U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _______
Commission file number 0-27239
GENEMAX CORP.
---------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 88-0277072
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
435 Martin Street, Suite 2000
Blaine, Washington 98230
-----------------------------------------
(Address of Principal Executive Offices)
(360) 332-7734
--------------
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
------- -------
Check here if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this Form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
State the issuer's revenues for its more recent fiscal year (ending
December 31, 2002): $-0-.
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked prices of such common equity, as
of February 28, 2003: $10,405,574.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the most practicable date:
Class Outstanding as of March 31, 2003
Common Stock, $.001 par value 16,813,519
Page
ITEM 1. DESCRIPTION OF BUSINESS 1
ITEM 2. PROPERTIES 14
ITEM 3. LEGAL PROCEEDINGS 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED 15
STOCKHOLDER MATTERS
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR 19
PLAN OF OPERATION
ITEM 7. FINANCIAL STATEMENTS 26
AUDITOR'S REPORT DATED FEBRUARY 25, 2003 28
CONSOLIDATED BALANCE SHEETS 29
CONSOLIDATED STATEMENTS OF OPERATIONS 30
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY 31
CONSOLIDATED STATEMENTS OF CASH FLOWS 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 37
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS OF 47
ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND 47
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT
ITEM 10. EXECUTIVE COMPENSATION 49
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 56
AND MANAGEMENT
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 58
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 60
ITEM 14. CONTROLS AND PROCEDURES 60
SIGNATURES 60
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS HISTORY AND DEVELOPMENT
GeneMax Corp., formerly known as Eduverse.com, is a Nevada corporation
which currently trades on the OTC Bulletin Board under the symbol "GMXX" and is
referred to in this Form 10-KSB as the "Company". The Company is also listed for
trading on the Frankfurt Stock Exchange (FWB) under the symbol "GX1". The
Company is a product-focused biotechnology company specializing in the
application of the latest discoveries in cellular immunology and cancer biology
to the development of proprietary therapeutics aimed at the treatment and
eradication of cancer and therapies for infectious diseases, autoimmune
disorders and transplant tissue rejection. The Company's operating subsidiaries
are GeneMax Pharmaceuticals Inc., a Delaware corporation ("GeneMax
Pharmaceuticals"), and the subsidiary of GeneMax Pharmaceuticals named GeneMax
Pharmaceuticals Canada Inc., which is a corporation organized under the laws of
British Columbia.
The Company's principal place of business is located at 435 Martin Street,
Suite 2000, Blaine, Washington 98230. Its telephone number is 360.332.7734 and
its facsimile number is 360.332.1643.
SHARE EXCHANGE AGREEMENT
During fiscal year ended December 31, 2002, the Company consummated and
finalized the acquisition of GeneMax Pharmaceuticals and its subsidiary
interests. On May 9, 2002 and effective July 15, 2002, Eduverse.com (now known
as GeneMax Corp.), GeneMax Pharmaceuticals, the shareholders of GeneMax
Pharmaceuticals (the "GeneMax Shareholders"), and Investor Communications
International, Inc., a Washington corporation ("ICI") entered into a share
exchange agreement (the "Share Exchange Agreement"). In accordance with the
terms of the Share Exchange Agreement and the securities laws of Canada, a
Directors' Circular dated July 15, 2002 (the "Directors' Circular") was
distributed to certain management, insiders and directors of GeneMax
Pharmaceuticals, and other Canadian shareholders (the "Canadian GeneMax
Shareholders").
Pursuant to the terms of the Share Exchange Agreement, the Directors'
Circular and related settlements, the Company acquired from the GeneMax
Shareholders and the Canadian GeneMax Shareholders one hundred percent (100%) of
the issued and outstanding shares of common stock of GeneMax Pharmaceuticals and
its subsidiary interests. In accordance with the terms of the Share Exchange
Agreement, the Directors' Circular and related settlement agreements, the
Company issued shares of its restricted common stock as follows: (i)
approximately 6,571,304 shares of restricted common stock to the GeneMax
Shareholders in proportion to their respective holdings in GeneMax
Pharmaceuticals; (ii) approximately 4,479,001 shares of restricted common stock
to the Canadian GeneMax Shareholders pursuant to the terms of the Directors'
Circular; (iii) 181,660 shares of restricted common stock to certain creditors
of GeneMax Pharmaceuticals at $0.75 per share for settlement of an aggregate
debt in the amount of $136,245; (iv) 188,154 shares of its restricted common
stock to certain creditors of GeneMax Pharmaceuticals at $1.00 per share for
settlement of an aggregate debt in the amount of $188,154; and (v) 200,000
shares of restricted common stock to a third party.
1
The Company issued an aggregate of 11,620,119 shares of its restricted
common stock under the Share Exchange Agreement and Directors' Circular and
related settlement agreements. Certain warrant instruments were issued in
accordance with the terms and provisions of warrant agreements pursuant to which
the holder thereof has the right to convert such warrant into shares of common
stock on a one-to-one basis at either the rate of $2.50 per share, $0.75 per
share or $1.00 per share. Pursuant to the Share Exchange Agreement and
Directors' Circular and related settlement agreements, there were an aggregate
of 744,494 warrant instruments issued, of which 110,334 warrants were issued
convertible into 110,334 shares of common stock at the rate of $2.50 per share
expiring on September 1, 2002. The 110,334 warrants were not converted by the
holders thereof into shares of common stock and expired on their terms. Thus, as
of the date of this Annual Report, there are an aggregate of 634,160 warrant
instruments issued comprised of the following: (i) 277,500 warrants issued and
outstanding which may be converted into 277,500 shares of common stock at the
rate of $1.00 per share expiring December 1, 2005; (ii) 175,000 warrants issued
and outstanding which may be converted into 175,000 shares of common stock at
the rate of $1.00 per share expiring May 1, 2006; and (iii) 181,660 warrants
issued and outstanding which may be converted into 181,660 shares of common
stock at the rate of $0.75 per share expiring May 1, 2006. See "Part I. Item 5.
Market for Registrant's Common Equity and Related Stockholder Matters".
Voluntary Pooling Agreement
The Company and GeneMax Pharmaceuticals desire to provide for and maintain
an orderly trading market and stable price for the Company's shares of Common
Stock. Therefore, the Company, certain shareholders of GeneMax Pharmaceuticals
and of the Company, and Global Securities Transfer Inc., the Company's transfer
agent ("Global Securities"), entered into a voluntary pooling agreement dated
May 9, 2002 and effective July 15, 2002 (the "Pooling Agreement"). Pursuant to
the terms and provisions of the Pooling Agreement, certain shareholders of
GeneMax Pharmaceuticals and certain shareholders of the Company (the "Pooled
Shareholders") representing up to an aggregate of 9,166,980 shares of common
stock, respectively (the "Pooled Shares"), generally agreed that the Pooled
Shares are subject to a contractual restrictive holding period. The Pooled
Shareholders further agreed that that the Pooled Shares may not be traded and
currently become available for trading and released and sold in the following
manner: (i) an initial ten percent (10%) of the Pooled Shares will be released
to the Pooled Shareholders on the date which is one calendar year from the
closing date of the Share Exchange Agreement (the "First Release Date"); and
(ii) a further ten percent (10%) will be released to the Pooled Shareholders on
each of the dates which are every three (3) calendar months from the First
Release Date in accordance with each Pooled Shareholder's respective
shareholdings.
Secured and Convertible Loan Agreement
As a condition to entering into and in accordance with the Share Purchase
Agreement, the Company and ICI agreed to advance to GeneMax Pharmaceuticals the
aggregate principal sum of not less than $250,000 within five (5) business days
of ICI raising an aggregate of $700,000. As a result of the acquisition, the
Loan became an intercompany account between the Company, as parent, and GeneMax
Pharmaceuticals, as subsidiary.
CURRENT BUSINESS OPERATIONS
GENERAL
The Company is a product-focused biotechnology company specializing in the
application of the latest discoveries in cellular immunology and cancer biology
to the development of proprietary therapeutics aimed at the treatment and
eradication of cancer and therapies for infectious diseases, autoimmune
disorders and transplant tissue rejection. The Company's technologies are based
on an understanding of the function of a protein "pump" within cells that is
essential in the processing of tumor antigens, known as Transporters associated
with Antigen Processing ("TAP").
2
Cancer is a disease in which cells become abnormal and fail to respond to
the body's normal control mechanisms. As a result, the cancerous cells
proliferate in an uncontrolled manner, invade nearby tissues and often spread to
other parts of the body. Ultimately, if the cancer is not controlled, it will
result in failure of body functions and death. Cancers are characterized by
defects in the cellular antigen presentation pathway, which result in the cancer
becoming invisible to the immune system. This allows the cancer to continue to
proliferate and eventually spread.
The current standard therapies for cancer treatment include surgery,
radiation therapy and chemotherapy. However, management of the Company believes
that these treatments are not specific in targeting just cancerous cells and
often fail to remove or destroy all of the cancer, and can negatively affect
other cells and cause significantly detrimental side effects. The remaining
cancer cells then grow into new tumors, which are often resistant to further
chemotherapy or radiation, resulting in a high mortality rate. In the United
States, statistics reflect that cancer is the second leading cause of death with
an estimated 550,000 deaths from cancer annually.
Immunotherapy for Cancer
Management of the Company believes that there is a critical need for more
effective cancer therapies. Management further believes that the global market
for effective cancer treatments is large, and that immunotherapies representing
potential treatments for metastatic cancer is an unmet need in the area of
oncology.
It has been known for several years that the human immune systems has the
potential to clear cancers from the body based on clinical observations that
some tumors spontaneously regress when the immune system is activated.
Previously, it was discovered that most cancers are not very "immunogenic",
meaning that the cancers were not able to cause an immune response because they
no longer expressed key immune proteins on their cell surface (known as "MHC
Class I". In healthy cells, these proteins provide the information to the immune
system that defines whether the cell is healthy or, in the case of cancer or
viral infection, abnormal. If the MHC Class I proteins signal that the cells are
abnormal, then the immune system T-cells are activated to attack and kill the
infected or malignant cell.
Generally, the steps in the cellular antigen presentation pathway are as
follows:
1. abnormal or foreign proteins from the cytoplasm of a cell are broken
down into peptides by an enzyme complex;
2. the TAP protein then assists in transporting these antigen peptides
into the endoplasmic reticulum, which is a cellular compartment where
the MHC Class I proteins are assembled (the "ER");
3. in the ER, the antigen peptides are attached to the MHC Class I
proteins and then transferred to the cell surface where they signal
the immune system that the cell should be destroyed; and
4. the immune system then recognizes the complex and activates T cells to
attack and kill the infected or cancerous cells.
It was recently discovered that the TAP protein is often disabled in
cancers, leading to low expression of cancer antigen peptides on the cell
surface. In many solid tumors, the TAP protein does not function and, therefore,
the immune system is not stimulated to attack the cancer. Management of the
Company believes that although a number of cancer therapies have been developed
that stimulate the immune system, these approaches have generally proven
ineffective because the cancers remain invisible to the immune system due to the
lack of the TAP protein. See "Part I. Item 1. Description of Business -
Products".
3
Therapeutic Cancer Vaccines
A "cancer vaccine" is a therapy that stimulates the immune system to attack
tumors. Management of the Company believes that most cancer vaccines of other
companies under development contain either cancer-specific proteins that
directly activate the immune system or contain genetic information (DNA) that
codes for these cancer-specific proteins. There are, however, a number of key
conditions that must be met before a cancer vaccine can be effective in
generating a therapeutic immune response: (i) the cancer antigen peptide
delivered by the vaccine has to be recognized by the immune system as "foreign"
in order to generate a strong and specific T-cell response; (ii) exactly the
same cancer antigen peptide has to be displayed on the surface of the cancer
cells in association with the MHC Class I proteins; and (iii) these cancer
antigen peptides then have to be sufficiently different from normal proteins in
order to generate a strong anti-tumor response.
If these conditions are all met, then the cancer vaccine should generate a
sufficiently strong immune response to kill the cancer cells. Management of the
Company believes, however, that the identification of suitable cancer-specific
antigen proteins to use in these therapeutic vaccines has proven extremely
complex. The MHC Class I proteins are highly variable (over 100 different types
in humans) and, as a result, any one cancer antigen peptide will not produce an
immune response for all individuals. Management of the Company further believes
that cancers are "genetically unstable" and their proteins are highly variable,
so that the selected cancer antigen protein may result in the immune system only
attacking a small subset of the cancerous cells. Management of the Company
believes that the Company's TAP Cancer Vaccine overcomes many of the problems
associated with the current cancer vaccines discussed above (see "TAP Cancer
Vaccine" section below).
PRODUCTS
The Company's strategic vision is to be a product-driven biotechnology
company, focusing primarily on use of its patented TAP technology to restore the
TAP function within cancerous cells, thus making them immunogenic. As a result,
the MHC Class I proteins can signal the immune system to attack the cancer. The
Company intends to develop the TAP technology as a therapeutic cancer vaccine
that will restore the normal immune recognition. Management believes that its
cancer vaccine is the only therapeutic approach that addresses this problem of
"non-immunogenicity" of cancer. Management believes that this therapy will have
a strong competitive advantage over other cancer therapies, since restoring the
TAP protein will direct the immune system to specifically target the cancerous
cells without damaging healthy tissue.
TAP Cancer Vaccine
The Company has developed a patented therapeutic cancer vaccine to restore
the TAP protein (the "TAP Cancer Vaccine"). The TAP Cancer Vaccine is targeted
at those cancers that are deficient in the TAP protein, which include commonly
occurring breast cancer, prostate cancer, lung cancer, liver cancer, melanoma,
renal cancer and colorectal cancer.
The TAP Cancer Vaccine would deliver the TAP protein and genetic
information, thus "turning on" the defective TAP signaling system within the
cancer cells. These cancer cells would then transport cancer antigen proteins to
the cell surface using the individual's specific MHC Class I proteins. As a
result, the immune response would be targeted to the entire repertoire of cancer
antigen proteins produced by the cancer cell, rather than just to the single
cancer antigen (as delivered by usage of current cancer vaccines). The TAP
Cancer Vaccine would allow the immune response to respond to the cancer even if
the TAP protein and genetic information is only delivered to a small portion of
the cancer cells. In addition, the TAP Cancer Vaccine would generate a strong
immune response to any TAP-deficient cancer, regardless of the patient's
individual genetic variability either in the MHC Class I proteins or in the
cancer-specific proteins.
4
TAP Cancer Vaccine Development Program
The Company is currently developing the TAP Cancer Vaccine at the
University of British Columbia Biomedical Research Centre (the "BRC") under a
collaborative research agreement. See "Part I. Item 1. Description of Business -
Strategic Alliances".
Management of the Company believes that the key milestone of efficacy in
animal models of cancer has been attained and that other scientific research
teams have independently validated the experimental data from these animal
studies. The proof of principle for TAP as a cancer vaccine was established in
research conducted the last ten years in the laboratory at the BRC by Dr.
Wilfred Jefferies, a director and executive officer of the Company. The initial
studies were conducted using a small-cell lung cancer cell line that was derived
from an aggressive, metastatic cancer. These cells have multiple defects in the
"antigen presentation pathway" in that they are not detected by the immune
system. When the TAP protein was introduced into these cells, antigen
presentation was restored. In addition, a series of animal studies have
demonstrated the ability of TAP to restore an immune response. This study was
published in Nature Biotechnology (Vol. 18, pp. 515-520, May 2000). The TAP
Technology was further validated in melanoma.
Pre-Clinical Testing. As of the date of this Annual Report, the TAP Cancer
Vaccine is undergoing formal pre-clinical testing, which includes the following:
(i) evaluation of several strains of vaccinia and adenovirus vectors for their
respective ability to deliver and express the TAP protein and genetic
information in tumors; (ii) selection and licensing of the vector and
identification and contracting with a good manufacturing practice (GMP)
manufacturer for subsequent production of the TAP Cancer Vaccine; and (iii)
performance and completion of toxicology studies using the TAP Cancer Vaccine on
at least two animal species to confirm its non-toxicity.
Upon completion of the formal pre-clinical testing, the Company intends to
compile and summarize the data and submit it to two governmental agencies, the
U.S. Federal Drug Administration ("FDA") and the Canadian Health Canada ("HC"),
in the form of an investigational new drug application (the "IND"). The IND will
include data on the vaccine production, animal studies and toxicology studies,
as well as the proposed protocol for the Phase I human clinical trials.
Phase I Human Clinical Trials. Management of the Company believes that the
Phase I human clinical trials will be commenced approximately second quarter of
2004 and will be conducted at the British Columbia Cancer Agency in Vancouver,
British Columbia. As of the date of this Annual Report, the Company has
presented information on the TAP Cancer Vaccine to members of the Department of
Advanced Therapeutics. The Phase I trials will generally be designed to provide
data on the safety of the TAP Cancer Vaccine when used by humans.
As of the date of this Annual Report, management of the Company estimates
that GeneMax Pharmaceuticals previously raised approximately $2,000,000 in
funding and the Company has raised $2,538,500 in funding since the May 2002
announcement of the GeneMax Pharmaceuticals acquisition. Management of the
Company believes that an estimated $15,000,000 is required over the next three
years for payment of expenses associated with the balance of pre-clinical
development and commencement of Phase I-II clinical trials for the TAP Cancer
Vaccine and for corporate expenses, other expected development initiatives, and
acquisitions. See "Part II. Item 6. Management's Discussion and Analysis or Plan
of Operation."
5
Peptide Transfer Assay
The Company is also currently developing potential products that may
interrupt the chain of events involved in certain autoimmune diseases. As of the
date of this Annual Report, the Company is developing a peptide transfer assay,
which is a cell-based assay designed to evaluate compounds and drugs for their
ability to stimulate or suppress the immune response (the "Peptide Transfer
Assay"). The Peptide Transfer Assay's application will be to identify compounds
effective in the treatment of cancer, infectious diseases, and autoimmune
diseases. Autoimmune diseases include psoriasis, rheumatoid arthritis, multiple
sclerosis, myasthenia gravis and diabetes. T cells and antibodies in the body's
immune system normally identify and destroy foreign substances and cancerous
cells. Autoimmune diseases are generally caused by the abnormal destruction of
healthy body tissues when T cells and antibodies react against normal tissue.
Management of the Company believes that the Peptide Transfer Assay is a
novel and sophisticated cell-based assay. Management of the Company expects that
the Peptide Transfer Assay will be of significant interest to pharmaceutical
companies, companies with natural product libraries, anti-sense or gene
libraries or proprietary rights to chemical compounds (e.g. combinatorial
chemistry companies). As of the date of this Annual Report, management of the
Company believes that the Peptide Transfer Assay is ready for development for
high-throughput screening and partnering.
TARGET MARKET AND STRATEGY
The Company is currently focused primarily on the oncology market. Cancer
encompasses a large number of diseases that afflict many different parts of the
human body. The diversity of cancer types and their overall prevalence create a
large need for new and improved treatments. Management of the Company believes
that there is a significant market opportunity for a cancer treatment that
utilizes the highly specific defense mechanisms of the immune system to attack
cancers.
The Company is focused on the development and commercialization of the TAP
technology as a "cancer vaccine" that would overcome the limitations of current
immunotherapies. Management believes that proposed cancer vaccines under
development by other companies require that individualized treatments be
prepared based on the genetic differences of each patient and the genetic
make-up of each tumor. As a result, these other cancer vaccines will be
prohibitively expensive to implement as a different vaccine has to be developed
for each patient. In addition, since the TAP protein is often not operational in
cancer cells, these other vaccines may still not be able to activate the immune
system.
Management of the Company believes that the TAP Cancer Vaccine offers the
potential for highly specific destruction of cancer tumors without any adverse
side effects. The TAP protein is a normal component of all healthy cells, but
deficient in many cancer cells. The TAP Cancer Vaccine delivers the TAP protein
and genetic information thus activating this normal component of all cells.
Management further believes that the TAP Cancer Vaccine will provide a method
for generating therapeutic immune responses that are generalized to the entire
population, and potentially patient specific or cancer-specific cancer vaccines.
Management believes that, despite the limitations of the other types of
cancer vaccines being developed by other companies, the FDA will approve the
first cancer vaccine within the next several years. Based upon recent market
reports, management of the Company believes that an approximate $2 billion
market for cancer vaccines will develop by 2007, with a compounded annual growth
rate of 104%. Management anticipates that the Company's TAP Cancer Vaccine could
secure a significant portion of this large market, and that the TAP Cancer
Vaccine will not only be an effective cancer treatment but also be synergistic
and complimentary to existing cancer therapies.
6
Management of the Company believes that the competitive advantages of the
TAP Technology include (i) efficacy against secondary cancerous growths
elsewhere in the body; (ii) no restrictions on the genetics of the tumors or
individuals; (iii) non-toxicity to normal cells; and (iv) complementary to and
synergistic with other therapeutics. As of the date of this Annual Report, the
Company's TAP Technology is in the pre-clinical development stage and is
preparing for Phase I clinical trials.
STRATEGIC ALLIANCES
Collaborative Research Agreement
During May 2000, GeneMax Pharmaceuticals and the BRC Biotechnology
Laboratory at the University of British Columbia ("BRC") entered into a contract
research agreement (the "Collaborative Research Agreement"), to develop the TAP
technologies as a cancer vaccine and other commercial products. In accordance
with the terms of the Collaborative Research Agreement: (i) the Company provides
funding for three PHD scientists, as well as support technicians and students.
and BRC; (ii) BRC provides the Company with access to the laboratories and
equipment at the BRC, as well as other facilities of the University of British
Columbia; and (iii) Dr. Wilfred Jefferies, the inventor of the TAP technologies
and the Chief Scientific Officer and a director of the Company, will provide
supervision of all scientific activity.
As of the date of this Annual Report, the research under the Collaborative
Research Agreement will continue in the future to support the commercial
development of the TAP Cancer Vaccine and to develop enhanced vaccine products
and other therapeutics based on the TAP technology. See "Part I. Item 1.
Description of Business - Intellectual Property, Patents and Trademarks."
License Agreement
During March 2000, GeneMax Pharmaceuticals and the University of British
Columbia (the "UBC") entered into an exclusive worldwide license agreement (the
"License Agreement"). Pursuant to the terms of the License Agreement, the UBC
granted to GeneMax Pharmaceuticals exclusive licensing rights to certain
patented and unpatented cancer immuno-therapy technologies originally invented
and developed by Dr. Jefferies and the scientific team at the UBC including: (i)
the cell-based peptide transfer assay (the "Peptide Transfer Assay"), and (ii)
the cancer immuno-therapy based on restoration of antigen presentation through
transporters associated with antigen-processing technologies, which is the basis
for the Company's lead product (the "TAP Cancer Vaccine"). GeneMax
Pharmaceuticals obtained the exclusive licensing rights to this technology for
the consideration of $78,743 and issuance to UBC of equity, with no royalty
components or provisions. Pursuant to further terms of the License Agreement:
(i) the License Agreement will terminate after the latter of fifteen years or
the expiration of the last patent obtained relating to the licensed technology;
(ii) GeneMax Pharmaceuticals will bear the cost of obtaining any patents; and
(iii) the technology remains the property of UBC, however, it may be utilized
and improved by GeneMax Pharmaceuticals. The Company expects the approval of
multiple further patents. See "Part I. Item 5. Market for Common Equity and
Related Stockholder Matters."
On March 6, 2003, the Company announced that the terms of the License
Agreement were modified thus expanding to the Company's technology portfolio.
The added technology, developed under the Collaborative Research Agreement, is a
method to identify novel tumor associated antigens produced by cancers.
Management of the Company believes the identification of novel immune dominant
antigens will enable the development of new cancer vaccines that can be patient
specific as well as antigens generalized across differing cancer types and
patient populations.
7
Network Affiliate Agreement
On January 1, 2001, GeneMax Pharmaceuticals, UBC and the Canadian Network
for Vaccines and Immunotherapeutics of Cancer and Chronic Viral Diseases
("CANVAC") entered into a one-year network affiliate agreement (the "Network
Affiliate Agreement"). Pursuant to the terms of the Network Affiliate Agreement,
CANVAC would provide an $85,000 Canadian Dollars research grant to the UBC to
fund further research activities upon GeneMax contributing $117,3000 Canadian
Dollars towards the UBC research. During fiscal year 2001, all amounts required
under the Network Affiliate Agreement were paid by GeneMax Pharmaceuticals to
the UBC. As of the date of this Annual Report, GeneMax Pharmaceuticals and
CANVAC are negotiating a new network affiliate agreement in order to continue
funding the research activities conducted at the UBC.
TAP Cancer Vaccine Production
In March, 2003, the Company contracted production of the TAP Cancer Vaccine
to Molecular Medicine BioServices, Inc. This company specializes in production
of clinical grade vaccine vectors under GLP/GMP standards. See "Part I. Item 1.
Description of Business - Government Regulation."
INTELLECTUAL PROPERTY, PATENTS AND TRADEMARKS
Patents and other proprietary rights are vital to the business operations
of the Company. The Company's policy is to seek appropriate patent protection
both in the United States and abroad for its proprietary technologies and
products. Pursuant to the License Agreement, the Company has acquired the
exclusive world-wide license to a portfolio of intellectual property as follows:
Method of Enhancing Expression of MHC Class I Molecules Bearing Endogenous
Peptides
On March 26, 2002, the United States Patent and Trademark Office issued a
patent for the use of "TAP-1 (transporters associated with antigen processing)
as an immunotherapy against all cancers ("US Patent No. 6,361,770"). The patent
is titled "Method of Enhancing Expression of MHC Class I Molecules Bearing
Endogenous Peptides" and provides comprehensive protection and coverage to both
in vivo and ex vivo applications of TAP-1 as a therapeutic against all cancers
with a variety of delivery mechanisms. The inventors were Dr. Wilfred Jefferies,
Dr. Reinhard Gabathuler, Dr. Gerassinmoes Kolatis and Dr. Gregor S.D. Reid, who
collectively assigned the patent to the UBC. During the lengthy application
process, many proofs of the application were required by the U.S. Patent and
Trademark Office for a patent of such relevance and applicability to all cancers
to be approved, and included proofs in multiple forms of cancer tumors including
small cell lung carcinoma and melanoma cancer. Management of the Company
considers issuance of this patent as a major product development milestone for
the Company.
As of the date of this Annual Report, the Company has pending applications
filed for patent protection in France, United Kingdom, Germany, Switzerland and
Japan.
Method of Identifying MHC Class I Restricted Antigens Endogenously
Processed by a Secretory Pathway
On August 11, 1998, the United States Patent and Trademark Office issued to
UBC a patent for the use of bioengineered cell lines to measure the output of
the MHC Class I restricted antigen presentation pathway as a way to screen for
immunomodulating drugs ("US Patent No. 5,792,604"). The patent is titled "Method
of Identifying MHC Class I Restricted Antigens Endogenously Processed by a
Secretory Pathway." This patent covers the assay which can identify compounds
capable of modulating the immune system. The inventors were Dr. Wilfred
Jefferies, Dr. Reinhard Gabathuler, Dr. Gerassinmoes Kolaitis and Dr. Gregor
S.D. Reid, who collectively assigned the patent to the UBC.
8
As of the date of this Annual Report, the Company has pending applications
filed for patent protection in Canada, Japan and Europe.
Method of Enhancing Expression of MHC Class I Molecules Bearing Endogenous
Peptides
The UBC filed a patent application with the United States Patent and
Trademark Office for patent protection of extension of the TAP-1 for use in
viral vaccines as a method for increasing immune responses. As of the date of
this Annual Report, the UBC has not received an order granting a patent.
Management of the Company believes that such patent will be granted by
approximately the fourth quarter of 2003.
The Company intends to continue to work with the UBC to file additional
patent applications with respect to any novel aspects of its technology to
protect its intellectual property. The Company has not conducted in-depth
validity and infringement studies on the patents and patent applications that
the Company has in-licensed, and there is a possibility that these patents or
patent applications may be challenged or may not provide protection.
The patent positions of biotechnology and pharmaceutical companies are
generally uncertain and involve complex legal and factual issues. No assurance
can be given that any patent issued to or licensed by the Company will provide
protection that has commercial significance. The Company cannot assure that: (i)
the patents will afford protection against competitors with similar compounds or
technologies; (ii) the patent applications pending will be issued; (iii) other
companies will not obtain patents claiming aspects or technologies similar to
those covered by the issued patents; (iv) the patents of other companies will
not have an adverse effect on the Company's ability to do business; or (v) the
patents issued to or licensed by the Company will not be infringed, challenged,
invalidated or circumvented.
Moreover, management of the Company believes that obtaining foreign patents
may, in some cases, be more difficult than obtaining domestic patents because of
differences in patent laws. The Company also recognizes that the patent
protection may generally be stronger in the United States and Canada than
abroad. Conversely, the protection provided by foreign patents may be weaker
than that provided by domestic patents.
COMPETITION
The oncology industry is characterized by rapidly evolving technology and
intense competition. Many companies of all sizes, including a number of large
pharmaceutical companies as well as several specialized biotechnology companies,
are developing various immunotherapies and drugs to treat cancer. There may be
products on the market that will compete directly with the products that the
Company is seeking to develop. In addition, colleges, universities, governmental
agencies and other public and private research institutions will continue to
conduct research and are becoming more active in seeking patent protection and
licensing arrangements to collect license fees and royalties in exchange for
license rights to technologies that they have developed, some of which may
directly compete with the Company's technologies and products. These companies
and institutions may also compete with the Company in recruiting qualified
scientific personnel. Many of the Company's potential competitors have
substantially greater financial, research and development, human and other
resources than the Company does. Furthermore, large pharmaceutical companies may
have significantly more experience than the Company in pre-clinical testing,
human clinical trials, and regulatory approval procedures. Such competitors may:
(i) develop safer and more effective products; (ii) obtain patent protection or
intellectual property rights that limit the Company's ability to commercialize
products; or (iii) commercialize products earlier than the Company.
9
Management expects technology developments in the oncology industry to
continue to occur at a rapid pace. Commercial developments by any competitors
may render some or all of the Company's potential products obsolete or
non-competitive, which could materially harm the Company's business and
financial condition.
Management of the Company believes that the following companies, which are
developing various types of similar immunotherapies and therapeutic cancer
vaccines to treat cancer, could be major competitors of the Company: CellGenSys
Inc., Corixa Corp., Dendreon Corp., Genzyme Molecular Oncology, Therion
Biologics Corp. and Transgene S.A.
Management of the Company believes, however, that its TAP Cancer Vaccine
represents a conceptual leap in immunotherapeutics and has certain competitive
advantages as follows: (i) the TAP Cancer Vaccine could be an effective therapy
for all types of cancer that are deficient in TAP because knowledge of specific
tumor antigens is not required; and (ii) not all of the tumor cells have to be
transduced with the TAP protein for the TAP Cancer Vaccine to be effective.
Management believes that since defects in the TAP protein is a fundamental
underlying mechanism by which cancer avoids detection by the immune system, the
TAP Cancer Vaccine offers a superior therapeutic approach to any type of cancer
in which this system is not functioning.
GOVERNMENT REGULATION
The design, research, development, testing, manufacturing, labeling,
promotion, marketing, advertising and distribution of drug products are
extensively regulated by the FDA in the United States and similar regulatory
bodies in other countries. The regulatory process is similar for a new drug
application (the "NDA"). The steps ordinarily required before a new drug may be
marketed in the United States, which are similar to steps required in most other
countries, include: (i) pre-clinical laboratory tests, pre-clinical studies in
animals, formulation studies and the submission to the FDA of an initial NDA;
(ii) adequate and well-controlled clinical trials to establish the safety and
efficacy of the drug for each indication; (iii) the submission of the NDA to the
FDA; and (iv) FDA review and approval of the NDA.
Pre-clinical tests include laboratory evaluation of product chemistry, good
laboratory practices ("GLP"), toxicology studies, formulation development,
animal pre-clinical efficacy studies and manufacturing of current good
manufacturing practices ("GMP"). The results of pre-clinical testing are
submitted to the FDA as part of an initial NDA. A thirty-day waiting period
after the filing of each initial NDA is required prior to the commencement of
clinical testing in humans. At any time during this thirty-day period or at any
time thereafter, the FDA may halt proposed or ongoing clinical trials until the
FDA authorizes trials under specified terms. The initial NDA process may be
extremely costly and substantially delay development of products. Moreover,
positive results of pre-clinical tests will not necessarily indicate positive
results in subsequent clinical trials.
