singh of
Vancouver, British Columbia.
(6) Socrates Trust, which is beneficially owned by Patrick Smyth of
Vancouver, British Columbia, purchased 841,499 shares of our
common stock from Jerry Kroll on April 9, 2001 and subsequently
transferred 450,000 shares. In addition, on April 17, 2002,
Socrates Trust purchased 600,000 shares of our common stock
from treasury at $0.25747 per share.
(7) The beneficial owner of Techsonic Trust is Julia Raeder of
Vancouver, British Columbia.

(8) The beneficial owner of Weril Investments is Chris Zacharias of
Cariarri, Costa Rica.

As of May 1, 2003, we had 26 shareholders on record, with a total of
11,714,535 shares of our common stock issued and outstanding. The
following is a list of our shares of common stock that we are looking to
register for sale on a public market:

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Name Holdings as at May 1, 2003
---- --------------------------

Amoretto, Frank 585,067
Drake Enterprises(1) 218,400
Friesen, Diane 7,000
Friesen, Kevin 22,000
Hopkins, Jim 585,067
Hrescak, Helen 20,000
Jeske, Susan 2,000
Lelek, Ken 45,000
Lelek, Shawn 10,000
Lelek, Tim 10,000
Lelek, William 150,000

Lukinuk, David 15,000
Nikolai, William 2,000
Phillips, Leslie Anne 400,000
Renewal Partners(2) 12,000
Taillon, Troy 2,000
-----
Total 2,085,534

(1) The beneficial owners of Drake Enterprises are Donna Taylor and
Suzanne MacDonald, both of Vancouver, British Columbia
(2) The beneficial owner of Renewal Partners is Joel Solomon of
Vancouver, British Columbia

Also being registered are the following outstanding warrants and
outstanding warrant units to purchase shares of our common stock.

Drake Enterprises Ltd.(1) 200,000(2)
McQueen, Michelle 150,000(3)
-------
Total 350,000

(1) The beneficial owners of Drake Enterprises Ltd. are Donna
Taylor and Suzanne MacDonald, both of Vancouver, British
Columbia.

(2) This figure represents 200,000 warrants that were issued to
Drake Enterprises Ltd. on October 17, 2002. Each warrant
entitles the holder to purchase one share of our common stock
at an exercise price of US$0.25 per share.

(3) This figure includes 150,000 warrant units that were issued to
Ms. McQueen on October 17, 2002. Each warrant units consists
of a right to purchase one share of our common stock at a price
of US$2.00 per share plus one piggyback warrant. Each
piggyback warrant consists of a right to purchase one share of
our common stock at a price of US$4.00 per share. These
warrant units expire on October 17, 2005 and the piggyback
warrants expire 1 year from the date of the exercise of the
warrant units.

As of May 1, 2003, there were no other classes of shares of our common
stock optioned or subject to a warrant to purchase.

We do not plan to issue dividends for the foreseeable future.

Holders of our common stock are entitled to receive dividends as may be
declared by our board of directors. Our board of directors may, from
time to time, declare and we may pay dividends in cash, property, or its
own shares, except when we are insolvent or when the payment thereof
would render us insolvent. The board is not obligated to declare a
dividend. We have not paid any dividends since our inception. It is not
anticipated that dividends will be paid in the foreseeable future.

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POOLING AGREEMENT

All recipients of shares of our common stock with a purchase price of
CDN$0.00001 per share have entered into a pooling agreement. A copy of
the complete pooling agreement has been attached to this registration
statement as an exhibit. All parties to the pooling agreement have
agreed to the following terms:

* The parties severally agree each with the other in accordance with
the following:

(a) Each party is allowed to sell the lesser of either 5% of their
holdings per month or such amount as calculated by an average
daily trading volume formula as set out in 1(b).
(b) The daily trading volume formula shall be equal to 50% of the
previous month's average daily volume. In the case of the
first trading month, the parties shall sell no shares.
(c) This restriction on trading volume shall become effective upon
signing, and extend till one of the following has occurred:
1. 24 months have elapsed, starting from the date our shares
are first traded on a public exchange, or
2. our shares are trading under either a full Nasdaq, NYSE or
a TSE listing.

The following is a list of all the parties to the pooling agreement, as
well as the number of shares that are subject to the pooling agreement.

NUMBER OF SHARES
NAME OF PARTY INCLUDED IN THE POOL
------------- --------------------

Amoretto, Frank 100,000

Drake Enterprises Ltd.(1) 100,000

Edmunds, Robert 500,000

Finnis, Jason / Harrison, Larisa 2,100,000

Hopkins, Jim 100,000

Imperial Trust(2) 441,499

Kroll, Jerry 2,703,005

Lelek, William 150,000

O'Day, Daniel 330,000

Phillips, Leslie Anne 400,000

Plato Trust(3) 841,499

Socrates Trust(4) 391,499

Techsonic Trust(5) 841,499

Weril Investments Inc.(6) 200,000
-------

Total 9,199,001

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(1) The beneficial owners of Drake Enterprises Ltd. are Donna
Taylor and Suzanne MacDonald, both of Vancouver, British
Columbia.
(2) The beneficial owner of Imperial Trust of Vancouver, British
Columbia.
(3) The beneficial owner of Plato Trust is Jasvindar Singh of
Vancouver, British Columbia.
(4) The beneficial owner of Socrates Trust is Patrick Smith of
Vancouver, British Columbia.
(5) The beneficial owner of Techsonic Trust is Julia Raeder of
Vancouver, British Columbia.
(6) The beneficial owner of Weril Investments Inc. is Chris
Zacharias of Cariarri, Costa Rica.

EXCHANGE CONTROLS

There is no law or government decree of regulation in Canada that
restricts the export or import of capital, or that affects the remittance
of dividends, interest or other payments to a non-resident holder of
common shares, other than withholding tax requirements. See the section
captioned "Taxation" herein below.

There is no limitation imposed by Canadian law or by our Articles of
Association or other charter documents on the right of a non-resident to
hold or vote shares of our common stock, other than as provided in the
INVESTMENT CANADA ACT (Canada), as amended (the "INVESTMENT ACT").

The Investment Act generally prohibits implementation of a reviewable
investment by an individual, government or agency thereof, corporation,
partnership, trust or joint venture that is a "non-Canadian" as defined
in the Investment Act, unless, after review the Minister responsible for
the Investment Act is satisfied that the investment is likely to be of
net benefit to Canada. If an investment by a non-Canadian is not a
reviewable investment, it nevertheless requires the filing of a short
notice which may be given at any time up to 30 days after the
implementation of the investment.

An investment in shares of our common stock by a non-Canadian that is a
"WTO INVESTOR" (an individual or other entity that is a national of, or
has the right of permanent residence in, a member of the World Trade
Organization, current members of which include the European Community,
Germany, Japan, Mexico, the United Kingdom and the United States, or a
WTO investor-controlled entity, as defined in the Investment Act) would
be reviewable under the Investment Act if it were an investment to
acquire direct control, through a purchase of assets or voting interests,
of us and the value of our assets equalled or exceeded $218 million, the
threshold established for 2001, as indicated on our financial statements
for our fiscal year immediately preceding the implementation of the
investment. In subsequent years, such threshold amount may be increased
or decreased in accordance with the provisions of the Investment Act.

An investment in shares of our common stock by a non-Canadian, other than
a WTO investor, would be reviewable under the Investment Act if it were
an investment to acquire direct control of us and the value of our assets
were $5.0 million or more, as indicated on our financial statements for
our fiscal year immediately preceding the implementation of the
investment.

A non-Canadian, whether a WTO investor or otherwise, would acquire
control of us for the purposes of the Investment Act if he, she or it
acquired a majority of the shares of our common stock or acquired all or
substantially all of our assets used in conjunction with our business.
The acquisition of less than a majority, but one-third or more of the
shares of our common stock, would be presumed to be an acquisition of
control of us unless it could be established that we are not controlled
in fact by the acquirer through the ownership of the shares of our common
stock.

