Cassandra (& All), here is the Lawyer's email response...
Here is the email response to the questions/concerns that I posed to Randall Goulding per what you and some others here within the IJJP forum were wanting answers for. He apologized for taking so long to respond, but he was out of town all last week and did not get around to it until early this week. If you or anyone have any further questions or concerns, I am going to have to defer you and others to emailing Randall for yourselves. His responses are in red print.
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Concern #1 ** Some investors are concerned that you have your family members listed as Property Interest Exchange (PIE) Recipients with the 3(a)(10) Exemption Court Order. The perception is that you are using the Exemption to sell free trading shares in the market to enrich your family. I am asking your thoughts on the matter so that I can respond to some public inquiries coming to me about the matter.
The basic premise of the program was to acquire the farm and to finance the construction process and the cultivation process, the beneficiaries of which are the public company assignees. As such, the most important facet of the selection process for the program was assurance that the PIE Share Recipients would comply with their contractual obligations and pay 90% of the sales proceeds, which is expressly provided for in the contract, to the farm operators. By design (90% versus 10%), the farm operators are to be the principal beneficiaries of the sales proceeds, not the PIE Share Recipients. The rationale behind selecting mostly family members and friends was to assure compliance and to assure that the program moved forward and that no one merely pocketed the money. If this were truly a mechanism to enrich my friends and family, the percentage to be paid for the farm cultivating operations, would not be 90% and there would not have been a very explicit contractual requirements of such funding. In other words, by design, it was the finance first (to the tune of 90%) and with any left over, yes, benefits to the PIE Share Recipients. Also noteworthy is the fact that this participation is not without its risk. There is personal liability to the PIE Share Recipients. Ultimately, the liability is not limited to sales proceeds. Recently, to accommodate IJJ Corporation and some of its concerns regarding market perception, family members have commenced the process of returning a substantial number of the shares. We are also trying to persuade Clifford Pope to return some of his shares as a show of good faith.
Concern #2 ** It is believed that this particular 3(a)(10) Exemption allows for the selling of unregistered shares directly to the public for debt relief. Some under the thought that future forward looking revenues from MJ facilities do not constitute a legitimate bona fide debt owed, which is what some believe is the requirement to effect a Section 3(a)(10) exemption. Those under this thought see the public funding from this arrangement being elicited for future MJ endeavors and not for the relief of bona fide existing debt. What are your thought on this way of thinking?
The use of Section 3(a)(10) is not limited to debt relief. However, that is the most conventional use. Indeed, the statute is much broader as illustrated by the statutory provisions and the related SEC pronouncements. This feature is perhaps best explained in my opinion letter to the court, citing the statute:
1. Section 3(a)(10) Is Available, in Exchange for “Property Interests”, As Well As Claims: Fortunately, and consistent with the statutory scheme and SEC pronouncements thereon, Section 3(a)(10) is not limited to resolving disputes and is not limited to exchanging securities for claims or other securities. Instead, Section 3(a)(10) of the Securities Act applies to:
“... any security which is issued in exchange for one or more bona fide … claims or property interests (emphasis added), … where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions … by any court ...”
Since the Issuer’s shares can be issued in exchange for “property interests” (not cash), then within the context of the settlements, an issuer should also be able to issue securities in exchange for “property interests”, which would in turn bring value to the issuer and its shareholders and also render more viable any resolution with the Law Firm, and perhaps other creditors. In other words, by using this portion of the statute (also specified by SEC explanations within no action letters), we can enhance the likelihood of an amicable resolution, enhance shareholder value, and hopefully enhance the likelihood that the Company will succeed.
As can be further gleaned from the opinion letter, SEC no action letters are inapposite.
Concern #3 ** Currently, the Transfer Agent (TA) for IJJP is gagged; meaning that investors can't publicly obtain share structure information if they call the IJJP TA. Investors have called the IJJP TA and it is true that it is the TA's policy to not release the share structure from people calling in about a company that's their client, but they also said that if the company writes in to them giving them permission to do so, they will release the share structure info for investors that call. Again, wondering your thoughts on the matter.
I agree. I believe it is a mistake to gag the stock transfer agent. While I personally have known Clifford Pope for several years and know that he would never misrepresent matters, I believe the whole notion of being a publicly traded company demands transparency. I made a personal plea with him to remove this veil. My understanding is that this veil has been removed.