Clinical trials to support NDAs are typically conducted in three sequential
phases, although the phases may overlap. During Phase I, there is an initial
introduction of the drug into healthy human subjects or patients. The drug is
tested to assess metabolism, pharmacokinetics and pharmacological actions and
safety, including side effects associated with increasing doses. Phase II
usually involves studies in a limited patient population to: (i) assess the
clinical activity of the drug in specific targeted indications; (ii) assess
dosage tolerance and optimal dosage; and (iii) continue to identify possible
adverse effects and safety risks. If a compound is found to be potentially
effective and to have an acceptable safety profile in Phase II evaluations,
Phase III trials are undertaken to further demonstrate clinical efficacy and to
further test for safety within an expanded patient population at geographically
disperse clinical trial sites.
10
After successful completion of the required clinical trials, a NDA is
generally submitted. The FDA may request additional information before accepting
a NDA for filing, in which case the application must be resubmitted with the
additional information. Once the submission has been accepted for filing, the
FDA reviews the application and responds to the applicant. The review process if
often significantly extended by FDA requests for additional information or
clarification. The FDA may refer the NDA to an appropriate advisory committee
for review, evaluation and recommendation as to whether the application should
be approved, but the FDA is not bound by the recommendation of an advisory
committee.
If the FDA evaluations of the NDA and the manufacturing facilities are
favorable, the FDA may issue an approvable letter. An approvable letter will
usually contain a number of conditions that must be met in order to secure final
approval of the NDA and authorization of commercial marketing of the drug for
certain indications. The FDA may also refuse to approve the NDA or issue a not
approval letter, outlining the deficiencies in the submission and often
requiring additional testing or information.
The manufacturers of approved products and their manufacturing facilities
are subject to continual review and periodic inspections. Because the Company
currently intends to contract with third parties for commercial scale
manufacturing of the TAP Cancer Vaccine, the Company's ability to control
compliance with FDA requirements will be limited.
Approved drugs and manufacturing facilities are subject to ongoing
compliance requirements, and the identification of certain side effects or the
occurrence of manufacturing problems after any of the drug products are on the
market may create other restrictions. This could result in issuance of warning
letters, subsequent withdrawal of approval, reformulation of the drug product,
and additional pre-clinical studies or clinical trials.
Outside the United States and Canada, the Company's ability to market its
drug products are also contingent on receiving marketing authorization from the
appropriate regulatory authorities. The foreign regulatory approval process
includes all of the complexities associated with FDA approval described above.
The requirements governing the conduct of clinical trials and marketing
authorization vary widely from country to country. At present, foreign marketing
authorizations are applied for at a national level, although within the European
Union, or the EU, procedures are available to companies wishing to market a
product in more than one member country.
PRODUCT LIABILITY AND INSURANCE
The Company's business involves the risk of product liability claims. The
Company has not experienced any product liability claims to date. As of the date
of this Annual Report, and due to the current stage of product development, the
Company does not yet maintain product liability insurance. Management, however,
intends to maintain product liability insurance consistent with industry
standards upon commencement of the marketing and distribution of the TAP Cancer
Vaccine or as is requisite in certain product development stages. There can be
no assurance that product liability claims will not exceed such insurance
coverage limits, which could have a materially adverse effect on the Company's
business, financial condition, results of operations, share price, or that such
insurance will continue to be available on commercially reasonable terms, if at
all.
11
EMPLOYEES
As of the date of this Annual Report, the Company does not employ any
persons directly on a full-time or on a part-time basis. All management and
labor positions are obtained on a contracted basis. Management of the Company
deems that the current contracted management structure maintains the highest
levels of product development efficiency with the lowest costs of plant,
equipment, and capital cost infrastructure. The Company's President is primarily
responsible for all day-to-day operations of the Company. Other services are
provided by outsourcing and management contracts. As the need arises and funds
become available, however, management may seek employees as necessary in the
best interests of the Company. The following lists and describes certain
services performed for the Company by consultants. See "Part III. Item 10.
Executive Compensation" and "Part III. Item 12. Certain Relationships and
Related Transactions".
Consulting Services Agreement
The Company and Investor Communications International, Inc., a Washington
corporation ("ICI"), entered into a consulting services agreement dated August
12, 2002 (the "Consulting Services Agreement"). Pursuant to the terms and
provisions of the Consulting Services Agreement, ICI will provide to the Company
such finance and managerial services as may be determined by the Board of
Directors, from time to time, and in its sole and absolute discretion, in order
to develop the various business interests of the Company in the drug discovery
and development industry, involving the patented drug discovery assay for
immunomodulatory compounds and the pipeline aimed at treatment of cancer,
infectious diseases, autoimmune disorders and transplant tissue rejection.
Pursuant to further terms of the Consulting Services Agreement, the Company
shall pay ICI a monthly fee not to exceed $10,000 in accordance with the
services performed.
Mr. Grant Atkins, a director of the Company, is employed by ICI and part of
the management team provided by ICI to the Company, and derives remuneration
from ICI for such services rendered to the Company. During fiscal year ended
December 31, 2002, Mr. Atkins was paid approximately $17,325 by ICI for services
rendered to the Company.
GeneMax Pharmaceuticals Consulting Agreement
GeneMax Pharmaceuticals and 442668 B.C. Ltd. ("442668"), a corporation
whose president and member of the board of directors is Dr. Wilfred Jefferies, a
director and the Chief Scientific Officer of the Company entered into a
consulting services agreement dated February 1, 2000 (the "GeneMax
Pharmaceuticals Consulting Agreement"). Pursuant to the terms and provisions of
the GeneMax Pharmaceuticals Consulting Agreement, Dr. Jefferies agreed to
provide technical, research and technology development services to GeneMax
Pharmaceuticals for a period of five years. Pursuant to further terms and
provisions of the GeneMax Pharmaceuticals Consulting Agreement, 442668 shall be
paid a monthly fee of $10,000 Canadian Dollars and reimbursement of expenses.
As of December 31, 2002, an aggregate amount of $88,135 in accrued fees was
due and owing 442668 under the GeneMax Pharmaceuticals Consulting Agreement.
During fiscal year ended December 31, 2002, Dr. Jefferies received an aggregate
of $67,670 thru 442668, and accepted the issuance by the Company to 442668 of
20,465 shares of restricted common stock at $1.00 per share as settlement for
the remaining balance of $20,465 due and owing. See "Part III. Item 10.
Executive Compensation."
12
GeneMax Pharmaceuticals Management Agreement
GeneMax Pharmaceuticals and Ronald L. Handford, the President/Chief
Executive Officer and a director of the Company, entered into a management
services agreement dated August 1, 1999 (the "GeneMax Pharmaceuticals Management
Agreement"). Pursuant to the terms and provisions of the GeneMax Pharmaceuticals
Management Agreement, Mr. Handford agreed to provide general managerial services
to GeneMax Pharmaceuticals for a period of five years. Pursuant to further terms
and provisions of the GeneMax Pharmaceuticals Management Agreement, Mr. Handford
shall be paid a monthly fee of $11,000 U.S. Dollars and reimbursement of
expenses. Effective May 1, 2002, GeneMax Pharmaceuticals and Mr. Handford agreed
to reduce the monthly fee to $12,500 Canadian Dollars until the earlier of the
Company reaching a senior board listing or commencement of clinical trials, at
which time the fee will be reviewed in accordance with market norms.
As of December 31, 2002, an aggregate amount of $185,706 in accrued fees
was due and owing under the GeneMax Pharmaceuticals Management Agreement. During
fiscal year ended December 31, 2002, Mr. Handford received an aggregate of
$69,374, and accepted the issuance by the Company of 100,000 shares of
restricted common stock at $1.00 per share as settlement for $100,000 owed. As
of December 31, 2002, an aggregate $16,332 remains due and owing. See "Part III.
Item 10. Executive Compensation."
GeneMax Pharmaceuticals Services Agreement
GeneMax Pharmaceuticals and Alan Lindsay and Associates Ltd., a corporation
whose sole officer, director and shareholder is Alan Lindsay, a director of the
Company ("AL&A"), entered into an amended services agreement dated May 31, 2002
(the "GeneMax Pharmaceuticals Services Agreement"). Pursuant to the terms and
provisions of the GeneMax Pharmaceuticals Services Agreement, Mr. Lindsay agreed
to provide general consulting services to GeneMax Pharmaceuticals on a
month-to-month basis. Pursuant to current negotiations and further terms and
provisions of the GeneMax Pharmaceuticals Services Agreement, AL&A shall be paid
a monthly fee of $2,500 U.S. Dollars and reimbursement of expenses.
As of December 31, 2002, an aggregate amount of $60,000 in accrued fees was
due and owing under the GeneMax Pharmaceuticals Services Agreement. During
fiscal year ended December 31, 2002, Mr. Lindsay received an aggregate of
$20,000 through AL&A, and accepted the issuance by the Company to AL&A of 27,500
shares of restricted common stock at $1.00 per share as settlement for $27,500.
As of December 31, 2002, an aggregate $12,500 remains due and owing AL&A. See
"Part III. Item 10. Executive Compensation."
Davidson Agreement
GeneMax Pharmaceuticals and James D. Davidson, a director and the Chief
Financial Officer of the Company, entered into a verbal month-to-month agreement
(the "Davidson Agreement"). Pursuant to the terms of the Davidson Agreement, Mr.
Davidson agreed to perform such duties and services as required commensurate
with his position as the Chief Financial Officer of the Company and such other
duties commensurate with his position as a director on the Board of Directors.
Pursuant to further terms and provisions of the Davidson Agreement, Mr. Davidson
shall be paid a monthly fee of $2,000 and reimbursement of expenses. Effective
July 15, 2002, GeneMax Pharmaceuticals agreed to increase the monthly fee to
$5,000 upon commencement of Mr. Davidson's duties associated with his position
as Chief Financial Officer and a director of the Company after the acquisition
of GeneMax Pharmaceuticals.
As of December 31, 2002, an aggregate amount of $45,500 in accrued fees was
due and owing Mr. Davidson under the Davidson Agreement. During fiscal year
ended December 31, 2002, Mr. Davidson received an aggregate of $32,500 and
accepted the issuance by the Company of 13,000 shares of restricted Common Stock
at $1.00 per share as settlement of an amount of $13,000. See "Part III. Item
10. Executive Compensation."
13
ITEM 2. PROPERTIES
Other than as described above, the Company does not own any real estate or
other properties. The Company's registered office is located at 435 Martin
Street, Suite 2000, Blaine, Washington 98230.
ITEM 3. LEGAL PROCEEDINGS
(a) On approximately September 4, 2002, the Company initiated litigation
against Global Securities Corporation and Union Securities Corporation (the
"B.C. Defendants") by filing a Writ of Summons and Statement of Claim in the
Supreme Court of British Columbia, Registry No. S024914 (the "British Columbia
Complaint"). The claims made by the Company against the B.C. Defendants in the
British Columbia Complaint involve the alleged illegal naked short selling of
the Company's shares of common stock conducted by the B.C. Defendants to
manipulate share price for profit and gain in violation of the provisions of the
Company's bylaws, the Investment Dealers Association of Canada, the National
Association of Securities Dealers, the Criminal Code of Canada, and the
Securities Exchange Act of 1934, as amended (the "Naked Short Sales"). The
claims against the B.C. Defendants specifically allege violation of fair-trading
practices, negligence and/or fraud and share price manipulation. The Company is
seeking damages from the B.C. Defendants resulting from the alleged actions of
the B.C. Defendants that include loss of investment opportunity, injury to
reputation, and artificial issuance of shares that results in illegal
devaluation of the Company's securities, and other damages.
As of the date of this Annual Report, the B.C. Defendants have filed a
statement of defense generally denying the allegations and counterclaiming for
defamation relating to statements made by the Company about the litigation in
news releases. The parties have engaged in preliminary discovery, which includes
response to interrogatories, preliminary production of documents and formal
request for further production of documents. Management of the Company intends
to aggressively pursue and continue its legal actions and to further review its
potential legal remedies.
(b) On approximately October 3, 2002, the Company initiated litigation
against various broker-dealers, market makers and clearing agents (the U.S.
Defendants") allegedly involved in the Naked Short Sales by filing a Complaint
in the U.S. District Court for the District of Nevada, Case No.
CV-N-02-0509-ECR-VPC (the "United States Complaint"). The claims made by the
Company against the U.S. Defendants in the United States Complaint allege
unlawful "shorting" activities involving the Company's shares of common stock
including fraud, negligence, violation of U.S. securities laws, racketeering
(RICO) and conspiracy. The Company seeks an injunction against the U.S.
Defendants to enjoin the unlawful shorting activities and substantial damages,
including punitive damages.
As of the date of this Annual Report, the U.S. Defendants have either filed
answers or requests for extensions of time within which to file formal
statements of defense. Management of the Company believes that upon receipt of
trading records and other documentation, the Company may amend the United States
Complaint to name additional broker-dealers, market makers, clearing agents and
individual securities professionals as defendants. Management of the Company
intends to aggressively pursue and continue its legal actions and to further
review its potential legal remedies.
Except as disclosed above, management is not aware of any other legal
proceedings contemplated by any governmental authority or other party involving
the Company or its properties. No director, officer or affiliate of the Company
is (i) a party adverse to the Company in any legal proceedings, or (ii) has an
adverse interest to the Company in any legal proceedings. Management is not
aware of any other legal proceedings pending or that have been threatened
against the Company or its properties.
14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 9, 2002, the Board of Directors approved and authorized execution of
the Share Exchange Agreement. The Board of Directors further authorized and
directed the filing with the Securities and Exchange Commission and subsequent
distribution to ten or less shareholders of the Company who held of record as of
May 27, 2002 at least a majority of the issued and outstanding shares of Common
Stock, an Information Statement pursuant to Section 14(c) of the Securities
Exchange Act of 1934, as amended. On approximately June 14, 2002, the Definitive
Information Statement was filed with the Securities and Exchange Commission and
distributed to all shareholders of the Company.
On July 15, 2002, a Written Consent of Shareholders of the Company was
executed pursuant to which the shareholders (i) approved the Share Exchange
Agreement, related conversion of loan to equity interest by the Company in
GeneMax Pharmaceuticals, and resulting change in control of the Company; (ii)
approved an amendment to the Articles of Incorporation of the Company to
effectuate a change in the corporate name to "GeneMax Corp."; (iii) approved the
Stock Option Plan for key personnel of the Company; (iv) approved an amendment
to the Company's bylaws to change the number of directors of the Company to
consist of one (1) to fifteen (15); (v) elected three persons to serve as
directors of the Company until the next annual meeting of the Company's
shareholders or until their successor has been elected and qualified; and (vi)
ratified the election of LaBonte & Co. as independent public accountants for the
Company for fiscal year ending December 31, 2002.
The names of the shareholders of the Company who held of record as of May
27, 2002 a majority of the issued and outstanding shares of Common Stock who
signed the Written Consent and their respective equity ownership of the Company
are as follows: (i) Investor Communications International, Inc. ("ICI") holding
of record 554,470 shares of common stock (18.48%); (ii) Alexander Cox holding of
record 535,060 shares of common stock (17.84%); (iii) Calista Capital
Corporation holding of record 250,000 shares of common stock (8.33%); (iv)
Spartan Asset Group holding of record 250,000 shares of common stock (8.33%);
(v) Pacific Rim Financial Inc. holding of record 250,000 shares of common stock
(8.33%); (vi) Eastern Capital Corp. holding of record 250,000 shares of common
stock (8.33%); and (vii) Rising Sun Capital Corp. holding of record 250,000
shares of common stock (8.33%).
No other matters or business were introduced or approved by the
shareholders pursuant to the Written Consent.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Common Stock is traded on the OTC Bulletin Board under the
symbol "GMXX" and on the Frankfurt Stock Exchange (FWB) under the symbol "GX1".
The market for the Company's Common Stock is limited, volatile and sporadic. The
following table sets forth the OTCBB high and low sales prices relating to the
Company's Common Stock for the last two fiscal years. These quotations reflect
inter-dealer prices without retail mark-up, mark-down, or commissions, and may
not reflect actual transactions.
FISCAL YEARS ENDED
------------------------------------------------------------
DECEMBER 31, 2002 DECEMBER 31, 2001
------------------------------------------------------------
HIGH BID LOW BID HIGH BID LOW BID
------------------------------------------------------------
First Quarter $7.500 $1.100 $2.781 $0.410
Second Quarter $2.000 $0.350 $1.531 $0.500
Third Quarter $7.74 $3.65 $0.812 $0.420
Fourth Quarter $5.15 $2.040 $0.530 $0.090
15
HOLDERS
As of March 31, 2003, the Company had approximately 345 shareholders of
record.
DIVIDENDS
No dividends have ever been declared by the board of directors of the
Company on its Common Stock. The Company's losses do not currently indicate the
ability to pay any cash dividends, and the Company does not intend paying cash
dividends on its Common Stock in the foreseeable future.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Pursuant to the terms of the Share Exchange Agreement, the Directors'
Circular and related settlements, the Company issued certain warrant instruments
pursuant to which the holder thereof has the right to convert such warrant into
shares of Common Stock on a one-to-one basis at either the rate of $2.50 per
share, $0.75 per share or $1.00 per share. Pursuant to the Share Exchange
Agreement, Directors' Circular and related settlement agreements, there were an
aggregate of 744,494 warrant instruments issued, of which 110,334 warrants were
convertible into 110,334 shares of common stock at the rate of $2.50 per share
expiring on September 1, 2002. The 110,334 warrants were not converted into
shares of common stock by the holders thereof and expired on their terms. Thus,
as of the date of this Annual Report, there are an aggregate of 634,160 warrant
instruments issued comprised of the following: (i) 277,500 warrants issued and
outstanding which may be converted into 277,500 shares of common stock at the
rate of $1.00 per share expiring December 1, 2005; (ii) 175,000 warrants issued
and outstanding which may be converted into 175,000 shares of common stock at
the rate of $1.00 per share expiring May 1, 2006; and (iii) 181,660 warrants
issued and outstanding which may be converted into 181,660 shares of common
stock at the rate of $0.75 per share expiring May 1, 2006. As of the date of
this Annual Report, 634,160 Warrants have been granted and are outstanding
pursuant to the Share Exchange Agreement and Directors' Circular and related
settlement agreements,. As granted, the 634,160 Warrants may be converted into
634,160 shares of restricted Common Stock.
In addition, the Company has issued 212,700 Warrants to purchase 212,700
restricted Common Shares at the rate of $5.00 per share expiring November 29,
2004 in connection with private placement offerings completed in the third and
fourth quarters of 2002.
Equity Compensation Plan Information
- ------------------------------------------------------------------------------------------------------
Number of Securities Weighted-Average Exercise Number of Securities
To be Issued Upon Price of Outstanding Remaining Available for
Plan Category Exercise of Outstanding Options, Warrants Future Issuance Under
Options, Warrants and Rights Equity Compensation Plans
and Rights (excluding column (a))
(a) (b) (c)
- ------------------------------------------------------------------------------------------------------
Equity Compensation n/a n/a n/a
Plans Approved by
Security Holders
Equity Compensation 452,500 shares $1.00 -0-
Plans Not Approved by
Security Holders - 181,660 shares $0.75 -0-
Warrants
Equity Compensation 212,700 shares $5.00 -0-
Plans Not Approved by
Security Holders -
Unit Warrants
Total 846,860 shares
- -----------------------------------------------------------------------------------------------------
16
RECENT SALES OF UNREGISTERED SECURITIES AND CHANGES IN CONTROL OF THE COMPANY
As of the date of this Annual Report and during fiscal year ended December
31, 2002, to provide capital, the Company sold stock in private placement
offerings, issued stock in exchange for debts of the Company or pursuant to
contractual agreements as set forth below. Pursuant to the terms of the Share
Exchange Agreement and the Directors' Circular, the Company issued 11,620,119
shares of Common Stock. Therefore, there was a change in control of the Company.
See "Part III. Item 11. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters."
(a) During the six-month period ended June 30, 2002, the Company engaged in
a private placement offering under Rule 506 of Regulation D of the Securities
Act of 1933, as amended (the "1933 Securities Act"). Pursuant to the terms of
the private placement, the Company offered 2,400,000 shares of its common stock
at $0.125 per share to raise $300,000. On approximately May 3, 2002, the Company
terminated the offering pursuant to which it sold 2,000,000 shares of common
stock at $0.125 per share for aggregate gross proceeds of $250,000.00 The per
share price of the offering was arbitrarily determined by the Board of Directors
based upon analysis of certain factors including, but not limited to, stage of
development, business risks, current earnings, assets and net worth of the
Company. The Company issued shares of common stock to seven investors, all of
which were accredited investors as that term is defined under Regulation D. The
investors executed subscription agreements and acknowledged that the securities
to be issued have not been registered under the 1933 Securities Act, that the
investors understood the economic risk of an investment in the securities, and
that the investors had the opportunity to ask questions of and receive answers
from the Company's management concerning any and all matters related to
acquisition of the securities. No underwriter was involved in the transaction,
and no commissions or other remuneration were paid in connection with the offer
and sale of the securities.
(b) During the six-month period ended June 30, 2002, the Company engaged in
a private placement offering under Rule 506 of Regulation D of the 1933
Securities Act. Pursuant to the terms of the private placement, the Company
offered 700,000 shares of its common stock at $1.00 per share to raise an
aggregate of $700,000. The shares of Common Stock were offered only to U.S.
residents who were accredited investors as that term is defined under Regulation
D and to non-U.S. residents. On June 14, 2002, the Company terminated the
offering pursuant to which it sold 700,000 shares of its common stock at $1.00
per share for aggregate gross proceeds of $700,000. The per share price of the
offering was arbitrarily determined by the Board of Directors based upon
analysis of certain factors relating to the acquisition of GeneMax
Pharmaceuticals including, but not limited to, stage of development, business
risks, current earnings, assets and net worth of the Company. The Company issued
shares of common stock to twenty-three investors, all of which were accredited
investors. The investors executed subscription agreements and acknowledged that
the securities to be issued have not been registered under the 1933 Securities
Act, that the investors understood the economic risk of an investment in the
securities, and that the investors had the opportunity to ask questions of and
receive answers from the Company's management concerning any and all matters
related to acquisition of the securities. No underwriter was involved in the
transaction, and no commissions or other remuneration were paid in connection
with the offer and sale of the securities.
(c) Pursuant to the terms of the Share Exchange Agreement, the Directors'
Circular and associated settlement agreements, the Company issued an aggregate
of 11,620,119 shares of its restricted common stock as follows: (i) 6,571,304
shares of restricted common stock to the GeneMax Shareholders in proportion to
their respective holdings in GeneMax Pharmaceuticals; (ii) 4,479,001 shares of
17
restricted common stock to the Canadian GeneMax Shareholders pursuant to the
terms of the Directors' Circular; (iii) 181,660 shares of restricted common
stock to certain creditors of GeneMax Pharmaceuticals at $0.75 per share for
settlement of an aggregate debt in the amount of $136,245; (iv) 188,154 shares
of restricted common stock to certain creditors of GeneMax Pharmaceuticals at
$1.00 per share for settlement of an aggregate debt in the amount of $188,154;
and (v) 200,000 shares of restricted common stock to a third party.
The Company also issued an aggregate of 744,494 warrant isntruments under
the Share Exchange Agreement, Directors' Circular and associated settlement
agreements pursuant to which the holder thereof has the right to convert such
warrants into shares of common stock on a one-to-one basis at either the rate of
$2.50 per share, $0.75 per share or $1.00 per share. Pursuant to the Share
Exchange Agreement and Directors' Circular and related settlement agreements,
there were an aggregate of 744,494 warrant instruments issued, of which 110,334
warrants were convertible into 110,334 shares of common stock at the rate of
$2.50 per share expiring on September 1, 2002. The 110,334 warrants were not
converted into shares of common stock by the holders thereof and expired on
their terms. Thus, as of the date of this Annual Report, there are an aggregate
of 634,160 warrant instruments issued comprised of the following: (i) 277,500
warrants issued and outstanding which may be converted into 277,500 shares of
common stock at the rate of $1.00 per share expiring December 1, 2005; (ii)
175,000 warrants issued and outstanding which may be converted into 175,000
shares of common stock at the rate of $1.00 per share expiring May 1, 2006; and
(iii) 181,660 warrants issued and outstanding which may be converted into
181,660 shares of common stock at the rate of $0.75 per share expiring May 1,
2006.
(d) During the nine-month period ended September 30, 2002, the Company
engaged in a private placement offering under Rule 506 of Regulation D and
Regulation S of the 1933 Securities Act. Pursuant to the terms of the private
placement, the Company offered 1,000,000 Units at $2.50 per Unit to raise an
aggregate of $2,500,000. The Units consist of one share of Common Stock and
one-half of one non-transferable share purchase warrant (the "Warrant"), with
each whole Warrant convertible into one share of Common Stock at $5.00 per whole
Warrant. The Units were offered primarily to U.S. residents who are accredited
investors as that term is defined under Regulation D and to non-U.S. residents.
On December 1, 2002, the Company terminated the offering pursuant to which it
sold 425,400 Units at $2.50 per Unit for aggregate gross proceeds of $1,063,500.
The per share price of the offering was arbitrarily determined by the Board of
Directors based upon analysis of certain factors relating to the acquisition of
GeneMax Pharmaceuticals including, but not limited to, stage of development,
business risks, current earnings, assets and net worth of the Company. The
Company issued 425,400 Units to approximately thirty-four investors of which
three were non-accredited. The investors executed subscription agreements and
acknowledged that the securities to be issued have not been registered under the
1933 Securities Act, that the investors understood the economic risk of an
investment in the securities, and that the investors had the opportunity to ask
questions of and receive answers from the Company's management concerning any
and all matters related to acquisition of the securities. No underwriter was
involved in the transaction, and no commissions or other remuneration were paid
in connection with the offer and sale of the securities.
(e) In accordance with the terms and provisions of the Stock Option Plan,
and as of the date of this Annual Report, the Board of Directors of the Company
has granted an aggregate of 3,270,000 Stock Options as follows: (i) 1,740,000
Stock Options and 395,000 Incentive Stock Options exercisable at $1.00 per share
to previous holders of stock options of GeneMax Pharmaceuticals to replace stock
options previously granted by GeneMax Pharmaceuticals at $0.60 per share; (ii)
1,000,000 Stock Options at $0.50 per share to ICI and/or its designates or
employees; (iii) 20,000 Stock Options at $5.50 per share; (iv) 15,000 Stock
Options at $7.50 per share; and (v) 100,000 Stock Options at $8.50 per share. Of
18
those 3,270,000 Stock Options granted, and as of the date of this Annual Report,
1,000,000 Stock Options have been exercised at $0.50 per share for aggregate
proceeds of $500,000 in accordance with the terms of the respective notice and
agreement of exercise of option. As a result, the Company has issued 1,000,000
shares of its Common Stock. Of the 3,270,000 Stock Options granted, an
additional 25,000 Stock Options have been exercised at $1.00 per share for
aggregate proceeds of $25,000 in accordance with the terms of a notice and
agreement of exercise of option. As a result, the Company has issued 25,000
shares of its Common Stock.
As a result of the issuance of shares, there was a change in control of the
Company. See "Part III. Item 11. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters."
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Statements made in this Form 10-KSB that are not historical or current
facts are "forward-looking statements" made pursuant to the safe harbor
provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section
21E of the Securities Exchange Act of 1934. These statements often can be
identified by the use of terms such as "may," "will," "expect," "believe,"
"anticipate," "estimate," "approximate" or "continue," or the negative thereof.
The Company intends that such forward-looking statements be subject to the safe
harbors for such statements. The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made. Any forward-looking statements represent management's best
judgment as to what may occur in the future. However, forward-looking statements
are subject to risks, uncertainties and important factors beyond the control of
the Company that could cause actual results and events to differ materially from
historical results of operations and events and those presently anticipated or
projected. The Company disclaims any obligation subsequently to revise any
forward-looking statements to reflect events or circumstances after the date of
such statement or to reflect the occurrence of anticipated or unanticipated
events.
The following discussions of the results of operations and financial
position of the Company should be read in conjunction with the financial
statements and notes pertaining to them that appear elsewhere in this Form
10-KSB.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
The Company's financial statements have been prepared which incorporate
financial data and figures of GeneMax Pharmaceuticals. Thus, the comparative
results are those of GeneMax Pharmaceuticals prior to the acquisition and are
not the financial results of Eduverse.com, and the current year comparative
results include the financial data and figures of the Company only subsequent to
the acquisition of GeneMax Pharmaceuticals.
For Fiscal Year Ended December 31, 2002 compared with Fiscal Year Ended
December 31, 2001.
The Company's net losses during fiscal year ended December 31, 2002 were
approximately ($2,284,709) compared to a net loss of approximately ($671,986)
during fiscal year ended December 31, 2001 (an increase of $1,612,723).
Net revenues during fiscal years ended December 31, 2002 and 2001 were
$-0-. The lack of revenues during fiscal years ended December 31, 2002 and 2001
resulted from the Company's decision to discontinue retail sales of its software
products, the focus on research relating to prospective new business endeavors,
and the consummation of the acquisition of GeneMax Pharmaceuticals. The Company
recorded interest income during fiscal years ended December 31, 2002 and 2001 of
$125 and $1,139, respectively.
19
During fiscal year ended December 31, 2002, the Company recorded operating
expenses of $2,284,834 compared to $673,125 of operating expenses recorded
during fiscal year ended December 31, 2001 (an increase of $1,611,709). The
operating expenses incurred during fiscal year ended December 31, 2002 consisted
primarily of the following: (i) research and development of approximately
$833,589 compared to $283,987 incurred during fiscal year ended December 31,
2001; (ii) consulting fees - stock based of approximately $680,275 compared to
$-0- incurred during fiscal year ended December 31, 2001; (iii) professional
fees of approximately $350,782 compared to $47,800 incurred during fiscal year
ended December 31, 2001; (iv) management fees of approximately $168,206 compared
to $132,000 incurred during fiscal year ended December 31, 2001; (v) consulting
fees of approximately $149,036 compared to $106,578 incurred during fiscal year
ended December 31, 2001; (vi) office and general of approximately $96,830
compared to $55,574 incurred during fiscal year ended December 31, 2001; (vii)
depreciation of approximately $40,890 compared to $32,837 incurred during fiscal
year ended December 31, 2001; and (viii) travel of approximately $15,226
compared to $14,349 incurred during fiscal year ended December 31, 2001. This
increase in operating expenses was due primarily to the increased scale and
scope of overall corporate activity pertaining to the acquisition of GeneMax
Pharmaceuticals and the ongoing research and development relating to the TAP
technology and the TAP Cancer Vaccine.
Of the $2,284,834 incurred as operating expenses, an aggregate of $382,969
was incurred payable to certain directors and/or private companies controlled by
those directors of the Company pursuant to consulting, management and research
and development agreements.
During fiscal year ended December 31, 2002, an aggregate of $60,000 in fees
was incurred (after the acquisition) to Investor Communications International,
Inc. ("ICI") for services rendered by ICI to the Company on a month-to-month
basis, as needed, including, but not limited to, financial, administrative and
general management. Based upon $106,276 which was due and owing to ICI prior to
the acquisition, and a further $27,754 owing to ICI for expenses incurred on
behalf of the Company, this resulted in $194,030 due and owing ICI. During
fiscal year ended December 31, 2002, the Company paid ICI $191,876 (after the
acquisition). As of December 31, 2002, an aggregate amount of $2,154 remains due
and owing to ICI by the Company relating to fees, cash advances and interest.
During fiscal year ended December 31, 2001, the Company had incurred an
aggregate amount of $225,000 to ICI, which together with other unpaid fees and
advances of $231,896, resulted in an aggregate of $456,896 due and owing ICI.
This amount was settled pursuant to a settlement agreement dated March 14, 2001
between the Company and ICI whereby ICI agreed to accept the issuance of
15,230,000 pre-reverse stock split shares of restricted Common Stock in
settlement and release of the $456,896 due and owing. Subsequent to this
settlement, an additional $65,700 in fees was accrued to ICI. Of this amount,
$37,481 was settled pursuant to a settlement agreement dated December 12, 2001
between the Company and ICI whereby ICI agreed to accept the issuance of 249,870
shares of restricted Common Stock in settlement and release of the $37,481 due
and owing. Mr. Grant Atkins, a director of the Company, is employed by ICI and
is part of the management team provided by ICI to the Company, and derives
remuneration from ICI for such services rendered to the Company. During fiscal
year ended December 31, 2002, Mr. Atkins received $17,325 from ICI as
compensation for services rendered to the Company. See "Part III. Item 10.