The Investment Act would not apply to certain transactions in relation to
shares of our common stock, including:

(a) an acquisition of shares of our common stock by any person if
the acquisition were made in the ordinary course of that
person's business as a trader or dealer in securities;

(b) an acquisition of control of us in connection with the
realization of security granted for a loan or other financial
assistance and not for any purpose related to the provisions of
the Investment Act; and

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(c) an acquisition of control of us by reason of an amalgamation,
merger, consolidation or corporate reorganization following
which the ultimate direct or indirect control in fact of us,
through the ownership of voting interests, remains unchanged.

TAXATION

The following comments summarize the material Canadian Federal Income Tax
consequences for one of our shareholders who is a non-resident of Canada
and who is a resident of the United States. These comments are intended
to provide only a brief outline and are not a substitute for advice from
a shareholder's own tax advisor for the specific tax consequences to them
as a result of their individual circumstances. They do not anticipate
statutory or regulatory amendments. There is a reciprocal tax treaty
between the United States and Canada.

The provisions of the Income Tax Act (Canada) (the "Tax Act") are subject
to income tax treaties to which Canada is a party, including the
Canada-United States Income Tax Convention, 1980 (the "Convention").

Under Article X of the Convention, dividends paid by Canadian
corporations to non-resident U.S. shareholders are subject to a
withholding tax of 15%. The rate of withholding tax on dividends is
reduced to 5% if the beneficial owner is a U.S. company, which owns at
least 10% of the voting stock of the company paying the dividend.

A U.S. shareholder is not subject to tax under the Tax Act in respect of
a capital gain realized on the disposition of a share of common stock in
the open market unless the share is "taxable Canadian property" to the
shareholder thereof and the U.S. shareholder is not entitled to relief
under the Treaty.

A share of common stock will be taxable Canadian property to a U.S.
shareholder if, at any time during the 60 month period ending at the time
of disposition, the U.S. shareholder or persons with whom the U.S.
shareholder did not deal at arm's length owned, or had options, warrants
or other rights to acquire, 25% or more of the Registrant's issued shares
of any class or series. In the case of a U.S. shareholder to whom shares
of common stock represent taxable Canadian property, tax under the Tax
Act will be payable on a capital gain realized on a disposition of such
shares in the open market by reason of the Treaty.

The Convention gives protection to United States residents from Canadian
tax on certain benefits derived from the alienation of property. There
is no protection for a gain on a disposition of shares the value of which
is derived principally from real property in Canada. Our operations are
such that we do not intend to hold real property in Canada.

Revenue Canada has indicated that it considers the protection of the
Convention with respect to capital gains extend to a "deemed disposition"
under the Tax Act, including the "deemed disposition" arising from the
death of a taxpayer.

The reader should be aware that we could be considered as a passive
foreign investment company for United States federal income tax purposes.
Under section 1296 of the Internal Revenue Code of the United States, a
foreign corporation is treated as a foreign investment company (a "PFIC")
if it earns 75% or more of its gross income from passive sources or if
50% or more of the value of its assets produce passive income.

Because we may have been a PFIC for our year ending December 31, 2002,
and may have been a PFIC for some of our fiscal years ending before that
date, each U.S. shareholder should consult a tax advisor with respect to
how the PFIC rules may affect such shareholder's tax situation. In
particular, a U.S. shareholder should determine whether such shareholder
should elect to have us be treated as a Qualified Electing Fund in the
event we are a PFIC. This might avoid adverse U.S. federal income tax
consequences that may otherwise result from us should we be treated as a
PFIC.

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Executive Compensation.

The persons acting as executive officers within Hemptown have remained
consistent throughout fiscal years ended December 31, 2000, 2001 and
2002.

While we were in a start-up phase, management decided to work for little
or no monetary compensation in order to allow for additional funds to be
put towards growing the business. We do not, as of May 1, 2003, offer
any bonus plans, group or individual medical plans, or insurance coverage
of any type.

The following table sets forth in summary form all the compensation
awarded to, earned by, or paid to our President and Chief Executive
Officer. None of our other executive officers received salary, bonus and
any other form of compensation exceeding $100,000 during the fiscal years
ended December 31, 2001 and 2002.

[Enlarge/Download Table]
Other Re- Securities All
Name and Annual stricted Underlying Other
Principal Fiscal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Awards SARs Payouts sation
---------------- ---- ------ ----- ------ ------ ---- ------- ------

Jerry Kroll 2002 $48,000
Chief Executive 2001 $8,000(1) $0.00 $0.00 None 175,000(2) None None
Officer, President,
Director

(1) This annual salary is denominated in Canadian funds. The dollar
value of base salary (cash and non-cash) received for fiscal year
ending December 31, 1998, 1999, and 2000 was zero. Mr. Kroll's sole
compensation from inception till December 31, 2000 is stock options.
Mr. Kroll continued to work without monetary compensation through
till October 31, 2001 as well. $4,000 of this salary amount was
deferred to Fiscal 2002. There were no amounts reimbursed for the
payment of taxes.

(2) On November 23, 2001 the Board of Directors issued stock options to
directors, officers and employees. Mr. Kroll was awarded 175,000
stock options with the following terms: 1/12 of the options vested
on June 1, 2002, and a further 1/12 of the original grant vest on
the first day of each subsequent month. The exercise price for
these stock options is $0.50 per share. These stock options have an
expiry date of November 30, 2011.

AGGREGATED OPTION/SAR EXERCISES DURING THE MOST RECENTLY COMPLETED
FINANCIAL YEAR AND FINANCIAL YEAR-END OPTION/SAR VALUES

The following table sets out information regarding the exercise of
options (or tandem SARs) and freestanding SARs during the most recently
completed financial year ended December 31, 2002 by each of the executive
officers and the financial year-end value of unexercised options and
SARs, on an aggregate basis.

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[Enlarge/Download Table]

-------------------------------------------------------------------------------------------------------------
UNEXERCISED OPTIONS/ VALUE OF UNEXERCISED IN
SECURITIES AGGREGATE VALUE SARS AT FY-END (#) THE MONEY OPTIONS/SARS
NAME ACQUIRED ON REALIZED ($) AT FY-END ($)
EXERCISE (#) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
-------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------
Jerry Kroll 0 0 102,083 of 175,000 Nil (1)
President, CEO were exercisable at
fiscal year end
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Jason Finnis 0 0 102,083 of 175,000 Nil (1)
COO, Secretary/Treasurer were exercisable at
fiscal year end
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Larisa Harrison 0 0 102,083 of 175,000 Nil (1)
VP Admin. were exercisable at
fiscal year end
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Robert Edmunds 0 0 72,916 of 125,000 Nil (1)
CFO were exercisable at
fiscal year end
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Lesley Hayes 0 0 29,166 of 50,000 Nil (1)
VP Communications were exercisable at
fiscal year end
-------------------------------------------------------------------------------------------------------------

(1) We account for our stock options in accordance with the fair value
based method of accounting for stock based compensation. The
following weighted-average assumptions were made in estimating fair
value: dividend yield 0%; risk-free interest 3.23%; expected life
3.9 years; and expected volatility 0%. The resulting fair value of
these options has been calculated to be Nil. See Note 7 to the
"Notes to the Financial Statements for the Fiscal Year ended
December 31, 2002".

OPTION/SAR GRANTS

The following sets forth certain information current to May 1, 2003
concerning the stock options granted by us to our executive officers.
Each option represents the right to purchase one share of our common
stock.

