IN THE MONEY:Lawsuit Calls Into Question GeneMax Float
By Carol S. Remond and Steve D. Jones
14 March 2003
Dow Jones News
A Dow Jones Newswires Column
VANCOUVER, Wash. (Dow Jones)- When it comes to trading in GeneMax Corp.
(GMXX), it's all about supply and demand.
Pooling agreements and insider selling restrictions have tied up all but 3%
of GeneMax's 15.2 million outstanding shares. A switch to certificate-only
trading in July and lawsuits against selected brokerages used by short
sellers tightened trading even further.
Last fall, officials of the biotech company said only 265,000 shares were
free to trade. That number rose to 367,000 in December after an option
exercise.
But as it turns out, there may be more shares in GeneMax's float than the
company and its marketing firm Investor Communications International Inc.
have said.
A lawsuit filed recently in the Superior Court for the State of Washington
indicates that ICI sold at least 300,000 GeneMax options to a third party as
early as last June.
That contradicts statements made by GeneMax director Grant Atkins to Dow
Jones Newswires last fall. In an October interview, Atkins said that ICI had
not sold or excercised any of its options.
Atkins, who is an ICI consultant, confirmed that ICI held 1 million options
in GeneMax that were freely tradeable. He said that ICI had not sold,
exchanged or shorted any shares against the options. He repeated a claim he
had made in July that only 265,000 GeneMax shares were free to trade.
The Washington suit, filed by ICI and an offshore entity called Newport
Capital Corp., shows that GeneMax shareholder Garth Braun bought shares from
ICI in June. The suit then alleges Braun and companies he controls reneged
on an agreement not to sell those shares without the approval of ICI
officers. The suit doesn't make clear whether Braun purchased options or
shares from ICI.
While the suit doesn't specify many details of the transaction, it does make
clear that ICI was dealing in large blocks of GeneMax stock at a time when
ICI representatives were telling the public otherwise.
ICI's attorney Steven Childress wouldn't comment on details of the
transaction, the number of shares sold in the deal or statements by Atkins.
He said that the intent of the suit was to prevent Braun from selling any
shares.
"My understanding is that the defendants actually have the stock," Childress
said. "Whether it got to (the defendants) as options and they later
exercised them, or they received stock, I don't know. But the defendants
have stock in their possession."
Childress referred other questions about the suit to ICI representative
Marcus Johnson. Johnson refused to comment.
Braun also declined to comment.
ICI is a marketing company that led a recapitalization of GeneMax in early
2002. It brought GeneMax public on the Nasdaq Bulletin Board market through
a reverse merger into a Nevada software company called Eduverse. Both ICI
and GeneMax are headquartered at the same address in Blaine, Washington.
According to SEC filings, British Columbia resident Brent Pierce, who in
1993 was banned from serving as an officer or director of a public company
in British Columbia, is president of both ICI and Newport Capital. A
February 2001 filing by Vega Atlantic Corp. (VATL) identified Pierce, as the
president, secretary and director of Newport Capital. Meanwhile, a December
2002 document filed with the SEC by Petrogen Corp. (PTGC) identified Pierce
as president of ICI. Both Vega and Petrogen are represented by ICI.
Pierce declined to comment.
The suit alleges that Braun and two companies he controls, Seraph Capital AG
of Germany, and MultiMillion Investments Ltd. of Vancouver, B.C., have sold,
or are attempting to sell shares in violation of the agreement with ICI. The
suit seeks unspecified damages and asks the court for an injunction to
prevent the sale of Braun's shares.
The suit says that on June 3, ICI and Braun on behalf of his company Seraph,
entered into an agreement "regarding the sale of certain shares of GeneMax."
The suit also says they executed a "share purchase and pooling agreement"
covering two groups of 300,000 shares each of GeneMax. The suit doesn't
specify at what price the shares were sold. It also doesn't specify which
company controlled which group of shares, just that the groups contained
equal numbers of shares.
A third group of shares in the pooling agreement covered 77,500 shares,
including 34,000 shares paid to MultiMillion Investments in exchange for
unspecified services. Overall, the pooling agreement covered 677,500 shares
owned by both ICI and Newport Capital and Braun and his companies.
According to the suit, Braun notified ICI and Newport Capital in January
that Seraph and MultiMillion Investments "would no longer recognize" the
pooling agreement.
The suit asks for an injunction imposing a "stop transfer" order on any
stock transfer agent that might handle sale of shares for Braun or his
companies.
This is not the first time that Braun's name comes up in litigation
involving shares of GeneMax.
In September, Braun filed a lawsuit against Octagon Capital Corp., a Toronto
stock brokerage, because the brokerage firm was unable to deliver
certificates for 29,500 shares of GeneMax Braun had purchased. The purchases
were made between July 23 and Aug. 2. Octagon later delivered a total of
29,500 shares of GeneMax in certificated form to Braun.
Although the pooling agreement between ICI and Braun predates Braun's
purchase of those 29,500 shares of GeneMax, the Washington state lawsuit
alleges that Braun is not free to trade those shares without ICI approval.
By Carol S. Remond, 201 938-2074; and Steven D. Jones, 360 253-5400;
Dow Jones Newswires
