Applied Biosciences Corporation (EM)【APPB】株式ニュース

FACTS
I. BACKGROUND OF APPB
A. APPB’s Business and Financial Condition
15. APPB’s Form 10-K for the year ended March 31, 2019, filed on July 1, 2019,
stated that APPB’s business focuses “on the development of science-driven Cannabinoid
therapeutics/biopharmaceuticals, and delivering high-quality CBD products as well as state -ofthe-art testing and analytics capabilities to our customers.”
II. APPB ISSUED MISLEADING PRESS RELEASES TO EXPLOIT THE COVID-19
PANDEMIC, INCLUDING A MATERIALLY MISLEADING PRESS RELEASE
ON MARCH 31, 2020.
A. The March 25, 2020 Press Release
16. As consumer demand for products to combat COVID-19 grew, APPB announced
a pivot in its business from cannabinoid-related products to pandemic-related products. First, on
March 25, 2020, APPB announced in a press release titled “[APPB] Announces Launch of . . .
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Product Line to Combat Spread of COVID-19” that the company had “diverted manufacturing
resources to build products that will help battle the spread of the coronavirus (COVID-19).” The
press release included a hyperlink to an APPB-affiliated online store that sold hand sanitizer and
other products. The press release further stated that APPB “has formulated its sanitizing blends
according to the CDC guidelines to make them as effective as possible in killing harmful germs
and bacteria.”
17. APPB’s March 25, 2020 press release was misleading because APPB neither
diverted “manufacturing resources” nor “formulated its sanitizing blends” in connection with the
hand sanitizer it sold, but rather a third-party manufactured the hand sanitizer sold by APPB.
B. The March 31, 2020 Press Release
18. On March 31, 2020, APPB announced in a press release titled “[APPB] Begins
Offering Coronavirus Test Kit to the General Public to Combat Spread of COVID-19” that the
company had “begun shipping” a line of home kits for coronavirus detection, specifically that
“further to its recent March 25th, 2020 press release regarding the Company’s diversion of
production production [sic] capacity to product [sic] hand sanitizer, it has begun shipping
Coronavirus Test Kits (the ‘Kits’ or the ‘Tests’) in the United States.”
19. The press release stated, with emphasis supplied:
These Coronavirus Tests Kits are CE certified, accurate, affordable
and reliable results in under 15 minutes [sic]. . . . This is an
expansion of products that will help battle the spread of the
coronavirus (“COVID-19”).
These CE certified Kits can be used for Homes, Schools,
Hospitals, Law Enforcement, Military, Public Servants or anyone
wanting immediate and private results.
The Home Test Kits can be found on the Company’s online
store. . . .
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20. The March 31, 2020 press release was reviewed and approved by the Director.
C. The Materially Misleading Nature of the March 31, 2020 Press Release
21. APPB’s March 31, 2020 press release was materially misleading in a number of
ways. First, by stating that “further to its recent March 25th, 2020 press release regarding the
Company’s diversion of production production [sic] capacity to product [sic] hand sanitizer, it
has begun shipping Coronavirus Test Kits[,]” APPB misled the public by implying that APPB
had some role in the production of the test kits. In fact, APPB had simply entered into an
agreement to purchase test kits from the Essential Oil Company, a company that prior to the
COVID-19 pandemic sold “vitamin essential oil aromatherapy diffuser sticks[,]” and whose sole
officer has a background in acting and modeling. The Essential Oil Company in turn sourced the
test kits from a manufacturer in China. APPB knew or was reckless in not knowing these
material facts, yet it misrepresented or did not disclose them.
22. Second, the March 31, 2020 press release claimed that it had “begun shipping”
the test kits, which were “Home Test Kits” offered to the “General Public” and that “can be used
for Homes . . . or anyone wanting immediate and private results.” In fact, APPB had not begun
shipping the test kits and now claims it did not offer, sell or intend to sell the test kit for home or
private use, but rather APPB intended to screen potential purchasers only to allow purchases in
connection with use by nursing homes, schools, military, first responders, or in consultation with
a medical professional. APPB knew or was reckless in not knowing these material facts, yet it
misrepresented or did not disclose them.