Concern #4 ** Why did you use that number to represent the IJJP O/S in that November 2014 legal document (the court 3a10 document) which was apparently miscalculated which is such an important number that could result in the issuance of more than enough shares to make your wife and son's affiliates of IJJP under SEC rules?
At the time of the court order, according to the stock transfer agent, the number of shares outstanding, calculated post-issuance exceeded 1,000,000,000. Collectively, this share issuance was an additional 1,000,000,000. As a consequence, the largest of the share issuances of 195,419,226 shares, were just under 10%, calculated post-issuance. None of the share recipients held more than 10%, calculated post-issuance. Moreover, for a nonreporting company, the 10% rule is not hard and fast. It is only a rule of thumb. If the suggestion is that my relatives would be considered in combination, that is not an accurate reflection of the affiliate rules. My wife would be an affiliate of myself. All of my sons are more than 21 years old. None of the sales activities are conducted in concert. There is no basis for considering all of the shares as a single holding. In short, none of the PIE Share Recipients, based on my knowledge, are affiliates of IJJP. For your perusal, I have attached an authoritative article concerning what is an affiliate. Finally, as an accommodation, and in part, in recognition of the success of the program, IJJ Corporation is in the process of redeeming many of those shares, including my wife’s 195,419,226 shares (held on behalf of this law firm), which were just returned by the brokerage company, and are being returned to the IJJP transfer agent for cancellation, and to further reduced the number of outstanding shares.
Concern # 5 ** Some consider any PIE Share Recipient which is also playing a role as an issuer in the program (playing a dual role) is automatically an insider. Some characterize this a share selling scheme to enrich Insiders as the PIE Share Recipients sell their shares.
This concern is in part a failure to fully analyze the circumstances in the context of what is an affiliate, which cannot be determined in a vacuum but only as a result of a disciplined analysis and with respect to a particular issuer. The question is whether any person is an affiliate of any entity in which the person holds shares. For the reasons set forth above in response to the other concerns, and as set forth in the attachment, none of the Pie Share Recipients are affiliates of any of the companies in which they hold shares. As can be gleaned from the SEC's website: "An affiliate is a person, such as an executive officer, a director or large shareholder, in a relationship of control with the issuer. Control means the power to direct the management and policies of the company in question, whether through the ownership of voting securities, by contract, or otherwise." According to 17 CFR 230.405 - "An affiliate of, or person affiliated with, a specified person, is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified." The mere fact that the same people holds stock in six different companies does not make them affiliates of each other or of the issuers.
I reiterate that in accordance with their contractual obligations, the PIE Share Recipients are obligated to pay 90% of the sales proceeds, which is expressly provided for in the contract, to the farm operators. By design (90% versus 10%), the farm operators are to be the principal beneficiaries of the sales proceeds, not the PIE Share Recipients.
Concern # 6 ** Some are disturbed with the fact that the participating public company issuers are all sub-penny stocks. That makes the whole program appear to be more scam like.
The focus on sub-penny companies as pie share issuer participants was in an effort to maximize the benefits associated with participating in the program. Secondarily, all of the participants are clients of my law firm and this firm has a policy of helping its clients succeed in their endeavors. The strategy is to finance the construction of the extremely profitable marijuana growing operations, in exchange for annual income of several times that amount.
By design, we have targeted small public companies, with minimum capitalization, or also clients of this firm, anticipating the maximum consequence to the market capitalization. Indeed, by design, the promised income dwarfs the value of the shares issued in exchange, maximizing the benefit to the shareholders of the company, which include the Pie Share Recipients. As such, with the magnitude of this income event facilitation, we are looking at a dramatic effect for the benefit of all. In short, by way of example, for $2,000,000 of annual income, in perpetuity, the participating public company issued stock, valued at only slightly in excess of that amount. Analytically, assuming the standard model of a 10% capitalization rate, $2,000,000 of annual income should increase the market capitalization by $20,000,000. For IJJ, by way of example, without giving effect to the redemption plan currently in effect, this alone should cause a stock price in excess of one cent per share, not even giving effect to the more dramatic market capitalization consequence attributable to the explosive marijuana field and its growth potential. This effect may even be exacerbated by the fact some of the public company participants are not even current in their filings and none of them are reporting companies. The hope is that each will soon be compliant and each will become a fully reporting OTCQB company.
I hope this is been helpful. I welcome the opportunity to clarify these matters.
v/r
Sterling