Executive Compensation."
During fiscal year ended December 31, 2002, an aggregate of $81,410 in fees
was incurred to 442668 B.C. Ltd. ("442668"), a corporation whose president and
member of the board of directors is Dr. Wilfred Jefferies, a director and the
Chief Scientific Officer of the Company. The fees incurred were for services
rendered by Dr. Jefferies to the Company under the GeneMax Pharmaceuticals
Consulting Agreement including, but not limited to, technical, research and
technology development. Based upon $6,725, which was due and owing to 442668 at
20
December 31, 2001, this resulted in an aggregate amount of $88,135 due and owing
442668. During fiscal year ended December 31, 2002, the Company paid 442668
$67,670 and settled the remaining balance of $20,465 through the issuance of
20,465 shares of restricted Common Stock at $1.00 per share. As of December 31,
2002, there was no amount that remained due and owing. During fiscal year ended
December 31, 2002, Dr. Jefferies received $67,670 through 442668 as compensation
for services rendered to the Company. See "Part III. Item 10. Executive
Compensation."
During fiscal year ended December 31, 2002, an aggregate of $105,206 in
fees was incurred to Ronald Handford, a director, the President and the Chief
Executive Officer of the Company. The fees incurred were for services rendered
by Mr. Handford to the Company under the GeneMax Pharmaceuticals Management
Agreement including, but not limited to, general managerial. Based upon $80,500,
which was due and owing to Mr. Handford at December 31, 2001, this resulted in
an aggregate amount of $185,706 due and owing. During fiscal year ended December
31, 2002, the Company paid Mr. Handford $69,374 and settled an amount of
$100,000 through the issuance of 100,000 shares of restricted Common Stock at
$1.00 per share. As of December 31, 2002, an aggregate amount of $16,332 remains
due and owing to Mr. Handford by the Company. During fiscal year ended December
31, 2002, Mr. Handford received $69,374 as compensation for services rendered to
the Company. See "Part III. Item 10. Executive Compensation."
During fiscal year ended December 31, 2002, an aggregate of $42,500 in fees
was incurred to Alan Lindsay and Associates Ltd. ("AL&A"), a corporation whose
sole officer, director and shareholder is Alan Lindsay, a director of the
Company. The fees incurred were for services rendered by Mr. Lindsay to the
Company under the GeneMax Pharmaceuticals Services Agreement including, but not
limited to, general consulting. Based upon $17,500, which was due and owing to
AL&A at December 31, 2001, this resulted in an aggregate amount of $60,000 due
and owing AL&A. During fiscal year ended December 31, 2002, the Company paid
AL&A $20,000 and settled an amount of $27,500 through the issuance of 27,500
shares of restricted Common Stock at $1.00 per share. As of December 31, 2002,
an aggregate amount of $12,500 remains due and owing to AL&A by the Company.
During fiscal year ended December 31, 2002, Mr. Lindsay received $20,000 through
AL&A as compensation for services rendered to the Company. See "Part III. Item
10. Executive Compensation."
During fiscal year ended December 31, 2002, an aggregate of $40,500 in fees
was incurred to James D. Davidson, a director and the Chief Financial Officer of
the Company. The fees incurred were for services rendered by Mr. Davidson to the
Company under the Davidson Agreement including, but not limited to, such duties
and services commensurate with his position as the Chief Financial Officer and a
director of the Company. Based upon $5,000, which was due and owing to Mr.
Davidson at December 31, 2001, this resulted in an aggregate amount of $45,500
due and owing to Mr. Davidson. During fiscal year ended December 31, 2002, the
Company paid Mr. Davidson $32,500 and settled the remaining balance of $13,000
through the issuance of 13,000 shares of restricted Common Stock at $1.00 per
share. As of December 31, 2002, there is no amount that remains due and owing to
Mr. Davidson by the Company. During fiscal year ended December 31, 2002, Mr.
Davidson received $32,500 compensation for services rendered to the Company. See
"Part III. Item 10. Executive Compensation."
As discussed above, the increase in net loss during fiscal year ended
December 31, 2002 as compared to fiscal year ended December 31, 2001 is
attributable primarily to the increase in operating expenses incurred during
fiscal year ended December 31, 2002. The Company's net losses during fiscal year
ended December 31, 2002 was approximately ($2,284,709) or ($0.17) per common
share compared to a net loss of approximately ($671,986) or ($0.06) per common
share during fiscal year ended December 31, 2001. The weighted average of common
shares outstanding were 13,289,451 for fiscal year ended December 31, 2002
compared to 11,431,965 for fiscal year ended December 31, 2001.
21
Liquidity and Capital Resources
The Company's financial statements have been prepared assuming that it will
continue as a going concern and, accordingly, do not include adjustments
relating to the recoverability and realization of assets and classification of
liabilities that might be necessary should the Company be unable to continue in
operation.
As of December 31, 2002, the Company's current assets were $648,589 and its
current liabilities were $295,599, which resulted in a working capital surplus
of $352,990. As of December 31, 2002, the Company's total assets were $761,428
consisting of: (i) $648,589 in current assets comprised of $642,589 in cash and
$6,000 in prepaid expenses; and (ii) $112,839 in furniture and equipment (net of
depreciation). As of December 31, 2002, the Company's total liabilities of
$295,599 consisted primarily of: (i) $264,613 in accounts payable and accrued
liabilities; and (ii) amounts due to related parties of $30,986.
As of December 31, 2002, the Company's stockholders' equity increased to
$465,829 from a deficit of ($74,049) at December 31, 2001.
The Company has not generated positive cash flows from operating
activities. For fiscal year ended December 31, 2002, net cash flows used in
operating activities was ($1,406,739) compared to ($603,754) of net cash flows
used in operating activities for fiscal year ended December 31, 2001 (an
increase of $802,985). The increase in cash flows used in operating activities
during fiscal year ended December 31, 2002 compared to fiscal year ended
December 31, 2001 resulted from: (i) a net loss of ($2,284,709) incurred during
fiscal year ended December 31, 2002 compared to a net loss of ($671,986)
incurred during fiscal year ended December 31, 2001; (ii) an increase in
stock-based compensation to $630,275 during fiscal year ended December 31, 2002
compared to $-0- during fiscal year ended December 31, 2001; (iii) an increase
in accounts payable to $206,805 during fiscal year ended December 31, 2002
compared to $35,395 during fiscal year ended December 31, 2001; and (iv) an
increase in depreciation to $40,890 during fiscal year ended December 31, 2002
compared to $32,837 during fiscal year ended December 31, 2001.
The Company's cash flow from investing activities during fiscal year ended
December 31, 2002 was $417,553 compared to ($70,889) used in investing
activities during fiscal year ended December 31, 2001. The increase in cash flow
from investing activities during fiscal year ended December 31, 2002 compared to
fiscal year ended December 31, 2001 resulted primarily from: (i) pre-reverse
merger advances from Eduverse.com in the amount of $250,000 compared to $-0-
during fiscal year ended December 31, 2001; (ii) cash in the amount of $173,373
acquired pursuant to acquisition of GeneMax Pharmaceuticals compared to $-0-
during fiscal year ended December 31, 2001; and (iii) purchase of furniture and
equipment in the amount of $5,820 compared to $70,889 during fiscal year ended
December 31, 2001.
Net cash flows from financing activities was $1,625,859 during fiscal year
ended December 31, 2002 compared to $501,245 in net cash flows from financing
activities for fiscal year ended December 31, 2001. The increase in net cash
flows from financing activities during fiscal year ended December 31, 2002
compared to fiscal year ended December 31, 2001 resulted primarily from: (i)
proceeds on sale and subscription of Common Stock in the amount of $1,570,000
compared to $347,750 during fiscal year ended December 31, 2001; (ii) loans
payable in the amount of $68,545 compared to $67,700 in loans payable during
fiscal year ended December 31, 2001; and (iii) repayments to related parties in
the amount of $12,686 compared to advances from related parties in the amount of
$85,795 during fiscal year ended December 31, 2001.
22
PLAN OF OPERATION
Funding
During the last quarter of fiscal year ended December 31, 2002, the Company
terminated an offering of 1,000,000 Units at $2.50 per Unit. Each Unit consists
of one share of restricted common stock of the Company (the "Share") and
one-half of one non-transferable share purchase warrant (the Warrant"), with
each whole Warrant convertible into one share of common stock at $5.00 per whole
Warrant. The Company sold 425,400 Units and received $1,063,500 in gross
proceeds.
Current management of the Company anticipates an increase in operating
expenses over the next three years to pay expenses associated with the
successful completion of the balance of pre-clinical development and
commencement of Phase I-II clinical trials for the TAP Technology and corporate
expenses. Pursuant to these operational requirements, the Company must raise
additional funds. The Company may finance these expenses with further issuance
of common stock of the Company. The Company believes that anticipated private
placements of equity capital and debt financing, if successful, may be adequate
to fund the Company's operations over the next twelve months. Thereafter, the
Company expects it will need to raise additional capital to meet long-term
operating requirements. If the Company raises additional funds through the
issuance of equity or convertible debt securities other than to current
shareholders, the percentage ownership of its current shareholders would be
reduced, and such securities might have rights, preferences or privileges senior
to its Common Stock. Additional financing may not be available upon acceptable
terms, or at all. If adequate funds are not available or are not available on
acceptable terms, the Company may not be able to conduct its proposed business
operations successfully or in the time frames contemplated, which could
significantly and materially restrict or delay the Company's overall business
operations.
Management of the Company estimates that as of the date of this Annual
Report, the Company has raised approximately $2,538,500 in funding. Management
of the Company believes that an estimated $15,000,000 is required over the next
three years for payment of expenses associated with the balance of pre-clinical
development and commencement of Phase I-II clinical trials for the TAP Cancer
Vaccine. The Company must raise additional capital to execute its business plan
according to time schedules provided by management. Furthermore, the Company has
not generated sufficient cash flow in the past to fund its operations and
activities due primarily to the nature of lengthy product development cycles
that are normal to the biotech industry. Historically, the Company has relied
upon internally generated funds, funds from the sale of shares of stock and
loans from its shareholders and private investors to finance its operations and
growth. The Company's future success and viability are dependent on the
Company's ability to raise additional capital through further private offerings
of its stock or loans from private investors. There can be no assurance,
however, that the Company will be able to raise additional capital. The
Company's inability to successfully raise additional capital would have a
material and adverse affect upon the Company and its shareholders.
Material Commitments
Consulting Services Agreement. A significant and estimated material
commitment for the Company for fiscal year 2003 is the amounts due and owing
under the consulting services agreement between the Company and ICI dated August
12, 2002 (the "Consulting Services Agreement"). Pursuant to the terms and
provisions of the Consulting Services Agreement, ICI will provide to the Company
such finance and managerial services as may be determined by the Board of
Directors, from time to time, and in its sole and absolute discretion, in order
to develop the various business interests of the Company in the drug discovery
and development industry, involving the patented drug discovery assay for
immunomodulatory compounds and the pipeline aimed at treatment of cancer,
infectious diseases, autoimmune disorders and transplant tissue rejection.
Pursuant to further terms of the Consulting Services Agreement, the Company
shall pay ICI a monthly fee not to exceed $10,000 in accordance with the
services performed.
23
GeneMax Pharmaceuticals Consulting Agreement. A significant and estimated
material commitment for the Company for fiscal year 2003 is the amounts due and
owing under the consulting services agreement dated February 1, 2000 between
GeneMax Pharmaceuticals and 442668 B.C. Ltd. ("442668"), a corporation whose
sole officer, director and shareholder is Dr. Wilfred Jefferies, a director of
the Company (the "GeneMax Pharmaceuticals Consulting Agreement"). Pursuant to
the terms and provisions of the GeneMax Pharmaceuticals Consulting Agreement,
Dr. Jefferies agreed to provide technical, research and technology development
services to GeneMax Pharmaceuticals for a period of five years. Pursuant to
further terms and provisions of the GeneMax Pharmaceuticals Consulting
Agreement, 442668 shall be paid a monthly fee of $10,000 Canadian Dollars and
reimbursement of expenses.
GeneMax Pharmaceuticals Management Agreement. A significant and estimated
material commitment for the Company for fiscal year 2003 is the amounts due and
owing under the management services agreement dated August 1, 1999 between
GeneMax Pharmaceuticals and Ronald L. Handford, the President/Chief Executive
Officer and a director of the Company (the "GeneMax Pharmaceuticals Management
Agreement"). Pursuant to the terms and provisions of the GeneMax Pharmaceuticals
Management Agreement, Mr. Handford agreed to provide general managerial services
to GeneMax Pharmaceuticals for a period of five years. Pursuant to further terms
and provisions of the GeneMax Pharmaceuticals Management Agreement, Mr. Handford
shall be paid a monthly fee of $11,000 U.S. Dollars and reimbursement of
expenses. Effective May 1, 2002, GeneMax Pharmaceuticals and Mr. Handford agreed
to reduce the monthly fee to $12,500 Canadian Dollars until the earlier of the
Company reaching a senior board listing or commences clinical trials, at which
time the fee will be reviewed in accordance with market norms.
GeneMax Pharmaceuticals Services Agreement. A significant and estimated
material commitment for the Company for fiscal year 2003 is the amounts due and
owing under the services agreement dated May 31, 2002 between GeneMax
Pharmaceuticals and Alan Lindsay and Associates Ltd., a corporation whose sole
officer, director and shareholder is Alan Lindsay, a director of the Company
(the "GeneMax Pharmaceuticals Services Agreement"). Pursuant to the terms and
provisions of the GeneMax Pharmaceuticals Services Agreement, Mr. Lindsay agreed
to provide general consulting services to GeneMax Pharmaceuticals on a
month-to-month basis. Pursuant to further terms and provisions of the GeneMax
Pharmaceuticals Services Agreement, Mr. Lindsay shall be paid a monthly fee of
$2,500 U.S. Dollars and reimbursement of expenses.
Employment Agreement. A significant and estimated material commitment for
the Company for fiscal year 2003 is the amounts due and owing under a
month-to-month employment agreement between the Company and James D. Davidson, a
director and the Chief Financial Officer of the Company (the "Employment
Agreement"). Pursuant to the terms of the Employment Agreement, Mr. Davidson
agreed to perform such duties as required as the Chief Financial Officer of the
Company and such other duties commensurate with his position as a director on
the Board of Directors. Pursuant to further terms and provisions of the
Employment Agreement, Mr. Davidson shall be paid a monthly fee of $5,000 and
reimbursement of expenses.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Annual Report, the Company does not have any
off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on the Company's financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to investors. The
term "off-balance sheet arrangement" generally means any transaction, agreement
or other contractual arrangement to which an entity unconsolidated with the
Company is a party, under which the Company has (i) any obligation arising under
a guarantee contract, derivative instrument or variable interest; or (ii) a
retained or contingent interest in assets transferred to such entity or similar
arrangement that serves as credit, liquidity or market risk support for such
assets.
24
AUDIT COMMITTEE
As of the date of this Annual Report, the Company has not appointed members
to an audit committee and, therefore, the respective role of an audit committee
has been conducted by the board of directors of the Company. When established,
the audit committee's primary function will be to provide advice with respect to
the Company's financial matters and to assist the board of directors in
fulfilling its oversight responsibilities regarding finance, accounting, tax and
legal compliance. The audit committee's primary duties and responsibilities will
be to: (i) serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system; (ii) review and
appraise the audit efforts of the Company's independent accountants; (iii)
evaluate the Company's quarterly financial performance as well as its compliance
with laws and regulations; (iv) oversee management's establishment and
enforcement of financial policies and business practices; and (v) provide an
open avenue of communication among the independent accountants, management and
the board of directors.
The board of directors has considered whether the regulatory provision of
non-audit services is compatible with maintaining the principal independent
accountant's independence.
Audit Fees
During the fiscal year ended December 31, 2002, the Company incurred
approximately $16,065 in fees to its principal independent accountant for
professional services rendered in connection with the audit of the Company's
financial statements, and approximately $20,000 for the review of the Company's
financial statements for the quarters ended March 31, 2002, June 30, 2002 and
September 30, 2002.
Financial Information Systems Design and Implementation Fees
During fiscal year ended December 31, 2002, the Company did not incur any
fees for professional services rendered by its principal independent accountant
for certain information technology services which may include, but is not
limited to, operating or supervising or managing the Company's information or
local area network or designing or implementing a hardware or software system
that aggregate source data underlying the financial statements.
All Other Fees
During fiscal year ended December 31, 2002, the Company did not incur any
other fees for professional services rendered by its principal independent
accountant for all other non-audit services which may include, but is not
limited to, tax-relates services, actuarial services or valuation services.
25
ITEM 7. FINANCIAL STATEMENTS
The information required under Item 310(a) of Regulation S-B is included in
this report as set forth in the "Index to Consolidated Financial Statement".
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Auditors' Report dated February 25, 2003
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statement of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
TABLE OF CONTENTS
-----------------
Page
----
Auditors' Report....................................................... 28
Consolidated Balance Sheet............................................. 29
Consolidated Statements of Operations.................................. 30
Consolidated Statement of Stockholders' Equity (Deficit)............... 31
Consolidated Statements of Cash Flows.................................. 36
Notes to Consolidated Financial Statements............................. 37
26
GENEMAX CORP.
(formerly Eduverse.com)
(a development stage company)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
AUDITORS' REPORT
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
27
LABONTE & CO. 610 - 938 Howe Street
- ---------------------------------------- Vancouver, BC Canada
C H A R T E R E D A C C O U N T A N T S V6Z 1N9
- ---------------------------------------- Telephone (604) 682-2778
Facsimile (604) 689-2778
Email: info@labonteco.com
AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Stockholders and Board of Directors of GeneMax Corp. (formerly
eduverse.com)
We have audited the consolidated balance sheets of GeneMax Corp. (formerly
eduverse.com) as at December 31, 2002 and 2001 and the consolidated statements
of operations, stockholders' equity and cash flows for the years then ended and
for the period from July 27, 1999 (inception) to December 31, 2002. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with Canadian and United States generally
accepted auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 2002 and 2001
and the results of its operations and its cash flows and the changes in
stockholders' equity for the years then ended and for the period from July 27,
1999 (inception) to December 31, 2002 in accordance with United States generally
accepted accounting principles.
CHARTERED ACCOUNTANTS
Vancouver, B.C.
February 25, 2003
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-UNITED STATES REPORTING
DIFFERENCES
- --------------------------------------------------------------------------------
In the United States, reporting standards for auditors would require the
addition of an explanatory paragraph following the opinion paragraph when the
financial statements are affected by conditions and events that cast substantial
doubt on the Company's ability to continue as a going concern, such as those
described in Note 1. Our report to the stockholders and Board of Directors dated
February 25, 2003 is expressed in accordance with Canadian reporting standards
which do not permit a reference to such conditions and events in the auditors'
report when these are adequately disclosed in the financial statements.
CHARTERED ACCOUNTANTS
Vancouver, B.C.
February 25, 2003
28
GENEMAX CORP.
(formerly Eduverse.com)
(a development stage company)
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2002 2001
----------- -----------
(Note 1)
ASSETS
CURRENT ASSETS
Cash $ 642,589 $ 11,561
Prepaid expenses 6,000 --
----------- -----------
648,589 11,561
FURNITURE AND EQUIPMENT, (Note 5)
net of depreciation of $79,138 (2001 - $38,248) 112,839 147,909
----------- -----------
$ 761,428 $ 159,470
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 264,613 $ 43,524
Loans payable (Note 6) -- 67,700
Due to related parties (Note 7) 30,986 122,295
----------- -----------
295,599 233,519
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 1, 4 and 7)
STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
Capital stock (Note 8)
Common stock, $0.0001 par value, 25,000,000 shares authorized
15,847,519 shares issued and outstanding (2001 - 1,000,000) 15,847 10,863
Additional paid-in capital 3,621,665 1,607,117
Common stock subscriptions 200,000 --
Common stock purchase warrants 610,700 --
Deficit accumulated during the development stage (3,972,760) (1,688,051)
Accumulated other comprehensive income (loss) (9,623) (3,978)
----------- -----------
465,829 (74,049)
----------- -----------
$ 761,428 $ 159,470
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements
29
GENEMAX CORP.
(formerly Eduverse.com)
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
July 27, 1999
Year Ended Year Ended (inception) to
December 31 December 31 December 31,
2002 2001 2002
------------ ------------ ------------
(Note 1) (Note 1)
INTEREST INCOME $ 125 $ 1,139 $ 26,571
------------ ------------ ------------
Consulting fees 149,036 106,578 304,277
Consulting fees - stock based (Note 8) 630,275 -- 630,275
Depreciation 40,890 32,837 79,138
License fees -- -- 79,243
Management fees 168,206 132,000 487,206
Office and general 96,830 55,574 247,426
Professional fees 350,782 47,800 510,503
Research and development 833,589 283,987 1,533,040
Travel 15,226 14,349 78,223
------------ ------------ ------------
2,284,834 673,125 3,999,331
------------ ------------ ------------
NET LOSS FOR THE PERIOD $ (2,284,709) $ (671,986) $ (3,972,760)
============ ============ ============
BASIC NET LOSS PER SHARE $ (0.17) $ (0.06)
============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 13,289,451 11,431,965
============ ============
The accompanying notes are an integral part of these consolidated financial statements
30
GENEMAX CORP.
(formerly Eduverse.com)
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 27, 1999 (INCEPTION) TO DECEMBER 31, 2002
Common Stock
------------------------- Additional Common
Number of Paid In Stock
shares Amount Capital Subscriptions
----------- ----------- ----------- -------------
Issued on incorporation - July 27, 1999 1 $ -- $ -- $ --
Issued for consulting services - October 1999 2,150,000 2,150 -- --
Issued for cash at $0.001 per share - October 1999 1,850,000 1,850 -- --
Common stock subscriptions -- -- -- 177,100
Net loss for the period -- -- -- --
----------- ----------- ----------- -----------
Balance, December 31, 1999 4,000,001 4,000 -- 177,100
Issued for consulting services - February 2000 3,600,000 3,600 -- --
Issued for license fees - February 2000 500,000 500 -- --
Issued for cash at $0.60 per share - February 2000
- net of finders' fees of $95,570 1,408,828 1,409 748,321 (177,100)
Issued for cash at $0.60 per share - March 2000 644,000 644 385,756 --
Issued for cash at $0.60 per share- May 2000 210,000 210 125,790 --
Issued for finders' fees - May 2000 124,642 125 (125) --
Net loss for the year -- -- -- --
Currency translation adjustment -- -- -- --
----------- ----------- ----------- -----------
Balance, December 31, 2000 10,487,471 10,488 1,259,742 --
Table continues on following page.
31
GENEMAX CORP.
(formerly Eduverse.com)
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 27, 1999 (INCEPTION) TO DECEMBER 31, 2002 (Continued)
Deficit
Common Accumulated Accumulated
Stock During other
Purchase Development Comprehensive
Warrants Stage Income (loss) Total
----------- ----------- ------------- -----------
Issued on incorporation - July 27, 1999 $ -- $ -- $ -- $ --
Issued for consulting services - October 1999 -- -- -- 2,150
Issued for cash at $0.001 per share - October 1999 -- -- -- 1,850
Common stock subscriptions -- -- -- 177,100
Net loss for the period -- (80,733) -- (80,733)
----------- ----------- ----------- -----------
Balance, December 31, 1999 -- (80,733) -- 100,367
Issued for consulting services - February 2000 -- -- -- 3,600
Issued for license fees - February 2000 -- -- -- 500
Issued for cash at $0.60 per share - February 2000
- net of finders' fees of $95,570 -- -- -- 572,630
Issued for cash at $0.60 per share - March 2000 -- -- -- 386,400
Issued for cash at $0.60 per share- May 2000 -- -- -- 126,000
Issued for finders' fees - May 2000 -- -- -- --
Net loss for the year -- (935,332) -- (935,332)
Currency translation adjustment -- -- (1,937) (1,937)
----------- ----------- ----------- -----------
Balance, December 31, 2000 -- (1,016,065) (1,937) 252,228
The accompanying notes are an integral part of these consolidated financial statements
32
GENEMAX CORP.
(formerly Eduverse.com)
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 27, 1999 (INCEPTION) TO DECEMBER 31, 2002 (Continued)
Common Stock
-------------------------- Additional Common
Number of Paid In Stock
shares Amount Capital Subscriptions
----------- ----------- ----------- -------------
Issued for cash at $0.75 per share
- April to July 2001 110,334 110 82,640 --
Issued for cash at $1.00 per share
- June to November 2001 265,000 265 264,735 --
Net loss for the year -- -- -- --
Currency translation adjustment -- -- -- --
----------- ----------- ----------- -----------
Balance, December 31, 2001 10,862,805 10,863 1,607,117 --
Issued for cash at $1.00 per share- February to
May 2002 - net of finders' fees of $17,000 187,500 187 170,313 --
Issued on settlement of debts at $0.75 per share
- May 2002 181,660 182 136,063 --
----------- ----------- ----------- -----------
GPI balance, July 15, 2002 (Note 1) 11,231,965 11,232 1,913,493 --
Eduverse balance, July 15, 2002 (Note 8) 15,320,119 52,075 7,134,217 (85,000)
Reverse acquisition recapitalization adjustment (11,231,965) (47,987) (7,180,193) --
----------- ----------- ----------- -----------
Balance post reverse acquisition 15,320,119 15,320 1,867,517 (85,000)
Common stock purchase warrants expired -- -- 9,900 --
Eduverse subscription proceeds received -- -- -- 100,000
Table continues on following page.
33
GENEMAX CORP.
(formerly Eduverse.com)
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 27, 1999 (INCEPTION) TO DECEMBER 31, 2002 (Continued)
Deficit
Common Accumulated Accumulated
Stock During other
Purchase Development Comprehensive
Warrants Stage Income (loss) Total
----------- ----------- ------------- -----------
Issued for cash at $0.75 per share
- April to July 2001 -- -- -- 82,750
Issued for cash at $1.00 per share
- June to November 2001 -- -- -- 265,000
Net loss for the year -- (671,986) -- (671,986)
Currency translation adjustment -- -- (2,041) (2,041)
----------- ----------- ----------- -----------
Balance, December 31, 2001 -- (1,688,051) (3,978) (74,049)
Issued for cash at $1.00 per share- February to
May 2002 - net of finders' fees of $17,000 -- -- -- 170,500
Issued on settlement of debts at $0.75 per share
- May 2002 -- -- -- 136,245
----------- ----------- ----------- -----------
GPI balance, July 15, 2002 (Note 1) -- (1,688,051) (3,978) 232,696
Eduverse balance, July 15, 2002 (Note 8) -- (6,607,580) -- 493,712
Reverse acquisition recapitalization adjustment 620,600 6,607,580 -- --
----------- ----------- ----------- -----------
Balance post reverse acquisition 620,600 (1,688,051) (3,978) 726,408
Common stock purchase warrants expired (9,900) -- -- --
Eduverse subscription proceeds received -- -- -- 100,000
The accompanying notes are an integral part of these consolidated financial statements
34
GENEMAX CORP.
(formerly Eduverse.com)
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 27, 1999 (INCEPTION) TO DECEMBER 31, 2002 (Continued)
Common Stock
------------------------- Additional Common
Number of Paid In Stock
shares Amount Capital Subscriptions
----------- ----------- ----------- -------------
Issued for cash at $2.50 per share - November 2002 425,400 425 1,063,075 --
Subscription proceeds received - December 2002 -- -- -- 185,000
Exercise of stock options at $0.50 per share
- December 2002 102,000 102 50,898 --
Stock-based compensation -- -- 630,275 --
Net loss for the year -- -- -- --
Currency translation adjustment -- -- -- --
----------- ----------- ----------- -----------
Balance, December 31, 2002 15,847,519 $ 15,847 $ 3,621,665 $ 200,000
=========== =========== =========== ===========
Table continues below.
Deficit
Common Accumulated Accumulated
Stock During other
Purchase Development Comprehensive
Warrants Stage Income (loss) Total
----------- ----------- ------------- -----------
Issued for cash at $2.50 per share - November 2002 -- -- -- 1,063,500
Subscription proceeds received - December 2002 -- -- -- 185,000
Exercise of stock options at $0.50 per share
- December 2002 -- -- -- 51,000
Stock-based compensation -- -- -- 630,275
Net loss for the year -- (2,284,709) -- (2,284,709)
Currency translation adjustment -- -- (5,645) (5,645)
----------- ----------- ----------- -----------
Balance, December 31, 2002 $ 610,700 $(3,972,760) $ (9,623) $ 465,829
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements
35
GENEMAX CORP.
(formerly Eduverse.com)
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
July 27, 1999
Year Ended Year Ended (inception) to
December 31 December 31 December 31,
2002 2001 2002
----------- ----------- -----------
(Note 1) (Note 1)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year $(2,284,709) (671,986) $(3,972,760)
Adjustments to reconcile net loss to net cash from operating activities:
- depreciation 40,890 32,837 79,138
- non-cash consulting fees -- -- 5,750
- non-cash license fees -- -- 500
- stock-based compensation 630,275 630,275
- accounts payable 206,805 35,395 250,329
----------- ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,406,739) (603,754) (3,006,768)
----------- ----------- -----------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Purchase of furniture and equipment (5,820) (70,889) (191,977)
Pre reverse acquisition advances from Eduverse (Note 3) 250,000 250,000
Cash acquired on reverse acquisition of Eduverse (Note 3) 173,373 173,373
----------- ----------- -----------
NET CASH FROM (USED IN) INVESTING ACTIVITIES 417,553 (70,889) 231,396
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on sale and subscriptions of common stock 1,570,000 347,750 3,181,730
Loans payable 68,545 67,700 136,245
Advances (to) from related parties (12,686) 85,795 109,609
----------- ----------- -----------
NET CASH FLOWS FROM FINANCING ACTIVITIES 1,625,859 501,245 3,427,584
----------- ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES (5,645) (2,041) (9,623)
----------- ----------- -----------
INCREASE (DECREASE) IN CASH 631,028 (175,439) 642,589
CASH, BEGINNING OF YEAR 11,561 187,000 --
----------- ----------- -----------
CASH, END OF YEAR $ 642,589 $ 11,561 $ 642,589
=========== =========== ===========
Non-cash activities:
Prior to the reverse merger as described in Note 3, GPI settled loans payable totalling $136,245 through the
issuance of 181,660 shares of common stock of GPI at $0.75 per share (Refer to Notes 6 and 8).
Concurrent with the reverse merger as described in Note 3, GMC settled certain research and development, management
and consulting fees owing by GPI to related parties totalling $188,154 through the issuance of 188,154 shares of
common stock of GMC at $1.00 per share (Refer to Notes 7 and 8).
The accompanying notes are an integral part of these consolidated financial statements
36
GENEMAX CORP.
(formerly Eduverse.com)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
- --------------------------------------------------------------------------------
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
- --------------------------------------------------------------------------------
On May 9, 2002, GeneMax Corp. (formerly Eduverse.com) ("GMC", "Eduverse" or "the
Company"), a Nevada corporation entered into a letter of intent to acquire 100%
of the issued and outstanding common shares of GeneMax Pharmaceuticals Inc. (a
development stage company) ("GPI"), in exchange for a total of 11,431,965
restricted shares of common stock of Eduverse. In connection with this
transaction, Eduverse changed its name to GeneMax Corp. During July and August
Eduverse completed the transaction pursuant to a definitive Share Exchange
Agreement and issued 11,231,965 restricted shares of common stock to the GPI
stockholders and 200,000 shares of common stock as a finder's fee.
This acquisition has been accounted for as a reverse merger with GPI being
treated as the accounting parent and GMC, the legal parent, being treated as the
accounting subsidiary. Accordingly, the consolidated results of operations of
the Company include those of GPI for all periods shown and those of GMC since
the date of the reverse merger. The comparative balance sheet as at December 31,
2002 is that of GPI.
GPI is a private Delaware company incorporated July 27, 1999 which has a
wholly-owned subsidiary, GeneMax Pharmaceuticals Canada Inc. ("GPC"), a private
British Columbia company incorporated May 12, 2000. GPI is a development stage
company which was formed for the purpose of building a biotechnology business
specializing in the discovery and development of immunotherapeutics aimed at the
treatment and eradication of cancer, and therapies for infectious diseases,
autoimmune disorders and transplant tissue rejection.