Individual Grants
-----------------

[Enlarge/Download Table]

Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
---------------------------------------------------------------------------- -------------------
% of Total
Number of Options/
Securities SARS Exercise
Underlying Granted to or Base
Options/SARS Employees Price Expiration
Name Granted(1) in Fiscal Year ($/Share) Date 5% ($) 10% ($)
---- ------- -------------- --------- ---- ------ -------

Edmunds, Robert 125,000 14.09% $0.50 Nov. 30, 2011 3,125 6,250
CFO, Director

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Finnis, Jason 175,000 19.73% $0.50 Nov. 30, 2011 4,375 8,750
COO, Secretary/
Treasurer, Director

Harrison, Larissa 175,000 19.73% $0.50 Nov. 30, 2011 4,375 8,750
VP Administration,
Director

Hayes, Lesley 50,000 5.64% $0.50 Nov. 30, 2011 1,250 2,500
VP Communications,
Director

Kroll, Jerry 175,000 19.73% $0.50 Nov. 30, 2011 4,375 8,750
Chief Executive
Officer, President,
Director

(1) On November 23, 2001 the Board of Directors issued stock options to
directors, officers and employees. Each named executive officer was
awarded the stated amount of stock options with the following terms:
stock options were awarded as partial compensation for acting as
executive officer through to December 31, 2002. These stock options
vest as to 1/12 each month starting June 1, 2002. The exercise
price for these stock options is $0.50 per share. These stock
options have an expiry date of November 30, 2011.

PROPOSED COMPENSATION

The following table shows the amount which we pay our executive officers
starting as of November 1, 2001 and the time which our executive officers
devote to our business.

[Download Table]

Time intended
Time devoted to to be devoted to
Proposed Hemptown's Business Hemptown's Business
Name Compensation Fiscal year 2002 Fiscal year 2003
---- ------------ ---------------- ----------------

Finnis, Jason $4,000 CDN/mo. 100% 100%
Harrison, Larisa $4,000 CDN/mo. 50% 100%
Kroll, Jerry $4,000 CDN/mo. 70% 90%

EMPLOYMENT AGREEMENTS

We do not have any employment agreements with our executive officers, but
we intend in the future to enter into such agreements with our senior
executive officers.

LONG TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR

As at May 1, 2003, there were no Long Term Incentive Plans implemented or
awarded.

EMPLOYEE PENSION, PROFIT SHARING INSURANCE OR OTHER RETIREMENT PLANS

As at May 1, 2003, we did not have a benefit, pension plan, profit
sharing, insurance plan or other retirement plan, although we may adopt
one or more of such plans in the future.

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COMPENSATION OF DIRECTORS

We do not pay our directors for attending meetings of the board of
directors, although we expect to adopt a director compensation policy in
the future. We have no standard arrangement pursuant to which our
directors are compensated for any services provided as a director or for
committee participation or special assignments.

As of November 23, 2001 all directors have been awarded stock options.
The stock options were granted to reflect their efforts within Hemptown,
and were not meant to reflect their positions as directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

We do not currently have a compensation committee. Decisions as to
compensation are made from time to time with no set policies, or formulas
used as a guide.

The following table shows the persons who participated in deliberations
of our board of directors concerning executive officer compensation.

NAME OFFICES HELD
---------------- ------------
Finnis, Jason COO, Secretary/Treasurer, Director
Harrison, Larisa VP Administration, Director
Kroll, Jerry CEO, President, Chairman of the Board

FINANCIAL STATEMENTS

The audited financial statements for the years ended December 31, 2002,
2001 and 2000 are included herein.

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HEMPTOWN CLOTHING INC.

Financial Statements
(Expressed in U.S. Dollars)

December 31, 2002 and 2001

INDEX
-----

Auditors' Report

Balance Sheets

Statements of Operations and Deficit

Statements of Cash Flows

Notes to Financial Statements

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ELLIS FOSTER
CHARTERED ACCOUNTANTS

1650 West 1st Avenue
Vancouver, BC Canada V6J 1G1
Telephone: (604) 734-1112 Facsimile: (604) 714-5916
E-Mail: generaldelivery@ellisfoster.bc.ca
-------------------------------------------------------------------------

INDEPENDENT AUDITORS' REPORT

To the Shareholders of

HEMPTOWN CLOTHING INC.

We have audited the balance sheets of Hemptown Clothing Inc. as at
December 31, 2002 and 2001 and the statements of operations and deficit
and cash flows for the years then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian and United States
generally accepted auditing standards. Those standards require that we
plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 2002
and 2001 and the results of its operations and its cash flows for the
years then ended in accordance with Canadian generally accepted
accounting principles. As disclosed in Note 11, the application of
Canadian generally accepted accounting principles results in no material
differences from the application of United States generally accepted
accounting principles. As required by the Company Act of British
Columbia, we report that, in our opinion, these principles have been
applied on a consistent basis.

Vancouver, Canada [signed] "Ellis Foster"
February 11, 2003 Chartered Accountants

-------------------------------------------------------------------------
EF A partnership of incorporated professionals
An independently owned and operated member of Moore Stephens North
America Inc., a member of Moore Stephens International Limited
- members in principal cities throughout the world

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HEMPTOWN CLOTHING INC.

[Enlarge/Download Table]

Balance Sheets
December 31, 2002 and 2001
(Expressed in U.S. Dollars)
-----------------------------------------------------------------------------------------------
2002 2001
-----------------------------------------------------------------------------------------------

ASSETS

CURRENT
Cash and cash equivalents $ 125,454 $ 75,640
Accounts receivable 115,127 21,384
Inventories 190,114 41,168
Prepaid expenses 33,795 7,008
-----------------------------------------------------------------------------------------------
464,490 145,200
DUE FROM A SHAREHOLDER, non interest bearing and
no terms of repayment 15,000 -
Capital assets (note 4) 25,219 9,813
-----------------------------------------------------------------------------------------------
$ 504,709 $ 155,013
===============================================================================================

LIABILITIES

CURRENT
Accounts payable and accrued liabilities $ 110,635 $ 31,185
Note payable (note 6b) 50,000 -
Capital lease obligation (note 9b) 6,385 -
-----------------------------------------------------------------------------------------------
167,020 31,185
CAPITAL LEASE OBLIGATION (note 9b) 465 -
DUE TO SHAREHOLDERS, non-interest bearing and
no terms of repayment - 50,459
-----------------------------------------------------------------------------------------------
167,485 81,644
-----------------------------------------------------------------------------------------------

SHAREHOLDERS' EQUITY

SHARE CAPITAL (note 5) 760,567 225,321

FOREIGN CURRENCY TRANSLATION 1,778 2,199

DEFICIT (425,121) (154,151)
-----------------------------------------------------------------------------------------------
337,224 73,369
-----------------------------------------------------------------------------------------------
$ 504,709 $ 155,013
===============================================================================================

COMMITMENTS (note 9)

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HEMPTOWN CLOTHING INC.

[Enlarge/Download Table]

Statements of Operations and Deficit
Years Ended December 31, 2002 and 2001
(Expressed in U.S. Dollars)
-----------------------------------------------------------------------------------------------
2002 2001
-----------------------------------------------------------------------------------------------

SALES $ 497,409 $ 126,068

COST OF GOODS SOLD 388,776 87,561
-----------------------------------------------------------------------------------------------

GROSS MARGIN (2002 - 21.8%; 2001 - 30.5%) 108,633 38,507
-----------------------------------------------------------------------------------------------

EXPENSES
Advertising and promotion 100,950 21,016
Amortization 10,866 1,840
Automobile 3,159 3,978
Bad debts 2,678 3,375
Bank charges and interest 11,971 3,953
Insurance 3,484 902
Legal and accounting 41,977 11,093
Office and miscellaneous 20,316 5,497
Rent 32,710 23,065
Research and development 5,889 3,201
Salaries and employee benefits 132,672 40,858
Shrinking and spoilage 1,149 7,753
Telephone and fax 11,782 6,367
-----------------------------------------------------------------------------------------------

379,603 132,898
-----------------------------------------------------------------------------------------------

LOSS FOR THE YEAR (270,970) (94,391)

DEFICIT, beginning of year (154,151) (59,760)
-----------------------------------------------------------------------------------------------

DEFICIT, end of year $ (425,121) $ (154,151)
===============================================================================================

LOSS PER SHARE (BASIC AND DILUTED) $ (0.02) $ (0.01)
===============================================================================================

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
(BASIC AND DILUTED) 11,099,523 9,434,799
===============================================================================================

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HEMPTOWN CLOTHING INC.

