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21-202MR ASIC takes Holista CollTech Limited and its CEO to Court over COVID-19 product claims
ASIC has commenced civil penalty proceedings in the Federal Court against Holista CollTech Limited (ASX:HCT) (Holista) and its Executive Chairman and CEO, Dr Rajendran Marnickavasagar, for alleged misleading statements regarding the sale orders for its sanitiser product and its effectiveness against the coronavirus involved in the Wuhan outbreak, later named COVID-19.
Dr Marnickavasagar claimed in a YouTube video in February 2020 that Holista’s ‘NatShield’ sanitiser spray killed the coronavirus ‘involved in the current Wuhan outbreak’. ASIC alleges that this was misleading as the product had not been tested against COVID-19. Testing of the product against a feline coronavirus surrogate of COVID-19 commenced at a later date.
ASIC also alleges that on 9 April 2020, Holista announced to the Australian Securities Exchange (ASX) that Health Therapies LLC (Health Therapies) had placed orders for 415,000 bottles of NatShield, totalling $3.8 million, for delivery between April and June 2020, when those orders had not been placed.
Subsequently, on 9 July 2020, Holista updated the market that the forecasted sales by 30 June 2020 worth $3.8 million from Health Therapies would not be met, as Holista’s expected revenue for the sale of NatShield to all customers for the year to 30 June 2020 was now $500,000.
ASIC also alleges that Holista made a misleading statement that it had, in February 2020, executed a Binding Term Sheet with another company to co-develop a new sanitising nasal balm. ASIC alleges that the agreement was actually executed in April 2020, rather than in February as stated.
‘ASIC continues to focus on suspected misleading statements made to the market during the pandemic. In this case, we are concerned by the allegedly misleading claims, made when there were concerns about a potential pandemic, that NatShield was effective against the virus later known as COVID-19 when it had not been tested against that virus,’ said ASIC Deputy Chair Sarah Court.
ASIC alleges contraventions by Holista of sections 1041H and 674 of the Corporations Act and by Dr Marnickavasagar of sections 180 and 1309 of the Corporations Act.
ASIC is seeking declarations and pecuniary penalties from the Federal Court against Holista and Dr Marnickavasagar and an order to ban Dr Marnickavasagar from managing a corporation.
Holista is a Western Australian based company, principally focussed on the development of natural health foods and associated products. Holista distributes an alcohol-free, natural sanitiser spray product called ‘NatShield’. On 22 April 2020, Holista had a market capitalisation of approximately $49.5 million. On 4 August 2021, Holista’s market capitalisation was approximately $18.17 million. The company has offices in Malaysia and Perth.
In October 2020, ASIC issued administrative Determinations under ss713(6) and 708A of the Corporations Act making Holista ineligible to issue a reduced-content prospectus, and to use exemptions for reduced disclosure in any sale offer of its securities until 17 October 2021. These Determinations require Holista to issue full disclosure documents when raising funds until 17 October 2021(20-250MR).