During 2000 GPI and the University of British Columbia ("UBC") entered into a
world-wide license agreement providing GPI the exclusive license rights to
certain patented and unpatented technologies originally invented and developed
by UBC. Also during 2000 GPI and UBC entered into a Collaborative Research
Agreement ("CRA") appointing UBC to carry out further development of the
licensed technology and providing GPI the option to acquire the rights to
commercialize any additional technologies developed within the CRA in
consideration for certain funding commitments (Refer to Note 4).
The consolidated financial statements have been prepared on the basis of a going
concern which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has incurred
significant losses since inception and further losses are anticipated in the
development of its products raising substantial doubt as to the Company's
ability to continue as a going concern. The ability of the Company to continue
as a going concern is dependent on raising additional capital to fund ongoing
research and development and ultimately on generating future profitable
operations.
Subsequent to December 31, 2002 the Company received proceeds of $440,000 in
connection with the exercise of stock options and $30,000 in connection with the
Company's ongoing private placement financing (refer to Note 10).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Basis of Presentation
These consolidated financial statements have been presented in United States
dollars and prepared in accordance with United States Generally Accepted
Accounting Principles ("US GAAP").
Principles of Consolidation
The financial statements include the accounts of the Company and its
wholly-owned subsidiaries GPI and GPC as described in Notes 1 and 3. The
consolidated financial statements also include the accounts of the Company's
inactive wholly-owned subsidiary, M&M Information and Marketing Services Inc.
(incorporated in Nevada, USA). All significant intercompany balances and
transactions are eliminated on consolidation.
37
GENEMAX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(formerly Eduverse.com)
(a development stage company)
DECEMBER 31, 2002 AND 2001
- --------------------------------------------------------------------------------
NOTE 2: - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
- --------------------------------------------------------------------------------
Use of Estimates and Assumptions
Preparation of the Company's financial statements in conformity with United
States generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Furniture and Equipment
Furniture and equipment are stated at cost. Depreciation is computed at the
following rates over the estimated useful lives of the assets:
Office furniture and equipment 36 months straight-line
Laboratory equipment 60 months straight-line
Research and development costs
The Company has acquired exclusive development and marketing rights to certain
technologies through a License Agreement and a Collaborative Research Agreement
with UBC. The rights and license acquired are considered rights to unproven
technology which may not have alternate future uses and therefore, have been
expensed as incurred as research and development costs. Also, ongoing costs
incurred in connection with the Collaborative Research Agreement are considered
costs incurred in the development of unproven technology which may not have
alternate future uses and therefore, have been expensed as incurred as research
and development costs.
Fair Value of Financial Instruments
In accordance with the requirements of SFAS No. 107, the Company has determined
the estimated fair value of financial instruments using available market
information and appropriate valuation methodologies. The fair value of financial
instruments classified as current assets or liabilities including cash, prepaid
expense, loans and accounts payable and due to related parties approximate
carrying value due to the short-term maturity of the instruments.
Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance
with Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation", foreign denominated monetary assets and liabilities are translated
to their United States dollar equivalents using foreign exchange rates which
prevailed at the balance sheet date. Revenue and expenses are translated at
average rates of exchange during the year. Related translation adjustments are
reported as a separate component of stockholders' equity, whereas gains or
losses resulting from foreign currency transactions are included in results of
operations.
Net Loss per Common Share
Basic earnings (loss) per share includes no dilution and is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Dilutive earnings (loss) per share reflect
the potential dilution of securities that could share in the earnings of the
Company. The accompanying presentation is only of basic loss per share as the
potentially dilutive factors are anti-dilutive to basic loss per share.
Stock-Based Compensation
In December 2002, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure" ("SFAS No. 148"), an amendment of Financial
Accounting Standard No. 123 "Accounting for Stock-Based Compensation" ("SFAS No.
123"). The purpose of SFAS No. 148 is to: (1) provide alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation, (2) amend the disclosure
provisions to require prominent disclosure about the effects on reported net
income of an entity's accounting policy decisions with respect to stock-based
employee compensation, and (3) to require disclosure of those effects in interim
financial information. The disclosure provisions of SFAS No. 148 were effective
for the Company for the year ended December 31, 2002.
38
GENEMAX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(formerly Eduverse.com)
(a development stage company)
DECEMBER 31, 2002 AND 2001
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
- --------------------------------------------------------------------------------
The Company has elected to continue to account for stock options granted to
employees and officers using the intrinsic value based method in accordance with
the provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", ("APB No. 25") and comply with the disclosure
provisions of SFAS No. 123 as amended by SFAS No. 148 as described above. Under
APB No. 25, compensation expense is recognized based on the difference, if any,
on the date of grant between the estimated fair value of the Company's stock and
the amount an employee must pay to acquire the stock. Compensation expense is
recognized immediately for past services and pro-rata for future services over
the option-vesting period. In addition, with respect to stock options granted to
employees, the Company provides pro-forma information as required by SFAS No.
123 showing the results of applying the fair value method using the
Black-Scholes option pricing model.
In accordance with SFAS No. 123, the Company applies the fair value method using
the Black-Scholes option-pricing model in accounting for options granted to
consultants.
The Company accounts for equity instruments issued in exchange for the receipt
of goods or services from other than employees in accordance with SFAS No. 123
and the conclusions reached by the Emerging Issues Task Force in Issue No.
96-18. Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity instruments
issued for consideration other than employee services is determined on the
earliest of a performance commitment or completion of performance by the
provider of goods or services as defined by EITF 96-18.
The Company has also adopted the provisions of the Financial Accounting
Standards Board Interpretation No.44, Accounting for Certain Transactions
Involving Stock Compensation - An Interpretation of APB Opinion No. 25 ("FIN
44"), which provides guidance as to certain applications of APB 25. FIN 44 is
generally effective July 1, 2000 with the exception of certain events occurring
after December 15, 1998.
Income taxes
The Company follows the liability method of accounting for income taxes. Under
this method, deferred income tax assets and liabilities are recognized for the
estimated tax consequences attributable to differences between the financial
statement carrying values and their respective income tax basis (temporary
differences). The effect on deferred income tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. At December 31, 2002 a full deferred tax asset valuation
allowance has been provided and no deferred tax asset benefit has been recorded.
Comprehensive income (loss)
Comprehensive income (loss) is defined as the change in equity from
transactions, events and circumstances, other than those resulting from
investments by owners and distributions to owners. Comprehensive income (loss)
to date consists only of the net gains and losses resulting from translation of
the foreign currency financial statements of the Company's wholly-owned
subsidiary, GPC.
Recent accounting pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations",
which eliminates the pooling method of accounting for business combinations
initiated after June 30, 2001. In addition, SFAS 141 addresses the accounting
for intangible assets and goodwill acquired in a business combination. This
portion of SFAS 141 is effective for business combinations completed after June
30, 2001. The adoption of SFAS 141 has not had a material impact on the
Company's financial position or results of operations.
In July 2001, the FASB issued Statement of Financial Accounting Standards No.
142 ("SFAS 142"), "Goodwill and Intangible Assets", which revises the accounting
for purchased goodwill and intangible assets. Under SFAS 142, goodwill and
intangible assets with indefinite lives will no longer be amortized and will be
tested for impairment annually. SFAS 142 is effective for fiscal years beginning
after December 15, 2001, with earlier adoption permitted. The adoption of SFAS
has not had a material impact on the Company's financial position or results of
operations.
39
GENEMAX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(formerly Eduverse.com)
(a development stage company)
DECEMBER 31, 2002 AND 2001
- --------------------------------------------------------------------------------
NOTE 3 - EDUVERSE ACQUISITION
- --------------------------------------------------------------------------------
Effective May 9, 2002 the Company entered into a letter of intent to acquire
100% of the issued shares in the capital of GPI in exchange for 11,231,965
restricted shares of common stock plus 200,000 restricted shares of common stock
for a finder's fee. The Company also agreed to issue an additional 188,154
restricted shares of common stock in settlement of $188,154 of accrued GPI
management, consulting and research and development fees. Effective July 15,
2002, pursuant to a definitive Share Exchange Agreement, the Company commenced
the closing and acquired 5,880,304 shares of GPI from non-British Columbia
shareholders of GPI in exchange for the issuance of 5,880,304 restricted shares
of common stock. The Company also issued a take-over bid circular to British
Columbia GPI shareholders and acquired a further 4,487,001 shares of GPI in
exchange for 4,487,001 restricted shares of common stock effective August 13,
2002. Also during 2002, the Company completed the acquisition by acquiring the
remaining 864,660 shares of GPI in exchange for 864,660 restricted shares of
common stock. Also, 744,494 outstanding GPI common stock purchase warrants were
exchanged on a one for one basis for the Company's common stock purchase
warrants with identical terms and conditions and the Company issued 2,135,000
stock options to holders of GPI stock options (refer to Note 8). All GPI stock
options and common stock purchase warrants were then cancelled. As a result of
this transaction, the former stockholders of GPI owned 75% of the 15,320,119
total issued and outstanding shares of the Company as at July 15, 2002. In
connection with this transaction, Eduverse changed its name to GeneMax Corp
("GMC").
This acquisition has been accounted for as a recapitalization using accounting
principles applicable to reverse acquisitions with GPI being treated as the
accounting parent (acquirer) and GMC being treated as the accounting subsidiary
(acquiree). The value assigned to the capital stock of consolidated GMC on
acquisition of GPI is equal to the book value of the capital stock of GPI plus
the book value of the net assets of GMC as at the date of the acquisition.
The book value of GMC's capital stock subsequent to the reverse acquisition is
calculated and allocated as follows:
GPI capital stock $ 1,924,725
GMC net assets 493,712
-----------
$ 2,418,437
===========
Capital stock $ 15,320
Additional paid-in capital 620,600
Share purchase warrants 1,867,517
-----------
2,503,437
GMC subscriptions receivable pre reverse acquisition (100,000)
GMC subscriptions received pre reverse acquisition 15,000
-----------
Consolidated Capital accounts post reverse acquisition $ 2,418,437
===========
These consolidated financial statements include the results of operations of GPI
since July 27, 1999 (inception) and the results of operations of GMC since the
date of the reverse merger effective July 15, 2002. GMC'S results of operations
for the period from January 1, 2002 to June 30, 2002 have been reported in the
Company's June 30, 2002 filing on Form 10-QSB. GMC had no material operations
for the period from July 1, 2002 to July 14, 2002.
For the period from October 13, 1999 (inception) to July 14, 2002 the weighted
average number of common shares outstanding is deemed to be 11,431,965 being the
number of shares issued by GMC (including 200,000 common shares issued as
finders' fees) to effect the reverse acquisition of GPI.
40
GENEMAX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(formerly Eduverse.com)
(a development stage company)
DECEMBER 31, 2002 AND 2001
- --------------------------------------------------------------------------------
NOTE 4 - RESEARCH AGREEMENTS
- --------------------------------------------------------------------------------
University of British Columbia ("UBC")
Effective September 14, 1999 GPI entered into an Option Agreement ("Option")
whereby UBC granted GPI an option to obtain a world-wide license from UBC
providing GPI the exclusive license rights to certain patented and unpatented
cancer immuno-therapy technologies originally invented and developed by UBC. The
Option was for a term of 180 days and was considered exercised upon execution of
the License Agreement with UBC as described below. Prior to being eligible to
exercise the Option, GPI was to make a reasonable commercial effort to raise
equity funding in an amount not less than CAN$1,000,000 to fund ongoing research
and issue 500,000 common shares to UBC and an additional 3,600,000 common shares
to certain principals involved in the UBC research.
Effective March 6, 2000, having satisfied the conditions of the Option, GPI
obtained from UBC, the exclusive license rights as described above for
consideration of $78,743. The License will terminate after 15 years or upon the
expiration of the last patent obtained relating to the licensed technology. The
cost of obtaining any patents will be the responsibility of GPI. The technology
remains the property of UBC, however, it may be utilized and improved by GPI.
Concurrent with the execution of the license the head researcher at UBC became a
director of GPI.
GPI and UBC entered into a Collaborative Research Agreement ("CRA") dated
September 1, 2000 appointing UBC to carry out further development of the
licensed technology and providing GPI the option to acquire the rights to
commercialize any additional technologies developed within the CRA in
consideration for certain funding commitments totalling CAN$498,980 to be paid
in four equal instalments of CAN$124,725 due upon execution of the CRA,
September 30, 2000, January 1, 2001 and March 31, 2001 of which $374,215 was
paid. Through a series of amendments between November 28, 2000 and September 9,
2002, the funding commitment was increased to a total of CAN$ 2,973,049 of which
CAN$991,515 was to be paid for the year ended December 31, 2002, CAN$1,135,801
to be paid in 2003 and CAN$471,518 to be paid in 2004. As at December 31, 2002
CAN$115,303 is payable in connection with the CRA. In addition, as required by
the CRA, GPI has purchased certain laboratory equipment in connection with the
ongoing research.
Canadian Network for Vaccines and Immunotherapeutics of Cancer and Chronic Viral
Diseases ("CANVAC")
Effective January 1, 2001 GPI and UBC entered into a one year Network Affiliate
Agreement with CANVAC (the "CANVAC Agreement") whereby CANVAC would provide a
grant to GPI and UBC to further fund the research activities in connection with
the CRA. Under the terms of the CANVAC Agreement, CANVAC would provide a
CAN$85,000 research grant to UBC upon GPI contributing CAN$117,300 towards the
UBC research. The amounts paid by GPI do not qualify as amounts paid under the
CRA funding schedule outlined above. During 2001, all amounts required under the
CANVAC agreement were paid to UBC by GPI. GPI and CANVAC are currently
negotiating a new Network Affiliate Agreement in order to continue funding the
research activities in connection with the CRA.
NOTE 5 - FURNITURE AND EQUIPMENT
- --------------------------------------------------------------------------------
December 31, December 31,
2002 2001
--------- ---------
Office furniture and equipment $ 32,033 $ 26,213
Laboratory equipment 159,944 159,944
--------- ---------
191,977 186,157
Less: accumulated depreciation (79,138) (38,248)
--------- ---------
$ 112,839 $ 147,909
========= =========
NOTE 6 - LOANS PAYABLE
- --------------------------------------------------------------------------------
GPI has received loans to satisfy working capital requirements from certain
directors and a relative of a director of GPI. Of the amount outstanding at
December 31, 2001, $10,000 was payable on demand and bore interest at 5% per
annum. The remaining loans payable were unsecured, non-interest bearing and had
no specific terms of repayments. During 2002, GPI received additional loans of
$68,545 and the total balance outstanding of $136,245 was settled through the
issuance of 181,660 shares of common stock of GPI at $0.75 per share (refer to
note 8).
41
GENEMAX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(formerly Eduverse.com)
(a development stage company)
DECEMBER 31, 2002 AND 2001
- --------------------------------------------------------------------------------
NOTE 7 -RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
During 1999 and 2000 GPI entered into consulting, management and research and
development agreements with certain directors and private companies controlled
by directors of the Company. These agreements have terms ranging from month to
month to five years. In addition, in connection with the reverse merger, the
Company entered into a management services agreement with Investor
Communications, Inc. ("ICI"), a significant shareholder, whereby ICI will
provide various corporate services on a month-by-month basis for a fee of
$10,000 per month plus expenses. The following amounts have been incurred to
these related parties:
For the years ended
December 31, December 31,
2002 2001
-------- --------
Consulting fees $ 80,500 $ 84,000
Management fees 165,206 132,000
Research and development 137,263 148,400
-------- --------
$382,969 $364,400
======== ========
The Company has total commitments relating to the above agreements for the years
ended December 31, 2003 through 2005 of $172,000, $132,200 and $6,400
respectively.
A director of the Company has been contracted by ICI and is part of the
management team provided to the Company and was paid $17,325 during the year
ended December 31, 2002.
During the year ended December 31, 2002 GPI and the Company incurred $382,969 in
fees and $27,839 in expense reimbursements to these related parties, made net
repayments of $423,494, settled debts of $188,154 as described in notes 3 and 8
and acquired $109,531 owing to related parties in connection with the reverse
acquisition leaving $30,986 owing as at December 31, 2002 (2001 - $122,295).
Amounts due to related parties are unsecured, non-interest bearing and have no
specific terms of repayment.
Refer to Notes 3, 4 and 8.
NOTE 8 - CAPITAL STOCK
- --------------------------------------------------------------------------------
The authorized capital of the Company consists of 50,000,000 voting common
shares with $0.001 par value and 5,000,000 non-voting preferred shares with
$.001 par value.
GMC capital stock transactions during the year ended December 31, 2002:
During the year the company issued 11,231,965 shares of common stock on reverse
acquisition of GPI, issued 200,000 shares of common stock shares as a finders'
fee in connection with the acquisition, issued 188,154 shares of common stock on
settlement of debts of GPI at $1.00 per share, assumed 744,494 GPI share
purchase warrants and granted 2,135,000 stock options to former stock option
holders of GPI. (Refer to Note 3).
42
GENEMAX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(formerly Eduverse.com)
(a development stage company)
DECEMBER 31, 2002 AND 2001
- --------------------------------------------------------------------------------
NOTE 8 - CAPITAL STOCK (cont'd)
- --------------------------------------------------------------------------------
During the year the Company completed a private placement of 2,000,000
restricted shares of common stock at $0.125 per share for proceeds of $250,000.
During the year the Company completed a private placement of 700,000 restricted
shares of common stock at $1.00 per share for proceeds of $700,000 of which
$600,000 were received prior to the reverse acquisition and $100,000 were
received subsequent to the reverse acquisition.
Subsequent to the reverse acquisition, the Company completed a private placement
of 425,400 units at $2.50 per unit for total proceeds of $1,063,500. Each unit
consists of one common share and one half share purchase warrant. Each whole
share purchase warrant entitles the holder to purchase an additional common
share of the Company at a price of $5.00 per share for a period of two years.
Also during the year the Company commenced a private placement of up to
1,000,000 units and received proceeds of $185,000 towards the purchase of 37,000
units at $5.00 per unit. Each unit consists of one common share and one half
share purchase warrant. Each whole share purchase warrant will entitle the
holder to purchase an additional common share of the Company at a price of $7.50
per share for a period of one year. Subsequent to December 31, 2002 the Company
received additional proceeds of $30,000 towards the purchase of a further 6,000
units of this private placement.
Eduverse's changes in capital stock prior to and in connection with the reverse
acquisition were as follows:
Subscriptions
Common Stock Additional received
Number Amount Paid-in Capital (receivable) Deficit Total
----------- ----------- --------------- ------------ ----------- -----------
Balance December 31, 2001,
As previously reported by Eduverse 1,000,000 $ 37,755 $ 2,994,633 $ 15,000 $(3,220,414) $ (173,026)
Issued for cash at $0.125 per share 2,000,000 2,000 248,000 -- -- 250,000
Issued for cash at $1.00 per share 700,000 700 699,300 (100,000) -- 600,000
Stock-based compensation -- -- 930,000 -- -- 930,000
Issued on settlement of GPI debts 188,154 188 187,966 -- -- 188,154
Eduverse net loss for the period from
January 1, 2002 to July 15, 2002 -- -- -- -- (1,301,416) (1,301,416)
Issued as a finder's fee 200,000 200 199,800 -- (200,000) --
Fair value of stock options granted
concurrent with reverse acquisition -- -- 1,885,750 -- (1,885,750) --
Issued to effect reverse acquisition 11,231,965 11,232 (11,232) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Eduverse balance, July 15, 2002 15,320,119 $ 52,075 $ 7,134,217 $ (85,000) $(6,607,580) $ 493,712
=========== =========== =========== =========== =========== ===========
GPI capital stock transactions during the year ended December 31, 2002:
Between February 13, 2002 and May 7, 2002 GPI completed private placements of
187,500 units at $1.00 per unit for total proceeds of $170,500, net of finder's
fees of $17,000. Each unit consists of one common share of the Company and one
share purchase warrant entitling the holder to purchase one additional common
share of the Company at a price of $1.00 per share with 12,500 of the warrants
expiring December 1, 2005 and 175,000 of the warrants expiring May 1, 2006.
43
GENEMAX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(formerly Eduverse.com)
(a development stage company)
DECEMBER 31, 2002 AND 2001
- --------------------------------------------------------------------------------
NOTE 8 - CAPITAL STOCK (cont'd)
- --------------------------------------------------------------------------------
Effective May 22, 2002 GPI settled loans payable totalling $136,245 through the
issuance of 181,660 units at a price of $0.75 per unit. Each unit consists of
one common share of the Company and one share purchase warrant entitling the
holder to purchase one additional common share of the Company at a price of
$0.75 per share to May 1, 2006.
Stock Options
The Company accounts for stock-based employee compensation arrangements in
accordance with the provisions of APB No. 25 and complies with the disclosure
provisions of SFAS No. 123 and SFAS No. 148. In accordance with SFAS No. 123 the
Company applies the fair value method using the Black-Scholes option-pricing
model in connection with accounting for options granted to consultants and the
disclosure provision relating to options granted to employees
2002 Stock Option Plan
On May 15, 2002 the Board of Directors of Eduverse unanimously approved and
adopted a 2002 stock option plan which was approved by shareholders on July 15,
2002 (the "2002 Stock Option Plan"). Pursuant to the provisions of the 2002
Stock Option Plan, stock options may be granted only to key personnel of the
Company; generally defined as a person designated by the Board of Directors upon
whose judgement, initiative and efforts the Company may rely including any
Director, Officer, employee or consultant of the Company or its subsidiaries. At
the time a Stock Option is granted under the 2002 Stock Option Plan, the Board
of Directors shall fix and determine the exercise price at which shares of
common stock of the Company may be acquired; provided, however, that any such
exercise price shall not be less than that permitted under the rules and
policies of any stock exchange or over-the-counter market which may be
applicable to the Company at that time.
The 2002 Stock Option Plan further provides that the Board of Directors may
grant to any key personnel of the Company who is eligible to receive options,
one or more Incentive Stock Options at a price not less than fair market value
and for a period not to exceed 10 years from the date of grant.
The 2002 Plan incorporates the previous grant of an option to ICI and or its
consultants or employees on April 5, 2002 for 1,000,000 common shares
exercisable at $0.50 per share for a period of two years. The fair value of this
non-employee stock option at the date of grant of $930,000 was estimated using
the Black-Scholes option pricing model with an expected life of two years, a
risk-free interest rate of 4% and an expected volatility of 226%.
Stock Option Plan
On September 30, 2002 the Board of Directors of the Company approved the
adoption of a new stock option plan (the "Plan") allowing for the granting of up
to 3,500,000 options to directors, officers, employees and consultants of the
Company and its subsidiaries. Options granted under the Plan shall be at prices
and for terms as determined by the Board of Directors with terms not to exceed
10 years. The Plan further provides that the Board of Directors may grant to any
key personnel of the Company who is eligible to receive options, one or more
Incentive Stock Options at a price not less than fair market value and for a
period not to exceed 10 years from the date of grant. Options and Incentive
Stock Options granted under the Plan may have vesting requirements as determined
by the Board of Directors.
The Plan incorporates the previous grant of 1,000,000 options to ICI and or its
designates or employees. During the year 102,000 of these options were exercised
at $0.50 per share for proceeds of $51,000 and subsequent to December 31, 2002 a
further 830,000 of these options were exercised at $0.50 per share for further
proceeds of $415,000.
In connection with the reverse acquisition as described in Note 3, the Company
granted 1,740,000 options and 245,000 incentive stock options at $1.00 per share
to previous holders of stock options of GPI to replace options previously
granted by GPI at $0.60 per share. In accordance with accounting principles
applicable to accounting for business combinations, the fair value of the stock
options granted in connection with a business combination is included in the
determination of the purchase price. The fair value of these options at the date
of grant of $1,885,750 was estimated using the Black-Scholes option pricing
model with an expected life of three years, a risk-free interest rate of 4% and
an expected volatility of 226%
44
GENEMAX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(formerly Eduverse.com)
(a development stage company)
DECEMBER 31, 2002 AND 2001
- --------------------------------------------------------------------------------
NOTE 8 - CAPITAL STOCK (cont'd)
- --------------------------------------------------------------------------------
In addition, also in connection with the reverse acquisition as described in
Note 3, the Company granted 150,000 incentive stock options to previous holders
of stock options of GPI with terms and conditions consistent with their original
GPI stock options subject to straight line vesting for a period of 36 months
commencing October 1, 2002. The fair value of these incentive stock options will
be recorded as compensation expense over the vesting period. The fair value of
these options at the date of grant of $142,500 was estimated using the
Black-Scholes option pricing model with an expected life of three years, a
risk-free interest rate of 4% and an expected volatility of 226%. As at December
31, 2002 $11,875 has been recorded as consulting fees in connection with these
options.
Subsequent to the reverse acquisition the Company granted a further 135,000
incentive stock options at prices ranging from $5.50 per share to $8.50 per
share subject to immediate vesting. The fair value of these options at the date
of grant of $618,400 was estimated using the Black-Scholes option pricing model
with an expected life of three years, a risk-free interest rate of 4% and an
expected volatility of 229%. As at December 31, 2002 the $618,400 was recorded
as consulting fees in connection with these options.
The Company's stock option activity is as follows:
Weighted Average
Number of Weighted Average Remaining
options Exercise Price Contractual Life
---------- ---------------- ----------------
Balance, December 31, 2000 and 2001,
as previously reported by Eduverse - $ - -
Granted prior to reverse acquisition 1,000,000 0.50
Granted in connection with reverse acquisition 2,135,000 1.00
Granted subsequent to reverse acquisition 135,000 7.94
Exercised during the year (102,000) 0.50
---------- ------- ----------------
Balance, December 31, 2002 3,168,000 $ 1.15 2.33 years
========== ======= ================
Share Purchase Warrants
In connection with the reverse acquisition of GPI, the Company assumed 744,494
share purchase warrants previously outstanding in GPI. In accordance with
accounting principles applicable to accounting for business combinations, the
fair value of the share purchase warrants assumed in connection with a business
combination is included in the determination of the purchase price. The fair
value of these share purchase warrants as at the date of the reverse acquisition
of $620,600 was estimated using the Black-Scholes option pricing model with an
expected life of 2.95 years, a risk-free interest rate of 4% and an expected
volatility of 236%.
The Company's share purchase warrant activity is as follows:
Weighted Average
Number of Weighted Average Remaining
warrants Exercise Price Contractual Life
--------- ---------------- ----------------
Balance, December 31, 2000 and 2001,
as previously reported by Eduverse - $ - -
GPI warrants assumed 744,494 1.16
Issued during the year 212,700 5.00
Exercised during the year - -
Expired during the year (110,334) 2.50
--------- -------- ----------------
Balance, December 31, 2002 846,860 $ 1.95 2.71 years
========= ======== ================
NOTE 9 - INCOME TAXES
- --------------------------------------------------------------------------------
There were no temporary differences between GPI's tax and financial bases that
result in deferred tax assets, except for the Company's net operating loss
carryforwards amounting to approximately $3,340,000 at December 31, 2002 (2001 -
$1,688,000; 2000 - $1,016,000; 1999 - $81,000) which may be available to reduce
future year's taxable income. These carryforwards will expire, if not utilized,
commencing in 2008. Management believes that the realization of the benefits
from these deferred tax assets appears uncertain due to the Company's limited
operating history and continuing losses. Accordingly a full, deferred tax asset
valuation allowance has been provided and no deferred tax asset benefit has been
recorded.
45
GENEMAX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(formerly Eduverse.com)
(a development stage company)
DECEMBER 31, 2002 AND 2001
- --------------------------------------------------------------------------------
NOTE 10 - SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
Subsequent to December 31, 2002 the Company received proceeds of $440,000 upon
the exercise of 830,000 options at $0.50 and 25,000 options at $1.00.
Subsequent to December 31, 2002 the Company received additional proceeds of
$30,000 towards the purchase of a further 6,000 units of its ongoing private
placement.
46
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS OF ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company's principal independent accountant from November 9, 2000 to the
current date is LaBonte & Co., 610 - 938 Howe Street, Vancouver, British
Columbia, Canada V6Z 1N9.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
As of the date of this Annual Report, the directors and executive officers
of the Company are as follows:
Name Age Position with the Company
- ---- --- -------------------------
Ronald L. Handford 50 Director and President/
Chief Executive Officer
Dr. Wilfred Jefferies 45 Director/Chairman of the
Board and Chief Scientific Officer
James D. Davidson 55 Director and Chief Financial
Officer/Secretary
Alan P. Lindsay 52 Director
Grant Atkins 42 Director
Dr. Karl E. Hellstrom 68 Director
Biographies of Directors and Officers
RONALD L. HANDFORD, B.A.Sc., M.B.A. is the President/Chief Executive
Officer and a director of the Company and of GeneMax Pharmaceuticals, Inc. Mr.
Handford has over 29 years of international experience in business, finance and
leading public and private companies. He has conducted due diligence review of
the GeneMax technology acquisition, negotiated the key license as well as
operating and management contracts, prepared the business plan, and arranged the
private seed capital with the assistance of the other members of the business
team. Mr. Handford is an engineering graduate from the University of British
Columbia with an MBA from the University of Western Ontario. From 1993-1996, he
was investment officer at the International Finance Corporation, the private
sector arm of the World Bank, in Washington D.C. Before that he was a vice
president with Barclays Bank in Toronto, responsible for their structured
finance activities in Canada. He is experienced in capital raising, as well as
in building and administering public and private companies.
DR. WILDRED JEFFERIES, D.Phil. (Oxon) is the Chief Scientist Officer, a
director and the chairman of the board of directors of the Company and of
GeneMax Pharmaceuticals, Inc. Dr. Jefferies is a Professor of Medical Genetics,
Microbiology and Immunology, and a member of the Biomedical Research Centre and
the Biotechnology Laboratory at the University of British Columbia
(http//www.brc.ubc.ca/facult/wilf/wilf.htm). He is the lead researcher on the
47
scientific discoveries that form the bases of GeneMax Pharmaceuticals, Inc. Dr.
Jefferies received his D.Phil. from Oxford and was a post-doctoral research
fellow at the Karolinska Institute in Sweden and the Swiss Cancer Institute in
Lausanne. His current research foci at UBC are iron transport/metabolism and
antigen processing. Dr. Jefferies was the founder of Synapse Technologies Inc.,
which was acquired in 2002 by BioMarin Pharmaceutical. He oversees and directs
the scientific development of the Company.
JAMES D. DAVIDSON, B.A., M.A., M. Litt. (Oxon), is the Chief Financial
Officer/Secretary and a director of the Company and of GeneMax Pharmaceuticals,
Inc. Mr. Davidson is a private investor and analyst. He founded Agora, Inc., a
worldwide publishing group with offices in Baltimore, London, Dublin, Paris,
Johannesburg, Melbourne and other cities, and The Hulbert Financial Digest and
Strategic Investment. In conjunction with Lord Rees-Mogg, co-editor of Strategic
Investment and former editor of the Times of London, Mr. Davidson co-authored a
series of books on financial markets. Mr. Davidson is also a current or recent
director of a number of companies, many of which he co-founded. They include in
addition to GeneMax, MIV Therapeutics, BEVsystems, New Paradigm Capital
(Bermuda), Anatolia Minerals Development Corporation, and Wharekauhau Holdings
(New Zealand). In addition, Mr. Davidson is a director of Plasmar, S.A. (La Paz,
Bolivia), Martinborough Winery Ltd. (New Zealand) and New World Premium Brands
Ltd. (New Zealand). He is the editor of Vantage Point Investment Advisory, a
private financial newsletter with a worldwide circulation.
DR. KARL E. HELLSTROM is a director of the Company and of GeneMax
Pharmaceuticals, Inc. Dr. Karl Hellstrom received his M.D. and Ph.D. degrees
from the Karolinska Institute in Stockholm, Sweden, initially working in the
area of tumor biology with an emphasis on immunogenetics. Subsequently, Dr.
Hellstrom became a professor in pathology and an adjunct professor in
microbiology/immunology at the University of Washington Medical School. During
1975, Dr. Hellstrom moved to the newly established Fred Hutchinson Cancer
Research Center in Seattle, Washington, as a director of its Tumor Immunology
Program. In 1983, he joined the biotechnology company Oncogen which, in 1990,
was integrated into the Pharmaceutical Research Institute of Brisol-Myers Squibb
Company. Dr. Hellstrom then became vice president of Oncology Discovery and,
since 1995, of Immunotherapeutics. During 1997, Dr. Hellstrom moved from
Bristol-Myers Squibb to Pacific Northwest Research Institute, where he is
currently leading a group in Tumor Immunology as a principal investigator. Dr.
