The billion dollar offer for Remington Outdoor Company in 2014 turned out to be part of a series of misleading statements to federal regulators to inflate the ability of a little known penny stock company from Florida.
Global Digital Solutions, Inc. failed to disclose that it had no prospect of financing the $1.082 billion to acquire Remington when it released a press release announcing the offer, according to a lawsuit filed by the Securities and Exchange Commission.
When Global Digital filed its unsolicited offer in March 2014, Remington’s senior management responded by calling the offer “a publicity stunt from an agenda-driven group with no credible financing options” and outright rejected the deal.
But the SEC lists other allegedly misleading statements before the Remington offer that exaggerated Global Digital’s operations, revenue projections and acquisitions relating to its ability as an arms manufacturing, security and tech company.
In October 2013, the company claimed an impending merger with an arms maker to fill a $95 million contract for grenade launchers. However, the agreement didn’t exist and the arms maker had actually asked Global Digital to remove the claim, the lawsuit says.
In November 2013, Global Digital released statements listing projected annual revenue as $60 million to $90 million when in reality it only had $509,224 in cash and no credible financing, the lawsuit says.
Then in the March 2014 offer to buy Remington for $1.082 billion in cash and shares, Global Digital’s cash supply had dropped and was actually $272,000. The press statement was filed as a Form 8-K with the SEC and it was signed by a company official. The document was followed up with an SEC Form 10-K.
The lawsuit says Global Digital’s management, Richard J. Sullivan, the chair and chief executive officer, and David A. Loppert, the chief financial officer, failed to correct the record after the deal had been rejected.
Global Digital, Sullivan and Loppert face seven counts of violating SEC rules and regulations. If convicted, they face financial penalties, disgorgement with interest, and they will be barred from offering penny stocks.