The Securities and Exchange Commission has halted a Reg A offering by a California-based marijuana company after the company was late in filing its annual report. Med-X, which operates a website about the marijuana industry, had been marketing its $15 million offering through StartEngine’s online portal. The company is seeking capital to expand its business into a product research and development business serving the marijuana industry. It currently markets a “natural” pesticide for marijuana plants.
The SEC qualified Med-X’s Reg A offering on Nov. 3, 2015, enabling the company to sell shares to accredited and unaccredited investors. Shares are priced at 60 cents, with a minimum investment of $420. Investors only had audited financials up to Dec. 31, 2014. According to securities attorney David Feldman of Duane Morris, Reg A issuers have to file an updated annual report within 6 months of the offer being qualified by the SEC. Med-X ignored that mandatory requirement while it continued to attract $840,000 in investments, according to the company’s September 19 SEC filing.
The SEC wrote in its administrative action against Med-X, “Rule 258 under Regulation A authorizes the Commission to temporarily suspend the Regulation A exemption of an issuer if it has reason to believe that a term, condition or requirement, such as the requirement to file an annual report, has not been complied with.”
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