Hellstrom also currently retains an affiliate professorship at the University of
Washington Medical School. He has been a past member of two NIH Study Sections
(Immunobiology and Experimental Immunology), and a member of the Scientific
Advisory Board of Memorial Sloan Kettering Institute for Cancer Research as well
as of the Scientific Advisory Board of Hybritech Inc. Dr. Hellstrom has received
many awards, including the Parke-Davis award in experimental pathology, Alpha
Omega Alpha, the Lucy Wortham James award of the Ewing Society, the Pap Award
for outstanding contribution to cancer research, the Humboldt Award to a senior
U.S. scientist, and the yearly American Cancer Society National Award. He has
also been honored as Knight of the Northern Star, First Class, Swedish Order of
Merit.
ALAN P. LINDSAY is a director of the Company and of GeneMax
Pharmaceuticals, Inc. Mr. Lindsay has an extensive backgrounds in business
management, marketing and finance. He is currently chairman and chief executive
officer of MIV Therapeutics, Inc., an OTCBB medical devices company developing a
laser-cut stent with drug delivery capability. In addition, Mr. Lindsay headed
up and built a significant business and marketing organization for a major
international financial institution in Vancouver, British Columbia. Mr. Lindsay
has raised over $100 million of equity financing for private and public
companies over the last five years. Mr. Lindsay is a graduate of the M.L.I.
management development program.
48
GRANT ATKINS, B.Comm. Mr. Atkins was formerly president, and secretary of
the Company through restructuring phases and has served as a director since
March 1, 2001. For the past ten years, Mr. Atkins has provided services as a
financial and project coordination consultant to clients in government and
private industry. He has extensive multi-industry experience in the fields of
finance, administration and business development. Mr. Atkins has a Commerce
degree from the University of British Columbia specializing in Finance. He has
many years experience in both director and officer designations of public
companies. Mr. Atkins forms part of the management team that provides a wide
range of services to the Company through Investor Communications International,
Inc.
Involvement in Certain Legal Proceedings
As of the date of this Annual Report, no director or executive officer of
the Company is or has been involved in any legal proceeding concerning (i) any
bankruptcy petition filed by or against any business of which such person was a
general partner or executive officer either at the time of the bankruptcy or
within two years prior to that time; (ii) any conviction in a criminal
proceeding or being subject to a pending criminal proceeding (excluding traffic
violations and other minor offenses) within the past five years; (iii) being
subject to any order, judgment or decree permanently or temporarily enjoining,
barring, suspending or otherwise limiting involvement in any type of business,
securities or banking activity; or (iv) being found by a court, the Securities
and Exchange Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law (and the judgment has
not been reversed, suspended or vacated).
AUDIT COMMITTEE FINANCIAL EXPERT
As of the date of this Annual Report, the Board of Directors of the Company
has determined that the Company does not have an audit committee financial
expert nor does the Company have an audit committee.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and the persons who beneficially own more than ten percent of the
common stock of the Company, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Copies of all filed
reports are required to be furnished to the Company pursuant to Rule 16a-3
promulgated under the Exchange Act. Based solely on the reports received by the
Company and on the representations of the reporting persons, the Company
believes that these persons have complied with all applicable filing
requirements during the fiscal year ended December 31, 2002.
ITEM 10. EXECUTIVE COMPENSATION
COMPENSATION OF OFFICERS AND DIRECTORS
As of the date of this Annual Report, none of the directors or executive
officers of the Company are compensated for their roles as directors or
executive officers. However, as of the date of this Annual Report, Messrs.
Handford, Atkins, Lindsay, Davidson, and Dr. Jefferies derive remuneration from
the Company as compensation for consulting and/or managerial services rendered.
See "Summary Compensation Table". Officers and directors of the Company are also
reimbursed for any out-of-pocket expenses incurred by them on behalf of the
Company. Any executive compensation is subject to change concurrent with Company
requirements. The Company presently has no pension, health, annuity, insurance,
profit sharing or similar benefit plans.
49
Consulting Services Agreement
Effective May 9, 2002 and fully executed July 15, 2002, the Company and ICI
entered into a consulting services agreement (the "Consulting Services
Agreement"). Pursuant to the terms and provisions of the Consulting Services
Agreement, ICI provides to the Company such finance and managerial services as
may be determined by the Board of Directors, from time to time, and in its sole
and absolute discretion, in order to develop the various business interests of
the Company in the drug discovery and development industry, involving the
patented drug discovery assay for immunomodulatory compounds and the pipeline
aimed at treatment of cancer, infectious diseases, autoimmune disorders and
transplant tissue rejection.
Mr. Grant Atkins, a director of the Company, is employed by ICI and part of
the management team provided by ICI to the Company, and derives remuneration
from ICI for such services rendered to the Company. During fiscal year ended
December 31, 2002, Mr. Atkins was paid approximately $17,325 for services
rendered to the Company.
GeneMax Pharmaceuticals Consulting Agreement
On February 1, 2000, GeneMax Pharmaceuticals and 442668 B.C. Ltd.
("442668"), a corporation whose president and member of the board of directors
is Dr. Wilfred Jefferies, a director of the Company entered into a consulting
services agreement (the "GeneMax Pharmaceuticals Consulting Agreement") for a
period of five years. Pursuant to the terms and provisions of the GeneMax
Pharmaceuticals Consulting Agreement, Dr. Jefferies agreed to provide technical,
research and technology development services to GeneMax Pharmaceuticals for a
period of five years. Pursuant to further terms and provisions of the GeneMax
Pharmaceuticals Consulting Agreement, 442668 shall be paid a monthly fee of
$10,000 Canadian Dollars and reimbursement of expenses.
As of the date of this Annual Report, 442668 invoices the Company $10,000
per month (plus expenses). During the year ended December 31, 2002, an aggregate
of $81,410 in fees was incurred to 442668. Based upon $6,725, which was due and
owing at December 31, 2001, this resulted in an aggregate amount of $88,135 due
and owing 442668. During fiscal year ended December 31, 2002, the Company paid
442668 $67,670 and settled the remaining balance of $20,465 through the issuance
to 442668 of 20,465 shares of restricted common stock at $1.00 per share. As of
December 31, 2002, there was no amount that remained due and owing. During the
year ended December 31, 2002, Dr. Jefferies received approximately $67,670
through 442668 See "Part III. Item 12. Certain Relationships and Related
Transactions".
GeneMax Pharmaceuticals Management Agreement
On August 1, 1999, GeneMax Pharmaceuticals and Ronald L. Handford, the
President/Chief Executive Officer and a director of the Company, entered into a
management services agreement (the "GeneMax Pharmaceuticals Management
Agreement"). Pursuant to the terms and provisions of the GeneMax Pharmaceuticals
Management Agreement, Mr. Handford agreed to provide general managerial services
to GeneMax Pharmaceuticals for a period of five years. Pursuant to further terms
and provisions of the GeneMax Pharmaceuticals Management Agreement, Mr. Handford
shall be paid a monthly fee of $11,000 U.S. Dollars and reimbursement of
expenses. Effective May 1, 2002, GeneMax Pharmaceuticals and Mr. Handford agreed
to reduce the monthly fee to $12,500 Canadian Dollars until the earlier of the
Company reaching a senior board listing or commences clinical trials, at which
time the fee will be reviewed in accordance with market norms.
50
As of the date of this Annual Report, Mr. Handford invoices the Company
$12,500 Canadian Dollars per month (plus expenses). During the year ended
December 31, 2002, an aggregate of $105,206 in fees was incurred to Handford
Management. Based upon $80,500, which was due and owing to Mr. Handford at
December 31, 2001, this resulted in an aggregate amount of $185,706 due and
owing Mr. Handford. During fiscal year ended December 31, 2002, the Company paid
Mr. Handford $69,374 and settled an amount of $100,000 through the issuance to
Mr. Handford of 100,000 shares of restricted common stock at $1.00 per share. As
of December 31, 2002, an aggregate amount of $16,332 remains due and owing to
Mr. Handford. During the year ended December 31, 2002, Mr. Handford received
approximately $69,374. See "Part III. Item 12. Certain Relationships and Related
Transactions".
GeneMax Pharmaceuticals Services Agreement
On May 31, 2002, GeneMax Pharmaceuticals and Alan Lindsay and Associates
Ltd. ("AL&A"), a corporation whose sole officer, director and shareholder is
Alan Lindsay, a director of the Company entered into a services agreement (the
"GeneMax Pharmaceuticals Services Agreement"). Pursuant to the terms and
provisions of the GeneMax Pharmaceuticals Services Agreement, Mr. Lindsay agreed
to provide general consulting services to GeneMax Pharmaceuticals on a
month-to-month basis. Pursuant to further terms and provisions of the GeneMax
Pharmaceuticals Services Agreement, AL&A shall be paid a monthly fee of $2,500
U.S. Dollars and reimbursement of expenses.
As of the date of this Annual Report, Mr. Lindsay invoices the Company
through AL&A $2,500 U.S. Dollars per month (plus expenses). During the year
ended December 31, 2002, an aggregate of $42,500 in fees was incurred to AL&A.
Based upon $17,500, which was due and owing to AL&A at December 31, 2001, this
resulted in an aggregate amount of $60,000 due and owing AL&A. During fiscal
year ended December 31, 2002, the Company paid AL&A $20,000 and settled an
amount of $27,500 through the issuance to AL&A of 27,500 shares of restricted
Common Stock at $1.00 per share. As of December 31, 2002, an aggregate amount of
$12,500 remains due and owing to AL&A by the Company. During fiscal year ended
December 31, 2002, Mr. Lindsay received $20,000 through AL&A as compensation for
services rendered to the Company. See "Part III. Item 12. Certain Relationships
and Related Transactions."
Davidson Agreement
GeneMax Pharmaceuticals and James D. Davidson, a director and the Chief
Financial Officer of the Company, entered into a verbal month-to-month agreement
(the "Davidson Agreement"). Pursuant to the terms of the Davidson Agreement, Mr.
Davidson agreed to perform such duties and services as required commensurate
with his position as the Chief Financial Officer of the Company and such other
duties commensurate with his position as a director on the Board of Directors.
Pursuant to further terms of the Davidson Agreement, Mr. Davidson shall be paid
a monthly fee of $2,000 and reimbursement of expenses. Effective July 15, 2002,
GeneMax Pharmaceuticals agreed to increase the monthly fee to $5,000 upon
commencement of Mr. Davidson's duties associated with his position as Chief
Financial Officer and a director of the Company after the acquisition of GeneMax
Pharmaceuticals.
As of the date of this Annual Report, Mr. Davidson invoices the Company
$5,000 per month (plus expenses). During fiscal year ended December 31, 2002, an
aggregate of $40,500 in fees was incurred to Mr. Davidson. Based upon $5,000,
which was due and owing to Mr. Davidson at December 31, 2001, this resulted in
an aggregate amount of $45,500 due and owing. During fiscal year ended December
31, 2002, the Company paid Mr. Davidson $32,500 and settled the remaining
balance of $13,000 through the issuance of 13,000 shares of restricted common
stock at $1.00 per share. As of December 31, 2002, there is no amount that
remains due and owing to Mr. Davidson by the Company. See "Part III. Item 12.
Certain Relationships and Related Transactions."
51
The Summary Compensation Table below reflects those amounts received as
compensation by the executive officers and directors of the Company during
fiscal year ended December 31, 2002 from the Company subsequent to consummation
of the Share Exchange Agreement and from or GeneMax Pharmaceuticals prior to
consummation of the Share Exchange Agreement.
Summary Compensation Table
Annual Compensation Awards Payouts
--------------------- ------------- -------
$ $ $ $ # $
Name and Position Year Salary Bonus Other RSA Options LTIP Other
- ------------- ---- ------ ----- ----- --- ------- ---- -----
(1)
Ronald L. Handford 2002 $ 0 0 69,374 0 350,000 0 0
Pres./CEO and
Director
(2)
Dr. W. Jefferies 2002 $ 0 0 67,670 0 500,000 0 0
Chief Scientific
Officer and Chair
of the Board
(3)
James D. Davidson 2002 $ 0 0 32,500 0 150,000 0 0
CFO/Secretary
and Director
(4)
Alan P. Lindsay 2002 $ 0 0 $20,000 0 150,000 0 0
Director
(5)
Grant Atkins 2000 $ 0 0 0 0 0 0 0
Director 2001 0 0 0 0 0 0 0
2002 0 0 $17,325 0 0 0 0
Dr. Karl Hellstrom 2002 $ 0 0 0 0 100,000 0 0
Director
- --------------------------------------
(1) During fiscal year ended December 31, 2002, an aggregate of $105,206 in
fees was incurred to Ronald Handford. The fees incurred were for services
rendered by Mr. Handford to the Company under the GeneMax Pharmaceuticals
Management Agreement. Based upon $80,500, which was due and owing to Mr.
Handford at December 31, 2001, this resulted in an aggregate amount of
$185,706 due and owing. During fiscal year ended December 31, 2002, the
Company paid Mr. Handford $69,374 and settled an amount of $100,000 through
the issuance of 100,000 shares of restricted Common Stock at $1.00 per
share. As of December 31, 2002, an aggregate amount of $16,332 remains due
and owing to Mr. Handford by the Company. During fiscal year ended December
31, 2002, Mr. Handford received $69,374 as compensation for services
rendered to the Company.
(2) During fiscal year ended December 31, 2002, an aggregate of $81,410 in fees
was incurred to 442668, a corporation whose president and member of the
board of directors is Dr. Wilfred Jefferies, a director and the Chief
Scientific Officer of the Company. The fees incurred were for services
rendered by Dr. Jefferies to the Company under the GeneMax Pharmaceuticals
Consulting Agreement. Based upon $6,725, which was due and owing to 442668
at December 31, 2001, this resulted in an aggregate amount of $88,135 due
and owing 442668. During fiscal year ended December 31, 2002, the Company
paid 442668 $67,670 and settled the remaining balance of $20,465 through
the issuance of 20,465 shares of restricted Common Stock at $1.00 per
share. As of December 31, 2002, there was no amount that remained due and
owing. During fiscal year ended December 31, 2002, Dr. Jefferies received
$67,670 through 442668 as compensation for services rendered to the
Company.
52
(3) During fiscal year ended December 31, 2002, an aggregate of $40,500 in fees
was incurred to James D. Davidson, a director and the Chief Financial
Officer of the Company. The fees incurred were for services rendered by Mr.
Davidson to the Company under the Davidson Agreement. Based upon $5,000,
which was due and owing to Mr. Davidson at December 31, 2001, this resulted
in an aggregate amount of $45,500 due and owing to Mr. Davidson. During
fiscal year ended December 31, 2002, the Company paid Mr. Davidson $32,500
and settled the remaining balance of $13,000 through the issuance of 13,000
shares of restricted Common Stock at $1.00 per share. As of December 31,
2002, there is no amount that remains due and owing to Mr. Davidson by the
Company. During fiscal year ended December 31, 2002, Mr. Davidson received
$32,500 compensation for services rendered to the Company.
(4) During fiscal year ended December 31, 2002, an aggregate of $42,500 in fees
was incurred to AL&A, a corporation whose sole officer, director and
shareholder is Alan Lindsay, a director of the Company. The fees incurred
were for services rendered by Mr. Lindsay to the Company under the GeneMax
Pharmaceuticals Services Agreement. Based upon $17,500, which was due and
owing to AL&A at December 31, 2001, this resulted in an aggregate amount of
$60,000 due and owing AL&A. During fiscal year ended December 31, 2002, the
Company paid AL&A $20,000 and settled an amount of $27,500 through the
issuance of 27,500 shares of restricted Common Stock at $1.00 per share. As
of December 31, 2002, an aggregate amount of $12,500 remains due and owing
to AL&A by the Company. During fiscal year ended December 31, 2002, Mr.
Lindsay received $20,000 through AL&A as compensation for services rendered
to the Company.
(5) Grant Atkins, a director of the Company, indirectly receives compensation
for services provided to the Company through ICI pursuant to the
contractual relationship between the Company and ICI.
STOCK OPTIONS AND PURCHASE PLANS
Stock Option Plan
On May 15, 2002, the Board of Directors of the Company unanimously approved
and adopted a stock option plan and on September 30, 2002, the Board of
Directors approved the adoption of a new stock option plan (the "Stock Option
Plan"). See "Part II. Item 5. Market for Common Equity and Related Stockholder
Matters."
The purpose of the Stock Option Plan is to advance the interests of the
Company and its shareholders by affording key personnel of the Company an
opportunity for investment in the Company and the incentive advantages inherent
in stock ownership in the Company. Pursuant to the provisions of the Stock
Option Plan, stock options (the "Stock Options") will be granted only to key
personnel of the Company, generally defined as a person designated by the Board
of Directors upon whose judgment, initiative and efforts the Company may rely
including any director, officer, employee or consultant of the Company.
The Stock Option Plan is to be administered by the Board of Directors of
the Company, which shall determine (i) the persons to be granted Stock Options
under the Stock Option Plan; (ii) the number of shares subject to each Stock
Option, however, in no event may the maximum number of shares reserved for any
one individual exceed 15% of the total issued and outstanding shares of the
Company; (iii) the time at which each Stock Option is to be granted; (iv) the
purchase price for the shares under the Stock Option; (v) the option period; and
(vi) the manner in which the Stock Option becomes exercisable or terminated. The
Stock Option Plan provides authorization to the Board of Directors to grant up
to 3,500,000 Stock Options to directors, officers, employees and consultants of
the Company and its subsidiaries.
53
In the event an optionee who is a director or officer of the Company ceases
to serve in that position, any Stock Option held by such optionee generally may
be exercisable within up to ninety (90) days after the effective date that his
position ceases, and after such ninety-day period any unexercised Stock Option
shall expire. In the event an optionee who is an employee or consultant of the
Company ceases to be employed by the Company, any Stock Option held by such
optionee generally may be exercisable within up to ninety (90) days (or up to
thirty (30) days where the optionee provided only investor relations services to
the Company) after the effective date that his employment ceases, and after such
ninety- or thirty-day period any unexercised Stock Option shall expire.
No Stock Options granted under the Stock Option Plan will be transferable
by the optionee, and each Stock Option will be exercisable during the lifetime
of the optionee subject to the option period of ten (10) years or limitations
described above. Any Stock Option held by an optionee at the time of his death
may be exercised by his estate within one (1) year of his death or such longer
period as the Board of Directors may determine.
The exercise price of a Stock Option granted pursuant to the Stock Option
Plan shall be paid in cash or certified funds upon exercise of the option.
Incentive Stock Options. The Stock Option Plan further provides that,
subject to the provisions of the Stock Option Plan, the Board of Directors may
grant to any key personnel of the Company who is an employee eligible to receive
options one or more incentive stock options to purchase the number of shares of
common stock allotted by the Board of Directors (the "Incentive Stock Options").
The option price per share of common stock deliverable upon the exercise of an
Incentive Stock Option shall be no less than fair market value of a share of
common stock on the date of grant of the Incentive Stock Option. In accordance
with the terms of the Stock Option Plan, "fair market value" of the Incentive
Stock Option as of any date shall not be less than the closing price for the
shares of common stock on the last trading day preceding the date of grant. The
option term of each Incentive Stock Option shall be determined by the Board of
Directors, which shall not commence sooner than from the date of grant and shall
terminate no later than ten (10) years from the date of grant of the Incentive
Stock Option, subject to possible early termination as described above.
As of the date of this Annual Report, an aggregate of 3,270,000 Stock
Options have been granted as follows: (i) 1,740,000 Stock Options and 395,000
Incentive Stock Options exercisable at $1.00 per share to previous holders of
stock options of GeneMax Pharmaceuticals to replace stock options previously
granted by GeneMax Pharmaceuticals at $0.60 per share; (ii) 1,000,000 Stock
Options exercisable at $0.50 per share to ICI and/or its designates or
employees; (iii) 20,000 Stock Options at $5.50 per share; (iv) 15,000 Stock
Options at $7.50 per share; and (v) 100,000 Stock Options at $8.50 per share. Of
the 3,270,000 Stock Options granted, 1,000,000 Stock Options have been exercised
at $0.50 per share resulting in $500,000, and a further 25,000 Stock Options
have been exercised at $1.00 per share resulting in $25,000. The table below
reflects the Stock Options originally granted to directors, executive officers,
affiliates or shareholders holding greater than 5% of the equity in the Company,
without taking into consideration any exercise of Stock Options or expiration of
Stock Options.
54
Options/SAR Grants Table
- --------------------------------------------------------------------------------
Name Number of Percent of Total Exercise Expiration
Securities Options Granted Price Date
Underlying Options
- --------------------------------------------------------------------------------
(1)
Investor 1,000,000 30.58% $0.50 04/04/04
Communications
International
Inc.
Dr. W. Jefferies 500,000 15.29% $1.00 09/29/05
Ronald Handford 350,000 10.70% $1.00 09/29/05
(2)
Dr. Julia Levy 250,000 7.65% $1.00 09/29/05
Alan P. Lindsay 150,000 4.59% $1.00 09/29/05
(3)
Dr. Calvin R. Stiller 100,000 3.06% $1.00 09/29/05
James D. Davidson 150,000 4.59% $1.00 09/29/05
(4)
Dr. Erik Hellstrom 100,000 3.06% $8.50 12/05/05
Total 2,600,000 79.51%
- --------------------------------------------------------------------------------
(1) Pursuant to certain Notice and Agreements of Option, certain contractors to
ICI have exercised 1,000,000 Stock Options at the exercise price of $0.50
per option to acquire 1,000,000 shares of the Common Stock of the Company.
Pursuant to the terms and provisions of the Consulting Services Agreement,
the Company previously granted to ICI 1,000,000 Stock Options (which were
subject to an S-8 registration statement filed with the Securities and
Exchange Commission). In connection with the exercise of the Stock Options,
the shares of Common Stock of the Company were issued to certain
contractors of ICI who have provided bona fide services to the Company
under the Consulting Services Agreement.
(2) Dr. Levy resigned from the Board of Directors effective December 6, 2002
and was simultaneously appointed Chair of the Scientific Advisory Board.
The 250,000 Stock Options granted to Dr. Levy have been continued under the
existing terms, subject to approval by the Board of Directors.
(3) Due to Dr. Stiller's resignation from the Board of Directors effective
October 7, 2002, the 100,000 Stock Options previously granted would have
expired on January 5, 2003 pursuant to the terms of the Stock Option Plan.
However, the Board of Directors authorized and approved the retention by
Dr. Stiller of an aggregate of 50,000 Stock Options at an exercise price of
$1.00 as follows: (i) 35,000 Stock Options currently vested; and (ii) 5,000
Stock Options vest annually commencing September 30, 2003 for a period of
three years. The remaining 50,000 Stock Options expired and will not be
exercisable.
(4) Contractual arrangements provide for the immediate vesting of 50,000 stock
options and the remaining balance vesting over the next twenty-four months.
55
Aggregated Options/SAR Exercises
- --------------------------------------------------------------------------------
Name Shares Value Number of Securities Value of
Acquired Realized Underlying Unexercised Unexercised in-
On Exercise Options the-money Options
- --------------------------------------------------------------------------------
Investor 1,000,000* 9,270,000 nil 0
Communications
International,
Inc.
- --------------------------------------------------------------------------------
*Pursuant to certain Notice and Agreements of Option, certain contractors to ICI
have exercised 1,000,000 Stock Options at the exercise price of $0.50 per option
to acquire 1,000,000 shares of the Common Stock of the Company. Pursuant to the
terms and provisions of the Consulting Services Agreement, the Company
previously granted to ICI 1,000,000 Stock Options (which were subject to an S-8
registration statement filed with the Securities and Exchange Commission). In
connection with the exercise of the Stock Options, the shares of Common Stock of
the Company were issued to certain contractors of ICI who have provided bona
fide services to the Company under the Consulting Services Agreement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the name and address, as of the date of this
Annual Report, and the approximate number of shares of common stock of the
Company owned of record or beneficially by each person who owned of record, or
was known by the Company to own beneficially, more than five percent (5%) of the
Company's common stock, and the name and shareholdings of each officer and
director, and all officers and directors as a group as of the date of this
Annual Report.
As of the date of this Annual Report, there are 16,813,519 shares of Common
Stock issued and outstanding.
- --------------------------------------------------------------------------------
Title of Class Name and Address of Amount and Nature Percent of
Beneficial Owner of Class Class
- --------------------------------------------------------------------------------
(1)(2)
Common Stock James D. Davidson 1,466,666 8.63%
321 S. St. Asaph Street
Alexandria, Virginia 22314
(1)(3)
Common Stock Ronald L. Handford 1,266,000 7.38%
3432 West 13th Avenue
Vancouver, British Columbia
Canada V5Y 1W1
(1)(4)
Common Stock 442668 B.C. Ltd. 3,270,465 21.73%
12596 23rd Avenue
Surrey, British Columbia
Canada V4A 2C2
(5)
Common Stock Alan P. Lindsay 150,000 .08%
2701 Hornby Street
Vancouver, British Columbia
Canada V62 2R1
(6)
Common Stock Dr. Karl Hellstrom 100,000 .06%
720 Broadway
Seattle, Washington 98122
(7)
Common Stock Investor Communications 554,470 3.69%
International, Inc.
435 Martin Street, Suite 2000
Blaine, Washington 98230
Common Stock Grant R. Atkins 0 0%
435 Martin Street, Suite 2000
Blaine, Washington 98230
(8)
Common Stock All current officers 6,253,131 37.12%
and directors as a group
(6 persons)
- --------------------------------------------------------------------------------
56
(1) These are restricted shares of common stock.
(2) Mr. James Davidson is an initial founding shareholder of GeneMax
Pharmaceuticals. This figure includes (a) 788,333 shares of common stock
held of record by Mr. Davidson; (b) an aggregate of 500,000 shares of
common stock held of record by Mr. Davidson's two minor children,
respectively, over which Mr. Davidson has sole voting and disposition
rights; (c) an assumption of the exercise of an aggregate of 13,333
warrants exercisable into 13,333 shares of common stock at the rate of
$0.75 per share expiring on May 1, 2006; (d) an assumption of the exercise
by Mr. Davidson of an aggregate of 15,000 warrants exercisable by Mr.
Davidson into 15,000 shares of common stock at the rate of $1.00 per share
expiring December 1, 2005; and (e) an assumption of the exercise by Mr.
Davidson of an aggregate of 150,000 Stock Options to acquire 150,000 shares
of common stock at $1.00 per share. As of the date of this Annual Report,
no warrants nor Stock Options have been exercised.
(3) Mr. Ronald Handford is an initial founding shareholder of GeneMax
Pharmaceuticals. This figure includes (a) 158,000 shares of common stock
held of record by Mr. Handford; (b) 325,000 shares of common stock held of
record by Aberdeen Holdings Limited over which Mr. Handford has sole
disposition rights; (c) 325,000 shares of common stock held of record by
Latitude 32 Holdings Ltd. over which Mr. Handford has sole disposition
rights; (d) 100,000 shares of common stock held of record by Handford
Management Inc. over which Mr. Handford has sole voting and disposition
rights; (e) an assumption of the exercise by Mr. Handford of an aggregate
of 8,000 warrants into 8,000 shares of common stock at $0.75 per share
expiring December 1, 2005; and (f) an assumption of the exercise by Mr.
Handford of an aggregate of 350,000 Stock Options to acquire 350,000 shares
of common stock at $1.00 per share. As of the date of this Annual Report,
no warrants nor Stock Options have been exercised.
(4) Dr. Wilfred Jefferies is an initial founding shareholder of GeneMax
Pharmaceuticals. Dr. Jefferies has sole voting and disposition rights over
the 2,770,465 shares of common stock held of record by 442668 B.C. Ltd.
This figure also includes an assumption of the exercise by Dr. Jefferies of
an aggregate of 500,000 Stock Options to acquire 500,000 shares of common
stock at $1.00 per share. As of the date of this Annual Report, no Stock
Options have been exercised.
(5) This figure includes the assumption of the exercise by Mr. Lindsay of an
aggregate of 150,000 Stock Options to acquire 150,000 shares of common
stock at $1.00 per share. As of the date of this Annual Report, no Stock
Options have been exercised.
(6) This figure includes the assumption of the exercise by Mr. Hellstrom of an
aggregate of 100,000 Stock Options to acquire 100,000 shares of common
stock at $8.50 per share. As of the date of this Annual Report, 50,000
stock options have vested and the remaining stock options will vest over
the next twenty-four months. As of the date of this Annual Report, no Stock
Options have been exercised.
(7) This figure includes 554,470 shares of common stock held of record by
Investor Communications International, Inc., 304,600 of which are free
trading, while the balance of 249,870 are available for sale under Rule
144. Pursuant to certain Notice and Agreements of Option, certain
contractors of ICI exercised 1,000,000 Stock Options at the exercise price
of $0.50 per option to acquire 1,000,000 shares of the Common Stock of the
Company. Pursuant to the terms and provisions of the Consulting Services
Agreement, the Company previously granted to ICI 1,000,000 Stock Options
(which were subject to an S-8 registration statement filed with the
Securities and Exchange Commission). In connection with the exercise of the
Stock Options, the shares of Common Stock of the Company were issued to
certain contractors of ICI who have provided bona fide services to the
Company under the Consulting Services Agreement.
57
(8) This figure includes the assumption of the exercise of an aggregate of
129,827 warrants into 129,827 shares of common stock and the assumption of
the exercise of 1,250,000 Stock Options into 1,250,000 shares of common
stock.
Notwithstanding the Pooling Agreement, there are no arrangements or
understanding among the entities and individuals referenced above or their
respective associates concerning election of directors or any other matters
which may require shareholder approval.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The officers/directors of the Company are engaged in other businesses,
either individually or through partnerships and corporations in which they may
have an interest, hold an office or serve on the boards of directors. Certain
conflicts of interest, therefore, may arise between the Company and the
respective officer/director. Such conflicts can be resolved through the exercise
by such officer/director of judgment consistent with his fiduciary duties to the
Company. The officers/directors of the Company intend to resolve such conflicts
in the best interests of the Company. Moreover, the officers/directors will
devote their time to the affairs of the Company as they deem necessary.
Consulting Services Agreement
Effective May 9, 2002 and fully executed July 15, 2002, the Company and ICI
entered into the Consulting Services Agreement. Pursuant to the terms and
provisions of the Consulting Services Agreement, ICI will provide to the Company
such finance and managerial services as may be determined by the Board of
Directors, from time to time, and in its sole and absolute discretion, in order
to develop the various business interests of the Company in the drug discovery
and development industry, involving the patented drug discovery assay for
immunomodulatory compounds and the pipeline aimed at treatment of cancer,
infectious diseases, autoimmune disorders and transplant tissue rejection.
Pursuant to further terms and provisions of the Consulting Services Agreement,
ICI shall be paid a monthly fee of $10,000 for its services.
Pursuant to the terms of the Consulting Services Agreement, the Stock
Option Plan incorporates the previous grant of 1,000,000 Stock Options at $0.50
per share to ICI and/or its consultants or employees who performed services
directly to the Company under the Consulting Services Agreement. In connection
Mr. Grant Atkins, a director of the Company, is employed by ICI and part of the
management team provided by ICI to the Company, and derives remuneration from
ICI for such services rendered to the Company. During fiscal year ended December
31, 2002, ICI paid Mr. Atkins approximately $17,325 by ICI and was reimbursed
for various expenses paid on behalf of the Company.
GeneMax Pharmaceuticals Consulting Agreement
On February 1, 2000, GeneMax Pharmaceuticals and 442668 B.C. Ltd. entered
into the GeneMax Pharmaceuticals Consulting Agreement for a period of five
years. Pursuant to the terms and provisions of the GeneMax Pharmaceuticals
Consulting Agreement, Dr. Jefferies agreed to provide technical, research and
technology development services to GeneMax Pharmaceuticals which include, but
are not limited to: (i) initiation, creation, development, coordination and
management of all aspects of any development and maintenance programs in
connection with the research and development of technology interests and each of
their proposed commercial applications; (ii) assistance in the negotiation of
proposed joint venture arrangements; (iii) assistance in the organization,
preparation and dissemination of any and all business plans, technical reports,
news releases or investment reports; (iv) assistance in liaison with corporate
alliances and regulatory associations; and (v) assistance in all other
technical, research, technology development, maintenance and regulatory services
as may be directed by the board of directors. Pursuant to further terms and
provisions of the GeneMax Pharmaceuticals Consulting Agreement, 442668 B.C. Ltd.
shall be paid a monthly fee of $10,000 Canadian Dollars and reimbursement of
expenses.
