2014-11-05 SEC Press pdf 24 KB 7,545 chars

In re Red Giant Entertainment

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

summary

Red Giant Entertainment, Inc. violated SEC reporting rules by failing to disclose a material financing agreement and the unregistered issuance of over one billion shares—exceeding 190% of its outstanding stock—leading to a cease-and-desist order and a $25,000 civil penalty.

paragraph

Red Giant Entertainment, Inc., a Nevada-based reporting company quoted on OTC Link, failed to file required Form 8-K disclosures between January and April 2014 regarding a material financing agreement and the unregistered sale of over one billion shares of common stock. These sales amounted to more than 190% of the shares outstanding as reported on its January 14, 2014 Form 10-Q, violating Sections 13(a) and Rule 13a-11 of the Securities Exchange Act. Without admitting or denying the allegations, Red Giant consented to a cease-and-desist order and agreed to pay a $25,000 civil penalty in nine installments through July 2015.

narrative

Red Giant Entertainment, Inc., a Nevada corporation and smaller reporting company registered with the SEC since 2008 and quoted on OTC Link under the symbol REDG, violated Sections 13(a) and Rule 13a-11 of the Securities Exchange Act by failing to disclose material events in a timely manner. Between January 16 and April 11, 2014, Red Giant issued over one billion unregistered shares of common stock to a financing company and other parties, which exceeded 190% of the shares outstanding reported on its January 14, 2014 Form 10-Q. On February 5, 2014, it entered into a material financing agreement that required disclosure under Item 1.01 of Form 8-K, yet it did not file the required Form 8-K until April 21, 2014—more than 70 days late. The company also failed to disclose the unregistered stock sales under Item 3.02, which mandates disclosure when unregistered issuances exceed five percent of outstanding shares. The SEC found these failures to be serious violations of mandatory reporting obligations, undermining investor transparency. Red Giant consented to a cease-and-desist order without admitting or denying the findings and agreed to pay a $25,000 civil penalty in nine installments, with the final payment due by July 15, 2015. The company’s last filed periodic report was its May 31, 2014 Form 10-Q, after which it ceased timely filings.

Enriched metadata

Scheme: unregistered-securities (80%)
Outcome: settled
Civil penalty: $25,000

Classified unregistered-securities(confidence 80%). EDGAR detection: forms Form D/S-1· recall 41% / precision 30%. detection rule →

Extracted insights

Dollar amounts 5

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

Entities 2

person red giant
agency the securities and exchange commission

Triples 7

The Securities and Exchange Commission deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted
Respondent has submitted an Offer of Settlement
Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings
Red Giant is a Nevada corporation headquartered in Clermont, Florida
Red Giant has been registered with the Commission under Section 12(g) of the Exchange Act
Red Giant failed to file a Form 8-K with the Commission on or before February 11, 2014
Red Giant sold more than one billion shares of common stock to the financing company and other parties

PDF

In re Red Giant Entertainment · Source

Text layers

Extracted body text (7,545c)

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 73518 / November 5, 2014

ADMINISTRATIVE PROCEEDING
File No. 3-16249

In the Matter of

Red Giant Entertainment,
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 Red Giant Entertainment, Inc. (“Red Giant” 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 Red Giant 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 finds
1
that:

Company Background

1. Red Giant is a Nevada corporation headquartered in Clermont, Florida. Red Giant
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 September 5, 2008. Red Giant’s
last-filed periodic report was the Form 10-Q for the period ended May 31, 2014. Its shares are
quoted on OTC Link (formerly “pink sheets”) operated by OTC Markets Group Inc. under the
symbol REDG.

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 sale 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.

Red Giant Failed to Disclose the Issuance of Unregistered Shares
and the Existence of a Related Financing Agreement

3. On February 5, 2014, Red Giant entered into an agreement with a financing
company (“financing agreement”) pursuant to which Red Giant 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 Red Giant.

4. Red Giant failed to file a Form 8-K with the Commission on or before February 11,
2014, or thereafter, disclosing the financing agreement.
2

5. Between January 16, 2014 and April 11, 2014, Red Giant sold more than one
billion shares of common stock to the financing company and other parties in transactions that
were not registered under the Securities Act. By February 7, 2014, the common stock sold, in the

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.
2
Red Giant disclosed the existence of the financing agreement on April 21, 2014 in a Form
10-Q.

3
aggregate, exceeded five percent of the number of shares of common stock outstanding reported on
Red Giant’s January 14, 2014 Form 10-Q, and ultimately, the common stock sold exceeded 190
percent of the number of shares of common stock outstanding reported on Red Giant’s January 14,
2014 Form 10-Q.

6. Red Giant failed to file a Form 8-K with the Commission between February 13,
2014 and April 20, 2014 disclosing the unregistered sale of equity securities.

7. As a result of the conduct described above, Red Giant 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 Red Giant’s Offer.

Accordingly, it is hereby ORDERED that:

A. Pursuant to Section 21C of the Exchange Act, Respondent Red Giant cease and
desist from committing or causing any violations and any future violations of Sections 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
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 Red
Giant 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, U.S. Securities and Exchange Commission, 950 East Paces Ferry Road, NE, Atlanta,
GA 30326-1382.

By the Commission.

Brent J. Fields
Secretary

OCR text (7,470c · tika · 95% conf)

UNITED STATES OF AMERICA
Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 73518 / November 5, 2014

ADMINISTRATIVE PROCEEDING
File No. 3-16249

In the Matter of

Red Giant Entertainment,
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.

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

Red Giant Failed to Disclose the Issuance of Unregistered Shares
and the Existence of a Related Financing Agreement

4. Red Giant failed to file a Form 8-K with the Commission on or before February 11,
2014, or thereafter, disclosing the financing agreement.2

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.
2 Red Giant disclosed the existence of the financing agreement on April 21, 2014 in a Form
10-Q.

aggregate, exceeded five percent of the number of shares of common stock outstanding reported on
Red Giant’s January 14, 2014 Form 10-Q, and ultimately, the common stock sold exceeded 190
percent of the number of shares of common stock outstanding reported on Red Giant’s January 14,
2014 Form 10-Q.

6. Red Giant failed to file a Form 8-K with the Commission between February 13,
2014 and April 20, 2014 disclosing the unregistered sale of equity securities.

IV.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent Red Giant’s Offer.

Accordingly, it is hereby ORDERED that:

(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 Red

Giant 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, U.S. Securities and Exchange Commission, 950 East Paces Ferry Road, NE, Atlanta,
GA 30326-1382.

By the Commission.

Brent J. Fields
Secretary