Business ProfileforQuanta Inc

The Securities and Exchange Commission today announced that Quanta, Inc., a Burbank, California-based biopharmaceutical company that develops and sells a scorpion venom product called Escozine, its CEO, Arthur Mikaelian, and his son and Quanta's executive vice president in charge of operations, Grant Mikaelian, have agreed to settle fraud charges without admitting or denying the allegations in the SEC's complaint. As part of the settlement, the Mikaelians consented to officer and director bars and to pay civil penalties.

According to the SEC's complaint, in a July 23, 2021 press release, Quanta and Arthur Mikaelian misrepresented the FDA staff's response to the company's proposed clinical trial of Escozine as a Covid-19 treatment. As the complaint alleges, the press release misrepresented that the FDA staff's response validated the clinical study conducted in the Dominican Republic and that the FDA's staff had recognized the potential therapeutic benefits of Escozine. The complaint further alleges that these, and additional false and misleading statements in the press release, gave investors the impression that the FDA's staff was positive about the proposed clinical trial and the results of its clinical trials in the Dominican Republic. However, as alleged in the complaint, the FDA staff's response stated that the Dominican Republic clinical trial "cannot be directly leveraged to support your proposed clinical trial" and that antiviral activity "has not been demonstrated with your specific product, [E]scozine."

In addition, the SEC's complaint alleges that Quanta included $198,000 of improperly recognized revenue in its Form 10-Q for the first quarter of 2021, causing Quanta to overstate its total revenue by 61% in that quarter. The SEC's complaint alleges that Quanta based its improper revenue recognition on a backdated purchase order created by Grant Mikaelian for its Escozine immunapens, which it also provided to Quanta's auditors as support for its revenues. The SEC's complaint further alleges that Arthur Mikaelian falsely represented in a management representation letter to Quanta's auditor that the quarterly financials were prepared in accordance with generally accepted accounting principles (GAAP), and he certified Quanta's first quarter Form 10-Q, which included the $198,000 in revenue.

Quanta, without admitting or denying the allegations in the SEC's complaint, consented, pre-filing, to the entry of a final judgment which permanently enjoins it from violating the antifraud, reporting, books and records, and internal controls provisions of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder.

Arthur and Grant Mikaelian, without admitting or denying the allegations in the SEC's complaint, consented, pre-filing, to the entry of final judgments permanently enjoining each of them from violating Section 17(a) of the Securities Act and Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b5, 13a-14, 13b2-1, and 13b2-2 thereunder, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a1, and 13a-13 thereunder and Rules 12b-20 and 13a-13 thereunder, respectively. In addition, Arthur and Grant Mikaelian each consented, pre-filing, to five-year officer and director bars and five-year penny stock bars, and civil penalties of $150,000 and $75,000, respectively.