2014-11-05 SEC Press pdf 26 KB 8,762 chars

In re Monster Arts

Exhibit of SEC Sanctions 10 Companies for Disclosure Failures Surrounding Financing Deals and Stock Dilution

summary

Monster Arts, Inc. violated securities reporting rules by issuing over 450 million unregistered shares between November 2013 and June 2014—exceeding 100% to 350% of its outstanding shares—and failed to file required Form 8-K disclosures, resulting in a SEC cease-and-desist order and a $25,000 civil penalty.

paragraph

Monster Arts, Inc., a Nevada-based reporting company quoted on OTC Link, failed to file Form 8-K disclosures between November 2013 and June 2014 regarding material financing agreements and unregistered stock issuances totaling over 450 million shares. These unregistered sales exceeded 350% of its outstanding shares as of November 2013 and 100% of its shares as of May 2014, violating Items 1.01 and 3.02 of Form 8-K. Without admitting or denying the allegations, Monster Arts consented to a cease-and-desist order and agreed to pay a $25,000 civil penalty in nine installments through July 15, 2015.

narrative

Monster Arts, Inc., a Nevada corporation headquartered in San Clemente, California, and registered with the SEC since 2008, violated Section 13(a) of the Securities Exchange Act and Rule 13a-11 by failing to file required Form 8-K disclosures between November 2013 and June 2014. During this period, the company issued more than 450 million unregistered shares of common stock in multiple transactions, exceeding 350% of its outstanding shares as reported in its November 19, 2013 Form 10-Q and later surpassing 100% of its shares as of its May 20, 2014 Form 10-Q. Monster Arts also failed to disclose a material financing agreement entered on April 25, 2014, which involved the issuance of shares under a claimed Section 3(a)(10) exemption. The company did not file any Form 8-Ks to report these unregistered sales or the financing agreement, despite regulatory requirements mandating disclosure within four business days of occurrence. The SEC instituted cease-and-desist proceedings, and Monster Arts consented to the order without admitting or denying the findings, agreeing to pay a $25,000 civil penalty payable in nine installments through July 15, 2015 via ACH, Fedwire, Pay.gov, or certified payment methods. The company’s last filed periodic report was its March 31, 2014 Form 10-Q, and its shares were quoted on OTC Link under the symbol APPZ.

Enriched metadata

Scheme: unregistered-securities (90%)
Outcome: settled
Civil penalty: $25,000

Classified unregistered-securities(confidence 90%). EDGAR detection: forms Form D/S-1· recall 41% / precision 30%. detection rule →

Extracted insights

Dollar amounts 4

$25K $25,000 $10K–$100K
$10K $10,000 $10K–$100K
$2K $2,000 <$10K
$1K $1,000 <$10K

Entities 3

company monster arts, inc.
agency sec under section 12(g) of exchange act since june 3, 2008
agency Securities and Exchange Commission

Triples 11

Monster Arts, Inc. is Nevada Corporation Headquartered In San Clemente, California
Monster Arts, Inc. registered with SEC Under Section 12(g) Of Exchange Act Since June 3, 2008
Monster Arts, Inc. is Smaller Reporting Company Under Rule 12b-2 Of Exchange Act
Monster Arts, Inc. has shares quoted on OTC Link Under Symbol APPZ
Monster Arts, Inc. entered into financing agreement with Financing Company On April 25, 2014
Monster Arts, Inc. issued Common Stock Shares To Financing Company Pursuant To Section 3(a)(10) Of Securities Act
Monster Arts, Inc. failed to file Form 8-K Disclosing Financing Agreement By May 1, 2014
Monster Arts, Inc. sold More Than 140 Million Unregistered Common Stock Shares Between November 27, 2013 And March 27, 2014
Monster Arts, Inc. failed to disclose Unregistered Shares Issuance And Related Financing Agreement
SEC instituted Cease-And-Desist Proceedings Against Monster Arts, Inc. Pursuant To Section 21C Of Exchange Act
SEC issued Order On November 5, 2014 (Release No. 73519)

PDF

In re Monster Arts · Source

Text layers

Extracted body text (8,762c)

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 73519 / November 5, 2014

ADMINISTRATIVE PROCEEDING
File No. 3-16250

In the Matter of

Monster Arts, Inc.

Respondent.

ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO
SECTION 21C OF THE SECURITIES
EXCHANGE ACT OF 1934, MAKING
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER

The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities
Exchange Act of 1934 (“Exchange Act”), against Monster Arts, Inc. (“Monster Arts” or
“Respondent”).

II.

In anticipation of the institution of these proceedings, Respondent has submitted an Offer
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the
purpose of these proceedings and any other proceedings brought by or on behalf of the
Commission, or to which the Commission is a party, and without admitting or denying the findings
herein, except as to the Commission’s jurisdiction over Monster Arts and the subject matter of
these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting
Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934,
Making F indings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below.

III.

