Without knowing much about KMAG
My bets are on a stock issuance issue. Where 434M shares were issued to the "someones" for $292K in debt, and the CEO exchanged something like $328K in debt said to be owed to him for 25M preferred convertible into 625M common. This occurred between Jan 2011- May 2012. Of course the herd somehow considers this to be non-dilutionary. Why? Because the CEO had a stock buyback of 37M shares, where he never announced the amount to be repurchased up front, and came days after he converted his first 140M shares from his preferred. Ironic or not, before converting the CEO had 39M in common. Makes one wonder if he didn't have his company buy 37M shares from him. The PPS went down after the stock buyback announcement on heavier than usual volume. Then there are the "consultants" being issued stock in the past. There was also misrepresentation of the company prior to the suspension. PRs mentioning "Factory A", and "Factory B" shipping product to undisclosed customers. Very secretive.
Add in the legalese about not ever having been investigated disappearing after last December. The CEO choosing only to post the so called quarterly (unaudited) financials on his website instead of submitting to the OTC site. And finally Russian hackers - hacking the website, and redirecting it to a Russian personals site, approaching 2 weeks in length. Maybe the CEO ticked off the Russian mafia? LOL The herd is eagerly awaiting the next "financials" to be reported... well somewhere!
In summary you are saying the SEC would just block the new S1 for stock issuance. What regulation would they cite to block it? Or might they throw an immediate litigation at the CEO, and/or offer it up to the NY AG for criminal prosecution? It's hard to believe the SEC would be amused by such a tactic to begin with.
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