[Enlarge/Download Table]

Statements of Cash Flows
Years Ended December 31, 2002 and 2001
(Expressed in U.S. Dollars)
-----------------------------------------------------------------------------------------------
2002 2001
-----------------------------------------------------------------------------------------------

CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Loss for the year $ (270,970) $ (94,391)
Adjustment for:
Amortization 10,866 1,840
-----------------------------------------------------------------------------------------------

(260,104) (92,551)

Changes in non-cash working capital
Increase in accounts receivable (93,743) (16,009)
Increase in inventories (148,946) (25,507)
Increase in prepaid expenses (26,787) (6,853)
Increase in accounts payable and accrued liabilities 79,450 7,424
Increase in capital lease obligation 6,850 -
-----------------------------------------------------------------------------------------------

(443,280) (133,496)
-----------------------------------------------------------------------------------------------

CASH FLOWS (USED IN) INVESTING ACTIVITIES
Purchase of capital assets (26,272) (6,768)
-----------------------------------------------------------------------------------------------

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Issuance of share capital 535,246 225,258
Issuance of note payable 50,000 -
Repayments to shareholders (65,459) (35,556)
-----------------------------------------------------------------------------------------------

519,787 189,702
-----------------------------------------------------------------------------------------------

EFFECT OF EXCHANGE RATE CHANGES ON CASH (421) 1,432
-----------------------------------------------------------------------------------------------

INCREASE IN CASH AND CASH EQUIVALENTS 49,814 50,870

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 75,640 24,770
-----------------------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS, END OF YEAR $ 125,454 $ 75,640
===============================================================================================

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HEMPTOWN CLOTHING INC.

Notes to Financial Statements
December 31, 2002 and 2001
(Expressed in U.S. Dollars)
-------------------------------------------------------------------------

The financial statements are presented in accordance with Canadian
Generally Accepted Accounting Principles ("GAAP").

1. OPERATIONS

Hemptown Clothing Inc. ("Hemptown" or the "Company") is a British
Columbia corporation incorporated on October 6, 1998 in the business
of manufacturing clothing. Primary sales markets are in Canada and
the United States.

2. SIGNIFICANT ACCOUNTING POLICIES

a) Inventories

Inventories of clothing are valued at the lower of cost and net
realizable value. Cost includes all direct material and direct
labour incurred during the manufacturing process.

b) Capital Assets

Capital assets are stated at cost and amortized using the
following methods:

Computer equipment 30% declining balance
Computer software 100% declining balance
Furniture and fixtures 20% declining balance
Leasehold improvements 30% declining balance
Production equipment 20% declining balance
Website 5 year straight line
Assets under capital lease straight line over term of lease

c) Reporting Currency Translation

The Company's functional currency is Canadian dollars. The
Company translates its functional currency to the reporting
currency in U.S. dollars using the Current Rate Method. Assets
and liabilities are translated into U.S. dollars at the
exchange rate in effect at the year-end. Revenues and expenses
are translated throughout the year at the exchange rate
prevailing at the date of receipt or payment. Unrealized gains
or losses from such transactions are reported as a separate
component of shareholders' equity.

d) Revenue Recognition

Revenue is recognized upon the shipment of the goods to the
customer.

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HEMPTOWN CLOTHING INC.

Notes to Financial Statements
December 31, 2002 and 2001
(Expressed in U.S. Dollars)
-------------------------------------------------------------------------

2. SIGNIFICANT ACCOUNTING POLICIES (cont'd)

e) Use of Estimates

The preparation of financial statements in conformity with
Canadian generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amount of assets and liabilities at the date of the
financial statements and the reported amount of revenues and
expenses during the period. Actual results may differ from
those estimates.

f) Income Taxes

Income taxes are accounted for using the asset and liability
method pursuant to Section 3465, Income Taxes, of THE HANDBOOK
OF THE CANADIAN INSTITUTE OF CHARTERED ACCOUNTANTS. Future
taxes are recognized for the tax consequences of "temporary
differences" by applying enacted or substantively enacted
statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and tax basis
of existing assets and liabilities. The effect on deferred
taxes for a change in tax rates is recognized in income in the
period that includes the date of enactment or substantive
enactment. In addition, Section 3465 requires the recognition
of future tax benefits to the extent that realization of such
benefits is more likely than not.

g) Stock-Based Compensation

Effective July 1, 2002, the Company changed its stock options
accounting policy to apply the fair value based method to
account for stock-based compensations for all of its Stock
Option Plan since inception (see Note 7). The fair value of
stock options is determined by the Black-Scholes Option Pricing
Model with assumptions for risk-free interest rates, dividend
yield, volatility factor of the expected market price of the
Company's common shares and the expected life of options.

h) Cash Equivalents

Cash equivalents usually consist of highly liquid investments
that are readily convertible into cash with maturity of three
months or less when purchased.

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HEMPTOWN CLOTHING INC.

Notes to Financial Statements
December 31, 2002 and 2001
(Expressed in U.S. Dollars)
-------------------------------------------------------------------------

2. SIGNIFICANT ACCOUNTING POLICIES (cont'd)

i) Earnings (Loss) Per Share

Basic earnings (loss) per share are computed using the
weighted-average number of common shares outstanding during the
period. Diluted earnings (loss) per share amounts are
calculated giving effect to the potential dilution that would
occur if securities or other contracts to issue common shares
were exercised or converted to common shares using the treasury
method. The treasury stock method assumes that proceeds
received from the exercise of stock options and warrants are
used to repurchase common shares at the prevailing market rate.

3. FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash, accounts
receivable, notes payable, accounts payable and accrued liabilities
and amounts due from shareholders. It is management's opinion that
the Company is not exposed to significant interest, currency or
credit risks arising from these financial instruments. The fair
value of these financial instruments approximate their carrying
values.

4. CAPITAL ASSETS

[Download Table]

Net Book Value
--------------------------
Accumulated December 31, December 31,
Cost Amortization 2002 2001
--------------------------------------------------------------------------------

Computer equipment $ 5,227 $ 1,453 $ 3,774 $ 824
Computer software 190 190 - 99
Furniture and fixtures 2,554 535 2,019 1,456
Leasehold improvements 3,693 970 2,723 1,442
Production equipment 7,046 2,138 4,908 4,664
Website 6,588 1,642 4,946 1,328
Computer equipment under
capital lease 1,020 227 793 -
Telephone equipment under
capital lease 2,233 1,428 805 -
Computer software under
capital lease 10,503 5,252 5,251 -
--------------------------------------------------------------------------------
$ 39,054 $ 13,835 $ 25,219 $ 9,813
================================================================================

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HEMPTOWN CLOTHING INC.

Notes to Financial Statements
December 31, 2002 and 2001
(Expressed in U.S. Dollars)
-------------------------------------------------------------------------

5. SHARE CAPITAL

Authorized:

100,000,000 common shares without par value

Issued and outstanding:

[Download Table]

2002 2001
--------------------------------------------------
Number of Number of
Shares Amount Shares Amount
---------------------------------------------------------------------------------

BALANCE, BEGINNING OF PERIOD 9,664,201 $ 225,321 9,199,001 $ 63
----------------------------
Shares issued for cash 1,970,334 534,827 465,200 225,258
Imputed interest on warrants - 419 - -
--------------------------------------------------------------------------------
BALANCE, END OF PERIOD 11,634,535 $ 760,567 9,664,201 $ 225,321
================================================================================

6. SHARE PURCHASE WARRANTS

On September 24, 2002, pursuant to the 'Waiver of Rights' agreement,
the Company has allotted 2,300,000 common shares with the use of the
following share purchase warrants:

a) 900,000 WARRANT UNITS were allotted as part of a loan
agreement whereby the lenders may lend up to $1,800,000 to
the Company. Lenders will be issued a single warrant unit
for every $2.00 US lent to the Company under the terms of
the loan agreement.

