Each template includes a custom PPM, Subscription Agreement, Verification Letter(s) and Operating Agreement.
Template Package I: Dual Reg D & Reg S Offerings
Use this template if you want to use Regulation D to solicit citizens of the U.S., U.K., Canada and Australia while simultaneously using Regulation S to solicit non-U.S. citizens outside of the U.K., Canada or Australia.
Minimum $10,000 investment.
For up to 450 investors where the Regulation S offering is being made and up to 1,950 non-accredited investors and accredited investors overall.
Template Package II: Regulation S Offering
Use this template if you want to use Regulation S to offer up to 450 accredited and non-accredited non-U.S. citizens (including non-U.S. citizens living in the U.S.).
The exempt securities offered are convertible notes and common shares.
Minimum $100,000 investment.
Language appropriate for licensing organic brands, proprietary strains and related products as well as a "premium global consumer facing brand."
Template Package III: Regulation D Offering
Use this template package if you want to use Regulation D to offer convertible debentures in the U.S., U.K., Canada and Australia.
For accredited, sophisticated and qualified non-accredited investors.
Minimum $5,000 investment
Language appropriate for cannabis retail goods, CBD personal care products and other products.
A security is created by any passive investment. If the investor assumes management duties, even if only part time, it is not a security. But when the investor completely relies on others, securities have been created.
Investors often have the right to give input on management decisions but they do not exercise this right.
A cannabis startup may want to attempt to require all investors to be "member-managers." This management structure is spelled out in the operating agreement.
Here are some suggestions to help make your investors qualify as member-managers rather than passive investors.
If your investors have a participatory role in management you do not have to worry about complying with regulations for exempt offerings. When choosing investors, you may want to try to find some with experience, however minimal, in the cannabis industry. Of course, as the number of investors grows they will be more geographically diverse and it is more likely that one or more will be considered “passive.”
At that point you will need to make the appropriate filings under one or more SEC exemptions, such as the very popular Rule 506(c.
Cannabis businesses whose investors participate in the business need to make sure that these investors can pass muster in any cannabis licensing processes.
Both securities compliance and cannabis regulatory compliance are very much in play these days.
Some cannabis issuers are avoiding exemption compliance by using a general partnership for a specific purpose.
A general partnership for a specific purpose can be a special purpose vehicle where you can take someone's money without need for an exemption.
This strategy requires an investor who is willing to assume joint responsibility for your acts and omissions in the execution of the general partnership’s business, but only for those acts and omissions. It requires experienced counsel or someone with expert drafting skills.
I. Initial Consult
The fee for PPA providing the documents described in this documentation paragraph within 20 business days following the date this engagement letter is signed by both parties is $1,195. The fee for PPA providing the documents described herein within 12 business days is $1,595.
PPA agrees to teach the Issuer how to establish an EDGAR account, secure its CIK number and file the Form D with the SEC. PPA will explain to the Issuer how this pedagogical approach can expeditie SEC processing.
IV. Notice Filings
PPA agrees to: a) file the document commonly referred to as a “Notice Filing” with the securities commissioner in each resident state of each investor within 15 days of closing and, b) prepare a one-year calendar red-flagging forthcoming state securities deadlines. (Some state regulators ask for a nominal notice filing fee, to be paid by NMFF’s pro-profit affiliate).
Fee: $100/state (including follow up services)
V. Rule 506 Verification Letter
PPA agrees to draft and deliver a personalized Rule 506 verification letter for each Rule 506 investor within 15 days following closing, to be signed by Douglas Slain (Slain). PPA represents that Slain is a nationally recognized authority, author and expert witness in litigation involving exempt offerings.
VI. Negotiating Terms
At the request of the Issuer, PPA agrees to serve as its agent for the purpose of negotiating terms with third parties to promote this offering.
Fee: $245/platform or investor venue
VII. Find and Pitch Investors
Slain agees to work with the Client on a one-on-one basis to identify classes of prospective investors and to undertake best practices in contacting individual investors within each class. Slain agrees to participate in negotiations and closings at the direction of the Issuer.
Fee: $75/hour or negotiated project fee; preferred by PPA
VIII. Consult on Secondary Market Opportunities
A. PPA agrees to consult on Rule 144 and Rule 144A secondary market opportunities available to the Client a year following the date(s) of the closing(s).
B. PPA agrees to consult on current Rule 144 and Rule 144A opportunities.
With the right facts, there can be surprisingly attractive opportunities.
We will work with you every step of the way. Prior to closing, we do the following:
At or following closing, we will do the following:
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