April
16, 2021
VIA EDGAR TRANSMISSION AND FEDEX
Mr.
Jeffrey Gabor
Ms.
Abby Adams
Ms.
Tracey McKoy
Ms.
Angela Connell
United
States Securities and Exchange Commission
Division
of Corporation Finance
Office
of Life Sciences
100 F
Street, N.E.
Washington,
D.C. 20549
Registration Statement on Form
10
Filed
March 9, 2021
File
No. 000-56254
Mr.
Gabor and Ms. Adams:
On
behalf of Lowell Farms Inc. (“Lowell Farms”), we are providing
the following responses to the comments set forth in the comment
letter (the “Comment
Letter”) of the staff (the “Staff”) of the Securities and
Exchange Commission (the “Commission”) dated April 5, 2021
relating to Lowell Farms’ Registration Statement on Form 10
(the “Registration
Statement”) that was filed on March 9, 2021. For your
convenience, the numbered paragraphs of this letter correspond to
the numbered paragraphs of the comment letter. The responses and
information described herein are based upon information provided to
us by Lowell Farms.
We
appreciate the time and effort that the Staff has dedicated to
reviewing the Registration Statement.
Item 1. Business, page 1
1.
Please revise your Business section to differentiate between
product offerings and activities (including cultivation,
extraction, manufacturing, and distribution) that you were involved
in both prior to and after your acquisition of Lowell, given that
the acquisition did not take effect until February 2021 and has not
yet been reflected in your financial statements.
Response: We have
revised the disclosure as requested by the Staff.
Lowell
Farms Inc.
File
No. 000-56254
April
12, 2021
Page
2
Recent Developments, page 5
2.
Revise to clarify which entity issued the Subordinate Voting Shares
and warrants in the December 2020 unit offering (currently trading
in Canada).
Response: We have
revised the disclosure as requested by the Staff.
Organizational Chart, page 6
3.
Provide context to the chart by identifying the purpose or main
business of each subsidiary. Revise the chart to depict the class
of stock being registered in this registration statement. Revise
the chart to include all classes of stock outstanding that are
described on page 5, including the Class B shares, Class C shares,
and the Super Voting Shares.
Response: We have
revised the disclosure as requested by the Staff.
U.S. Cannabis Market, page 7
4.
You state that “almost a quarter of the [United States]
population lives in states where [cannabis] is fully legalized for
adult use.” Revise to clarify in what way marijuana is
“fully legal” in any state where those states fall
within the jurisdiction of the federal government.
Response: We have
revised the disclosure as requested by the Staff.
5.
We note the disclosure addressing the use of cannabis for medical
applications, including to treat pain and muscle spasms. Please
revise to disclose the effect of the United States Food and Drug
Administration's regulation on your business, including the
requirement for FDA approval, the nature and duration of the FDA
approval process, the regulation of manufacturing and labeling,
post-market approval reporting and record keeping, and the
regulation of the advertising and promotion. Also include a
discussion of potential sanctions for non-compliance with FDA
regulation.
Response: We have
revised the disclosure as requested by the Staff.
6.
We note the hyperlinks to the articles you cite. Please note that
when an issuer includes an active hyperlink within a document
required to be filed or delivered under the federal securities
laws, the issuer assumes responsibility for the information that is
accessible through the hyperlinked website as if it were part of
the filing. Refer to Release No. 3442728 for further guidance
regarding the use of hyperlinks in your document.
Response: We
acknowledge the Staff’s comment and the guidance in Release
No. 3442728.
Lowell
Farms Inc.
File
No. 000-56254
April
12, 2021
Page
3
Intellectual Property, page 9
7.
Clarify the extent to which your intellectual property rights are
enforceable where cannabis remains illegal under U.S. federal
law.
Response: We have
revised the disclosure as requested by the Staff.
Item 1A. Risk Factors
Risks Related to Our Business and Industry, page 21
8.
In the first risk factor, you mention that “shareholders may
be left to defend any criminal charges against them at their own
expense and, if convicted, be sent to federal prison,”
without clearly stating the risk that shareholders could be charged
with federal crimes simply by their activity as shareholders.
Revise to make this risk clear.
Response: We have
revised the disclosure as requested by the Staff.
Risks Related to the Securities of the Company, page
35
9.