58
GeneMax Pharmaceuticals Management Agreement
On August 1, 1999, GeneMax Pharmaceuticals and Ronald L. Handford entered
into the GeneMax Pharmaceuticals Management Agreement for a period of five
years. Pursuant to the terms and provisions of the GeneMax Pharmaceuticals
Management Agreement, Mr. Handford agreed to provide general managerial services
to GeneMax Pharmaceuticals which include, but are not limited to, the following:
(i) overseeing all operational aspects; (ii) management of the day-to-day
operations; (iii) development and management of all aspects of any program in
connection with the development and management of the technology interests; (iv)
initiation, creation, development and administration of any and all other
development and management programs in respect of the technology and business
interests and proposed commercial applications; (v) negotiation of proposed
joint venture arrangements; (vi) setting up of all corporate alliances with
potential customers and strategic business and financial partners; and (vii)
assistance in all other development and management services as may be directed
by the Board of Directors. Pursuant to further terms and provisions of the
GeneMax Pharmaceuticals Management Agreement, Mr. Handford would be paid a
monthly fee of $11,000 U.S. Dollars and reimbursement of expenses. Effective May
1, 2002, GeneMax Pharmaceuticals and Mr. Handford agreed to reduce the monthly
fee to $12,500 Canadian Dollars until the earlier of the Company reaching a
senior board listing or commencing clinical trials, at which time the fee will
be reviewed in accordance with market norms.
GeneMax Pharmaceuticals Services Agreement
On May 31, 2002, GeneMax Pharmaceuticals and Alan Lindsay and Associates
Ltd. entered into the GeneMax Pharmaceuticals Services Agreement on a
month-to-month basis. Pursuant to the terms and provisions of the GeneMax
Pharmaceuticals Services Agreement, Mr. Lindsay agreed to provide general
corporate finance consulting services to GeneMax Pharmaceuticals as may be
determined by the Board of Directors in connection with and in order to develop
the various technology and business interests. Pursuant to further terms and
provisions of the GeneMax Pharmaceuticals Services Agreement, Mr. Lindsay shall
be paid a monthly fee of $2,500 U.S. Dollars and reimbursement of expenses.
Davidson Agreement
GeneMax Pharmaceuticals and James D. Davidson, a director and the Chief
Financial Officer of the Company, entered into the Davidson Agreement. Pursuant
to the terms and provisions of the Davidson Agreement, Mr. Davidson agreed to
perform such duties and services as required commensurate with his position as
the Chief Financial Officer of the Company and such other duties commensurate
with his position as a director on the Board of Directors. Pursuant to further
terms and provisions of the Davidson Agreement, Mr. Davidson shall be paid a
monthly fee of $2,000 and reimbursement of expenses. Effective July 15, 2002,
GeneMax Pharmaceuticals agreed to increase the monthly fee to $5,000 upon
commencement of Mr. Davidson's duties associated with his position as Chief
Financial Officer and a director of the Company after the acquisition of GeneMax
Pharmaceuticals.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are filed as part of this Annual Report:
10.18 Consulting Services Agreement between GeneMax Pharmaceuticals
Inc. and 442668 B.C. Ltd. dated February 1, 2000.
10.19 Management Services Agreement between GeneMax Pharmaceuticals
Inc. and Ronald L. Handford dated August 1, 1999.
59
10.20 Amended Services Agreement between GeneMax Pharmaceuticals
Inc. and Alan Lindsay and Associates Ltd. dated May 31, 2002.
10.21 Stock Option Plan dated effective September 30, 2002.
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act.
(b) Reports on Form 8-K.
(i) Form 8-K filed on December 10, 2002.
(ii) Form 8-K filed on September 27, 2002.
(iii) Form 8-K filed on September 26, 2002.
ITEM 14. CONTROLS AND PROCEDURES
There were no significant changes in the Company's internal control or in
other factors that could significantly affect the Company's internal controls
subsequent to the evaluation date.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GENEMAX CORP.
Dated: April 14, 2003 By: /s/ RONALD L. HANDFORD
----------------------------------
Ronald L. Handford, President and
Chief Executive Officer
60
EXHIBIT 10.18
CONSULTING SERVICES AGREEMENT
-----------------------------
Between:
--------
GENEMAX PHARMACEUTICALS INC.
----------------------------
And:
----
442668 B.C. LTD.
----------------
GeneMax Pharmaceuticals Inc.
----------------------------
Suite 1260, 999 West Hastings Street
Vancouver, British Columbia
V6C2W2
------------
CONSULTING SERVICES AGREEMENT
=============================
THIS CONSULTING SERVICES AGREEMENT is made and dated for reference as
fully executed on this 1st day of February, 2000 (the "Execution Date").
BETWEEN:
- --------
GENEMAX PHARMACEUTICALS INC. a company duly incorporated
under the laws of the State of Delaware, U.S.A., and having
a business office and an address for notice and delivery
located at Suite 1260, 999 West Hastings Street, Vancouver,
British Columbia, V6C 2W2
(hereinafter referred to as the " Company" );
OF THE FIRST PART
-----------------
AND:
- ----
442668 B.C. LTD., having an address for notice and delivery
located at IRC 331 - 2194 Health Sciences Mall, Biomedical
Research Centre, University of British Columbia, Vancouver,
British Columbia, V6T lZ3
(hereinafter referred to as the "Consultant");
OF THE SECOND PART
------------------
(the Company and the Consultant being hereinafter singularly
also referred to as a "Party" and collectively referred to
as the "Parties" as the context so requires).
WHEREAS:
A. The Company is a non-reporting company duly incorporated under the laws of
the State of Delaware, U.S.A.;
B. The Consultant is a non-reporting company, duly incorporated under the laws
of the Province of British Columbia, and is owned and controlled by Dr. Wilfred
A. Jefferies ("Dr. Jeferies");
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-2-
C. Dr. Jefferies has been engaged in research during the course of which Dr.
Jefferies and Dr. Jefferies' research group, working in and on behalf of the
Biotechnology Laboratory at the University of the Province of British Columbia
(the "University"), were instrumental in the invention and development of
certain technology relating to "Methods of Enhancing Expression of MHC-Class 1
Molecules Bearing Endogenous Peptides" and "Methods of Identifying MHC-Class 1
Restricted Antigens Endogenously Processed by a Cellular Secretory Pathway"
(collectively, the "Technology") and, correspondingly, Dr. Jefferies specializes
in and has expertise in the development of the Technology in connection
therewith;
D. In accordance with the execution of a certain "Option Agreement" (the "
Option Agreement"), which is intended to have occurred contemporaneously with
the execution of this agreement (the "Agreement"), as entered into between the
Company and the University, the University has therein, and in part, provided
the Company with an option (herein and therein the "Option") to obtain the
exclusive, world-wide license to utilize and sub-license the Technology and to
manufacture, distribute and sell all products based on the Technology and in
accordance with the terms and conditions of a certain form of "License
Agreement" (the "License Agreement") which is attached as Appendix "B" to the
Option Agreement (collectively, the "License");
E. In conjunction with the terms and conditions of the Option Agreement and the
License Agreement (collectively, the "Underlying Agreements"), and in partial
consideration of the agreement therein by Dr. Jefferies, together with the Dr.
Jefferies' research group, to expressly assign all of their respective rights,
entitlement and interest in and to Technology to the University and in
accordance with the terms and conditions of a certain form of "Waiver of Rights
Agreement" which is attached as Appendix "C" to the Option Agreement, the
Company is hereby desirous of formally retaining the Consultant as a consultant,
and the Consultant is hereby desirous of accepting such position, in order to
provide such technical, research arid Technology development services
(collectively, the "General Services") as may be necessary arid determined by
the Company, from to time and in its sole and absolute discretion, to develop
the Technology in conjunction with the terms and conditions of each of the
Underlying Agreements (collectively, the "Business") during the initial term
and during the continuance of this Agreement;
F. Since the introduction of the Parties hereto the Parties hereby acknowledge
and agree that there have been various discussions, negotiations, understandings
and agreements between them relating to the terms and conditions of the proposed
General Services and, correspondingly, that it is their intention by the terms
and conditions of this Agreement to hereby replace, in their entirety, all such
prior discussions, negotiations, understandings and agreements with respect to
the proposed General Services; and
G. The Parties hereto have agreed to enter into this Agreement which initially
replaces, in their entirety; all such prior discussions, negotiations,
understandings and agreements, and, furthermore, which necessarily clarifies
their respective duties and obligations with respect to the within General
Services to be provided hereunder, all in accordance with the terms and
conditions of this Agreement;
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-3-
NOW THEREFORE THIS AGREEMENT WITNESSETH that, in consideration of the
mutual covenants and provisos herein contained, THE PARTIES HERETO AGREE AS
FOLLOWS:
Article 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following words
and phrases shall have the following meanings:
(a) "Agreement" means this Consulting Services Agreement as from time to
time supplemented or amended by one or more agreements entered into
pursuant to the applicable provisions hereof;
(b) "Arbitration Act" means the Commercial Arbitration Act (British
Columbia), R.S.B.C. 1996, as amended, as set forth in Article "7"
hereinbelow;
(e) "Board of Directors" means the Board of Directors of the Company as
duly constituted from time to time;
(d) "Business" has the meaning ascribed to it in recital "D." hereinabove;
(e) "business day" means any day during which Canadian Chartered Banks are
open for business in the City of Vancouver, Province of British
Columbia;
(f) "Company" means GeneMax Pharmaceuticals Inc., a company duly
incorporated under the laws of the State of Delaware, U.S.A., or any
successor company, however formed, whether as a result of merger,
amalgamation or other action;
(g) "Company's Non-Renewal Notice" has the meaning ascribed to it in
section"' 3.2" hereinbelow;
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-4-
(h) "Company's Notice of Termination" has the meaning ascribed to it in
section " 3.4" hereinbelow;
(i) "Consultant" means 442668 B.C. Ltd., a company duly incorporated under
the laws of the Province of British Columbia, or any successor
company, however formed, whether as a result of merger, amalgamation
or other action; 0) "Dr. Jefferies" means Dr. Wilfred A. Jefferies;
(k) "Effective Date" has the meaning ascribed to it in section "3.1"
hereinbelow;
(1) "Effective Termination Date" has the meaning ascribed to it ill
section "3.4" hereinbelow;
(m) "Execution Date" has the meaning ascribed to it on the front page of
this Agreement;
(n) "Expenses" has the meaning ascribed to it in section "4.2"
hereinbelow;
(o) "Fee" has the meaning ascribed to it in section "4.1" hereinbelow;
(p) "General Services" has the meaning ascribed to it in section "2.1"
hereinbelow;
(q) "Initial Term" has the meaning ascribed to it in section `" 3.1"
hereinbelow;
(r) "Insurance" has the meaning ascribed to it in section "5.8"
hereinbelow;
(s) "License Agreement" has the meaning ascribed to it in recital "C."
hereinabove;
(t) "License" has the meaning ascribed to it in recital "C." hereinabove;
(u) " Option Agreement" has the meaning ascribed to it in recital "C."
hereinabove;
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-5-
(v) "Parties" or "Party" means the Company and/or the Consultant hereto,
as the context so requires, together with their respective successors
and permitted assigns as the context so requires;
(w) "Property" has the meaning ascribed to it in section "5.6"
hereinbelow;
(x) "subsidiary" means any company or companies of which more than 50% of
the outstanding shares crying votes at all times (provided that the
ownership of such shares confers the right at all times to elect at
least a majority of the directors of such company or companies) are
for the time being owned by or held for that company and/or any other
company in like relation to that company and includes any company in
like relation to the subsidiary;
(y) "Technology" has the meaning ascribed to it in recital "B,"
hereinabove;
(z) " Underlying Agreements" has the meaning ascribed to it in recital
"D," hereinabove; and
(aa) " University" means The University of British Columbia, a company duly
continued under the University Act (British Columbia), or any
successor company, however formed, whether as a result of merger,
amalgamation or other action.
1.2 Interpretation. For the purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular Article, section or other subdivision of this Agreement;
(b) the headings are for convenience only and do not form a part of this
Agreement nor are they intended to interpret, define or limit the
scope or extent of this or any provision of this Agreement;
(c) any reference to an entity shall include and shall be deemed to be a
reference to any entity that is a permitted successor to such entity;
and
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-6-
(d) words in the singular include the plural and words in the masculine
gender include the feminine and neuter genders, and vice versa.
Article 2
---------
SERVICES AND DUTIES OF THE CONSULTANT
-------------------------------------
2.1 General Services. During the Initial Term (as hereinafter determined) of
this Agreement, and in conjunction with the general intent of the Parties hereto
which, upon the closing of the Option Agreement and the corresponding
effectiveness of the License Agreement, seeks to have the Consultant assist the
Company in the development of the Technology, the Company hereby agrees to
retain the Consultant as a consultant to and on behalf of the Company, or any of
the Company's subsidiaries, as the case may be and as may be determined by the
Company in its sole and absolute discretion, and the Consultant hereby agrees to
accept such position in order to provide such technical, research and Technology
development services as may be necessary and determined by the Company, from to
time and in its sole and absolute discretion, to develop the Technology during
the Initial Term and during the continuance of this Agreement and in accordance
with the terms and conditions of the Underlying Agreements (collectively, the
"General Services"); it being expressly acknowledged and agreed by the Parties
hereto that the Consultant shall commit and provide to the Company the General
Services on a part-time basis during the Initial Term and during the continuance
of this Agreement for which the Company, as more particularly set forth
hereinbelow, hereby agrees to pay to the order and direction of the Consultant
the Fee and the Expense payment reimbursements (each as hereinafter determined)
in accordance with Article "4" hereinbelow and during the Initial Tern and
during the continuance of this Agreement.
2.2 Specific Services, Without in any manner limiting the generality of the
General Services to be provided by the Consultant as set forth in section "2.1"
hereinabove, it is hereby also acknowledged and agreed that the Consultant will
provide the following specific technical, research and Technology development
services to the Company, or to any of the Company's subsidiaries, as the case
may be and as may be determined by the Company in its sole and absolute
discretion, and in connection with the development of the Technology subject, at
all times, to the direction of the Board of Directors of the Company:
(a) the specific initiation, coordination, implementation and management
of all aspects of any program in connection with the research and
development of the 'technology interests;
(b) the initiation, creation, development, coordination and administration
of any and all other development and maintenance programs in respect
of the Technology interests and each of their proposed or potential
commercial applications together with all capital funding projects and
resources which are, or which may be, necessarily incidental thereto;
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-7-
(c) the ongoing evaluation of all proposed and potential development and
maintenance programs in respect of the Technology interests;
(d) assistance in the negotiation and conclusion of all proposed or
potential joint venture arrangements in connection with the ongoing
development and maintenance of the Technology interests and each of
their proposed or potential commercial applications;
(e) assistance in the organization, preparation and dissemination of any
and all business plans, technical reports, news releases and special
shareholder or investment reports for the Company, or for any of the
Company's subsidiaries, as the case may be and as may be determined by
the Company in its sole and absolute discretion, and in connection
with the ongoing development and maintenance of the Technology
interests and each of their proposed or potential commercial
applications;
(f) assistance in the liaison with and the setting up of all corporate
alliances and regulatory associations for the Company, or for any of
the Company's subsidiaries, as the case may be and as may be
determined by the Company in its sole and absolute discretion, with
all required regulatory authorities and with potential customers and
strategic business and financial partners for the purposes of the
ongoing development and maintenance of the Technology interests and
each of their proposed or potential commercial applications;
(g) the identification and recommendation of suitable staff for the
Company, or for any of the Company's subsidiaries, as the case may be
and as may be determined by the Company in its sole and absolute
discretion, to both provide and lead further consulting services fox
or in connection with the ongoing development and maintenance of the
Technology interests and each of their proposed or potential
commercial applications; and
(h) assistance in all other technical, research, Technology development,
maintenance and regulatory services in connection with the Technology
interests as may be directed, from time to time, by the Board of
Directors of the Company in its sole and absolute discretion.
In this regard it is hereby acknowledged and agreed that the
Consultant shall be entitled to communicate with and rely upon the immediate
advice and instructions of Mr. Ronald L. Handford, the current President, Chief
Executive Officer and a Director of the Company, or upon the advice or
instructions of such other Director or Officer of the Company as Mr. Handford
shall, from time to time, designate in times of his absence, in order to
initiate, coordinate and implement the General Services for the Company as
contemplated herein.
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-8-
2.3 Consultant to make Dr. Jefferies available. During the Initial Term (as
hereinafter determined) and during the continuance of this Agreement it is
hereby further acknowledged and agreed that the Consultant will make the
services of Dr. Jefferies available in order to assist the Consultant in the
performance of the General Services hereunder faithfully, diligently, to the
best of the Consultant's abilities and in the best interests of the Company.
Article 3
---------
INITIAL TERM. RENEWAL AND TERMINATION
-------------------------------------
3.1 Initial Term. The initial term of this Agreement (the "Initial Term") is for
a period of five calendar years commencing on the date of the due and complete
execution of the License Agreement by the parties thereto (the ",Effective
pate").
3.2 Renewal by the Company. Subject at all times to sections "3.3" and "3.4"
hereinbelow, this Agreement shall renew automatically if not specifically
terminated in accordance with the following provisions. The Company agrees to
notify the Consultant in writing at least 180 calendar days prior to the end of
the Initial Term of its intent not to renew this Agreement (the "Company's
Non-Renewal Notice"), Should the Company fail to provide a Company's Non-Renewal
Notice this Agreement shall automatically renew on a one year to one year basis
after the Initial Term until otherwise specifcally renewed in writing by each of
the Parties hereto for the next one calendar year or, otherwise, terminated upon
delivery by the Company of a corresponding and follow-up 180 calendar day
Company's Non-Renewal Notice in connection with and within 180 calendar days
prior to the end of any such one year renewal period. Any such renewal on a
one-year bass shall be on the same terms and conditions contained herein unless
modified and agreed to in writing by the Parties.
3.3 Termination for cause by the Company. Notwithstanding any, other provision
of this Agreement, the General Services portion of thus Agreement may be
terminated at any time by the Company upon written notice to the Consultant and,
if applicable, damages sought if
(a) the Consultant fails to cure a material breach of any provision of
this Agreement within 30 calendar days from its receipt of written
notice from the Company (unless such breach cannot be reasonably
cured within said 30 calendar days and the Consultant is actively
pursuing to cure said breach);
(b) the Consultant is willfully non-compliant in the performance of the
Consultant's respective duties under this Agreement within 30 calendar
days from its receipt of written notice from the Company (unless such
willful non-compliance cannot be reasonably corrected within said 30
calendar days and the Consultant is actively pursuing to cure said
willful non-compliance);
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-9-
(c) the Consultant commits fraud or serious neglect or misconduct in the
discharge of the Consultant's respective duties hereunder or under the
law; or
(d) the Consultant becomes adjudged bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy,
and where any such involuntary petition is not dismissed within 30
calendar days.
In any such event the respective obligations of each of the Parties hereto
under this Agreement (and including, without limitation, the Consultant's
ongoing obligation to provide the General Services and the Company's ongoing
obligation to provide the Fee and the Expense payment reimbursements (each as
hereinafter determined)) will immediately terminate.
3.4 Termination without cause by the Company. Notwithstanding any other
provision of this Agreement, this Agreement may also be terminated by the
Company at any time after the Effective Date and during the Initial Term and
during the continuance of this Agreement upon its delivery to the Consultant of
prior written notice of its intention to do so (the "Company's Notice of
Termination") at least 180 calendar days prior to the effective date of any such
termination (the "Effective Termination Date"). In any such event the
respective obligations of each of Parties hereto under this Agreement (and
including, without limitation, the Consultant's ongoing obligation to provide
the General Services and the Company's ongoing obligation to provide the Fee and
the Expense payment reimbursements (each as hereinafter determined)) will
continue until such Effective Termination Date as provided for in the Company's
Notice of Termination and, furthermore, upon the Effective Termination Date the
Company will also be obligated to provide the Consultant the then balance of any
Fee and Expense payment reimbursement which would then be due and owing by the
Company to the Consultant to the completion of the Initial Term of this
Agreement and, in addition, and if this Agreement had then been previously and
automatically renewed for a further one year period in accordance with section
"3.2" hereinabove, until the end of any such further one year period in
conjunction with section "3.2".
Article 4
---------
GENERAL SERVICES COMPENSATION OF THE CONSULTANT
-----------------------------------------------
4.1 Fee. It is hereby acknowledged and agreed that the Consultant shall render
the General Services as defined hereinabove during the initial Term and during
the continuance of this Agreement and shall thus be compensated on a monthly
basis by the Company from the Effective Date of this Agreement to the
termination of the same by way of the payment by the Company to the Consultant,
or to the further order or direction of the Consultant as the Consultant may
determine, in the Consultant's sole and absolute discretion, and advise the
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-10-
Company of prior to such payment, of a monthly fee of Cdn. $10,000 (the "Fee"),
with such Fee being due and payable by the Company to the Consultant, or to the
further order or direction of the Consultant as the Consultant may determine, in
the Consultant's sole and absolute discretion, and advise the Company of prior
to such payment, on the first business day of the month following the then
monthly period of service during the Initial Term and during the continuance of
this Agreement. In this regard, and for the purposes of evidencing the Company's
ongoing commitment to compensate the Consultant together with the Consultant's
ongoing commitment to perform the General Services faithfully, diligently, to
the best of the Consultant's abilities and in the best interests of the Company
during the Initial Term and during the continuance 4f this Agreement, it is
hereby acknowledged and agreed that the Company shall provide the Consultant, in
the manner aforesaid, with the initial month's Fee payment for the Initial Term
of this Agreement on the first business day following the Effective Date of this
Agreement.
4.2 Reimbursement of Expenses. It is hereby also acknowledged and agreed that
the Consultant shall be reimbursed for all pre-approved direct reasonable
expenses actually and properly incurred by the Consultant for the benefit of the
Company (collectively, the "Expenses"), which Expenses have first been approved
by the Board of Directors of the Company, and which Expenses, it is hereby
acknowledged and agreed, shall be payable by the Company to the order, direction
and account of the Consultant as the Consultant may designate in writing, from
tinge to time, in the Consultant's sole and absolute discretion, as soon as
conveniently possible after the prior delivery by the Consultant of written
substantiation on account of each such reimbursable Expense.
Article 5
---------
ADDITIONAL OBLIGATIONS OF THE CONSULTANT AND THE COMPANY
--------------------------------------------------------
5.1 Reporting by the Consultant. At least once in every month, or so often as
may be required by the Company, the Consultant will provide the Board of
Directors of the Company with such information concerning the results of the
Consultant's General Services and activities hereunder for the previous month as
the Board of Directors of the Company may reasonably require. In addition, it is
hereby acknowledged and agreed that any written information or materials
provided by the Consultant to any person or company hereunder will be subject to
the prior review, approval and direction of the Board of Directors of the
Company.
5.2 Confidentiality by the Consultant. The Consultant will not, except as
authorized or required by the Consultant's duties hereunder, reveal or divulge
to any person or companies any information concerning the organization,
business, finances, transactions or other affairs of the Company, or of any of
its subsidiaries, which may come to the Consultant's knowledge during the
Initial Term and during the continuance of this Agreement, and the Consultant
will keep in complete secrecy all confidential information entrusted to the
Consultant and will not use or attempt to use any such information in any manner
which may injure or cause loss either directly or indirectly to the Company's
respective businesses. This restriction will continue to apply after the
termination of this Agreement without limit in point of time but will cease to
apply to information or knowledge which may come into the public domain.
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-11-
5.3 Compliance with Applicable Laws by the Consultant. The Consultant will
comply with all Canadian, U.S. and foreign laws, whether federal, provincial
or state, applicable to the Consultant's duties hereunder and, in addition,
hereby represents and warrants that any information which the Consultant may
provide to any person or company hereunder will, to the best of the
Consultant's knowledge, information and belief, be accurate and complete in
all material respects and not misleading, and will not omit to state any fact
or information which would be material to such person or company.
5.4 -Opinions, Reports and Advice of the Consultant. The Consultant
acknowledges and agrees that all written and oral opinions, reports, advice and
materials provided by the Consultant to the Company in connection with the
Consultant's engagement hereunder are intended solely for the Company's benefit
and for the Company's use only, and that any such written and oral opinions,
reports, advice and information are the exclusive property of the Company. In
this regard the Consultant covenants and agrees that the Company may utilize
any such opinion, report, advice and materials for any purpose whatsoever and,
furthermore, may reproduce, disseminate, quote from and refer to, in whole or
in part, and at any tire any such opinion, report, advice and materials in the
Company's sole and absolute discretion. The Consultant further covenants and
agrees that no public references to the Consultant or disclosure of the
Consultant's role in respect of the Company be made by the Consultant without
the prior written consent of the Company in each specific instance and,
furthermore, that any such written opinions, reports, advice or materials
shall, unless otherwise required by the Company, be provided by the Consultant
to the Company in a form and with such substance as would be acceptable for
fling with and approval by any regulatory authority having jurisdiction over
the affairs of the Company from time to time.
5.5 Covenant by the Company in connection with the Consultant's Opinions.
Reports and Advice. The Company hereby covenants and agrees with the Consultant
that it shall not alter the form or substance of any written or oral opinions,
reports, advice or information provided by the Consultant to the Company in
connection with the Consultant's engagement hereunder without the prior written
consent of the Consultant in each such specific instance.
5.6 Consultant's Business conduct. The Consultant warrants that it shall conduct
its General Services and other related activities in a manner which is lawful
and reputable and which brings good repute to the Company, the Consultant and
the Technology and Business interests. In this regard the Consultant warrants to
provide all General Services in a sound and professional manner such that the
same meets superior standards of performance quality within the standards of the
industry or as set by the specifications of the Company. In the event that the
Company has a reasonable concern that the General Services as conducted by the
Consultant, or the conduct of any individual thereof, is being conducted in a
way contrary to law or is reasonably likely to bring disrepute to the Technology
and Business interests or to the Company's or the Consultant's reputation, the
Company may require that the Consultant make such alterations in its conduct,
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-12-
personnel or structure, whether of management, employee or consultant or
sub-licensee representation, as the Company may reasonably require, in its sole
and absolute discretion, failing which the Company, in its sole and absolute
discretion, may terminate this Agreement upon 30 calendar days' prior written
notice to the Consultant. In this regard, however, it is hereby expressly
acknowledged and agreed by the Parties hereto that nothing in this Agreement
shall require the Consultant to undertake any act which would contravene any of
the policies of the University as may be determined by the University from time
to time and in its sole and absolute discretion. In the event of any debate or
dispute as to the reasonableness of the Company's request or requirements, the
judgment of the Company shall be deemed correct until such time as the matter
has been determined by arbitration in accordance with Article "7" hereinbelow.
5.7 Right of Ownership to the Technology and related Property. The Consultant
hereby acknowledges and agrees that any and all Technology and Business
interests, together with any products or improvements derived therefrom and any
trade marks or trade names used in connection with the same (collectively, the
"property"), are wholly owned and controlled by the Company subject to the terms
and conditions of the Underlying Agreements. Correspondingly, neither this
Agreement, nor the operation of the research and development and the
distribution and marketing Business contemplated by this Agreement and the
Underlying Agreements, confers or shall be deemed to confer upon the Consultant
any interest whatsoever in and to any of the Property. In this regard the
Consultant hereby further covenants and agrees not to, during or after the
Initial Term and the continuance of this Agreement, contest the title to any of
the Company's Property interests, in any way dispute or impugn the validity of
the Company's Property interests or take any action to the detriment of the
Company's interests therein. The Consultant acknowledges that, by reason of the
unique nature of the Property interests, and by reason of the Consultant's
knowledge of and association with the Property interests during the Initial Term
and during the continuance of this Agreement, the aforesaid covenant, both
during the term of this Agreement and thereafter, is reasonable and commensurate
for the protection of the legitimate business interests of the Company. As a
final note, the Consultant hereby further covenants and agrees to immediately
notify the Company of any infringement of or challenge to the any of the
Company's Property interests as soon as the Consultant becomes aware of the
infringement or challenge.
5.8 Board of Directors of the Company and Insurance therefore. During the
Initial Term and during the continuance of this Agreement it is hereby
acknowledged and agreed that management of the Company will consult with the
Consultant and consider the Consultant's advice in connection with the proposed
appointment by the Company of any further members to the present Board of
Directors of the Company. In this regard, and again during the initial Tern and
during the continuance of this Agreement, it is hereby also acknowledged and
agreed that the Company will use its best efforts to seek and obtain directors'
and officers' liability insurance (collectively, the "Insurance") for its Board
of Directors and Senior Officers which in no case shall be less than: the
insurance which a reasonable and prudent businessman carrying on a similar line
of business would acquire from time to time. In connection with the foregoing it
is hereby further acknowledged and agreed that any such insurance shall be
placed with a reputable and financially secure insurance carrier and shall
include the Company as an additional insured .and shall provide primary coverage
with respect to the activities contemplated by this Agreement. Furthermore, it
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-13-
is also intended that any such Insurance policy(ies) shall include severability
of interest and cross-liability provisions and shall provide that the
policy(ies) shall not be canceled or materially altered except upon at least 30
calendar days' prior written notice to each of the relevant parties thereto.
Article 6
---------
FORCE MAJEURE
-------------
6.1 Events. If either Party hereto is at any time either during this Agreement
or thereafter prevented or delayed in complying with any provisions of this
Agreement by reason of strikes, walk-outs, labour shortages, power shortages,
fires, wars, acts of God, earthquakes, storms, floods, explosions, accidents,
protests or demonstrations by environmental lobbyists or native rights groups,
delays in transportation, breakdown of machinery, inability to obtain necessary
materials in the open market, unavailability of equipment, governmental
regulations restricting normal operations, shipping delays or any other reason
or reasons beyond the control of that Party, then the time limited for the
performance by that Party of its respective obligations hereunder shall be
extended by a period of time equal in length to the period of each such
prevention or delay.
6.2 Notice. A Party shall within three calendar days give notice to the other
Party of each event of force majeure under section "6.1" hereinabove, and upon
cessation of such event shall furnish the other Party with notice of that event
together with particulars of the number of days by which the obligations of that
Party hereunder have been extended by virtue of such event of force majeure and
all preceding events of force majeure.
Article 7
---------
ARBITRATION
-----------
7.1 Matters for Arbitration. The Parties agree that all questions or matters in
dispute with respect to this Agreement shall be submitted to arbitration
pursuant to the terms hereof:
7.2 Notice. It shall be a condition precedent to the right of any Party to
submit any matter to arbitration pursuant to the provisions hereof, that any
Party intending to refer any matter to arbitration shall have given not less
than five business days' prior written notice of its intention to do so to the
other Party together with particulars of the matter in dispute. On the
expiration of such five business days the Party who gave such notice may proceed
to refer the dispute to arbitration as provided for in section "7.3"
hereinbelow.
7.3 Appointments. The Party desiring arbitration shall appoint one arbitrator,
and shall notify the other Party of such appointment, and the other Party shall,
within five business days after receiving such notice, appoint an arbitrator,
and the two arbitrators so named, before proceeding to act, shall, within five
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-14-
business days of the appointment of the last appointed arbitrator, unanimously
agree on the appointment of a third arbitrator, to act with them and be chairman
of the arbitration herein provided for. If the other Party shall fail to appoint
an arbitrator within five business days after receiving notice of the
appointment of the first arbitrator, and if the two arbitrators appointed by the
Parties shall be unable to agree on the appointment of the chairman, the
chairman shall be appointed in accordance with the Arbitration Act. Except as
specifically otherwise provided in this section, the arbitration herein provided
for shall be conducted in accordance with such Arbitration Act. The chairman, or
in the case where only one arbitrator is appointed, the single arbitrator, shall
fix a time and place for the purpose of hearing the evidence and representations
of the Parties, and he shall preside over the arbitration and determine all
questions of procedure not provided for by the Arbitration Act or this section-
After hearing any evidence and representations that the Parties may submit, the
single arbitrator, or the arbitrators, as the case may be, shall make an award
and reduce the same to writing, and deliver one copy thereof to each of the
Parties. The expense of the arbitration shall be paid as specified in the award.
7.4 Award. The Parties agree that the award of a majority of the arbitrators, or
in the case of a single arbitrator, of such arbitrator, shall be final and
binding upon each of them.
Article 8
---------
GENERAL PROVISIONS
------------------
8.1 Entire Agreement. This Agreement constitutes the entire agreement to date
between the Parties hereto and supersedes every previous agreement, expectation,
negotiation, representation or understanding, whether oral or written, express
or implied, statutory or otherwise, between the Parties with respect to the
subject matter of this Agreement.
8.2 No Assignment. This Agreement may not be assigned by either Party hereto
except with the prior written convent of the other Party.
