Tom Allinder of HotStockChat interviews Ron Handford, President and CEO of GeneMax Corp and Grant Atkins, Director of GenMax Corp. (OTCBB-GMXX)
Interview Transcript
Transcript of Tom Allinder of HotStockChat.com’s Interview with Ron Handford and Grant Atkins of GeneMax Corporation (OTCBB-GMXX)
Tom: Hello and welcome to HotStockChat. My name is Tom Allinder. Today our guests are Ron Handford – Mr. Handford is the President and CEO of GeneMax Corporation, which is traded on the OTCBB, under ticker symbol GMXX. Also, we have Grant Atkins – Mr. Atkins is the Director of GeneMax. Today we’re going to talk about the company first, and then we’re going to go ahead and go into the most recent news that GeneMax has had, which is regarding the naked short position on their stock, which they produced evidence of in a news release a little bit earlier this week.
Good afternoon, gentlemen. How are you doing?
Ron and Grant: Very well, thank you. This is Ron Handford here. And Grant Atkins – nice to be here, Tom.
Tom: All right. Ron, can you give us some background on GeneMax Corporation?
Ron: Yes, I’d be pleased to. GeneMax was founded in 1999, specifically to license in technologies from the University of British Columbia in the area of immune modulation and treatment of diseases such as cancer, autoimmune diseases, which could be addressed through manipulation of the immune system. So what we’ve done is a private company has moved the technology forward to the point where we now have a U.S. patent on two of our technologies, and our lead product is a cancer therapy, which we intend to get into human clinical trials within 18 months.
On the corporate side, we have this summer been going through a merger with a OTCBB company, previously known as Eduverse.com and now known as GeneMax Corp., and we are completing that merger this month and we’ll be moving forward as a public company to finance our program and get our TAP, which is our lead product, in the clinical trials as soon as possible.
Tom: Now I talked to a few people and done some research on your technology. Can you tell us what your company is working on, with regard to treatment or subsequent cure for some types of cancers?
Ron: Yes, the technology which we are developing – it’s a very broad enabling technology and we should be able to address the problems of all the major groups of cancer, such as lung cancer, breast cancer, melanoma, prostate cancer and many of the smaller group of cancers as well. How we do this is we reintroduce a gene into the cancer cells which restores a problem within the cancer cells which allows the cancer cells to go unrecognized by the immune system. It’s very simple and it’s, I believe, elegant in its simplicity and that there’s a number of components within the pathway in the cell which result in a flag being placed on the cell’s surface – this flag being used by the immune system cells to recognize this cell as a cancer cell. Now, one of the ways that the cancer evades the immune system is the lack of presentation of these flags which are really called antigens, and the main reason for this lack of antigen presentation on the cell’s surface is the mis-functioning of a protein within the cell called a TAP protein, and the tap protein – that’s short for “transporters associated with antigen processing” but we just call it TAP for short – and we can fix that problem by delivering a TAP gene – we deliver this with a viral vector and this restores the TAP protein within the cancer cells, restores antigen presentation, which is the flag on the cell’s surface, and lets the immune system then recognize the cancer cell and kill it, as it should do in the normal course of events.
Tom: The next couple of questions I have may be getting ahead of things a little bit, but where do you stand with regard to patents right now?
Ron: Well we have a very strong patent position on the two technologies we licensed in and they both have U.S. patents and other European and Japanese coverage as well. Our lead product compound, which is the TAP, was given an allowance from the U.S. patent office for the use of a TAP-1 gene against all cancers in the fall of 2001, and in the spring of 2002 we were finally awarded the patent. The history of development of this was many years in the developing – it was 1994 that the University of B.C. had first applied for this patent and it took many years of moving the technology forward and proving that it worked not just with small cell lung cancer cell line in mice but in doing other tests in the laboratory establishing that it worked also with a melanoma and prostate cancer cell lines, and with all of the data then we are finally awarded a very broad patent for the use of our TAP-1 gene against all cancers, so we think this is a very powerful intellectual property position.
We’ve also got another tool, which is called a peptide transfer assay, and this also has a U.S. patent issued on it. Basically, this is a related topic to our lead candidate in that it’s a tool by which we can assess compounds for their ability to modulate the immune system. For example, we can screen through hundreds of compounds, whether they be natural products or man-made chemical libraries, or genes, or anti-sense compounds, and determine if any of these compounds have the ability to boost or suppress this antigen presentation – in other words if they’re modulating the immune system. For example, if we find drug candidates which suppress the immune system, this would be good for applications in autoimmune diseases or transplant surgery. On the other hand, if we find things that boost the immune system, this would be very good for cancer or viral applications, so we have a patented tool now that we can use to build a pipeline of products and diversify the risk for the company and for investors. Intellectual property is very strong in the company.
Tom: All right. When do you expect to move to production?
