The SEC (Securities and Exchange Commission) is issuing cease and desist orders against a CBD beverage company called NewAge Inc. The SEC said in its Administrative Proceeding dated October 19, 2022 that from approximately July 2017 through April 2019, NewAge, through its former Chief Executive Officer and Director Brent D. Willis, made numerous false and misleading public statements concerning NewAge’s business operations and activities.
These false and misleading public statements concerned a wide range of matters, including NewAge’s alleged development of a portfolio of CBD-infused beverages and its purported product distribution deals with the U.S. military and a number of large domestic and international distributors and retailers. Willis orchestrated this multiyear fraud and disseminated the false and misleading public statements to create the illusion that NewAge was a pioneer and first mover in the potentially lucrative CBD beverage market and that its overall beverage portfolio was gaining traction with major retailers and distributors around the world. These false and misleading public statements were made knowingly and/or recklessly over a two-year period to artificially inflate NewAge’s stock price, improve its financial position, and financially benefit Willis.
Willis left the company on January 10, 2022. The SEC claims that Willis controlled the flow of information that was disclosed to the public, including company press releases, earnings and
other investor calls, investor presentations, and media appearances. Willis was directly involved in the creation, approval, and release of all of the false and misleading public statements upon which this action is based.
NewAge was traded on the NASDAQ using the symbol NBEV, but it was delisted in September and now trades on the OTC using the symbol NBEVQ.
Claims From NewAge
According to the SEC, these are some of the claims that Willis made but was unable to support:
- NewAge’s alleged new distribution of 15 different beverage products across four different product lines throughout Canada with major retailers 7-Eleven, Loblaw, and Sobeys. There was no factual basis for these public statements at the time they were made and an expansion of this scope did not occur.
- A July 21, 2017 press release announcing NewAge’s alleged expansion of its relationship with 7-Eleven, whereby its Xing Tea product would be sold across the 1,400 stores of 7-Eleven’s “Heartland Division.” However, 7-Eleven only sold NewAge’s Xing Tea products within the State of Colorado (constituting approximately 250 stores) and an expansion of this scope did not occur.
- A January 18, 2018 press release announcing a “new distribution agreement” with the U.S. military and a “new U.S. military initiative in partnership with NewAge” whereby 21 NewAge SKUs across its five product lines were purportedly “shipping out now and throughout the 1st quarter to all commissary locations worldwide.” The press release described the scope of the
distribution agreement as including 240 military commissaries and 3,100 exchanges in more than 30 countries across the world. The press release further stated that “[t]he new distribution agreement is expected to have a material impact on the financial results of New Age.”
- An April 8, 2019 press release announcing NewAge’s purported expansion of its distribution of the Marley beverage line with Walmart, including statements that NewAge had “begun shipments to Walmart distribution centers across the U.S.,” that each its three Marley Mate flavors would be available at all Walmart stores in the beginning of April 2019, and that NewAge would be running significant marketing efforts “across Walmart stores.” There was no factual basis for these public statements at the time they were made, and at its peak, Walmart sold Marley brand products in fewer than 10% of its stores.
The SEC also highlighted financial media outlets where Willis promoted his false claims:
- A December 6, 2018 interview with TheStreet.com wherein Willis stated that NewAge’s CBD portfolio was in production and that he expected to have NewAge’s CBD products in stores before Christmas 2018.
- A January 16, 2019 interview with Fox Business News wherein Willis told show host Stuart Varney that NewAge’s CBD beverages were currently available for purchase at major Japanese retailer FamilyMart.
In August NewAge filed for bankruptcy under Chapter 11. On September 9, 2022, NewAge released an announcement stating that its wholly-owned subsidiaries, NABC, Inc. and NABC Properties, LLC were sold to Legacy Distribution Group, LLC for $4.5 million pending bankruptcy proceedings. The deal is expected to close in the fourth quarter of 2022.
Legacy Distribution Group is a 100%-owned subsidiary of CBD Global Sciences Inc. (CSE: CBDN) (OTC: CBDNF), which is an American multi-national consumer goods and manufacturing company headquartered in Denver, Colorado. Ed Brennan, NewAge’s Chairman, and Interim CEO said, “Over the past several months, we have conducted a comprehensive strategic review of our company as we endeavor to simplify our business, scale our operations and position NewAge for sustained growth in the direct selling industry. DSD had humble beginnings and has grown to be one of the largest independent distributors in the country. This proposed sale offers what we believe to be an excellent outcome for stakeholders in the DSD business, including our employees and our customers. Legacy Distribution Group has a deep understanding of the industry and the market in which DSD operates, and we believe they will be able to provide strategic ownership of the business moving forward.”