23. Third, APPB’s March 31, 2020 press release misleadingly failed to disclose that
the FDA had not approved or authorized the sale of any at-home test kits, despite the fact that
APPB knew that the test kits were subject to FDA review. Just days earlier, the FDA announced
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on its website on March 20, 2020 that no home-based coronavirus tests had been approved
(emphasis supplied):
[T]he agency is beginning to see unauthorized fraudulent test kits
that are being marketed to test for COVID-19 in the home.
We want to alert the American public that, at this time, the
FDA has not authorized any test that is available to purchase
for testing yourself at home for COVID-19. The FDA sees the
public health value in expanding the availability of COVID-19
testing through safe and accurate tests that may include home
collection, and we are actively working with test developers in this
space.
24. In a “Consumer Update” included in a March 24, 2020 “Coronavirus (COVID-19)
Update,” the FDA further emphasized that no home-based coronavirus tests have been
authorized, in a release entitled “Beware of Fraudulent Coronavirus Tests, Vaccines and
Treatments” (emphasis supplied):
The FDA has also seen unauthorized fraudulent test kits for
COVID-19 being sold online. Currently, the only way to be tested
for COVID-19 is to talk to your health care provider.
At this time, the FDA has not authorized any COVID-19 test to
be completely used and processed at home. The FDA has
authorized the first COVID-19 test for home collection of samples,
but those samples are to be sent to a laboratory for processing and
test reporting.
25. The FDA also posted a list of all approved coronavirus-related in vitro
(laboratory) test kits on its website, including the manufacturer or laboratory that produced the
test. That list did not include APPB or the test kit it offered to sell, because the test kit was not
authorized by the FDA, which APPB also failed to disclose in its press release.
26. APPB knew or was reckless in not knowing that it was offering to sell a test kit
that was subject to FDA review but that had not been approved by the FDA for home use, yet
APPB did not disclose that material fact. APPB has explained that prior to the March 31, 2020
press release, the Essential Oil Company Executive told the Director that the test kit offered by
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APPB was approved by the FDA. However, APPB conceded that it performed no further
diligence to confirm whether the test kit had been approved by the FDA. Even a minimal
amount of diligence by APPB would have revealed that the test kit was not approved by the
FDA.
D. The April 24 and 27, 2020 Press Releases
27. On April 24, 2020, APPB issued a press release announcing that it had terminated
its agreement with its COVID-19 test supplier, the Essential Oil Company. The release further
stated that:
while at the time of publication of the March 31, 2020 press
release, the [FDA] did not disallow use of the test kit for home use
without the administration of the test by a qualified medical
professional, subsequent to publication of the March 31, 2020
press release, by April 1, 2020, the FDA notified the supplier of
the test kit that home use of the test kit by a qualified medical
professional was not allowed.
28. While the April 24, 2020 press release attempted to correct the March 31, 2020
press release, that correction itself was misleading because the COVID-19 test kit offered for
sale by APPB was never authorized for home use, with or without the administration by a
qualified medical professional.
29. The April 24, 2020 press release also stated that “[o]n April 1, 2020, immediately
after the supplier of the test kit notified the Company that the FDA had informed it that the test
kit was not allowed for home use, the Company supplemented its March 31, 2020 press release
to remove reference to home use.” That statement was misleading because the company never
“supplemented its March 31, 2020 press release.” In fact, on April 27, 2020, APPB issued a
press release to correct that misstatement, stating that it “should have stated that the Company
revised its website (not supplemented the March 31, 2020 press release). . . .”
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III. APPB’S STOCK PRICE AFTER THE MARCH 31, 2010 PRESS RELEASE AND
SUBSEQUENT TRADING SUSPENSION
30. After the materially misleading March 31, 2020 press release, APPB’s price and
volume both increased notably. The press release was issued before the market opened on
March 31. During trading on March 31, APPB’s stock price increased almost 80 percent from
the previous day (from $0.45 to $0.80), and its volume increased by a factor of 85 (136,300
shares sold, versus 1600 shares sold on the previous day). From March 31, 2020 through April
7, 2020, APPB’s closing stock price ranged from $0.45 to $0.80, with an average trading volume
of 48,985 shares. In contrast, from January 2, 2020 through March 30, 2020, APPB’s closing
stock price ranged from $0.24 to $0.69, with an average trading volume of 3,635 shares.
31. On April 13, 2020, the Commission suspended trading in APPB’s securities for
ten trading days, effective April 14, 2020.