On the basis of this Order and Respondent’s Offer, the Commission finds
1
that:

Company Background

1. Monster Arts is a Nevada corporation headquartered in San Clemente, California.
Monster Arts is a smaller reporting company under Rule 12b-2 of the Exchange Act and has been
registered with the Commission under Section 12(g) of the Exchange Act since June 3, 2008.
Monster Arts’ last-filed periodic report was the Form 10-Q for the period ended March 31, 2014.
Its shares are quoted on OTC Link (formerly “pink sheets”) operated by OTC Markets Group Inc.
under the symbol APPZ.
Applicable Reporting Requirements Concerning the Issuance of Unregistered Shares

2. Under Item 1.01 of Form 8-K, a registrant must disclose its entry into a material
definitive agreement that provides for obligations that are material to and enforceable against the
registrant. Under Item 3.02 of Form 8-K, a smaller reporting company must disclose the
unregistered sales of equity securities unless such sales, in aggregate since its last report filed under
Item 3.02 or its last periodic report, whichever is more recent, constitute less than five percent of
the number of shares outstanding of the class of equity securities sold. For both items, the
registrant must file within four business days of the date of the occurrence or when such agreement
becomes enforceable against the registrant.

Monster Arts Failed to Disclose the Issuance of Unregistered Shares
and the Existence of the Related Financing Agreement

3. On April 25, 2014, Monster Arts entered into an agreement with a financing
company (“financing agreement”) pursuant to which Monster Arts issued shares of common stock
to the financing company purportedly in reliance on a registration exemption found in Section
3(a)(10) of the Securities Act of 1933 (“Securities Act”). The financing agreement provided for
obligations that were material to and enforceable against Monster Arts.

4. Monster Arts failed to file a Form 8-K with the Commission, on or before May 1,
2014, or thereafter, disclosing the financing agreement.

5. Between November 27, 2013 and March 27, 2014, Monster Arts sold more than
140 million shares of its common stock in transactions that were not registered under the Securities
Act. By December 5, 2013, the common stock sold, in the aggregate, exceeded five percent of the
number of shares of common stock outstanding reported on Monster Arts’ November 19, 2013

1
The findings herein are made pursuant to Respondent’s Offer of Settlement and are not
binding on any other person or entity in this or any other proceeding.

3
Form 10-Q. Ultimately, the common stock sold exceeded 350 percent of the number of shares of
common stock outstanding reported on Monster Arts’ November 19, 2013, Form 10-Q.

6. Monster Arts failed to file a Form 8-K with the Commission between December 5,
2013 and April 14, 2014, disclosing the unregistered sales of equity securities.

7. Between April 16, 2014 and May 13, 2014, Monster Arts sold more than 85 million
shares of its common stock to the financing company and other parties in transactions that were not
registered under the Securities Act. On April 16, 2014, the common stock sold, in the aggregate,
exceeded five percent of the number of common stock outstanding reported on Monster Arts’ April
15, 2014 Form 10-K. Ultimately, the common stock sold exceeded 50 percent of the number of
shares of common stock outstanding reported on Monster Arts’ April 15, 2014 Form 10-K.

8. Monster Arts failed to file a Form 8-K with the Commission between April 22,
2014 and May 19, 2014, disclosing the unregistered sales of equity securities.

9. Between May 23, 2014 and June 24, 2014, Monster Arts sold more than 225
million shares of its common stock to the financing company and other parties in transactions that
were not registered under the Securities Act. On May 23, 2014, the common stock sold exceeded
five percent of the number of shares of common stock outstanding reported on Monster Arts’ May
20, 2014 Form 10-Q. Ultimately, the common stock sold exceeded 100 percent of the number of
shares of common stock outstanding reported on Monster Arts’ May 20, 2014 Form 10-Q.

10. Monster Arts failed to file a Form 8-K with the Commission between May 29, 2014
and June 30, 2014, disclosing the unregistered sales of equity securities.

11. As a result of the conduct described above, Monster Arts violated Section 13(a) of
the Exchange Act and Rule 13a-11 thereunder, which require every issuer of a security registered
pursuant to Section 12 of the Exchange Act to file with the Commission information as the
Commission may require, including current reports on Form 8-K to disclose the occurrence of
certain events.

IV.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent Monster Arts’ Offer.

Accordingly, it is hereby ORDERED that:

A. Pursuant to Section 21C of the Exchange Act, Respondent Monster Arts cease and
desist from committing or causing any violations and any future violations of Section 13(a) of the
Exchange Act and Rule 13a-11 thereunder.