150,000 WARRANT UNITS were allotted in lieu of consulting
services to be performed for the Company. The contract
period for these services commences after December 31,
2002, thus no fair value has been expensed in the current
period.

Each warrant unit consists of a right to purchase one
common share at a price of $2.00, plus one piggyback
warrant, which consists of one common share at a price of
$4.00. The warrant units expire three years from the date
of issue and the piggyback warrants expire one year from
the exercise of the warrant units.

b) 200,000 WARRANTS were allotted in exchange for $50,000
interest-free debt to be lent to the Company. The loan
has a term of one year and is payable on October 2, 2003.
As at December 31, 2002, the Company received the loan but
has yet to issue the warrants. The fair value ($1,675) of
these warrants is recognized as interest and expensed over
the life of the debt.

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HEMPTOWN CLOTHING INC.

Notes to Financial Statements
December 31, 2002 and 2001
(Expressed in U.S. Dollars)
-------------------------------------------------------------------------

7. STOCK OPTION PLAN

Under the November 23, 2001 Stock Option Plan, the Company may grant
options to its directors and employees for up to 887,000 common
shares. The exercise price of each option is $0.50 per common share
and the term is 5 years. The options vest at 1/12 per month
beginning June 1, 2002. An additional 80,000 options were issued on
May 23, 2002. The exercise price of each option is $0.50 per common
share. These options vest 100% on March 8, 2003 and expire on March
23, 2003. The weighted average remaining contractual life of these
options at December 30, 2002 was 3.7 years. The following
weighted-average assumptions were made in estimating fair value:
dividend yield 0%, risk-free interest 3.23%, expected life 3.9
years, and expected volatility 0%.

The Company accounts for its stock options under those plans in
accordance with the fair value based method of accounting for
stock-based compensation. The resulting fair value of these options
has been calculated to be Nil. As a result, no compensation cost
has been charged to income.

A summary of the status of the Company's stock option plan as of
December 31, 2002 is presented below:

[Download Table]

--------------------------------
Weighted-Average
Shares Exercise Price
---------------------------------------------------------------------------

Options granted on inception of Plan 887,000 $ 0.50

Options granted during the period 80,000 $ 0.50
---------------------------------------------------------------------------

Options outstanding, end of period 967,000 $ 0.50
===========================================================================

Options exercisable, end of period 517,417 $ 0.50
===========================================================================

8. INCOME TAXES

As at December 31, 2002, the Company has estimated tax loss carry
forwards for tax purposes of $404,177. This amount may be applied
against future federal taxable income. The Company evaluates its
valuation allowance requirements on an annual basis based on
projected future operations. When circumstances change and this
causes a change in management's judgement about the realizability of
deferred tax assets, the impact of the change on the valuation
allowance is generally reflected in current income.

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HEMPTOWN CLOTHING INC.

Notes to Financial Statements
December 31, 2002 and 2001
(Expressed in U.S. Dollars)
-------------------------------------------------------------------------

8. Income Taxes (cont'd)

The tax effects of temporary differences that give rise to the
Company's future tax asset (liability) are as follows:

2002 2001
-------------------------------------------------------------
Loss carry forwards $ (161,750) $ (58,000)
Valuation allowance 161,750 58,000
-------------------------------------------------------------
$ - $ -
=============================================================

9. COMMITMENTS

a) The Company is committed to current annual lease payments
totaling $78,700 (2001 - $101,200) for premises under lease.
The lease expires in 2006. Approximate minimum lease payments
over the next four years are as follows:

2003 $ 23,500
2004 24,800
2005 26,000
2006 4,400
-------------------------
$ 78,700
=========================

b) Obligations Under Capital Leases

The future minimum lease payments are as follows:

[Download Table]

2002 2001
------------------------------------------------------------------

2003 $ 6,871 $ -
2004 375 -
2005 125 -
------------------------------------------------------------------
Total future minimum lease payments 7,371 -

Less: Imputed interest (521) -
------------------------------------------------------------------
Balance of obligations under capital
leases 6,850 -

Less: Principal due within one year 6,385 -
------------------------------------------------------------------
Long-term obligations under capital
leases $ 465 $ -
==================================================================

These capital leases bear interest ranging from 6.5% to 8.5% per
annum. The liabilities are effectively secured as the rights to the
leased assets revert to the lessor in the event of default.

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HEMPTOWN CLOTHING INC.

Notes to Financial Statements
December 31, 2002 and 2001
(Expressed in U.S. Dollars)
-------------------------------------------------------------------------

10. RELATED PARTY TRANSACTIONS

During the year, a consulting fee of $15,000 was paid to a
shareholder of the Company for promotional and consulting services.
The fee was for a period of service of 48 months ending August 31,
2004. The amount is being charged to operations over the term of
the contract.

At December 31, 2002, a shareholder loan receivable of $15,000
remains outstanding. The loan has no stated terms of repayment and
is non-interest bearing.

11. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

These financial statements have been prepared in accordance with
Canadian generally accepted accounting principles ("Canadian GAAP"),
which may differ, in certain respects, from accounting principles
generally accepted in the United States (U.S. "GAAP"). As at
December 31, 2002 there are no material differences between Canadian
GAAP and U.S. GAAP. However, the component of "Foreign currency
translation gain" of Shareholders' Equity, under Canadian GAAP, is
classified as "Accumulated Other Comprehensive Income" under U.S.
GAAP and the Company would have recorded "Other Comprehensive Loss"
due to changes in foreign currency translation of $421 under the
U.S. GAAP for the year, as presented below in the Statement of
Comprehensive Earnings (Loss):

Statement of Comprehensive Earnings (Loss):

[Download Table]

2002 2001
------------------------------------------------------------------

Loss for the year $ (270,970) $ (94,391)
Foreign currency translation adjustment (421) 1,432
------------------------------------------------------------------
Comprehensive loss $ (271,391) $ (92,959)
=================================================================

The statements of comprehensive earnings provide a measure of all
changes in equity of the Company that result from transactions and
other economic events that occur during the period.

12. COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform to the
financial statement presentation adopted for the current period.

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HEMPTOWN CLOTHING INC.

Financial Statements
(Expressed in U.S. Dollars)

December 31, 2001 and 2000

Index
-----

Auditors' Report

Balance Sheets

Statements of Operations and Deficit

Statements of Cash Flows

Notes to Financial Statements

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ELLIS FOSTER
CHARTERED ACCOUNTANTS

1650 West 1st Avenue
Vancouver, BC Canada V6J 1G1
Telephone: (604) 734-1112 Facsimile: (604) 714-5916
E-Mail: generaldelivery@ellisfoster.bc.ca

-------------------------------------------------------------------------

INDEPENDENT AUDITORS' REPORT

To the Shareholders of

HEMPTOWN CLOTHING INC.

We have audited the balance sheets of Hemptown Clothing Inc. as at
December 31, 2001 and 2000 and the statements of operations and deficit
and cash flows for the years then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

In our opinion these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 2001
and 2000 and the results of its operations and its cash flows for the
years then ended in accordance with Canadian generally accepted
accounting principles. As disclosed in Note 8, the application of
Canadian generally accepted accounting principles results in no material
differences from the application of United States generally accepted
accounting principles. As required by the Company Act of British
Columbia, we report that, in our opinion, these principles have been
applied on a consistent basis.

Vancouver, Canada [signed] "Ellis Foster"
February 6, 2002 Chartered Accountants

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HEMPTOWN CLOTHING INC.