Ron: The production plans, of course, we have to go through many years of clinical trials before we can actually get our TAP therapy into production and distribution worldwide. However, we are about 18 months away from beginning clinical trials and then we’ll have to go through three phases of clinical trials: Phase 1 and Phase 2 – each lasting about a year; Phase 3 which involves many clinical sites and lots of doctors and hundreds of patients, presumably some in Europe, some in North America, some in Japan. This will take at least another two years, so the earliest we’re going to be in production is about 5½ years.
The peptide transfer assay – we expect partnerships earlier than that and that could result in earlier cash flow to the company. I think the important thing for investors to note is by comparison with other publicly-listed cancer therapy biotech companies, there’s value to be created by the company moving through its milestones – if it gets into Phase 1 clinical trials, that’s one valuation benchmark. If it gets into Phase 2, that’s another benchmark, and so on. So, the investors don’t have to wait for us to be selling the first ounce of drug before they’ve realized a very good return on their investment. And we believe with the quality of the science and the quality of the management team and board and scientific advisory board we have, we will meet those targets and create a lot of value for investors along the way.
Tom: Well, we’ll certainly be back to talk to you more at length regarding your company. Right now I’d like to move on to the news release that you had yesterday, which is what prompted me to pick up the phone and call your company in the first place, and I guess this question is for Grant. Can you give us some background on your efforts to expose the naked shorting on the stock?
Grant: Sure. First we enforced provisions of the company’s bylaws to require certificated share transfers. Now this in the industry is, I believe, known as custody-only share ownership status. The depository trust corporation in the U.S. and the Canadian Depository are exiting our issue from eligibility in their system. So that means that there won’t be any electronic debit or credit bookkeeping allowed that currently enables their member participants – the broker/dealers and the clearing agents – to not require actual delivery of shares purchased by their clients. In addition, we’ve been following the illegal naked short selling conducted by market makers over a time series and collect detailed data to support NASD, SEC or IDA investigations or even litigation. We’ve contacted a series of broker/dealers and clearing agents, asking them to buy in certificated delivery against payment, GeneMax shares, where they do not have their client’s stock on deposit.
Tom: All right. Now in your news release from yesterday morning, you detailed all the firms that have sold stock in GMXX – it looks like most of the firms involved with OTCBB stocks are listed there to one extent or the other. Has there been any fallout from this particular news that you’ve put out?
Grant: First a minor point of clarification: The list of firms in the news release are ones that do not have the DTC or CDS positions that support their real shareholdings. As for fallout, there hasn’t been much yet at the certification process, and exit from the DTC system will take a few weeks to affect, and in addition the fallout may not be felt until firms are forced to purchase real share certificates. Brokers are currently allowed to fail deliveries in their buy-ins and naked shorting is still permitted, and if there has been any effect, there’s been some increased selling pressure to sell more air or fail deliveries. But thing to note is none of this selling is real; they are not selling actual share certificates, and buy-in attempts by the brokers continue to fail and I guess ultimately they’ll be replaced by real share certificates at some point, but when is really the question.
Right now the marked trading shares that have been sold and actually exist by a factor of two. Some brokers are attempting to buy in securities that they should have on behalf of their client. Buy-ins conducted currently by brokers are done at artificially low share prices that have been manipulated downwards by the sale of stock that really doesn’t exist. These buy-ins don’t lead to real shareholdings selling real certificated shares that the broker/dealers need to cover the failed deliveries to their clients. The brokers will ultimately have to repurchase the shares at the market rate for a real commodity, that is a real certificate, as opposed to the sale of air that currently goes for about $4 a share at today’s rates. The more the naked short sellers sell will ultimately increase the demand by real shareholders for certificates and the certificates will become low in supply and scarce and expensive. But there are regulations and time frames that the naked shorters rely on with respect to the making good on their failed deliveries that effectively push the problem down the road. The mechanism that they use is kind of like cutting a check and they can revolve it around a number of times.
As broker/dealers continue to fail in the delivery of the certificates to their clients, we may see some ensuing litigation as shareholders sue broker/dealers for breach of contract. In fact, the client has paid for the stock, the broker has confirmed that they purchased it, but the broker can’t deliver it. There may be some other fallout coming from regulatory investigations into illegal trading activity. The NASD has agreed today to investigate this manipulation. There may also be fallout and pressures coming from print and television media who are closely watching our story as it unfolds.
Tom: Absolutely, that’s what I’m doing.
Grant: But I guess on the good side, we have had some participant brokers contacting the company as we’ve requested to discuss the problem and look to some possible resolution. I hope that’s a first step anyway.
Tom: All right. Now Grant, this was obviously a lot of work that you went through here; how did you go about coming up with these figures?
Grant: The figures come from basically understanding your transfer agent records and understanding the breakdown between trading and restricted share totals that the company has. You can then simply order up an ADP proxy list to gauge your actual shareholdings against depository position reports at the DTC and CDS house reports, all for the same record date. So when you compare, the DTC depositories versus your real shareholdings, that’s where you’ll find the discrepancies and you can gauge an actual size of the naked shorting. We then collect our data over a time series, a time series of many different record dates, to really gauge the movement of the naked short in size and volume over a period of time.
