The Securities and Exchange Commission has informed a U.S. operated hashish media and dispensary firm, High Times Holdings, that they have to halt accepting investments of their mini-IPO as a result of they’ve failed to fulfill an prolonged deadline to file their audited annual report.

Adam Levin

 

The final date the corporate was allowed to take investments was the center of June.

High Times is run by former enterprise capitalist, Adam Levin, who says he as soon as owned comfortable porn video firm Girls Gone Wild and Penthouse.

 

Authored by: Teri Buhl

High Times securities legal professionals, Stephen Weiss and Megan Penick of L.A. based mostly Michelman Robinson LLP, confirmed in an electronic mail interview yesterday that the corporate can’t settle for gross sales till they get their annual report filed and publicly accessible for traders.

Stephen Weiss

But, that hasn’t stopped High Times from persevering with to pitch important avenue traders concerned about Cannabis to pony up their hard-earned {dollars} through electronic mail solicitations for investments, in line with advertising materials seen by Cannabis Law Report despatched by the corporate this week.

When legal professional Penick was requested why the corporate was nonetheless soliciting investments she initially informed Cannabis Law Report, in an electronic mail despatched on June 7, that she wasn’t conscious that it was occurring.

Megan Penick

High Times used a reporting extension the SEC created due to the Covid-19 pandemic to get a 45 day extension to file the annual report and stated in latest SEC disclosure filings, referred to as Form 1-U, that they promised traders to get them present income, money flows, debt ranges and asset values by June 12, 2020 through the annual report; however CLR has learnt that this by no means occurred.

Adam Levin’s firm has spent over two years making an attempt to get important avenue to take a position as much as $US50 million with out a profitable shut date that would result in publicly traded inventory on the OTC Markets beneath the ticker $HITM.

On June 30th, 2020 the corporate made an SEC filing saying as soon as once more their mini-ipo can be prolonged for one more three months however ignored the vital indisputable fact that they couldn’t really settle for gross sales.

When requested in regards to the perceived lack of disclosure to traders, legal professional Penick informed CLR that for the reason that SEC doesn’t require an issuer to reveal, the providing can’t be offered. CLR understands that High Times didn’t undertake this.

Cannabis Law Report reached High Times escrow agent, Prime Trust, who stated they weren’t conscious that gross sales of the providing had been halted. As of press time they haven’t responded to CLR with the intention to affirm the gross sales had stopped as of June 12 2020.

When requested whether it is regular observe for a Reg A issuer to proceed to solicit investments when it might’t settle for gross sales; securities legal professional Sara Hanks informed Cannabis Law Report,”

The SEC could have softened up within the Covid disaster however beforehand, each gross sales and affords have been imagined to cease throughout such time because the issuer was delinquent in its filings, as a result of there is no such thing as a exemption beneath Reg A  for “offers” (promoting and so on) whereas an organization is delinquent.”

Attorney Hanks, who was one of many key attorneys to work with the federal government to form the legal guidelines and guidelines of the mini-IPO Reg A+ providing, additionally pointed CLR to legal advice she wrote for small cap firms on what to do when you need to halt your providing. This consists of taking down your on-line providing web page. As of press time, High Times nonetheless has their investment offering web page reside.

Attorney Hanks warns if investments gross sales are accomplished they may very well be thought-about gross sales of unregistered securities. “If you take any money while you are not in compliance with the Reg A ongoing reporting requirements, you are making an unregistered offering in violation of Section 5 of the Securities Act of 1933, and people who buy in those circumstances have the right to make you take them back and refund their money, with interest. Plus, that unregistered offering may be considered a disqualifying “bad act”, wrote legal professional Hanks on Crowdcheck.com.

Sara Hanks

Adam Levin didn’t reply for remark when reached by electronic mail asking why the corporate continues to be soliciting affords.

In 2016 the Securities and Exchange Commision went after the one of many first hashish firms, Med-X, to make use of RegA to boost capital and charged them with an enforcement motion for persevering with to promote their RegA providing after they didn’t well timed file their annual report.

The SEC case, first reported by this reporter for Growth Capitalist Investor, was carefully adopted as a result of even after Medex received their annual report filed, the SEC nonetheless didn’t need the corporate to be allowed to boost capital by way of RegA. Med-X ultimately received the case, after almost a 12 months of litigation and costly authorized charges.