8.3 Notice. Each notice, demand oar other communication required or permitted to
be given under this Agreement shall be in writing and shall be sent by prepaid
registered mail deposited in a recognized post office and addressed to the Party
entitled to receive the same, or delivered to such Party, at the address for
such Party specified on the front page of this Agreement. The date of receipt of
such notice, demand or other communication shall be the date of delivery thereof
if delivered, or, if given by registered mail as aforesaid, shall be deemed
conclusively to be the third day after the same shall have been so mailed,
except in the case of interruption of postal services for any reason whatsoever,
in which case the date of receipt shall be the date on which the notice, demand
or other communication is actually received by the addressee. Either Party may
at any time and from time to time notify the other Party in writing of a change
of address and the new address to which notice shall be given to it thereafter
until further change.
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-15-
8.4 Time of the Essence. Time will be of the essence of this Agreement.
8.5 Enurement. This Agreement will enure to the benefit of and will be binding
upon the Parties hereto and their respective heirs, executors, administrators
and assigns.
8.6 Currency. Unless otherwise stipulated, all payments required to be made
pursuant to the provisions of this Agreement and all money amount references
contained herein are in lawful currency of Canada.
8.7 Further Assurances. The Parties will from time to time after the execution
of this Agreement make, do, execute or cause or permit to be made, done or
executed, all such further and other acts, deeds, things, devices and assurances
in law whatsoever as may be required to carry out the true intention and to give
full force and effect to this Agreement.
8.8 Representation and Costs. It is hereby acknowledged by each of the Parties
hereto that, as between the Company and the Consultant herein, Devlin Jensen
acts solely for the Company, and that the Consultant has been advised by both
Devlin Jensen and the Company to obtain independent legal advice with respect to
the Consultant's review and execution of this Agreement. In addition, it is
hereby further acknowledged and agreed by the Parties hereto that each Party to
this Agreement will bear and pay its own costs, legal and otherwise, in
connection with its respective preparation, review and execution of this
Ageement and, in particular, that the costs involved in the preparation of this
Agreement, and all documentation necessarily incidental thereto, by Devlin
Jensen shall be at the cost of the Company.
8.9 Applicable Law. The situs of this Agreement is Vancouver, British Columbia,
and for all purposes this Agreement will be governed exclusively by and
construed and enforced in accordance with the laws and Courts prevailing in the
Province of British Columbia.
8.10 Severability and Construction. Each Article, section, paragraph, terra and
provision of this Agreement, and any portion thereof, shall be considered
severable, and if, for any reason, any portion of this Agreement is determined
to be invalid, contrary to or in conflict with any applicable present or future
law, rule or regulation in a final unappealable ruling issued by any court,
agency or tribunal with valid jurisdiction in a proceeding to which any Party
hereto is a party, that ruling shall not impair the operation of, or have any
other effect upon, such other portions of this Agreement as may remain otherwise
intelligible (all of which shall remain binding 8n the Parties and continue to
be given full force and effect as of the date upon which the ruling becomes
final).
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-16-
8.11 Cautions. The captions, section numbers and Article numbers appearing in
this Agreement are inserted for convenience of reference only and shall in no
way define, limit, construe or describe the scope or intent of this Agreement
nor in any way affect this Agreement.
8.12 Counterparts. This Agreement may be signed by the Parties hereto in as many
counterparts as may be necessary, and via facsimile if necessary, each of which
so signed being deemed to be an original and such counterparts together
constituting one and the same instrument and, notwithstanding the date of
execution, being deemed to bear the execution date as set forth on the front
page of this Agreement.
8.13 No Partnership or Agency. The parties have not created a partnership and
nothing contained in this Agreement shall in any manner whatsoever constitute
any Party the partner, agent or legal representative of the other Party, nor
create any fiduciary relationship between them for any purpose whatsoever.
8.14 Consents and Waivers. No consent or waiver expressed or implied by either
Party in respect of any breach or default by the other in the performance by
such other of its obligations hereunder shall:
(a) be valid unless it is in writing and stated to be a consent or waiver
pursuant to this section;
(b) be relied upon as a consent to or waiver of any other breach or
default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
(d) eliminate or modify the need for a specific consent or waiver pursuant
to this section in. any other or subsequent instance.
IN WITNESS WHEREOF the Parties hereto have hereunto set their
respective hands and seals as at the Effective Date as hereinabove determined,
The COMMON SEAL of )
GENEMAX PHARMACEUTICALS INC., )
- ----------------------------- )
the Company herein, )
was hereunto affixed in the presence of ) (C/S)
/s/ Ronald Handford )
- -------------------------------------------)
Authorized Signatory )
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
-17-
The COMMON SEAL of )
442668 B.C.LTD., )
- ----------------------------- )
the Consultant herein, )
was hereunto affixed in the presence of ) (C/S)
/s/ ?????????????????? )
- -------------------------------------------)
Authorized Signatory )
-Consulting Services Agreement-
-Genemax Pharmaceuticals Inc.-
EXHIBIT 10.19
MANAGEMENT SERVICES AGREEMENT
Between:
GENEMAX PHARMACEUTICALS INC.
And:
RONALD L. HANDFORD
GeneMax Pharmaceuticals Inc.
Suite 1260, 999 West Hastings Street
Vancouver, British Columbia
V6C 2W2
EXHIBIT ____
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT is made and dated for reference as
effective on this 1st day of August, 1999 (the "Effective Date").
BETWEEN:
GENEMAX PHARMACEUTICALS INC., a company duly incorporated under the
laws of the State of Delaware, U.S.A., and having a business office
and an address for notice and delivery located at Suite 1260, 999 West
Hastings Street, Vancouver, British Columbia, V6C 2W2
(hereinafter referred to as the "Company");
OF THE FIRST PART
AND:
RONALD L. HANDFORD, having an address for notice and delivery located
at 5557 Cornwall Drive, Richmond, British Columbia, V7C 5M8
(hereinafter referred to as the "Manager");
OF THE SECOND PART
(the Company and the Manager being hereinafter singularly also
referred to as a "Party" and collectively referred to as the "Parties"
as the context so requires).
WHEREAS:
A. The Company is a non-reporting company duly incorporated under the laws
of the State of Delaware, U.S.A.;
B. The Manager is the current President, Chief Executive Officer and a
Director of the Company and is primarily responsible for the development and
management of the Company;
C. Dr. William A. Jefferies ("Dr. Jefferies") has been engaged in research
during the course of which the Dr. Jefferies and Dr. Jefferies' research group,
working in and on behalf of the Biotechnology Laboratory at the University of
the Province of British Columbia (the "University"), has been instrumental in
the invention and development of certain technology relating to "Methods of
Enhancing Expression of MHC-Class 1 Molecules Bearing Endogenous Peptides" and
"Methods of Identifying MHC-Class 1 Restricted Antigens Endogenously Processed
by a Cellular Secretory Pathway" (collectively, the "Technology");
D. In accordance with the terms and conditions of a proposed and certain
"Option Agreement" (the "Option Agreement"), which has been and is being
negotiated by the Manager on behalf of the Company and which is intended to be
executed either subsequent to or contemporaneously with the execution of this
agreement (the "Agreement"), to be entered into between the Company and the
University, it is presently intended that the University will therein, and in
part, provide the Company with an option (herein and therein the "Option") to
obtain the exclusive, world-wide license to utilize and sub-license the
Technology and to manufacture, distribute and sell all products based on the
Technology and in accordance with the terms and conditions of a certain form of
proposed "License Agreement" (the "License Agreement") which is attached as
Appendix "B" to the proposed Option Agreement (collectively, the "License");
E. In conjunction with the terms and conditions of the proposed Option
Agreement and the proposed License Agreement (collectively, the "Underlying
Agreements") the Company is hereby desirous of formally retaining the Manager
and the Manager is hereby desirous of accepting such position in order to
provide such management services (collectively, the "General Services") as may
be necessary and determined by the Company, from to time and in its sole and
absolute discretion, to develop, manage and market the development of the
Technology and the License in conjunction with the terms and conditions of each
of the proposed Underlying Agreements (collectively, the "Business") during the
initial term and during the continuance of this Agreement;
F. Since the introduction of the Parties hereto the Parties hereby
acknowledge and agree that there have been various discussions, negotiations,
understandings and agreements between them relating to the terms and conditions
of the proposed General Services and, correspondingly, that it is their
intention by the terms and conditions of this Agreement to hereby replace, in
their entirety, all such prior discussions, negotiations, understandings and
agreements with respect to the proposed General Services; and
G. The Parties hereto have agreed to enter into this Agreement which
initially replaces, in their entirety, all such prior discussions, negotiations,
understandings and agreements, and, furthermore, which necessarily clarifies
their respective duties and obligations with respect to the within General
Services to be provided hereunder, all in accordance with the terms and
conditions of this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH that, in consideration of the
mutual covenants and provisos herein contained, THE PARTIES HERETO AGREE AS
FOLLOWS:
Article 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following words
and phrases shall have the following meanings:
(a) "Adjustment to the Fee" has the meaning ascribed to it in section
"4.2" hereinbelow;
(b) "Agreement" means this Management Services Agreement as from time to
time supplemented or amended by one or more agreements entered into
pursuant to the applicable provisions hereof;
(c) "Arbitration Act" means the Commercial Arbitration Act (British
Columbia), R.S.B.C. 1996, as amended, as set forth in Article "8"
hereinbelow;
(d) "Board of Directors" means the Board of Directors of the Company as
duly constituted from time to time;
(e) "Business" has the meaning ascribed to it in recital "D." hereinabove;
(f) "business day" means any day during which Canadian Chartered Banks are
open for business in the City of Vancouver, Province of British
Columbia;
(g) "Company" means GeneMax Pharmaceuticals Inc., a company duly
incorporated under the laws of the State of Delaware, U.S.A., or any
successor company, however formed, whether as a result of merger,
amalgamation or other action;
(h) "Company's Non-Renewal Notice" has the meaning ascribed to it in
section "3.2" hereinbelow;
(i) "Company's Notice of Termination" has the meaning ascribed to it in
section "3.4" hereinbelow;
(j) "Dr. Jefferies" means Dr. Wilfred A. Jefferies;
(k) "Effective Date" has the meaning ascribed to it on the front page of
this Agreement;
(l) "Effective Termination Date" has the meaning ascribed to it in section
"3.4" hereinbelow;
(m) "Expenses" has the meaning ascribed to it in section "4.5"
hereinbelow;
(n) "Fee" has the meaning ascribed to it in section "4.1" hereinbelow;
(o) "General Services" has the meaning ascribed to it in section "2.1"
hereinbelow;
(p) "Indemnified Party" has the meaning ascribed to it in section "6.1"
hereinbelow;
(q) "Initial Term" has the meaning ascribed to it in section "3.1"
hereinbelow;
(r) "Insurance" has the meaning ascribed to it in section "5.7"
hereinbelow;
(s) "License Agreement" has the meaning ascribed to it in recital "D."
hereinabove;
(t) "License" has the meaning ascribed to it in recital "D." hereinabove;
(u) "Manager" means Ronald L. Handford;
(v) "Option" has the meaning ascribed to it in section "4.4" hereinbelow;
(w) "Option Agreement" has the meaning ascribed to it in recital "D."
hereinabove;
(x) "Parties" or "Party" means the Company and/or the Manager hereto, as
the context so requires, together with their respective successors and
permitted assigns as the context so requires;
(y) "Property" has the meaning ascribed to it in section "5.6"
hereinbelow;
(z) "subsidiary" means any company or companies of which more than 50% of
the outstanding shares carrying votes at all times (provided that the
ownership of such shares confers the right at all times to elect at
least a majority of the directors of such company or companies) are
for the time being owned by or held for that company and/or any other
company in like relation to that company and includes any company in
like relation to the subsidiary;
(aa) "Technology" has the meaning ascribed to it in recital "C."
hereinabove;
(ab) "Underlying Agreements" has the meaning ascribed to it in recital "E."
hereinabove;
(ac) "University" means The University of British Columbia, a company duly
continued under the University Act (British Columbia), or any
successor company, however formed, whether as a result of merger,
amalgamation or other action; and
(ad) "Vacation" has the meaning ascribed to it in section "4.3"
hereinbelow.
1.2 Interpretation. For the purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular Article, section or other subdivision of this Agreement;
(b) the headings are for convenience only and do not form a part of this
Agreement nor are they intended to interpret, define or limit the
scope or extent of this or any provision of this Agreement;
(c) any reference to an entity shall include and shall be deemed to be a
reference to any entity that is a permitted successor to such entity;
and
(d) words in the singular include the plural and words in the masculine
gender include the feminine and neuter genders, and vice versa.
Article 2
SERVICES AND DUTIES OF THE MANAGER
2.1 General Services. During the Initial Term (as hereinafter determined)
of this Agreement the Company hereby agrees to retain the Manager as a manager
to and on behalf of the Company, or any of the Company's subsidiaries, as the
case may be and as may be determined by the Company in its sole and absolute
discretion, and the Manager hereby agrees to accept such position in order to
provide such development and management services as may be necessary and
determined by the Company, from to time and in its sole and absolute discretion,
to both develop and manage the Technology and the Business during the Initial
Term and during the continuance of this Agreement and in conjunction with the
terms and conditions of the proposed Underlying Agreements (collectively, the
"General Services"); it being expressly acknowledged and agreed by the Parties
hereto that the Manager shall commit and provide to the Company the General
Services on a reasonably full-time basis during the Initial Term and during the
continuance of this Agreement for which the Company, as more particularly set
forth hereinbelow, hereby agrees to pay to the order and direction of the
Manager the Fee and the Expense payment reimbursements (each as hereinafter
determined) in accordance with Article "4" hereinbelow and during the Initial
Term and during the continuance of this Agreement.
2.2 Specific Services. Without in any manner limiting the generality of the
General Services to be provided by the Manager as set forth in section "2.1"
hereinabove, it is hereby also acknowledged and agreed that the Manager will
provide the following specific development and management services to the
Company, or to any of the Company's subsidiaries, as the case may be and as may
be determined by the Company in its sole and absolute discretion, and in
conjunction with the development and management of the Technology and the
Business subject, at all times, to the direction of the Board of Directors of
the Company:
(a) overseeing all aspects of the Company;
(b) management of the day-to-day operations and development of the Company
and including, without limitation, the activities, services, duties
and functions to be performed by Dr. Jefferies in conjunction with
Technology and Business interests under the proposed Underlying
Agreement;
(c) identifying projects that fall within the ambit of the Company's
mission statement which may enhance shareholder value for the Company;
(d) liaising with the public and the media to promote the image of the
Company;
(e) development and management of all aspects of any program in connection
with the development and management of the Technology and Business
interests;
(f) the initiation, creation, development, coordination and administration
of any and all other development and management programs in respect of
the Technology and Business interests and each of their proposed or
potential and respective commercial applications together with all
capital funding projects and resources which are, or which may be,
necessarily incidental thereto;
(g) the negotiation and conclusion of all proposed or potential joint
venture arrangements in connection with the ongoing development and
management of the Technology and Business interests and each of their
proposed or potential and respective commercial applications and
including, without limitation, any and all interest which the
University may have therein;
(h) the organization, preparation and dissemination of any and all
business plans, technical reports, news releases and special
shareholder or investment reports for the Company, or for any of the
Company's subsidiaries, as the case may be and as may be determined by
the Company in its sole and absolute discretion, and in connection
with the ongoing development and management of the Technology and
Business interests and each of their proposed or potential and
respective commercial applications;
(i) the setting up of all corporate alliances for the Company, or for any
of the Company's subsidiaries, as the case may be and as may be
determined by the Company in its sole and absolute discretion, with
all potential customers and strategic business and financial partners
for the purposes of the ongoing development and management of the
Technology and Business interests and each of their proposed or
potential and respective commercial applications; and
(j) assistance in all other development and management services in
connection with the Technology and Business interests as may be
directed, from time to time, by the Board of Directors of the Company
in its sole and absolute discretion.
2.3 Additional Duties respecting the General Services. Without in any
manner limiting the generality of the General Services and specific services to
be provided as set forth in sections "2.1" and "2.2" hereinabove, it is hereby
also acknowledged and agreed that the Manager will, during the Initial Term (as
hereinafter determined) and during the continuance of this Agreement, devote
such of the Manager's management and employment time to the General Services of
the Manager as may be determined and required, from time to time, by the Board
of Directors of the Company, in its sole and absolute discretion, for the
performance of said General Services faithfully, diligently, to the best of the
Manager's abilities and in the best interests of the Company and, furthermore,
that the Manager's management and employment time will be prioritized at all
times for the Company in that regard. In addition, and again without in any
manner limiting the generality of the General Services and specific services to
be provided as set forth in sections "2.1" and "2.2" hereinabove, it is hereby
also acknowledged and agreed that the Manager will, during the Initial Term (as
hereinafter determined) and during the continuance of this Agreement:
(a) be responsible for the initiation, planning, direction and execution
of such development and management programs as may be necessary for
the Technology and Business interests so as to allow them to be highly
productive and profitable for the Company;
(b) be responsible for maintaining a strong industry profile through
ongoing liaising with the public and the media and through
participation at Technology and Business interest related conferences;
(c) be responsible for the identification and recommendation of suitable
management staff for the Company, or for any of the Company's
subsidiaries, as the case may be and as may be determined by the
Company in its sole and absolute discretion, to both provide and lead
further services for or in connection with the ongoing development,
and management of the Technology and Business interests and each of
their proposed or potential and respective commercial applications;
and
(d) be responsible for all other development and management services in
connection with the Technology and Business interests as may be
directed, from time to time, by the Board of Directors of the Company
in its sole and absolute discretion.
In this regard it is hereby acknowledged and agreed that the Manager
shall also initially assume the duties and responsibilities of the roles of
"President" and "Chief Executive Officer" for the Company or for any of the
Company's subsidiaries, as the case may be and as may be determined by the
Company in its sole and absolute discretion.
Article 3
INITIAL TERM, RENEWAL AND TERMINATION
3.1 Initial Term. The initial term of this Agreement (the "Initial Term")
is for a period of five calendar years commencing on the date of the due and
complete execution of the License Agreement by the parties thereto (the
"Effective Date").
3.2 Renewal by the Company. Subject at all times to sections "3.3" and
"3.4" hereinbelow, this Agreement shall renew automatically if not specifically
terminated in accordance with the following provisions. The Company agrees to
notify the Manager in writing at least 180 calendar days prior to the end of the
Initial Term of its intent not to renew this Agreement (the "Company's
Non-Renewal Notice"). Should the Company fail to provide a Company's Non-Renewal
Notice this Agreement shall automatically renew on a one year to one year basis
after the Initial Term until otherwise specifically renewed in writing by each
of the Parties hereto for the next one calendar year or, otherwise, terminated
upon delivery by the Company of a corresponding and follow-up 180 calendar day
Company's Non-Renewal Notice in connection with and within 180 calendar days
prior to the end of any such one year renewal period. Any such renewal on a
one-year basis shall be on the same terms and conditions contained herein unless
modified and agreed to in writing by the Parties.
3.3 Termination for cause by the Company. Notwithstanding any other
provision of this Agreement, the General Services portion of this Agreement may
be terminated at any time by the Company upon written notice to the Manager and,
if applicable, damages sought if:
(a) the Manager fails to cure a material breach of any provision of this
Agreement within 30 calendar days from its receipt of written notice
from the Company (unless such breach cannot be reasonably cured within
said 30 calendar days and the Manager is actively pursuing to cure
said breach);
(b) the Manager is willfully non-compliant in the performance of the
Manager's respective duties under this Agreement within 30 calendar
days from its receipt of written notice from the Company (unless such
willful non-compliance cannot be reasonably corrected within said 30
calendar days and the Manager is actively pursuing to cure said
willful non-compliance);
(c) the Manager commits fraud or serious neglect or misconduct in the
discharge of the Manager's respective duties hereunder or under the
law; or
(d) the Manager becomes adjudged bankrupt or a petition for reorganization
or arrangement under any law relating to bankruptcy, and where any
such involuntary petition is not dismissed within 30 calendar days.
In any such event the respective obligations of each of the Parties hereto
under this Agreement (and including, without limitation, the Manager's ongoing
obligation to provide the General Services and the Company's ongoing obligation
to provide the Fee and the Expense payment reimbursements (each as hereinafter
determined)) will immediately terminate.
3.4 Termination without cause by the Company. Notwithstanding any other
provision of this Agreement, this Agreement may also be terminated by the
Company at any time after the Effective Date and during the Initial Term and
during the continuance of this Agreement upon its delivery to the Manager of
prior written notice of its intention to do so (the "Company's Notice of
Termination") at least 180 calendar days prior to the effective date of any such
termination (the "Effective Termination Date"). In any such event the respective
obligations of each of Parties hereto under this Agreement (and including,
without limitation, the Manager's ongoing obligation to provide the General
Services and the Company's ongoing obligation to provide the Fee and the Expense
payment reimbursements (each as hereinafter determined)) will continue until
such Effective Termination Date as provided for in the Company's Notice of
Termination and, furthermore, upon the Effective Termination Date the Company
will also be obligated to provide the Manager the then balance of any Fee and
Expense payment reimbursement which would then be due and owing by the Company
to the Manager to the completion of the Initial Term of this Agreement and, in
addition, and if this Agreement had then been previously and automatically
renewed for a further one year period in accordance with section "3.2"
hereinabove, until the end of any such further one year period in conjunction
with section "3.2".
Article 4
GENERAL SERVICES COMPENSATION OF THE MANAGER
4.1 Fee. It is hereby understood and agreed that the Manager shall render
the General Services as defined hereinabove during the Initial Term and during
the continuance of this Agreement and shall thus be compensated on a monthly
basis by the Company from the Effective Date of this Agreement to the
termination of the same by way of the payment by the Company to the Manager, or
to the further order or direction of the Manager as the Manager may determine,
in the Manager's sole and absolute discretion, and advise the Company of prior
to such payment, of a monthly fee of U.S. $11,000 (the "Fee"); with such Fee
being due and payable by the Company to the Manager, in the Manager's sole and
absolute discretion, in either United States or Canadian dollars and with a
pre-determined exchange rate of U.S. $1.00 equaling Cdn. $1.45; and with such
Fee also being due and payable by the Company to the Manager, or to the further
order or direction of the Manager as the Manager may determine, in the Manager's
sole and absolute discretion, and advise the Company of prior to such payment,
on the first business day of the month following the then monthly period of
service during the Initial Term and during the continuance of this Agreement. In
this regard, and for the purposes of evidencing the Company's ongoing commitment
to compensate the Manager together with the Manager's ongoing commitment to
perform the General Services faithfully, diligently, to the best of the
Manager's abilities and in the best interests of the Company during the Initial
Term and during the continuance of this Agreement, it is hereby acknowledged and
agreed that the Company shall provide the Manager, in the manner aforesaid, with
the initial month's Fee payment for the Initial Term of this Agreement on the
first business day following the Effective Date of this Agreement.
4.2 Review and Adjustment to the Fee. It is hereby also understood and
agreed that the Fee which is due and payable by the Company to the Manager in
accordance with section "4.1" hereinabove will be reviewed on an annual basis
commencing on the Effective Date and during the Initial Term and during the
continuance of this Agreement and shall be adjusted upward, from time to time,
by a minimum of either the greater of (a) at least ten percent (10%) per year
during each and every 12-month period subsequent to the first year during the
Initial Term and during the continuance of this Agreement and (b) such other
amount as may, from time to time, be independently determined to equate to such
annual remuneration which is then being paid by similar companies in similar
industry sectors to their respective and senior executive officers (the
"Adjustment to the Fee"). In this regard it is hereby further understood and
agreed that the Fee shall automatically be reviewed immediately prior to the
completion by the Company of its initial public offering of any equity
securities and adjusted upward (however, not downward) if, at such time, it is
independently determined that a further increase to the then Adjustment to the
Fee is warranted based upon such annual remuneration which is then being paid by
similar companies in similar industry sectors to their respective and senior
executive officers.
4.3 Paid Vacation. It is hereby further understood and agreed that, during
the continuance of this Agreement, the Manager shall be entitled to up to three
weeks' paid vacation (the "Vacation") during the Initial Term of this Agreement
and during each and every year subsequent to the Initial Term and during the
continuance of this Agreement. In this regard it is hereby further understood
and agreed that the Manager's entitlement to any such paid Vacation during any
year (including the Initial Term) during the continuance of this Agreement will
be subject, at all times, to the Manager's entitlement to only a pro rata
portion of any such paid Vacation time during any year (including the Initial
Term) and to the effective date upon which this Agreement is terminated prior to
the end of any such year for any reason whatsoever.
4.4 Stock Options. It is hereby understood and agreed that, as soon as
conveniently possible after the Effective Date and, in any event, during the
Initial Term and during continuance of this Agreement, the Manager will be
granted, subject to the rules and policies of such regulatory authorities and/or
stock exchange(s) which, from time to time, may have jurisdiction over the
affairs of the Company, and when available, an incentive stock option or stock
options to acquire common shares in and to the Company (each an "Option"). It is
also hereby understood and agreed that any such Option or Options will be
exercisable for a period of at least five years from the date of granting and,
in any event, for so long as this Agreement is in existence and for a period of
at least 30 calendar days thereafter, at such minimum exercise price or prices
as may be determined at such date or dates of granting, or from time to time, in
accordance with the then rules and policies of such regulatory authorities
and/or stock exchange(s) which, from time to time, may have jurisdiction over
the affairs of the Company. It is hereby further understood and agreed that
should this Agreement not renew or terminate for any reason whatsoever all
Options which then remain outstanding and unexercised by the Manager shall
continue to be exercisable by the Manager for a period of at least 30 calendar
days after such effective date of termination of this Agreement as provided for
hereinabove.
4.5 Reimbursement of Expenses. It is also understood hereby that the
Manager shall also be reimbursed for all pre-approved direct reasonable expenses
actually and properly incurred by the Manager for the benefit of the Company
(collectively, the "Expenses"), which Expenses have first been approved by the
Board of Directors of the Company, and which Expenses, it is hereby acknowledged
and agreed, shall be payable by the Company to the order, direction and account
of the Manager as the Manager may designate in writing, from time to time, in
the Manager's sole and absolute discretion, as soon as conveniently possible
after the prior delivery by the Manager of written substantiation on account of
each such reimbursable Expense.
Article 5
ADDITIONAL OBLIGATIONS OF THE MANAGER AND THE COMPANY
5.1 Reporting by the Manager. At least once in every month, or so often as
may be required by the Company, the Manager will provide the Board of Directors
of the Company with such information concerning the results of the Manager's
General Services and activities hereunder for the previous month as the Board of
Directors of the Company may reasonably require. In addition, it is hereby
further acknowledged and reaffirmed that any written information or materials
provided by the Manager to any person or company hereunder will be subject to
the prior review, approval and direction of the Board of Directors of the
Company.
5.2 Confidentiality by the Manager. The Manager will not, except as
authorized or required by the Manager's duties hereunder, reveal or divulge to
any person or companies any information concerning the organization, business,
finances, transactions or other affairs of the Company, or of any of its
subsidiaries, which may come to the Manager's knowledge during the Initial Term
and during the continuance of this Agreement, and the Manager will keep in
complete secrecy all confidential information entrusted to the Manager and will
not use or attempt to use any such information in any manner which may injure or
cause loss either directly or indirectly to the Company's respective businesses.
This restriction will continue to apply after the termination of this Agreement
without limit in point of time but will cease to apply to information or
knowledge which may come into the public domain.
5.3 Compliance with Applicable Laws by the Manager. The Manager will comply
with all Canadian, U.S. and foreign laws, whether federal, provincial or state,
applicable to the Manager's duties hereunder and, in addition, hereby represents
and warrants that any information which the Manager may provide to any person or
company hereunder will, to the best of the Manager's knowledge, information and
belief, be accurate and complete in all material respects and not misleading,
and will not omit to state any fact or information which would be material to
such person or company.
5.4 Opinions, Reports and Advice of the Manager. The Manager acknowledges
and agrees that all written and oral opinions, reports, advice and materials
provided by the Manager to the Company in connection with the Manager's
engagement hereunder are intended solely for the Company's benefit and for the
Company's use only, and that any such written and oral opinions, reports, advice
and information are the exclusive property of the Company. In this regard the
Manager covenants and agrees that the Company may utilize any such opinion,
report, advice and materials for any other purpose whatsoever and, furthermore,
may reproduce, disseminate, quote from and refer to, in whole or in part, at any
time and in any manner, any such opinion, report, advice and materials in the
Company's sole and absolute discretion. The Manager further covenants and agrees
that no public references to the Manager or disclosure of the Manager's role in
respect of the Company be made by the Manager without the prior written consent
of the Company in each specific instance and, furthermore, that any such written
opinions, reports, advice or materials shall, unless otherwise required by the
Company, be provided by the Manager to the Company in a form and with such
substance as would be acceptable for filing with and approval by any Regulatory
Authority having jurisdiction over the affairs of the Company from time to time.
5.5 Manager's Business conduct. The Manager warrants that it shall conduct
its General Services and other related activities in a manner which is lawful
and reputable and which brings good repute to the Company, the Manager and the
Technology and Business interests. In this regard the Manager warrants to
provide all General Services in a sound and professional manner such that the
same meets superior standards of performance quality within the standards of the
industry or as set by the specifications of the Company. In the event that the
Company has a reasonable concern that the General Services as conducted by the
Manager, or the conduct of any individual thereof, is being conducted in a way
contrary to law or is reasonably likely to bring disrepute to the Technology and
Business interests or to the Company's or the Manager's reputation, the Company
may require that the Manager make such alterations in its conduct, personnel or
structure, whether of management, employee, consultant or sub-licensee
representation, as the Company may reasonably require, in its sole and absolute
discretion, failing which the Company, in its sole and absolute discretion, may
terminate this Agreement upon 30 calendar days' prior written notice to the
Manager. In the event of any debate or dispute as to the reasonableness of the
Company's request or requirements, the judgment of the Company shall be deemed
correct until such time as the matter has been determined by arbitration in
accordance with Article "9" hereinbelow.
5.6 Right of Ownership to the Technology and related Property. The Manager
hereby acknowledges and agrees that any and all Technology and Business
interests, together with any Products or improvements derived therefrom and any
trade marks or trade names used in connection with the same (collectively, the
"Property"), are wholly owned and controlled by the Company subject to the terms
and conditions of the proposed Underlying Agreements. Correspondingly, neither
this Agreement, nor the operation of the research and development and the
distribution and marketing Business contemplated by this Agreement and the
proposed Underlying Agreements, confers or shall be deemed to confer upon the
Manager any interest whatsoever in and to any of the Property. In this regard
the Manager hereby further covenants and agrees not to, during or after the
Initial Term and the continuance of this Agreement, contest the title to any of
the Company's Property interests, in any way dispute or impugn the validity of
the Company's Property interests or take any action to the detriment of the
Company's interests therein. The Manager acknowledges that, by reason of the
unique nature of the Property interests, and by reason of the Manager's
knowledge of and association with the Property interests during the Initial Term
and during the continuance of this Agreement, the aforesaid covenant, both
during the term of this Agreement and thereafter, is reasonable and commensurate
for the protection of the legitimate business interests of the Company. As a
final note, the Manager hereby further covenants and agrees to immediately
notify the Company of any infringement of or challenge to the any of the
Company's Property interests as soon as the Manager becomes aware of the
infringement or challenge.
5.7 Board of Directors of the Company and Insurance therefore. During the
Initial Term and during the continuance of this Agreement it is hereby
acknowledged and agreed that the Company will use its best efforts to seek and
obtain directors' and officers' liability insurance (collectively, the
"Insurance") for its Board of Directors and Senior Officers which in no case
shall be less than the insurance which a reasonable and prudent businessman
carrying on a similar line of business would acquire from time to time. In
connection with the foregoing it is hereby further acknowledged and agreed that
any such Insurance shall be placed with a reputable and financially secure
insurance carrier and shall include the Company as an additional insured and
shall provide primary coverage with respect to the activities contemplated by
this Agreement. Furthermore, it is also intended that any such Insurance
policy(ies) shall include severability of interest and cross-liability
provisions and shall provide that the policy(ies) shall not be canceled or
materially altered except upon at least 30 calendar days' prior written notice
to each of the relevant parties thereto.
