Beware of NewAge – Review Part 3

Former NewAge CEO Brent Willis is being sued by the SEC for fraud.

The regulator claims that Willis made false statements that helped NewAge “grow and succeed.”

The SEC claims that Willis misled in “investors conferences, earnings calls, media appearances, and in at least 12 news releases” on “product distribution arrangements.”

These distribution agreements were either substantially smaller than stated in the public announcements, or they didn’t exist at all.

One example of deception is Willis’ assertion that NewAge and the US military had a distribution deal in early 2018.

In truth, NewAge never signed a contract with the military for distribution, never intended to sell its goods at all commissaries and exchanges throughout the world, and didn’t even have the inventory to do so.

In late 2018, Willis said the NewAge was creating “a portfolio of CBD-infused drinks” to cash in on the MLM CBD fad.

Willis made a misleading claim about NewAge’s ability to market its CBD products, including that it had obtained sizable retail and distribution orders, commitments, and sales, and that its CBD products were available for purchase in physical shops.

In actuality, NewAge never finished developing a CBD beverage product and never had requests or commitments from any retailers to sell CBD beverages.

Even though no CBD products are even currently being developed, much less being distributed;

Retailers, distributors, and investors participated in an off-site conference that Defendant hosted during the NACS trade event in Las Vegas in October 2018. Sell papers supplied by NewAge contained deceptive claims that

A “unique production procedure” was used to creating the “full spectrum” CBD products from NewAge;

(ii) New Age Health Sciences’ “unique in-house recipe” was used in the allegedly sold items;

(iii) “Third-party testing” is done on “every batch” of the alleged items;

(iii) that a “full spectrum nano technology-amplified entourage effect” benefitted the allegedly beneficial items.

Among the other NewAge distribution falsehoods that Willis spoke:

Aspen Pure Probiotic Water was distributed through 2000+ Ahold Delhaize stores when NewAge didn’t have the inventory to do so and Ahold Delhaize only committed to 74 stores (2017); XingTea being distributed by 7-Eleven in about 1500 stores across the US when in reality the distribution agreement pertained only to about 250 stores in Colorado (2017); and Unified Strategies Group would distribute NewAge beverages through “more than 1 million vending machines, 5,000 micro markets, and over (2019)

The SEC claims Willis misled them.

while knowing, or willfully failing to know, that the representations were false and misleading, artificially inflating NewAge’s stock price, strengthening its financial position, and profit personally.

According to the SEC, Willis was “fixated” on NewAge’s dropping share price, which represented the company’s financial situation.

The financial situation of NewAge was terrible in both 2017 and 2018.

NewAge failed to cover its operational costs and inventory in 2017 due to losses.

NewAge recorded a net loss of almost $3.5 million for the fiscal year that ended on December 31, 2017, and it had just over $285,000 in cash.

New Age reported a net loss of over $3.4 million for the first half of 2018 (ending on June 30, 2018) and had just about $213,000 in cash.

Late in 2017, NewAge’s stock price also fell sharply as a result of the company’s failure to acquire national accounts for its existing brands or create exciting new goods.

In 2018, things deteriorated to the point that NewAge had to take out a “high-interest loan to satisfy basic financial responsibilities.”

Willis put a lot of pressure on his staff, especially his sales team, to produce good press for the business. He frequently voiced irritation with the Company’s failure to acquire distribution with large retailers.

In addition, Willis was pleading with the Board of Directors for a pay raise as “this”—NewAge’s financial collapse—was happening.

Additionally, Willis was dissatisfied with his salary at NewAge and frequently asked the Board of Directors of the Company to raise it, in part to cover personal tax problems.

The Board informed the Defendant that once the Company was on stronger financial footing, it would review his remuneration package in or around 2017 and early 2018.

Take note of the years 2017 and 2018, which correspond to Willis’ deceptive statements that ultimately led to his delivering on the share price of NewAge.

The above-described incorrect and deceptive comments helped Willis personally.

For instance, between April and October 2019, Defendant gained money or property by selling 425,000 NewAge shares for net profits of nearly $2 million, even though NewAge’s share price and liquidity were still unjustly inflated as a result of the aforementioned misstatements.

The Company’s strengthened financial situation, successful stock offerings, and completion of the Morinda acquisition—all of which were brought on by the aforementioned misstatements—led to the Board also increasing the defendant’s remuneration significantly, effective January 2019.

In the end, Willis resigned as CEO on January 10, 2022.

In September 2022, NewAge will subsequently file for Chapter 11 bankruptcy. Along with Willis’ falsehoods, sabotage and extortion plagued the period leading up to NewAge’s insolvency.

The SEC has charged Willis with many breaches of the Securities and Exchange Act as a result of his actions.

The regulatory body is asking for an injunction, the return of earnings that were obtained illegally, as well as a civil monetary fine.

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *