SEC charges 10 microcaps with securities-related violations

By James Rogers

The companies have agreed to pay civil penalties ranging from $5,000 to $90,000

The Securities and Exchange Commission has announced charges against 10 microcap companies for offering and selling securities in unregistered offerings that failed to comply with Regulation A.

A limited exemption from registration for public offerings, Regulation A lets companies raise money from the public as long as they meet specific requirements.

"Between December 2019 and May 2022, each of the 10 microcap companies obtained qualification from the SEC for their securities offerings using Regulation A, but they subsequently made one or more significant changes to their offerings without meeting the requirements of the exemption," the SEC said in a statement. The changes included improperly increasing the number of shares offered, improperly increasing or decreasing the price of shares offered, failing to file updated financial statements at least annually for ongoing offerings, engaging in prohibited at the market offerings or engaging in prohibited delayed offerings, according to the SEC.

"Companies that choose to benefit from Regulation A as a cost-effective way to raise capital must meet its requirements," Daniel Gregus, director of the SEC's Chicago Regional Office, said in the statement. "These actions stand as a reminder that companies which choose to circumvent Regulation A's requirements by engaging in prohibited conduct or making fundamental changes to their offerings without qualification will face action by the SEC."

Now read: Shares of microcap Singing Machine Company soar 81% after company ends ATM program

Each of the microcaps agreed to cease and desist violations of Section 5 of the Securities Act and to pay civil penalties. Verde Bio Holdings Inc. (VBHI) was hit with the largest penalty, agreeing to pay $90,000, while Green Stream Holdings Inc. (GSFI) agreed to pay $75,000. Hemp Naturals Inc. (HPMM) and LiveWire Ergogenics Inc. (LVVV) were each hit with a $50,000 civil penalty, while Principal Solar Inc. (PSWW) agreed to pay a $40,000 civil penalty. Graystone Company Inc. (GYST) and SFLMaven Inc. (SFLM) both received a $25,000 penalty, while DNA Brands Inc. (DNAX) and Marquie Group Inc. (TMGI) each agreed to pay a $10,000 penalty. CW Petroleum Corp. (CWPE) agreed to pay a $5,000 civil penalty.

Verde Bio Holdings is a mineral- and royalty-acquisition company headquartered in Frisco, Texas. The company acquires royalties, minerals and overriding royalties across the major basins of the U.S., with current holdings in Colorado, Louisiana, Ohio, Oklahoma, Texas, West Virginia and Wyoming, according to its website. In its third-quarter corporate update in March, Verde Bio Holdings reported revenue of $170,312, down from $301,567 in the prior year's quarter, and a net loss of $414,000. "The Company continues to strive toward its goal of profitability," it said in a statement. Verde Bio Holdings' stock, which trades over the counter, has fallen 66.7% in 2023.

Green Stream Holdings Inc., which also trades over the counter, describes itself as a solar utility and finance company. The Wyoming corporation has a market cap just under $498,000, and its stock has fallen 50% in 2023.

Plattsburgh, N.Y.-based Hemp Naturals Inc. is a developmental-stage company engaged in the manufacture and sale of cannabidiol products. The company reported zero sales and a net loss of $18,000 in its most recent quarterly income statement, for the period ending February 2022, according to FactSet data.

Also see:Why naked short selling has suddenly become a hot topic

LiveWire Ergogenics is focused on real estate, marketing and research and development "within the growing cannabis space," according to its website. The company reported sales of almost $688,000 in its most recent quarterly income statement, for the period ending December 2022, according to FactSet data. LiveWire Ergogenics has a market cap of $7.71 million and its stock has risen 47% in 2023.

-James Rogers

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-17-23 0815ET

Copyright (c) 2023 Dow Jones & Company, Inc.