We note that Section 26.1 of your articles of incorporation
provides that the Supreme Court of the Province of British
Columbia, Canada and the appellate Courts therefrom are the sole
and exclusive forum for any derivative action brought on behalf of
the company. Please disclose in your Risk Factors section and in
your Description of Registrant's Securities to be Registered
whether this provision applies to actions arising under the
Exchange Act and the Securities Act. If so, please address the
uncertainty as to whether a court would enforce such provision, and
state that stockholders will not be deemed to have waived the
company's compliance with federal securities laws and the rules and
regulations thereunder. If the provision does not apply to actions
arising under the Exchange Act and the Securities Act, please also
ensure that the disclosure in your Risk Factors and Description of
Registrant's Securities to be Registered sections and the exclusive
forum provision in your articles state this clearly. In addition,
in your Risk Factors section, please disclose the material risks to
investors caused by your exclusive forum provision.
Response: We have
revised the disclosure as requested by the Staff.
Lowell
Farms Inc.
File
No. 000-56254
April
12, 2021
Page
4
Item 2. Financial Information
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Reconciliations of Non-GAAP Financial and Performance Measures,
page 40
10.
You disclose that adjusted EBITDA and working capital are not
measures of financial performance under GAAP. Please revise to
explain how management utilizes these measures and why such
measures provide useful information.
Response: We have
revised the disclosure as requested by the Staff.
Revenue, page 41
11.
You present three categories of revenue (owned, agency and
distributed). Please revise to separately discuss the
period-over-period change in each revenue category. Instances where
you identify multiple contributing factors for a change in revenue,
please quantify the impact of each material factor that you discuss
to provide better insight into the underlying reasons behind the
changes in your results. Refer to Item 303 of Regulation SK and
Section III.D of SEC Release No. 33-6835.
Response: We have
revised the disclosure as requested by the Staff.
Results of Operations
Costs of Sales, Gross Profit and Gross Margin, page 42
12.
You present two
categories of cost of goods sold (product cost and agency brand
manufacturing) and you discuss the components of each category, but
didn’t provide sufficient detail to understand the change in
each category period-over-period. Please revise to separately
discuss the period-over-period change in each cost of goods sold
category. Instances where you identify multiple contributing
factors for a change in cost of goods sold, please quantify the
impact of each material factor that you discuss to provide better
insight into the underlying reasons behind the changes in your
results. Refer to Item 303 of Regulation S-K and Section III.D of
SEC Release No. 33-6835.
Response: We have
revised the disclosure as requested by the Staff.
Lowell
Farms Inc.
File
No. 000-56254
April
12, 2021
Page
5
Item 4. Security Ownership of Certain Beneficial Owners and
Management, page 51
13.
Tell us why you believe beneficial ownership of the shares subject
to the voting agreement between Mr. Weakley and the convertible
debenture holders should not be attributed to both parties in the
beneficial ownership table, as disclosed in the last sentence on
page 51.
Response: Rule
13d-5(b)(1) provides that when two or more persons agree to act
together for the purpose of acquiring, holding, voting or disposing
of equity securities of an issuer, the group formed thereby is
deemed to have acquired beneficial ownership of all equity
securities of that issuer beneficially owned by any such persons.
The statement in the Form 10 that “[b]eneficial ownership of
the shares held by Mr. Weakley and the investors in the Convertible
Debenture Offering has not been attributed to one another by reason
of the voting agreement for purposes of the calculations in the
table below” is intended as a clarification for readers of
our presentation and is not a comment as to whether beneficial
ownership by a group would, for example, be required to be
disclosed on a Form 13D filed by any such persons. For purposes of
the calculations and presentation set forth in the Form 10, we
believe it would hinder rather than assist a reader’s
understanding of beneficial ownership of the Company’s
securities if we were to attribute beneficial ownership by Mr.
Weakley to the investors in the Convertible Debenture Offering or
vice versa.
Item 7. Certain Relationships and Related Transactions and Director
Independence, page 58
14.
Tell us whether Edible Management’s “assets,
liabilities, rights and obligations” netted to the equivalent
of “nominal consideration,” and if not, the
circumstances of that transfer, and whether any valuation was
conducted by an independent party. If a valuation was performed,
disclose the valuation. Clarify what you mean by
“pass-through of costs.”