Regulator A+ was created by way of the JOBS Act for rising development firms to boost cash from important avenue whereas requiring much less monetary reporting than a standard IPO and High Times seems to have taken benefit of that. The hashish investing market typically feedback on how Adam Levin overpaid for the hashish media property in 2017 when his group of traders provided the unique house owners $70 million for the corporate funded by way of debt with excessive curiosity. He then publicly introduced he’d get the corporate listed on NASDAQ however subsequently failed.

Since then traders have seen a speedy tempo of public bulletins about asset purchases, through signed letter of intents, hyping the potential development of High Times adopted up with fairly SEC filings saying the offers has fallen aside or been watered down.

A purchase order of working hashish dispensary shops and license in three U.S. states from publicly traded Harvest Health is the latest instance.  The unique deal signed in April valued at $80 million included 13 dispensary licenses after which final month it was introduced High Times would solely be shopping for 10 licenses they usually’d be shedding two working California dispensaries within the renegotiated deal.

 

 

Additionally, within the final month there have been multiple information reports questioning if Harvest even has possession or management of the hashish licenses to promote to High Times.

Very little money really adjustments fingers within the offers crafted by High Times; as a substitute it has introduced tens of millions of inventory (which isn’t publicly traded but) can pay for the asset purchases. With the Harvest acquisition, High Times legal professional Stephen Weiss confirmed for CLR that $1.5 million was paid to Harvest however at signing solely $500ok was given. The asset buy settlement filed with the SEC stated High Times would pay Harvest $1 million on signing.

That leaves the query how the corporate, through recommendation from their attorneys, has stored traders knowledgeable of fabric adjustments within the firm by way of scattered bulletins through 1-U submitting as a substitute of updating their providing round.

In an interview with legal professional Weiss and Penick they repeated, sworn, they understood  the way in which the corporate is disclosing materials occasions is accepted by the SEC. But different attorneys interviewed by CLR with expertise in writing Reg A choices query this narrative.

“The regulations for Reg A offerings still require an amendment at least once a year and upon any fundamental change, and this company appears to have had both and not filed amendments. And the rules do not permit the 1-U’s to be incorporated. You can’t get around that by having an investor sign something. The SEC does not want unsophisticated investors having to scour 1-U filings to find all the information scattered about. That’s why they have that rule,” an legal professional who has labored on Reg A choices for years informed Cannabis Law Report.

After a number of makes an attempt to get legal professional Weiss to web site which SEC rule permits him to make use of U-1 types to reveal materials occasions he wouldn’t checklist one.

High Times preliminary providing round dates again to occasions from 2017 that talk to the corporate working as a media firm. It wasn’t till lately that Adam Levin modified course and determined the corporate would transfer to changing into a hashish retail dispensary firm.

The firm has additionally moved by way of three CEO’s within the final  12 months. High Times have performed what could be described as a work-around and filed what is known as a complement to the providing which wasn’t reviewed by the SEC as a substitute of amending the providing which wants SEC approval.

Current High Times CEO, Peter Horvath

When requested about this legal professional Penick defensively knowledgeable CLR,” The providing round complement is similar because the providing assertion, simply with a special cowl web page.  The SEC at all times has the chance to evaluate a doc, make  feedback and require the submitting of an modification.  In this case, the SEC didn’t remark or ask for an modification. Had a evaluate commenced, the providing wouldn’t be certified till such time because the evaluate accomplished.”

High Times legal professional Weiss additionally provided a proof that they’ll’t file an modification to the unique providing as a result of the corporate doesn’t have 2019 financials audited but. But why that audit hasn’t occur isn’t clear given the corporate seems to have cash to purchase different hashish property however is unable get an audit performed.

Cannabis analyst Alan Brochstein of New Cannabis Ventures informed Cannabis Law Report, the “High Times extended Reg A offering is just a fleecing of main street investors.”

Attorney Weiss and Penick have repeatedly informed Cannabis Law Report they suppose High Times is in compliance with SEC guidelines and confirmed that they’ve had verbal conversations with the SEC about High Times lacking their annual report deadline.

High Times hasn’t made latest public bulletins about how a lot they’ve really raised by way of their mini-ipo. The final SEC submitting from 2019 stated as of April 30, 2019 the corporate had raised $15 million of their $50 million aim.

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