[Enlarge/Download Table]

Balance Sheets
December 31, 2001 and 2000
(Expressed in U.S. Dollars)
-----------------------------------------------------------------------------------------------
2001 2000
-----------------------------------------------------------------------------------------------

ASSETS

Current
Cash $ 75,640 $ 24,770
Accounts receivable (less provisions of $3,014; 2000 - $nil) 21,384 5,375
Inventories 41,168 15,661
Prepaids 7,008 156
-----------------------------------------------------------------------------------------------

145,200 45,962

Capital assets (note 4) 9,813 4,881
-----------------------------------------------------------------------------------------------

$ 155,013 $ 50,843
===============================================================================================

LIABILITIES

Current
Accounts payable and accrued liabilities $ 31,185 $ 23,758

Due to shareholders, non-interest bearing and
no terms of repayment 50,459 86,015
-----------------------------------------------------------------------------------------------

81,644 109,773
-----------------------------------------------------------------------------------------------

SHARE CAPITAL & DEFICIT

Share capital (note 5) 225,321 63

Unrealized foreign exchange gain 2,199 767

Deficit (154,151) (59,760)
-----------------------------------------------------------------------------------------------

73,369 (58,930)
-----------------------------------------------------------------------------------------------

$ 155,013 $ 50,843
===============================================================================================

Commitments (note 7)
Contingent liabilities (note 9)

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HEMPTOWN CLOTHING INC.

[Enlarge/Download Table]

Statements of Operations and Deficit
Years Ended December 31, 2001 and 2000
(Expressed in U.S. Dollars)
-----------------------------------------------------------------------------------------------
2001 2000
-----------------------------------------------------------------------------------------------

Sales $ 126,068 $ 39,014

Cost of goods sold 87,561 32,418
-----------------------------------------------------------------------------------------------

Gross margin (2001 - 30.5%; 2000 - 16.9%) 38,507 6,596
-----------------------------------------------------------------------------------------------

Expenses
Advertising and promotion 21,016 8,818
Amortization 1,840 852
Automobile 3,978 4,449
Bad debts 3,375 1,264
Bank charges and interest 3,953 1,899
Insurance 902 308
Legal and accounting 11,093 11,990
Office and miscellaneous 5,497 2,314
Rent 23,065 4,040
Research and development 3,201 387
Salaries and employee benefits 40,858 3,261
Shrinking and spoilage 7,753 6,952
Telephone and fax 6,367 1,060
-----------------------------------------------------------------------------------------------

132,898 47,594
-----------------------------------------------------------------------------------------------

Loss for the year (94,391) (40,998)

Deficit, beginning of year (59,760) (18,762)
-----------------------------------------------------------------------------------------------

Deficit, end of year $ (154,151) $ (59,760)
===============================================================================================

Loss per share (basic and diluted) $ (0.01) $ (0.01)
===============================================================================================

Weighted average number of shares outstanding
(basic and diluted) 9,434,799 3,906,425
===============================================================================================

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HEMPTOWN CLOTHING INC.

[Enlarge/Download Table]

Statements of Cash Flows
Years Ended December 31, 2001 and 2000
(Expressed in U.S. Dollars)
-----------------------------------------------------------------------------------------------
2001 2000
-----------------------------------------------------------------------------------------------

Cash flows (used for) operating activities
Loss for the year $ (94,391) $ (40,998)
Adjustment for:
Amortization 1,840 852
-----------------------------------------------------------------------------------------------

(92,551) (40,146)

Changes in non-cash working capital
Decrease (increase) in accounts receivable (16,009) 6,809
Increase in inventories (25,507) (5,741)
Increase in prepaid expenses (6,853) (156)
Increase in accounts payable and accrued liabilities 7,424 23,126
-----------------------------------------------------------------------------------------------

(133,496) (16,108)
-----------------------------------------------------------------------------------------------

Cash flows (used for) investing activities
Purchase of capital assets (6,768) (5,579)
-----------------------------------------------------------------------------------------------

Cash flows from (used for) financing activities
Issuance of share capital 225,258 62
Advances from (repayments to) shareholders (35,556) 38,708
Unrealized foreign exchange gain 1,432 767
-----------------------------------------------------------------------------------------------

191,134 39,537
-----------------------------------------------------------------------------------------------

Increase in cash 50,870 17,850

Cash, beginning of year 24,770 6,920
-----------------------------------------------------------------------------------------------

Cash, end of year $ 75,640 $ 24,770
===============================================================================================

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HEMPTOWN CLOTHING INC.

Notes to Financial Statements
December 31, 2001 and 2000
(Expressed in U.S. Dollars)
-------------------------------------------------------------------------

The financial statements are presented in accordance with Canadian
Generally Accepted Accounting Principles ("GAAP").

1. Operations

Hemptown Clothing Inc. ("Hemptown" or the "Company") is a British
Columbia corporation incorporated on October 6, 1998 in the business
of manufacturing clothing.

2. Significant Accounting Policies

a) Inventories

Inventories of clothing are valued at the lower of cost and net
realizable value. Cost includes all direct material and direct
labour incurred during the manufacturing process.

b) Capital Assets

Capital assets are stated at cost and amortized using the
following methods:

c) Foreign Currency Translation

Assets and liabilities pertaining to monetary assets are
translated into U.S. dollars at the exchange rate in effect at
the year-end. Revenues and expenses are translated throughout
the year at the exchange rate prevailing at the date of receipt
or payment. Unrealized gains or losses from such transactions
are included in shareholders' equity.

d) Revenue Recognition

Revenue is recognized upon the shipment of the goods to the
customer.

e) Use of Estimates

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HEMPTOWN CLOTHING INC.

Notes to Financial Statements
December 31, 2001 and 2000
(Expressed in U.S. Dollars)
-------------------------------------------------------------------------

2. Significant Accounting Policies (cont'd)

f) Stock-Based Compensation

No compensation expense is recognized when stock options are
issued to employees, directors and consultants of the Company.
Any consideration paid on the exercise of stock options or
purchase of stock is credited to share capital.

g) Advertising Costs

The Company expenses advertising costs as incurred.

h) Earnings (Loss) Per Share

Basic earnings (loss) per share are computed using the
weighted-average number of common shares outstanding during the
period. Options to purchase common shares outstanding as at
December 31, 2001 are not included in the computation, as the
effect of including them would be anti-dilutive.

3. Financial Instruments

The Company's financial instruments consist of cash, accounts
receivable, accounts payable and accrued liabilities and amounts due
to shareholders. It is management's opinion that the Company is not
exposed to significant interest, currency or credit risks arising
from these financial instruments. The fair value of these financial
instruments approximate their carrying values, unless otherwise
noted.

4. Capital Assets

[Download Table]

Net Book Value
Accumulated ------------------------
Cost Amortization 2001 2000
---------------------------------------------------------------------------------

Computer equipment $ 1,497 $ 673 $ 824 $ 342
Computer software 198 99 99 -
Furniture and fixtures 1,618 162 1,456 -
Leasehold improvements 1,697 255 1,442 -
Production equipment 5,801 1,137 4,664 2,844
Website 2,137 809 1,328 1,695
---------------------------------------------------------------------------------
$ 12,948 $ 3,135 $ 9,813 $ 4,881
=================================================================================

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HEMPTOWN CLOTHING INC.

Notes to Financial Statements
December 31, 2001 and 2000
(Expressed in U.S. Dollars)
-------------------------------------------------------------------------

5. Share Capital

Authorized:

100,000,000 common shares without par value

Issued and outstanding:

[Download Table]

Number of Shares Amount
2001 2000 2001 2000
---------------------------------------------------------------------------------

Balance, beginning of year 9,199,001 1 $ 63 $ 1
Shares issued for cash 220,200 9,199,000 106,587 62
Fully paid, unissued shares 245,000 - 118,671 -
---------------------------------------------------------------------------------
Balance, end of year 9,664,201 9,199,001 $ 225,321 $ 63
=================================================================================

During the year, 245,000 common shares were subscribed to for
$118,587. At December 31, 2001, the issuance of these shares are
pending the approval of the board of directors.

6. Stock-Based Compensation Plan

During the year, the Company implemented a stock-based compensation
plan. Under the November 23, 2001 Stock Option Plan, the Company
may grant options to its directors and employees for up to 887,000
common shares. The exercise price of each option is $0.50 per
common share and the term is 5 years. The options vest at 1/12 per
month beginning June 1, 2002.