B. Respondent shall pay civil penalties of $25,000 to the Securities and Exchange
Commission. Payment shall be made in the following installments: $10,000 on or before

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November 15, 2014; $2,000 on or before December 15, 2014; $2,000 on or before January 15,
2015; $2,000 on or before February 15, 2015; $2,000 on or before March 15, 2015; $2,000 on or
before April 15, 2015; $2,000 on or before May 15, 2015; $2,000 on or before June 15, 2015; and
$1,000 on or before July 15, 2015. If any payment is not made by the date the payment is required
by this Order, the entire outstanding balance of civil penalties, plus any additional interest accrued
pursuant to 31 U.S.C. 3717, shall be due and payable immediately, without further application.
Payment must be made in one of the following ways:

(1) Respondent may transmit payment electronically to the Commission, which
will provide detailed ACH transfer/Fedwire instructions upon request;

(2) Respondent may make direct payment from a bank account via Pay.gov
through the SEC website at http://www.sec.gov/about/offices/ofm.htm
; or

(3) Respondent may pay by certified check, bank cashier’s check, or United
States postal money order, made payable to the Securities and Exchange
Commission and hand-delivered or mailed to:

Enterprise Services Center
Accounts Receivable Branch
HQ Bldg., Room 181, AMZ-341
6500 South MacArthur Boulevard
Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying
Monster Arts as a Respondent in these proceedings, and the file number of these proceedings; a
copy of the cover letter and check or money order must be sent to William P. Hicks, Division of
Enforcement, Securities and Exchange Commission, 950 East Paces Ferry Rd. N.E., Suite 900,
Atlanta, Georgia 30326.

By the Commission.

Brent J. Fields
Secretary

OCR text (8,781c · tika · 95% conf)

UNITED STATES OF AMERICA

Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 73519 / November 5, 2014

ADMINISTRATIVE PROCEEDING
File No. 3-16250

In the Matter of

Monster Arts, Inc.

Respondent.

ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO
SECTION 21C OF THE SECURITIES
EXCHANGE ACT OF 1934, MAKING
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER

II.

In anticipation of the institution of these proceedings, Respondent has submitted an Offer
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the
purpose of these proceedings and any other proceedings brought by or on behalf of the
Commission, or to which the Commission is a party, and without admitting or denying the findings
herein, except as to the Commission’s jurisdiction over Monster Arts and the subject matter of
these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting
Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934,
Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below.

III.

On the basis of this Order and Respondent’s Offer, the Commission finds1 that:

Company Background

Applicable Reporting Requirements Concerning the Issuance of Unregistered Shares

Monster Arts Failed to Disclose the Issuance of Unregistered Shares
and the Existence of the Related Financing Agreement

4. Monster Arts failed to file a Form 8-K with the Commission, on or before May 1,
2014, or thereafter, disclosing the financing agreement.

1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not
binding on any other person or entity in this or any other proceeding.

Form 10-Q. Ultimately, the common stock sold exceeded 350 percent of the number of shares of
common stock outstanding reported on Monster Arts’ November 19, 2013, Form 10-Q.

6. Monster Arts failed to file a Form 8-K with the Commission between December 5,
2013 and April 14, 2014, disclosing the unregistered sales of equity securities.

8. Monster Arts failed to file a Form 8-K with the Commission between April 22,
2014 and May 19, 2014, disclosing the unregistered sales of equity securities.

10. Monster Arts failed to file a Form 8-K with the Commission between May 29, 2014
and June 30, 2014, disclosing the unregistered sales of equity securities.

IV.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent Monster Arts’ Offer.

Accordingly, it is hereby ORDERED that:

B. Respondent shall pay civil penalties of $25,000 to the Securities and Exchange
Commission. Payment shall be made in the following installments: $10,000 on or before

November 15, 2014; $2,000 on or before December 15, 2014; $2,000 on or before January 15,
2015; $2,000 on or before February 15, 2015; $2,000 on or before March 15, 2015; $2,000 on or
before April 15, 2015; $2,000 on or before May 15, 2015; $2,000 on or before June 15, 2015; and
$1,000 on or before July 15, 2015. If any payment is not made by the date the payment is required
by this Order, the entire outstanding balance of civil penalties, plus any additional interest accrued
pursuant to 31 U.S.C. 3717, shall be due and payable immediately, without further application.
Payment must be made in one of the following ways:

(1) Respondent may transmit payment electronically to the Commission, which
will provide detailed ACH transfer/Fedwire instructions upon request;

(2) Respondent may make direct payment from a bank account via Pay.gov

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or

(3) Respondent may pay by certified check, bank cashier’s check, or United

States postal money order, made payable to the Securities and Exchange
Commission and hand-delivered or mailed to:

Enterprise Services Center
Accounts Receivable Branch
HQ Bldg., Room 181, AMZ-341
6500 South MacArthur Boulevard
Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying

Monster Arts as a Respondent in these proceedings, and the file number of these proceedings; a
copy of the cover letter and check or money order must be sent to William P. Hicks, Division of
Enforcement, Securities and Exchange Commission, 950 East Paces Ferry Rd. N.E., Suite 900,
Atlanta, Georgia 30326.

By the Commission.

Brent J. Fields
Secretary