Tom: All right. I’d like to ask you to go over the numbers here for those that have not read the news release and could you go over what you have in the way of number of shares outstanding and what’s in the public float, first of all?
Grant: Sure, I guess we’re just about through our reverse takeover and GeneMax Corp. will have approximately 15.3 million shares issued pursuant to the RTO of GeneMax Pharmaceuticals. Of that amount, all but approximately 265,000 shares are restricted under Rule 144 and/or voluntary pooling arrangements. The 265,000 trading shares represents the float, and I estimate that the float has been twice sold by naked shorting – in fact adding an artificial additional 265,000 failed delivery shares that have been purchased by investors. This means that there are twice as many investor shareholders in the company as there are trading shares in existence.
Tom: Well, that’s obviously due to the short there because I look at this – whenever you mentioned before – you mentioned this as sort of like writing a check and then you spin that check around and around and you can move it around all over the place and never have to make good on it.
Grant: That’s right.
Tom: I remember in the Canadian markets back in I believe it was in the ‘80s and ‘90s you could do that with stock – you could buy stock and never really have to pay for it and the only time that you’d actually pay for it is if you really made money with it but with a naked short, you’re really just making free money by today’s standards and it’s absolutely criminal and these few people – the number of people that are short and naked short on these stocks are comparatively very few compared to the number of people that are actually long on the stock, so it’s a few people that are destroying the stock and destroying the market as it is, and that’s my little soap box subject there, so I’ll go on into the next question here. Now, many companies as well as individual investors have tried to expose the problem before and it never seems to work – they change the CUSIP number, they do a reverse split, I’ve seen just about everything tried and it never seems to work out. How is your effort going to make this work out in this case and, the reason I ask that is because I would like to see other companies go through the same effort and it is a great deal of effort to go through and watch the stock on a daily basis and count the number of shares bought and sold and compare it to what’s held in firms. So what is making your effort different?
Grant: According to the Depository Trust Corporation and some of their long-time employees of over 20 years, they said that we were one of the only public company issues to exit the Depository Trust system to a certificate-only transfer status. I think that’s the first thing. And, I guess as the second, we’re attempting to make public actions that the company is taking to expose and correct a naked shorting dynamic via press release. So this has the effect of educating shareholders and at the same time elevating the problem to both regulators and both print and television media and we have a number of high-level media participants watching our story unfold. It’s my hope that the exposure of the problem will create a public outcry that will ultimately cause the regulations to change so that fair trading practices are followed.
Tom: Well, you know, there is a public outcry going on out there – if you go through and you read the various stock message boards, everyone’s complaining and have been for the last couple of years and what not, but nobody really seems to know how to do anything about it, and I have ways and means – I mean what you’ve gone through to come up with all of these numbers and so forth and to show clear evidence that there’s naked shorting, all companies could do that but they just don’t seem to go to this extent of work and it is a lot of work to try to clean up the stock and find out what’s really out there and what’s not out there. My next question is: What is going to be your next course of action?
Grant: Continued pressure to solve the problem, further education, possibly court actions, shareholder lawsuits, media attention, regulatory investigations, direct discussions with the market makers and the brokers and the shareholders involved. I guess in addition, increasing demands of shareholders simply asking their broker for delivery of what they purchased, and all of these actions in concert really attempt to force correction of the problem over time.
Tom: All right. Yeah we’re definitely going to need media help to bring this problem out because it’s like everybody knows about it but nobody’s done anything about it but it really hasn’t hit the media.
Now, I understand that you have some help from Washington D.C., and I have spoken to a number of people in Washington D.C. who are well placed that can help out with this sort of problem. Can you give us some details on some of the contacts that you have at Washington and what they’re doing to resolve the problem?
Grant: Sure. We are working through a new entity named the National Small Public Company Leadership Council that’s based in Washington, and the Leadership Council seeks to educate members of Congress, the White House, and federal agencies about the economic and regulatory issues facing America’s small public companies. Naked short selling is its priority. The organization seeks to force Congressional hearings into the matter of naked shorting and over a time, I think we’re going to increase its momentum and it should form a formidable lobby to prevent the current trading abuses and change the law accordingly.
Tom: Absolutely. Well, I’m certainly going to have you two gentlemen back on more and that is to talk about the company more and to talk about your progress, and on our end here we’re going to continue to raise the awareness to the naked shorting that’s going on on the OTCBB from now until as long as it takes to get this problem solved, that’s for sure.
I want to thank you gentlemen both very much for being with us today; it’s been a very enlightening session at HotStockChat.
Ron: We appreciate you taking the time and giving us the opportunity to both tell our story about our exciting therapy under development and expose that to your readers as well to work with you on solving this pernicious problem in the financial markets.
Grant: Thanks very much, Tom. It is a very complex subject and it just takes some time to tell the story.
Tom: Absolutely. All right, well thank you very much gentlemen. That’ll do it for this session of HotStockChat. We’re definitely going to have you back.
Ron: Okay, appreciate it.
End
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