A summary of the status of the Company's stock option plan as of
December 31, 2001 is presented below:

2001
---------------------
Weighted-
Average
Exercise
Shares Price
--------------------------------------------------------------------
Options granted on inception of plan 887,000 $ 0.50
Options outstanding, end of year 887,000 $ 0.50
Options exercisable at year-end (fully vested) -
====================================================================

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HEMPTOWN CLOTHING INC.

Notes to Financial Statements
December 31, 2001 and 2000
(Expressed in U.S. Dollars)
-------------------------------------------------------------------------

7. Commitments

The Company is committed to current annual lease payments totalling
$101,200 (2000 - nil) for premises under lease. The lease expires
in 2006. Approximate minimum lease payments over the next five
years are as follows:

2002 $ 22,500
2003 23,500
2004 24,800
2005 26,000
2006 4,400
------------------------------
$ 101,200
==============================

8. United States Generally Accepted Accounting Principles

9. Contingent Liabilities

A line of credit for $33,000 was opened prior to year-end in order
to secure a shipment of goods. Payment was made January 8, 2002.

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HEMPTOWN CLOTHING INC.

2,085,534 shares of common stock to be sold by
certain selling security holders
200,000 shares of common stock issuable upon
the exercise of outstanding warrants
150,000 shares of common stock issuable upon
the exercise of outstanding warrant units

--------------------------------
PROSPECTUS
--------------------------------

May 9, 2003

No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in
this prospectus, and, if given or made, such information or
representations may not be relied on as having been authorized by us or
any of the underwriters. Neither the delivery of this prospectus nor any
sale make hereunder shall under any circumstances create an implication
that there has been no change in our affairs since the date of this
prospectus. This prospectus does not constitute and offer to sell, or
solicitation of any offer to buy, by any person in any jurisdiction in
which it is unlawful for any such person to make such an offer or
solicitation. Neither the delivery of this prospectus nor any offer,
solicitation or sale made hereunder, shall under any circumstances create
any implication that the information herein is correct as of any time
subsequent to the date of the prospectus.

Dealer Prospectus Delivery Obligation

Until ________, _____, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be
required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.

SB-2/A 72nd Page of 77 TOC 1st Previous Next Bottom Just 72nd

PART II - INFORMATION NOT REQUIRED IN PROSPECTUS

Indemnification of Directors and Officers.

Our Articles of Association authorize indemnification of every person who
is or was a director of Hemptown or is or was serving at our request as a
director of another corporation of which we are or were a shareholder.
The board of directors may determine whether or not to indemnify any
person who is or was an officer, employee, agent, or person working to
the benefit of Hemptown against all costs, charges and expenses actually
incurred by him.

In addition, subject to the provisions of the Company Act (British
Columbia), our Articles of Association provide that:

No director, officer, employee or agent of Hemptown, will be liable
for:
* the act, neglect or default of any other director, officer,
employee or agent,
* for joining in any act for the sake of conformity,
* for any loss, damage or expense sustained or incurred by
Hemptown through the insufficiency or deficiency of any
security in or upon which any of the monies of Hemptown are
placed or invested,
* for any loss or damage arising from the bankruptcy, insolvency
or wrongful act of any person, firm or corporation with whom
any monies, or securities, are deposited, or
* for any other loss, damage or misfortune whatever which may
happen in the execution of the duties of his office or trust or
in relation thereto, unless the same happens by or through his
own willful neglect or default.

Furthermore, subject to the provisions of the Company Act (British
Columbia), our Articles of Association provide that our directors may
cause us to purchase and maintain insurance for the benefit of any person
who is or may be entitled to indemnification as mentioned above against
any expense or liability from which he is or may be so entitled to be
indemnified and may secure such right of indemnification by mortgage or
other charge upon all or any part of our real and personal property, and
any action taken by the board will not require approval or confirmation
by our shareholders.

Other Expenses of Issuance and Distribution.

The following table sets forth our expenses in connection with this
registration statement. All such expenses are estimates, other than the
filing fees payable to the Securities and Exchange Commission.

Filing Fee - Securities and Exchange Commission $ 112.81
Fees and Expenses of accountants and legal counsel $ 46,000.00
Printing Costs $ 4,045.00
State Taxes $ 0
Federal Taxes $ 0
Miscellaneous Expenses $ 500.00
-----------
Total $ 50,657.81

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Recent Sales of Unregistered Securities.

Since October 6, 1998, the date of our incorporation, we have issued the
following shares of our common stock for cash rendered to us and have
granted the following stock options to purchase shares of our common
stock, absent registration under the Securities Act of 1933, as amended
(the "Securities Act"). At the time of sale of our securities, we were
not subject to United States securities laws, the purchasers of our
securities were not United States residents and the subscription
agreements were not entered into in the United States. Therefore, we did
not have to rely on Regulation S for any of our distributions. In
addition, we issued our securities in accordance with exemptions from
prospectus requirements found in applicable securities legislation in the
Province of British Columbia.

Some of the holders of the shares of our common stock issued below may
have subsequently transferred or disposed of their shares and the list
does not purport to be a current listing of our shareholders.

On October 6, 1998, we issued one share of common stock to Mr. Jerry
Kroll at a purchase price of CDN$1.00 per share as the initial
subscriber's share for total gross proceeds in cash of CDN$1.00. We
believe that such issuance was exempt from registration as the securities
were issued in an offshore transaction which was negotiated outside of
the United States and consummated outside of the United States.

On July 29, 2000, we sold in aggregate 9,199,000 shares of our common
stock to Messrs. Jerry Kroll, Jason Finnis & Larisa Harison, Daniel O'Day
and Weril Investments Inc. at a purchase price of approximately $0.00001
per share for total gross proceeds in cash of CDN$91.99. We believe that
such issuance was exempt from registration as the securities were issued
in an offshore transaction which was negotiated outside of the United
States and consummated outside of the United States.

On April 9, 2001, Mr. Jerry Kroll who was issued 6,499,000 shares of our
common stock, transferred in aggregate 3,865,996 of his shares of our
common stock to Mr. Robert Edmunds, Imperial Trust, Plato Trust, Socrates
Trust and Techsonic Trust at a purchase price of $0.00001 per share.

On August 14, 2001, we sold in aggregate 220,200 shares of our common
stock to Messrs. Jim Hopkins, Darcy Taylor, Frank Amoretto and Ken Lelek
and Drake Enterprises Ltd. at a purchase price of $0.50 per share for
total gross proceeds in cash of $110,100. We believe that such issuance
was exempt from registration as the securities were issued in an offshore
transaction which was negotiated outside of the United States and
consummated outside of the United States.

On November 23, 2001, we granted to Messrs. Jerry Kroll, Jason Finnis,
Larisa Harrison, Robert Edmunds, Chris Zacharias, Lesley Hayes, David
Solomon and Diane Friesen in aggregate 887,000 stock options to purchase
an aggregate of 887,000 shares or our common stock exercisable at $0.50
per share until November 30, 2011. Such stock options were granted to
our officers, directors, employees and consultants. We believe that such
option grants were exempt from registration as the securities were issued
in an offshore transaction which were negotiated outside of the United
States and consummated outside of the United States.

On April 17, 2002, we issued in aggregate 1,815,334 shares of our common
stock to Messrs. William Nikolia, Helen Hrescak, Susan Jeske, Tim Lelek,
Diane Friesen, Kevin Friesen, Jim Hopkins, Frank Amoretto, Troy Tallion,
Shawn Lelek, and David Lukinuk, and Drake Enterprises Ltd., Imperial
Trust, Socrates Trust and Renewal Partners at purchase prices ranging
from $0.25747 to $0.50 per share for total gross proceeds in cash of
$549,964. 245,000 of these common shares were paid for in fiscal 2001.
We believe that such issuance was exempt from registration as the
securities were issued in an offshore transaction which were negotiated
outside of the United States and consummated outside of the United
States.

