On May 11, 2015, the Securities and Exchange Commission (“SEC”) instituted administrative proceedings against two penny stock companies, Visual Acumen, Inc., and First Xeris Corp. (FXER). The purpose of the actions was to establish grounds for imposing stop orders that would suspend registration of the companies’ stock.
First Xeris had filed a Form S-1 registration statement on April 22, 2013 to register an offering of 3 million common shares for a total of $39,000. The registration statement was amended several times, and finally deemed effective on January 8, 2014. Visual Acumen filed its own Form S-1 registration statement on February 5, 2014 to register an offering of 3 million common shares for a total of $33,000. The registration statement was amended once, and became effective on May 9, 2014.
First Xeris’s offering was to be sold to the public by its sole officer and director, David Mullins. Mullins himself owned 9 million shares, which he had supposedly purchased for $9,000. Prior to the offering, that represented 100 percent ownership in the company. Visual Acumen’s stock was to be sold to the public by its own sole officer and director, Alex McKenna. Like First Xeris’s Mullins, McKenna owned 9 million shares of his company’s stock, which he had supposedly purchased for $9,000. Both First Xeris and Visual Acumen identified themselves as a shell company.
The notices announcing the initiation of the SEC stop orders against the two companies are similar. Both begin by asserting that the “Registration Statement includes untrue statement of material facts and omits to state material facts necessary to make the statement contained therein not misleading…” For example, the SEC alleges that both companies misrepresented their business plans, and that neither Mullins nor McKenna had actually paid $9,000 for the stock he owned. Using nearly identical wording in both notices, the agency goes on to object that the assertion that the “sole officer and director ‘is the only ‘parent’ and ‘promoter’ of the company’” is “untrue and misleading because Respondent [the company] is controlled and/or promoted by an undisclosed control person, parent and/or promoter.”
The inescapable conclusion is that the SEC believes that First Xeris and Visual Acumen were set up by the same unidentified individual or entity. What do the two companies have in common? Not much at first glance. Both were incorporated in Florida, First Xeris on March 21, 2013, and Visual Acumen on October 7, 2013. Different securities attorneys wrote the consent letters accompanying the Forms S-1: Angela Collette PSC of Michigan vouched for First Xeris; Everett & Everett of New York for Visual Acumen. The companies do, however, share an auditor, Messineo & Co. of Clearwater, Florida.
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