FITX SEC halts Creative Edge Nutrition
2016-02-22 10:22 ET - Street Wire
Also Street Wire (U-*SEC) U S Securities and Exchange Commission
Also Street Wire (U-FITX) Creative Edge Nutrition Inc
by Mike Caswell
The U.S. Securities and Exchange Commission has suspended Creative Edge Nutrition Inc., a subpenny OTC Bulletin Board listing from California. The company was once worth $350-million as it made a controversial effort to become a medical marijuana producer in Canada. (All figures are in U.S. dollars.) In halting Creative Edge, the SEC cites concerns with the accuracy and adequacy of information about the company. The regulator says a halt is necessary for the protection of investors.
The suspension comes about two years after Creative Edge's attempt to become certified to produce medical marijuana in Canada under the name CEN Biotech Inc. In late 2013 and early 2014 the company said that it had received government approval to become a medical marijuana grower. The company also told shareholders that it had set up a 10-acre site in Ontario. The stock went to 10 cents from under a penny in just weeks.
CEN's Site
FITXLONG
CEN's Site
Unfortunately for shareholders, the project quickly became troublesome. CEN's news releases indicated that it had approval from Health Canada, but the approval never actually came. In fact, on March 16, 2015, Health Canada said that it had denied the company's application. CEN loudly protested the denial, and even took the government to court. CEN said that it had spent over $10-million on its Ontario site and had complied with all the requirements to produce medical marijuana.
Within months, however, the company withdrew the lawsuit. It did later say that it would seek arbitration under the North American Free Trade Agreement, but it is not clear if that effort has produced any results. The process was barely under way when Creative Edge spun off CEN Biotech in September, 2015, effectively parting ways with its Canadian medical marijuana foray.
Before that spin-off the company attracted plenty of attention from the media, including a series of unflattering articles in The Globe and Mail. Among other things, The Globe reported that the company's chief executive officer, Bill Chaaban, was a seller of the stock while it was steadily rising. One article calculated him as having unloaded $4.6-million worth of shares. (The story also became a little odd, with the company reportedly having created a fake employee named Isak Weber, supposedly its head of investor relations.)
As with its clash with Health Canada, CEN loudly protested the coverage. It said that the reporter had published a series of misrepresentations and untruths that were part of an attempt to destroy the company. In particular, Mr. Chaaban denied selling the number of shares that The Globe reported him as selling. Despite those protests, it does not appear that CEN ever sued The Globe over the coverage. The stock drifted steadily lower after the Health Canada denial, and has been mostly under a penny since.
The SEC has not stated the reason for halting the stock, but the company remained an active trader up until the suspension. It was also the subject of a recent paid tout sheet. A Feb. 18, 2016, publication called Fortune Stock Alerts called the company "a steal" at its then-price of 0.54 cent. The tout sheet used glowing terms to describe the prospects for the company's current businesses, which include energy drinks and weight loss products. Fortune Stock Alerts also said that it had received a $10,000 payment for its work.
The tout sheet did not mention that Creative Nutrition's most recent balance sheet, dated Sept. 30, 2015, is not so attractive. It shows cash of $4,193 and a working capital deficiency of $20.2-million. Revenue for the year ended Sept. 30, 2015, was $92,278.
The SEC's halt notice will last for 10 business days, or until March 17, 2015. Unlike halts in Canada, those issued by the SEC place an onerous burden on brokers wishing to trade the stock even after it resumes. They must keep up-to-date information on the company's financial status and on its insiders. They must also have copies of the company's prospectus, its most recent annual report and any subsequent quarterly reports. In addition, brokers must maintain current information on the company's name, address, state of incorporation, number of shares outstanding, the name of its transfer agent and the nature of its products. Brokers must also know if a price quotation is from another broker or from an insider. They must provide this information to anyone interested in trading the company.
AI
