The material on this web site is intended to be strictly informational. The material on the website should not be construed as investment advice nor as an offering memorandum or other offer or solicitation to sell or purchase any security. Any sale of a security as a result of the material contained herein between an investor and a company that has its information posted on the website can only be made in accordance with applicable securities laws.
Red, White & Bloom will be engaged indirectly in the medical cannabis industry in the U.S., where such activities are regulated at the state level. Notwithstanding the permissive regulatory environment of cannabis at the state level, cannabis continues to be categorized as a controlled Schedule I substance under the Controlled Substances Act (the “CSA”) and as such, cultivation, distribution, sale and possession of cannabis violates federal law in the U.S.
The CSA also provides that an individual may not use or invest, directly or indirectly, any part of the income, or the proceeds of such income, of illegal cannabis-related operations in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce, with some exceptions. In addition, certain activities with regard to the proceeds of cannabis-related businesses may implicate federal money laundering statutes. In the event of civil or criminal litigation, there may also be limitations on confidentiality and the attorney-client privilege when illegal activity is involved. These limitations could materially and adversely affect Red, White & Bloom’s business, financial condition, and results of operations.
Under the current administration, the U.S. Department of Justice could allege that by providing financing and services to participants in the cannabis industry, Red, White & Bloom (and possibly, its investors) have “aided and abetted”, or conspired to commit, violations of federal law. In such circumstances, the federal prosecutor could seek to seize the assets of Red, White & Bloom, and to recover the “illicit profits” previously distributed to shareholders resulting from any of the foregoing financing or services. Such events would materially adversely affect the business of Red, White & Bloom. As a consequence, shareholders may be at risk of material losses and directors, officers and/or shareholders may be left to defend any criminal charges against them at their own expense and, if convicted, pay significant fines, or be sent to federal prison.
