CEO caught lying? Not on OTCBB! Oh my.
Note that the first sticky above indicates a claim that PHOT was on the OTCQB, which it NEVER was.
On February 18, 2016, PHOT announced that it had resumed quotation on the OTCBB (Bulletin Board), "after receiving clearance from the Financial Industry Regulatory Authority (“FINRA”) on its Form 15c2-11". The company reiterated that statement in another press release on February 24 and gleefully trumpeted the renewed interest in its stock.
Investors' new-found taste for PHOT stock was predicated on false statements by the company.
While the company had been approved to be quoted through the OTC Link system, the stock itself was classified as a pink sheet not a Bulletin Board issue and was not yet quoted on the Bulletin
Board platform because, in fact, it did not have approval under Rule 15c-211. This was well illustrated on February 25, 2016 FINRA's Daily List which classifies PHOT as being unable to be quoted on the OTCBB for this very reason.
Another indication that the company was making a false statement is in its reference to its (the company's) Form 15c-211. A Form 211 is filed by the sponsoring market maker, not by the company itself. In fact, FINRA will not communicate with the company regarding this form at all. It is the market maker who receives word of an approved Form 211 and it seems unlikely that the market
maker would have provided PHOT with false information. Until the Form 211 is approved by FINRA, a market maker cannot participate in the trading of the stock under Rule 15c-211, and the stock
should continue trading on the Grey Market. Mysteriously, these stocks do occasionally under the restriction of unsolicited quotes only, as in the case of PHOT. Nonetheless, market makers are not permitted to participate in the trading process.
Without an approved Form 211, enabling a market maker to direct trading in the stock, PHOT's status is really not any different than that of being on the Grey Market. Certainly, the trader is exposed to the same perils as those of trading on the Greys.
So was PHOT lying in its February 18 and 24 press releases or was it just a misunderstanding?
We'd almost be prepared to believe that the company misconstrued the circumstances and simply misstated the facts if it had corrected these statements at some point down the road. Certainly, the Officers and Directors of a public company, entrusted with the public's money, couldn't be in the dark for so long. In fact, the company has since doubled down on this statement by reiterating it in its May 5, 2016 press release:
The 15c2-11 approval in mid-February has given GrowLife the ability to negotiate more flexible financing terms for expansion, working capital and efficiently reduce its debt, thus improving the Company’s financial position and opportunity to grow
once again,” stated Marco Hegyi, GrowLife President and CEO.
The "approved 15c-211" presented no such ability because there is no approved Form 211! This press release is in fact, misleading, and the company's persistence in pressing this fallacy could cause it to find itself in hot water with the SEC once again, perhaps bringing yet another suspension.
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At any rate, billions of new shares will be created to satisfy the debt, certainly leading to the dumping of these shares and likely with the assistance of the same old email promotions. Myopic investors who will fondly recall the heyday of PHOT, will be seduced into throwing good money after bad, overlooking the fact that the share price will continue to be decimated as the dumping proceeds.
Even the most optimistic result of the end game, a future where PHOT is a viable and profitable company, does not present a scenario where an investment in the company right now, or even over the next year or two, could be anything but flushing money down the drain. The company must prove itself able to survive the debt amid deflating revenues and a degrading share price before any accumulation of shares could be considered wise.