On May 23, 2002, we granted to Mr. Joel Solomon, one of our consultants,
80,000 stock options to purchase an aggregate of 80,000 shares of our
common stock exercisable at $0.50 per share until March 23, 2003. All of
these stock options vested on March 8, 2003. On March 22, 2003, Mr. Joel
Solomon

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exercised all 80,000 of his stock options at $0.50 per share for total
proceeds of $40,000. We believe that such option grants were exempt from
registration as the securities were issued in an offshore transaction
which were negotiated outside of the United States and consummated
outside of the United States.

On August 20, 2002, we entered into two separate loan arrangements with
Bigger Bite Holdings Ltd. and Purchase Holdings Ltd., for up to $900,000
each with an interest rate of 12% per annum, calculated monthly in
arrears and not in advance, and whereby it is contemplated that for every
$2.00 lent to us, we will issue one warrant unit on August 20, 2004.
Therefore, we have allotted up to 900,000 warrant units which may be
issued on August 20, 2004. As of February 1, 2003, no money have been
lent to us from either of these certain companies. In addition, we have
the right to refuse to accept any loans offered by either of these
certain companies. Each warrant unit, if issued, consists of the right
to purchase one share of our common stock at a price of $2.00 per share
plus one piggyback warrant. Each piggyback warrant consists of a right
to purchase one share of our common stock at a price of $4.00 per share.
These warrant units, if issued, will expire on August 20, 2007, with the
piggyback warrants being exercisable for one year from the date of the
warrant units being exercised. We believe that the entering into of such
loan arrangements and the potential issuance of the warrant units is
exempt from registration as the securities were and will be issued in an
offshore transaction which were negotiated outside of the United States
and consummated outside of the United States.

On October 17, 2002 we issued in aggregate 400,000 shares of our common
stock to Messrs. Jim Hopkins and Frank Amoretto at a purchase price of
$0.25 per share for total gross proceeds in cash of $100,000. We believe
that such issuance was exempt from registration as the securities were
issued in an offshore transaction which were negotiated outside of the
United States and consummated outside of the United States.

On February 19, 2003, we issued 200,000 warrants to Drake Enterprises
Ltd. to purchase 200,000 shares of our common stock at a price of $0.25
per share as part of a convertible loan agreement. Proceeds from the
loan were $50,000 in cash. The warrants are exercisable for one year
from the issuance of the loan, which was October 2, 2002. We believe
that such issuance of warrants was exempt from registration as the
securities were issued in an offshore transaction which were negotiated
outside of the United States and consummated outside of the United
States.

On February 19, 2003, we issued 150,000 warrant units to Ms. Michelle
McQueen to purchase price of $0.001 per warrant unit for total gross
proceeds in cash of $150.00. Each warrant unit consists of the right to
purchase one share of our common stock at a price of $2.00 per share plus
one piggyback warrant. Each piggyback warrant consists of a right to
purchase one share of our common stock at a price of $4.00 per share.
These warrant units expire on September 18, 2005, with the piggyback
warrants being exercisable for one year from the date of the warrant
units being exercised. We believe that such issuance of warrant units
was exempt from registration as the securities were issued in an offshore
transaction which were negotiated outside of the United States and
consummated outside of the United States.

The gross proceeds from the sale of all the securities were used for our
general operations.

Exhibits.

Exhibits
3.1 Memorandum of Hemptown Clothing Inc.*
3.2 Articles of Association of Hemptown Clothing Inc.*
5.1 Opinion of Devlin Jensen
10.1 Form of Stock Option Agreement*
10.2 Voluntary Pooling Agreement dated April 8, 2002*
10.3 Loan Agreement with Drake Enterprises Ltd.*
10.4 Loan Agreement with Bigger Bite Holdings Ltd.*
10.5 Loan Agreement with Purchase Holdings Ltd.*

10.6 Consulting Services Agreement with Renewal Partners Company*

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10.7 Consulting Services Agreement with Michelle McQueen*

23.1 Consent of Accountants
23.2 Consent of Devlin Jensen (included in Exhibit 5.1)
24 Irrevocable Consent and Power of Attorney on Form F-X*

* previously filed

Undertakings

The undersigned registrant hereby undertakes:

(a) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change
in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in
the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and

(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.

(2) For determining liability under the Securities Act of 1933,
treat such post-effective amendment as a new registration statement
of the securities offered, and the offering of the securities at
that time to be the initial bona fide offering.

(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.

(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of
the registrant in the successful defence of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.

(c) The undersigned registrant hereby undertakes that for the purpose of
determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.

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SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized,

in the City of Vancouver, Province of British Columbia,
on May 9, 2003

HEMPTOWN CLOTHING INC.

Per: "Jerry Kroll" Per: "Robert Edmunds"
------------------------- -------------------------
Jerry Kroll, CEO, President Robert Edmunds, CFO
and Chairman of the Board Principal Accounting Officer
and a Director

In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.

"Jerry Kroll" "Jason Finnis"
------------------------- -------------------------
Jerry Kroll Jason Finnis
CEO, President, Chairman of the Board COO, Secretary, Treasurer and
a Director
May 9, 2003 May 9, 2003

"Robert Edmunds" "Larisa Harrison"
------------------------- -------------------------
Robert Edmunds Larisa Elizabeth Harrison
CFO, Principal Accounting Officer, Vice President of Administration
Director Director
May 9, 2003 May 9, 2003

"Lesley Hayes"
-------------------------
Lesley Hayes
Vice President of Communications
Director
May 9, 2003

II-5

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EXHIBIT INDEX

Exhibit # Page#
--------- -----
3.1 Memorandum of Hemptown Clothing Inc.*

3.2 Articles of Association of Hemptown Clothing Inc.*

5.1 Opinion of Devlin Jensen

10.1 Form of Stock Option Agreement*

10.2 Voluntary Pooling Agreement*

10.3 Loan Agreement with Drake Enterprises Ltd.*

10.4 Loan Agreement with Purchase Holdings Ltd.*

10.5 Loan Agreement with Bigger Bite Holdings Ltd.*

10.6 Consulting Services Agreement with Renewal Partners Company*

10.7 Consulting Services Agreement with Michelle McQueen*

23.1 Consent of Accountants

23.2 Consent of Devlin Jensen (included in Exhibit 5.1)

24 Irrevocable Consent and Power of Attorney on Form F-X*

* Previously filed

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Dates Referenced Herein and Documents Incorporated By Reference

		Referenced-On Page
This SB-2/A Filing	Date	First	Last	Other Filings

	10/6/98	6	73
	12/31/98	46
	12/31/99	46
	7/29/00	41	73
	12/15/00	18	19
	12/31/00	8	70
	4/9/01	41	73
	8/14/01	73
	10/31/01	46
	11/1/01	48
	11/23/01	12	73
	12/31/01	8	70
	1/8/02	70
	2/6/02	63
	4/8/02	74
	4/17/02	41	73
	5/23/02	12	73
	6/1/02	12	69
	7/1/02	56
	8/20/02	74
	9/24/02	58
	10/2/02	74
	10/17/02	15	74
	12/30/02	59
	12/31/02	6	61
	2/1/03	74
	2/11/03	51
	2/13/03	12	40
	2/19/03	74
	3/8/03	12	73
	3/22/03	12	73
	3/23/03	12	73
	5/1/03	11	48
Filed On / Filed As Of	5/9/03	3	76
	10/2/03	58
	8/20/04	23	74
	8/31/04	61
	9/18/05	74
	10/17/05	42
	1/31/06	26
	8/20/07	74
	11/30/11	23	73

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Naturally Advanced Technologies Inc · SB-2/A · On 5/9/03

Filed On 5/9/03 5:25pm ET · SEC File 333-102081 · Accession Number 1017951-3-100

Pre-Effective Amendment to Registration of Securities by a Small-Business Issuer · Form SB-2Filing Table of Contents

SB-2/A · Amendment No. 2 for Form SB-2Document Table of Contents

Dates Referenced Herein and Documents Incorporated By Reference

Pre-Effective Amendment to Registration of Securities by a Small-Business Issuer · Form SB-2
Filing Table of Contents

SB-2/A · Amendment No. 2 for Form SB-2
Document Table of Contents