Response: We have
revised the disclosure to clarify that the Company’s
relationship with Edible Management as terminated without
consideration and its functions assumed by Wellness Innovations
Group Incorporated. No valuation was conducted in connection with
the termination of the Company’s relationship with Edible
Management. We have revised the disclosure to clarify that expenses
were reimbursed to Edible Management on a dollar-for-dollar
basis.
15.
Revise to disclose the parties to and the material terms of the
voting agreement between Mr. Weakley and the investors in the
Convertible Debenture Offering.
Response: We have
revised the disclosure as requested by the Staff.
Item 9. Market Price of and Dividends on the Registrants Common
Equity and Related Stockholder Matters, page 59
16.
Here you disclose over the counter trading in the United States for
shares traded under the symbol “INDXF,” and state your
shares are traded in Canada under the symbol “INDS.”
This registration statement is filed in the name of Lowell Farms,
Inc., and on page 6 you report a name change and that your
securities are traded in Canada under the symbols LOWL and LOWL.WT,
and in the United States under the ticker symbol LOWLF. Revise to
update or clarify this section. Refer to Item 201 of Regulation
S-K.
Response: We have
revised the disclosure as requested by the Staff.
Lowell
Farms Inc.
File
No. 000-56254
April
12, 2021
Page
6
Item 11. Description of Registrant's Securities to be Registered,
page 62
17.
Here, you identify “the Company” and Lowell Farms
separately, and described different classes of stock associated
with each, as well as Sub Class A and Class B Shares of Indus
Holding Company. This filing is made in the name of Lowell Farms,
Inc. Revise this section to describe only the class of securities
of Lowell Farms, Inc. to be registered pursuant to Section 12.
Refer to Item 11 of Form 10 and Item 202 of Regulation S-K. Revise
this section to provide all information required by Item 202 of
Regulation S-K for only the class of securities to be registered,
and eliminate or relocate to a different section of the
registration statement any description of stock that is not being
registered. Disclose the number of authorized shares of the class
being registered.
Response: We have
revised the disclosure as requested by the Staff.
18.
It appears that in disclosing the “support agreement,”
you have copied verbatim a portion of the legal contract, with no
explanation. Revise to explain the support agreement, disclosing
the material terms, insofar as the support agreement describes the
terms of or is materially related to the class of securities you
are registering. To the extent this support agreement benefits
persons for whom disclosure is required pursuant to Item 404 of
Regulation S-K, revise this disclosure to provide the information
required by Item 404(a) of Regulation S-K, including identifying
the related person, and consider disclosing this information with
other related party transactions.
Response: We have
revised the disclosure as requested by the Staff.
Signatures, page 71
19.
Be certain the appropriate company representative signs and dates
the amended filing. Refer to Instruction D of Form 10.
Response: We
acknowledge the Staff’s comment.
Notes to Consolidated Financial Statements
2. Significant Accounting Policies
Revenue Recognition, page F-12
20.
Please revise to provide a more fulsome discussion of your revenue
recognition accounting policy. In this regard, please disclose your
accounting policy for each of your revenue streams - owned, agency
and distributed - and discuss any differences between these
streams, including any principal vs agent considerations. Please
also clarify the point in time in which control transfers to the
customer and discuss the types of allowances, discounts and rebates
that you offer and how you estimate these for purposes of
determining your transaction price. Please refer to ASC 606-10-50
for other disclosure considerations.
Response: We have
revised the disclosure as requested by the Staff.
Lowell
Farms Inc.
File
No. 000-56254
April
12, 2021
Page
7
23. Subsequent Events, page F-31
21.
Please provide us your analysis under Rules 8-04 and 3-05 of
Regulation S-X in determining whether financial statements for
Lowell Farms are required. Please also provide the pro forma
financial information required by Rule 11-01(a)(2) of Regulation
S-X.
Response: Upon
further review and analysis of the financial statements and the
business acquired in the Lowell Acquisition, including the
Company’s worldwide market capitalization and other relevant metrics, the
Company has concluded that target financial statements and pro
forma financial information should be included in the Form 10 and
intends to file such financial statements and pro forma financial
information at the earliest practicable date prior to effectiveness
of the Form 10.
* * * *
*
If you
have any additional questions regarding any of our responses or the
revised Form 10 Registration Statement, please feel free to call me
at 212-880-3817.
Sincerely,
/s/
Kenneth G. Alberstadt
Kenneth
G. Alberstadt
cc:
Brian Shure, Chief
Financial Officer, Lowell Farms Inc.