Article 6
INDEMNIFICATION AND LEGAL PROCEEDINGS
6.1 Indemnification. The Parties hereto hereby each agree to indemnify and
save harmless the other Party hereto and including, where applicable, their
respective subsidiaries and affiliates and each of their respective directors,
officers, employees and agents (each such party being an "Indemnified Party")
harmless from and against any and all losses, claims, actions, suits,
proceedings, damages, liabilities or expenses of whatever nature or kind and
including, without limitation, any investigation expenses incurred by any
Indemnified Party, to which an Indemnified Party may become subject by reason of
the terms and conditions of this Agreement.
6.2 No Indemnification. This indemnity will not apply in respect of an
Indemnified Party in the event and to the extent that a Court of competent
jurisdiction in a final judgment shall determine that the Indemnified Party was
grossly negligent or guilty of willful misconduct.
6.3 Claim of Indemnification. The Parties hereto agree to waive any right
they might have of first requiring the Indemnified Party to proceed against or
enforce any other right, power, remedy, security or claim payment from any other
person before claiming this indemnity.
6.4 Notice of Claim. In case any action is brought against an Indemnified
Party in respect of which indemnity may be sought against either of the Parties
hereto, the Indemnified Party will give both Parties hereto prompt written
notice of any such action of which the Indemnified Party has knowledge and the
relevant Party will undertake the investigation and defense thereof on behalf of
the Indemnified Party, including the prompt employment of counsel acceptable to
the Indemnified Party affected and the relevant Party and the payment of all
expenses. Failure by the Indemnified Party to so notify shall not relieve the
relevant Party of such relevant Party's obligation of indemnification hereunder
unless (and only to the extent that) such failure results in a forfeiture by the
relevant Party of substantive rights or defenses.
6.5 Settlement. No admission of liability and no settlement of any action
shall be made without the consent of each of the Parties hereto and the consent
of the Indemnified Party affected, such consent not to be unreasonable withheld.
6.6 Legal Proceedings. Notwithstanding that the relevant Party will
undertake the investigation and defense of any action, an Indemnified Party will
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel will be at the
expense of the Indemnified Party unless:
(a) such counsel has been authorized by the relevant Party;
(b) the relevant Party has not assumed the defense of the action within a
reasonable period of time after receiving notice of the action;
(c) the named parties to any such action include that any Party hereto and
the Indemnified Party shall have been advised by counsel that there
may be a conflict of interest between any Party hereto and the
Indemnified Party; or
(d) there are one or more legal defenses available to the Indemnified
Party which are different from or in addition to those available to
any Party hereto.
6.7 Contribution. If for any reason other than the gross negligence or bad
faith of the Indemnified Party being the primary cause of the loss claim,
damage, liability, cost or expense, the foregoing indemnification is unavailable
to the Indemnified Party or insufficient to hold them harmless, the relevant
Party shall contribute to the amount paid or payable by the Indemnified Party as
a result of any and all such losses, claim, damages or liabilities in such
proportion as is appropriate to reflect not only the relative benefits received
by the relevant Party on the one hand and the Indemnified Party on the other,
but also the relative fault of relevant Party and the Indemnified Party and
other equitable considerations which may be relevant. Notwithstanding the
foregoing, the relevant Party shall in any event contribute to the amount paid
or payable by the Indemnified Party, as a result of the loss, claim, damage,
liability, cost or expense (other than a loss, claim, damage, liability, cost or
expenses, the primary cause of which is the gross negligence or bad faith of the
Indemnified Party), any excess of such amount over the amount of the fees
actually received by the Indemnified Party hereunder.
Article 7
FORCE MAJEURE
7.1 Events. If either Party hereto is at any time either during this
Agreement or thereafter prevented or delayed in complying with any provisions of
this Agreement by reason of strikes, walk-outs, labour shortages, power
shortages, fires, wars, acts of God, earthquakes, storms, floods, explosions,
accidents, protests or demonstrations by environmental lobbyists or native
rights groups, delays in transportation, breakdown of machinery, inability to
obtain necessary materials in the open market, unavailability of equipment,
governmental regulations restricting normal operations, shipping delays or any
other reason or reasons beyond the control of that Party, then the time limited
for the performance by that Party of its respective obligations hereunder shall
be extended by a period of time equal in length to the period of each such
prevention or delay.
7.2 Notice. A Party shall within three calendar days give notice to the
other Party of each event of force majeure under section "7.1" hereinabove, and
upon cessation of such event shall furnish the other Party with notice of that
event together with particulars of the number of days by which the obligations
of that Party hereunder have been extended by virtue of such event of force
majeure and all preceding events of force majeure.
Article 8
ARBITRATION
8.1 Matters for Arbitration. The Parties agree that all questions or
matters in dispute with respect to this Agreement shall be submitted to
arbitration pursuant to the terms hereof.
8.2 Notice. It shall be a condition precedent to the right of any Party to
submit any matter to arbitration pursuant to the provisions hereof, that any
Party intending to refer any matter to arbitration shall have given not less
than five business days' prior written notice of its intention to do so to the
other Party together with particulars of the matter in dispute. On the
expiration of such five business days the Party who gave such notice may proceed
to refer the dispute to arbitration as provided for in section "8.3"
hereinbelow.
8.3 Appointments. The Party desiring arbitration shall appoint one
arbitrator, and shall notify the other Party of such appointment, and the other
Party shall, within five business days after receiving such notice, appoint an
arbitrator, and the two arbitrators so named, before proceeding to act, shall,
within five business days of the appointment of the last appointed arbitrator,
unanimously agree on the appointment of a third arbitrator, to act with them and
be chairman of the arbitration herein provided for. If the other Party shall
fail to appoint an arbitrator within five business days after receiving notice
of the appointment of the first arbitrator, and if the two arbitrators appointed
by the Parties shall be unable to agree on the appointment of the chairman, the
chairman shall be appointed in accordance with the Arbitration Act. Except as
specifically otherwise provided in this section, the arbitration herein provided
for shall be conducted in accordance with such Arbitration Act. The chairman, or
in the case where only one arbitrator is appointed, the single arbitrator, shall
fix a time and place for the purpose of hearing the evidence and representations
of the Parties, and he shall preside over the arbitration and determine all
questions of procedure not provided for by the Arbitration Act or this section.
After hearing any evidence and representations that the Parties may submit, the
single arbitrator, or the arbitrators, as the case may be, shall make an award
and reduce the same to writing, and deliver one copy thereof to each of the
Parties. The expense of the arbitration shall be paid as specified in the award.
8.4 Award. The Parties agree that the award of a majority of the
arbitrators, or in the case of a single arbitrator, of such arbitrator, shall be
final and binding upon each of them.
Article 9
GENERAL PROVISIONS
9.1 Entire Agreement. This Agreement constitutes the entire agreement to
date between the Parties hereto and supersedes every previous agreement,
expectation, negotiation, representation or understanding, whether oral or
written, express or implied, statutory or otherwise, between the Parties with
respect to the subject matter of this Agreement.
9.2 No Assignment. This Agreement may not be assigned by either Party
hereto except with the prior written consent of the other Party.
9.3 Notice. Each notice, demand or other communication required or
permitted to be given under this Agreement shall be in writing and shall be sent
by prepaid registered mail deposited in a recognized post office and addressed
to the Party entitled to receive the same, or delivered to such Party, at the
address for such Party specified on the front page of this Agreement. The date
of receipt of such notice, demand or other communication shall be the date of
delivery thereof if delivered, or, if given by registered mail as aforesaid,
shall be deemed conclusively to be the third day after the same shall have been
so mailed, except in the case of interruption of postal services for any reason
whatsoever, in which case the date of receipt shall be the date on which the
notice, demand or other communication is actually received by the addressee.
Either Party may at any time and from time to time notify the other Party in
writing of a change of address and the new address to which notice shall be
given to it thereafter until further change.
9.4 Time of the Essence. Time will be of the essence of this Agreement.
9.5 Enurement. This Agreement will enure to the benefit of and will be
binding upon the Parties hereto and their respective heirs, executors,
administrators and assigns.
9.6 Currency. Unless otherwise stipulated, all payments required to be made
pursuant to the provisions of this Agreement and all money amount references
contained herein are in lawful currency of Canada.
9.7 Further Assurances. The Parties will from time to time after the
execution of this Agreement make, do, execute or cause or permit to be made,
done or executed, all such further and other acts, deeds, things, devices and
assurances in law whatsoever as may be required to carry out the true intention
and to give full force and effect to this Agreement.
9.8 Representation and Costs. It is hereby acknowledged by each of the
Parties hereto that, as between the Company and the Manager herein, Devlin
Jensen acts solely for the Company, and that the Manager has been advised by
both Devlin Jensen and the Company to obtain independent legal advice with
respect to the Manager's review and execution of this Agreement. In addition, it
is hereby further acknowledged and agreed by the Parties hereto that each Party
to this Agreement will bear and pay its own costs, legal and otherwise, in
connection with its respective preparation, review and execution of this
Agreement and, in particular, that the costs involved in the preparation of this
Agreement, and all documentation necessarily incidental thereto, by Devlin
Jensen shall be at the cost of the Company.
9.9 Applicable Law. The situs of this Agreement is Vancouver, British
Columbia, and for all purposes this Agreement will be governed exclusively by
and construed and enforced in accordance with the laws and Courts prevailing in
the Province of British Columbia.
9.10 Severability and Construction. Each Article, section, paragraph, term
and provision of this Agreement, and any portion thereof, shall be considered
severable, and if, for any reason, any portion of this Agreement is determined
to be invalid, contrary to or in conflict with any applicable present or future
law, rule or regulation in a final unappealable ruling issued by any court,
agency or tribunal with valid jurisdiction in a proceeding to which any Party
hereto is a party, that ruling shall not impair the operation of, or have any
other effect upon, such other portions of this Agreement as may remain otherwise
intelligible (all of which shall remain binding on the Parties and continue to
be given full force and effect as of the date upon which the ruling becomes
final).
9.11 Captions. The captions, section numbers and Article numbers appearing in
this Agreement are inserted for convenience of reference only and shall in no
way define, limit, construe or describe the scope or intent of this Agreement
nor in any way affect this Agreement.
9.12 Counterparts. This Agreement may be signed by the Parties hereto in as many
counterparts as may be necessary, and via facsimile if necessary, each of which
so signed being deemed to be an original and such counterparts together
constituting one and the same instrument and, notwithstanding the date of
execution, being deemed to bear the execution date as set forth on the front
page of this Agreement.
9.13 No Partnership or Agency. The Parties have not created a partnership and
nothing contained in this Agreement shall in any manner whatsoever constitute
any Party the partner, agent or legal representative of the other Party, nor
create any fiduciary relationship between them for any purpose whatsoever.
9.14 Consents and Waivers. No consent or waiver expressed or implied by either
Party in respect of any breach or default by the other in the performance by
such other of its obligations hereunder shall:
(a) be valid unless it is in writing and stated to be a consent or waiver
pursuant to this section;
(b) be relied upon as a consent to or waiver of any other breach or
default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
(d) eliminate or modify the need for a specific consent or waiver pursuant
to this section in any other or subsequent instance.
IN WITNESS WHEREOF the Parties hereto have hereunto set their respective
hands and seals as at the Effective Date as hereinabove determined.
The COMMON SEAL of )
GENEMAX PHARMACEUTICALS INC., )
the Company herein, )
was hereunto affixed in the presence of: ) (C/S)
)
)
- ------------------------------------------)
Authorized Signatory )
SIGNED, SEALED and DELIVERED by )
RONALD L. HANDFORD, )
the Manager herein, in the presence of: )
)
)
- ------------------------------------------)
Witness Signature )
)
) RONALD L. HANDFORD
- ------------------------------------------)
Witness Address )
)
)
- ------------------------------------------)
Witness Name and Occupation )
EXHIBIT 10.20
AMENDED SERVICES AGREEMENT
--------------------------
Between:
--------
GENEMAX PHARMACEUTICALS INC.
----------------------------
And:
----
ALAN LINDSAY AND ASSOCIATES, LTD.
---------------------------------
GeneMax Pharmaceuticals Inc.
----------------------------
Suite 400, 1681 Chestnet Street
Vancouver, British Columbia
V6J 4M6
-------------
AMENDED SERVICES AGREEMENT
==========================
THIS AMENDED SERVICES AGREEMENT is made and dated for reference as at
the 31st day of May, 2002.
BETWEEN:
- --------
GENEMAX PHARMACEUTICALS INC., a company incorporated under
the laws of the State of Delaware, U.S.A. and having a
business office and an address for notice and delivery
located at Suite 400, 1681 Chestnut Street, Vancouver,
British Columbia, V61 4M6
(the " Company"); OF THE FIRST PART
-----------------
AND:
- ----
ALAN LINDSAY AND ASSOCIATES LTD., a company incorporated
under the laws of tine Province of British Columbia and
having a business office and an address for notice and
delivery located at Suite 101, 1525 Bellevue Avenue, West
Vancouver, British Columbia, V7V lA6
(the "Consultant");
OF THE SECOND PART
------------------
(the Company and the Consultant being hereinafter singularly
also referred to as a "Party" and collectively referred to
as the "Parties" as the context so requires).
WHEREAS:
--------
A. The Company is a non-reporting company duly incorporated under the laws of
the State of Delaware, U.S.A.;
B. The Consultant is a non-reporting company, duly incorporated under the laws
of the Province of British Columbia, and is owned and controlled by Mr. Alan P.
Lindsay (" Mr. Lindsay"), a current Director of the Company, who, together with
the Consultant, specializes in providing various corporate finance services to
reporting companies and their principals;
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-2-
C. In accordance with the terms and conditions of a certain existing
"Development Services Agreement" in this matter, dated for reference effective
as at February 1, 2000 (the "Original Agreement"), as entered into between the
Company and the Consultant, the Company therein retained the Consultant to
provide certain development and .financial services to the Company;
D. Dr. William A. Jefferies ("Dr. Jefferies") has been engaged in research
during the course of which the Dr. Jefferies and Dr. Jefferies' research group,
working in and on behalf of the Biotechnology Laboratory at the University of
the Province of British Columbia (the "University"), has been instrumental in
the invention and development of certain technology relating to "Methods of
Enhancing Expression of MHC-Class I Molecules Bearing Endogenous Peptides" and
"Methods of Identifying MHC-Class I Restricted Antigens Endogenously Processed
by a Cellular Secretory Pathway" (collectively, the "Technology");
E. In accordance with the terms and conditions of a certain " Option Agreement"
(the" Option Agreement"), as entered into between the Company and the
University, the University has therein, and in part, provided the Company with
an option (herein and therein the "Option") to obtain the exclusive, world-wide
license to utilize and sub-license the Technology and to manufacture, distribute
and sell all products based on the Technology and din accordance with the terms
and conditions of a certain form of proposed "License Agreement" (the "License
Agreement") which is attached as Appendix "B" to the Option Agreement
(collectively, the "License");
F. In conjunction with the Option Agreement and the proposed .License Agreement
(collectively, the " Underlying Agreements") the Company is hereby desirous of
formally retaining the Consultant, and through the Consultant Mr. Lindsay, and
the Consultant is hereby desirous of accepting such position in order to provide
such corporate finance services (collectively, the "Services") as may be
necessary and determined by the Company, from to time and in its sole and
absolute discretion, to both develop and finance the development of the
Technology and the License in conjunction with each of the Underlying Agreements
(collectively, the "Business") during the initial term anal during the
continuance of this agreement (the "Agreement");
G. Since the introduction of the Parties hereto the Parties hereby acknowledge
and agree that there have been various discussions, negotiations, understandings
and agreements between them relating to the terms and conditions of the proposed
Services and, correspondingly, that it is their intention by the terms and
conditions of this Agreement to hereby replace, in their entirety, the Original
Agreement and all such prior discussions, negotiations, understandings and
agreements with respect to the proposed Services; and
H. The Parties hereto haze agreed to enter into this Agreement which initially
replaces, in its entirety, the Original Agreement, together with all such prior
discussions, negotiations, understandings and agreements, and, furthermore,
which necessarily clarifies their respective duties and obligations with respect
to the within Services to be provided hereunder, all in accordance with the
terms and conditions of this Agreement;
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-3-
NOW THEREFORE THIS AGREEMENT WITNESSETH that, in consideration of the
mutual covenants and provisos herein contained, THE PARTIES HERETO AGREE AS
FOLLOWS:
Article 1
---------
INTERPRETATION
--------------
1.1 Definitions. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following words
and phrases shall have the following meanings:
(a) "Agreement" means this Amended Services Agreement as from time to time
supplemented or amended by one or more agreements entered into
pursuant to the applicable provisions hereof;
(b) "Arbitration Act" means the Commercial Arbitration Act (British
Columbia), R.S.B.C. 1996, as amended, as set forth in Article "9"
hereinbelow;
(c) "Board of Directors" means the Board of Directors of the Company as
duly constituted from time to time;
(d) "Business" has the meaning ascribed to it in recital "F." hereinabove;
(e) "business day" means any day during which Canadian Chartered Banks are
open for business in the City of Vancouver, Province of British
Columbia;
(f) "Company" means GeneMax Pharmaceuticals Inc., a company incorporated
under the laws of the State of Delaware, U.S.A., or any successor
company, however formed, whether as a result of merger, amalgamation
or other action;
(g) "Consultant" means Alan Lindsay and Associates Ltd., or any successor
company or entity, however formed, whether as a result of merger,
amalgamation or other action, together with any nominee or nominees
of the Consultant as may be determined by the Consultant from time to
time and in the Consultant's sole and absolute discretion;
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-4-
(h) "Effective Date" has the meaning ascribed to it in each of section
"3.2" and "3.3" hereinbelow, respectively;
(i) "Effective Termination Date" has the meaning ascribed to it in section
"3.2" hereinbelow;
(j) "Expenses" has the meaning ascribed to it in section " 4.2"
hereinbelow;
(k) "Fee" has the meaning ascribed to it in section "4.1" hereinbelow;
(1) "Indemnified Party" has the meaning ascribed to it in section "7.1"
hereinbelow;
(m) "Mr. Lindsay" means Mr. Alan P. Lindsay;
(n) "Notice of Termination" has the meaning ascribed to it in section
"3.2" hereinbelow;
(o) "Original Agreement" has the meaning ascribed to it in recital "C."
hereinabove;
(p) "Party" or "Parties" means the Company and/or the Consultant hereto,
as the context so requires, together with their respective successors
and permitted assigns as the context so requires;
(q) "Regulatory Approval" means the acceptance for filing, if required, of
the transactions contemplated by this Agreement by the Regulatory
Authorities;
(r) "Regulatory Authority" and "Regulatory Authorities" means, either
singularly or collectively as the context so requires, such regulatory
agencies who have jurisdiction over the affairs of the Company and/or
the Consultant and all regulatory authorities from whom any such
authorization, approval or other action is required to be obtained or
to be made in connection with the transactions contemplated by this
Agreement;
(s) "Services" has the meaning ascribed to it in section "2.2"
hereinbelow;
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-5-
(t) "subsidiary" means any company or companies of which more than 50% of
the outstanding shares carrying votes at all times (provided that the
ownership of such shares confers the right at all times to elect at
least a majority of the directors of such company or companies) are
for the time being owned by or held for that company and/or any other
company in like relation to that company and includes any company in
like relation to the subsidiary;
(u) "Technology" has the meaning ascribed to it in recital "D."
hereinabove; and
(v) " Underlying Agreements" has the meaning ascribed to it in recital
"F." hereinabove.
1.2 Interpretation. For the purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the words "herein", "hereof" and "hereunder." and other words of
similar import refer to this Agreement as a whole and not to any
particular Article, section or other subdivision of this Agreement;
(b) the headings are for convenience only and do not form a part of this
Agreement nor are they intended to interpret, define or limit the
scope or extent of this or any provision of this Agreement;
(c) any reference to an entity shall include and shall be deemed to be a
reference to any entity that is a permitted successor to such entity;
and
(d) words in the singular include the plural and words in the masculine
gender include the feminine and neuter genders, and vice versa.
Article 2
---------
ORIGINAL AGREEMENT AND SERVICES AND DUTIES OF THE CONSULTANT
------------------------------------------------------------
2.1 Replaces Original Agreement. This Agreement constitutes the entire agreement
to date between the Parties hereto and replaces, in its entirety, the Original
Agreement, together with every previous agreement, discussion, expectation,
negotiation, representation or understanding, whether oral or written, express
or implied, statutory or otherwise, between the parties with respect to the
subject matter of the Original Agreement.
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-6-
2.2 Services. During the continuance of this Agreement the Consultant, and
through the Consultant Mr. Lindsay, will provide the Company with such general
corporate finance consulting services as may be determined and required, from
time to time, by the Board of Directors of the Company, in the Board of
Directors' sole and absolute discretion, in connection with and in order to
develop the various Business interests of the Company and all of its
subsidiaries as the context may require (collectively, the "Services"), and in
this regard it is hereby expressly acknowledged and agreed by the Parties hereto
that the Consultant, and through the Consultant Mr. Lindsay, shall commit and
provide the Services on a reasonably prioritized basis during the continuance of
this Agreement for which the Company, as more particularly set forth
hereinbelow, hereby agrees to provide the Consultant with the Fee and the
Expense payment reimbursements (each as hereinafter determined) in accordance
with Article "4" hereinbelow.
2.3 Duties respecting the Services. The Consultant hereby acknowledges and
agrees that the Consultant, and through the Consultant Mr. Lindsay, will, during
the continuance of this Agreement, devote such of the Consultant's and Mr.
Lindsay's time to the Services of the Company as may be determined arid
required, from time to time, by the Board of Directors of the Company, in the
Board of Directors' sole and absolute discretion, for the performance of said
Services faithfully, diligently, to the best of the Consultant's and Mr.
Lindsay's abilities and in the best interests of the Company.
2.4 Adherence to rules and policies. The Consultant hereby acknowledges and
agrees to abide by the reasonable rules, regulations, instructions, personnel
practices and policies of the Company and any changes therein which may be
adopted from time to time by the same as such rules, regulations, instructions,
personnel practices and policies may be reasonably applied to the Consultant.
Article 3
---------
EFFECTIVENESS AND TERMINATION
-----------------------------
3.1 Effective Date of the Agreement. This Agreement commences effective on June
1, 2002 (the "Effective Date") subject at all tunes to the Company's prior
receipt, if required, of Regulatory Approval from each of the Regulatory
Authorities to the terms and conditions of and the transactions contemplated by
this Agreement.
3.2 Termination without cause by any Party. Notwithstanding any other provision
of this Agreement, this Agreement may be terminated by any of the Parties
hereto at any time after the Effective Date and during the continuance of this
Agreement upon such Party's delivery to the other Party hereto of prior written
notice of its intention to do so (the "Notice of Termination") at least 30
calendar days prior to the effective date of any such termination (the
"Effective Termination Date"). In any such event the Consultant's ongoing
obligation to provide the Services will continue only until the Effective
Termination Date and the Company shall continue to pay to the Consultant all of
the amounts otherwise payable to the Consultant under Article "4" hereinbelow
until the Effective Termination Date.
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-7-
3.3 Termination for cause by any Party. Notwithstanding any other provision of
this Agreement, this Agreement may be terminated by any of the Parties hereto
at any time upon written notice to the other Party of such Party's intention to
do so at least 10 calendar days prior to the effective date of any such
termination (herein also the "Effective Termination Date"), and damages sought,
if:
(a) the other Party fails to cure a material breach of any provision of
this Agreement within 10 calendar days froth its receipt of written
notice from said Party (unless such material breach cannot be
reasonably cured within said 10 calendar days and the other Party is
actively pursuing to cure said material breach);
(b) the other Party is willfully non-compliant in the performance of its
respective duties under this Agreement within 10 calendar days from
its receipt of written notice from said Party (unless such willful
non-compliance cannot be reasonably corrected within said 10 calendar
days and the other Party is actively pursuing to cure said willful
non-compliance);
(c) the other Party commits fraud or serious neglect or misconduct in the
discharge of its respective duties hereunder or under the law; or
(d) the other Party becomes adjudged bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy,
and where any such involuntary petition is not dismissed within 10
calendar days.
3.4 Effect of Termination. Terms of this Agreement relating to accounting,
payments, confidentiality, accountability for damages or claims and all other
matters. reasonably extending beyond the terms of this Agreement and to the
benefit of the Parties hereto or for the protection of the Business interests of
the Company shall survive the termination of this Agreement, and any matter of
interpretation thereto shall be given a wide latitude in this regard. In
addition, and without limiting the foregoing, each of sections "3.2" and "3.3"
hereinabove shall survive the termination of this Agreement.
ARTICLE 4
---------
SERVICES COMPENSATION OF THE CONSULTANT
---------------------------------------
4.1 Fee. It is understood hereby that the Consultant shall render the Services
as defined hereinabove during the continuance of this Agreement and shall thus
be compensated on a monthly basis by the Company from the Effective Date of this
Agreement to the termination of the same by way of the payment by the Company to
the Consultant, or to the further order or direction of the Consultant as the
Consultant may determine, in the Consultant's sole and absolute discretion, and
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-8-
advise the Company of prior to such payment, of a monthly fee of U.S. $2,500.00
(the "Fee"); with such Fee being due and payable by the Company to the
Consultant, in the Consultant's sole and absolute discretion, in either United
States or Canadian dollars and with a pre-determined exchange rate of U.S. $1.00
equaling Cdn. $1.45; and with such Fee also being due and payable by the Company
to the Consultant, or to the further order or direction of the Consultant as the
Consultant nay determine, in the Consultant's sole and absolute discretion, and
advise the Company of prior to such payment, on the first business day of the
month following the then monthly period of service during the continuance of
this Agreement.
4.2 Reimbursement of Expenses. It is also understood hereby that the Consultant
shall also be reimbursed for all pre-approved direct reasonable expenses
actually and properly incurred by the Consultant for the benefit of the Company
(collectively, the "Expenses"), which Expenses have first been approved by the
Board of Directors of the Company, and which Expenses, it is hereby acknowledged
and agreed, shall be payable by the Company to the order, direction and account
of the Consultant as the Consultant may designate in writing, from time to time,
in the Consultant's sole and absolute discretion, as soon as conveniently
possible after the prior delivery by the Consultant of written substantiation on
account of each such reimbursable Expense.
Article 5
---------
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
5.1 Representations. warranties and covenants by the Consultant. In order to
induce the Company to enter into and consummate this Agreement, the Consultant
hereby represents to, warrants to and covenants with the Company, with the
intent that the Company will rely thereon in entering into this Agreement and in
concluding the transactions contemplated herein, that, to the best of the
knowledge, information and belief of the Consultant, after having made due
inquiry:
(a) the Consultant is a company duly incorporated under the laws of its
incorporating jurisdiction and is validly existing and in good
standing with respect to all statutory filings required by applicable
corporate laws;
(b) the Consultant will promptly disclose to the Company in writing any
and all material facts and circumstances which may affect the
Consultant's ability to perform its Services and duties under this
Agreement;
(c) the Consultant will cooperate in a prompt and professional manner with
the Company and its authorized agents in the performance of its
Services and duties under this Agreement; and
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-9-
(d) the Consultant will abide by all applicable securities laws in
conjunction with the execution of its obligations under this
Agreement.
5.2 Representations, warranties and covenants by the Company. In order to induce
the Consultant to enter into and consummate this Agreement, the Company hereby
represents to, warrants to and covenants with the Consultant, with the intent
that the Consultant will rely thereon in entering into this Agreement and in
concluding the transactions contemplated herein, that, to the best of the
knowledge, information and belief of the Company, after having made due inquiry:
(a) the Company is a company duly incorporated under the laws of the State
of Delaware, U.S.A., and is validly existing and in good standing with
respect to all statutory filings required by applicable corporate
laws;
(b) the Company will, if requested, and in so far as such information may
be available to the Company, provide the Consultant with such Business
and other material information respecting the Company as may be
necessary in order to complete the Services required under this
Agreement;
(c) the Company will promptly notify the Consultant of any material
changes in the status or nature of its Business, of any pending
litigation or of any other material developments which may require
further analysis by the Consultant in the performance of its Services
hereunder;
(d) all information which is provided by the Company to the Consultant
during the continuance of this Agreement will be provided in a timely
manner and, to the best of the knowledge, information and belief of
the Company, after having made due inquiry, will be accurate and
complete in every material respect; and
(e) the Company will cooperate in a prompt and professional manner with
the Consultant and its authorized agents during the performance of the
Consultant's Services and duties under this Agreement.
5.3 Continuity of the representations, warranties and covenants. The
representations, warranties and covenants of each Party contained in this
Article, or in any certificates or documents delivered pursuant to the
provisions of this Agreement or in connection with the transactions contemplated
hereby, will be true at arid as of the termination of this Agreement as though
such representations, warranties and covenants were made at and as of any such
time. Notwithstanding any investigations or inquiries made by any Party hereto
or by such Party's professional advisors prior to the termination of this
Agreement, or the waiver of any condition by any Party, the representations,
warranties and covenants of each Party contained in this Article shall survive
the termination of this Agreement and shall continue in full force and effect
for a period of three months therefrom. In the event that any of the said
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-l0-
representations, warranties or covenants are found by a Court of competent
jurisdiction to be incorrect and such incorrectness results in any loss or
damage sustained directly or indirectly by any Party hereto, then the determined
Party, as the case may be, will, in accordance with the provisions of Article
"8" hereinbelow, pay the amount of such loss or damage to the wronged Party
within 30 calendar days of receiving notice of judgment therefore; provided that
the wronged Party will not be entitled to make any claim unless the loss or
damage suffered may exceed the amount of U.S. $1,000.
Article 6
---------
ADDITIONAL OBLIGATIONS OF THE CONSULTANT
----------------------------------------
6.1 Reporting by the Consultant. At least once in every week, or so often as
may be required by the Company, the Consultant will provide the Board of
Directors of the Company with such information concerning the results of the
Consultant's Services and activities hereunder for the previous month as the
Board of Directors may reasonably require. In addition, it is hereby further
acknowledged and reaffirmed that any written information or materials provided
by the Consultant to any person or company hereunder will be subject to the
prior review, approval and direction of the Board of Directors.
6.2 Confidentiality by the Consultant. The Consultant will not, except as
authorized or required by the Consultant's duties hereunder, reveal or divulge
to any person or companies any information concerning the organization,
business, finances, transactions or other affairs of the Company, or of any of
its subsidiaries, which may come to the Consultant's knowledge during the
continuance of this Agreement, and the Consultant will keep in complete secrecy
all confidential information entrusted to the Consultant and will not use or
attempt to use any such information in any manner which may injure or cause loss
either directly or indirectly to the Company's various Business interests. This
restriction will continue to apply after the termination of this Agreement
without limit in point of tune but will cease to apply to information or
knowledge which may come into the public domain.
6.3 Compliance with applicable laws by the Consultant. The Consultant will
comply with all Canadian, U.S. and foreign laws, whether federal, provincial or
state, applicable to the Consultant's duties hereunder and, in addition, hereby
represents and warrants that any information which the Consultant may provide to
any person or company hereunder will, to the best of the Consultant's knowledge,
information and belief, be accurate and complete in all material respects and
not misleading, and will not omit to state any fact or information which would
be material to such person or company.
6.4 Opinions, reports and advice of the Consultant. The Consultant acknowledges
and agrees that all written and oral opinions, reports, advice and materials
provided by the Consultant to the Company in connection with the Consultant's
engagement hereunder are intended solely for the Company's benefit and for the
Company's use only, and that any such written and oral opinions, reports, advice
and information are the exclusive property of the Company. In this regard
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-11-
the Consultant covenants and agrees that the Company may utilize any such
opinion, report, advice and materials for any other purpose whatsoever and,
furthermore, may reproduce, disseminate, quote from and refer to, in whole or in
part, at any time and in any manner, any such opinion, report, advice and
materials in the Company's sole and absolute discretion. The Consultant further
covenants and agrees that no public references to the Consultant or disclosure
of the Consultant's role in respect of the Company be made by the Consultant
without the prior written consent of the Company in each specific instance and,
furthermore, that any such written opinions, reports, advice or materials shall,
unless otherwise required by the Company, be provided by the Consultant to the
Company in a form and with such substance as would be acceptable for filing with
and approval by any Regulatory Authority having jurisdiction over the affairs of
the Company from time to time.
6.5 Consultant's business conduct. The Consultant warrants that it shall conduct
its Services and other related activities in a manner which is lawful and
reputable and which brings good repute to the Company, the Consultant and the
Company's Various Business interests. In this regard the Consultant warrants to
provide all Services in a sound and professional manner such that the same meets
superior standards of performance duality within the standards of the industry
or as set by the specifications of the Company. In the event that the Company
has a reasonable concern that the Services as conducted by the Consultant, or
the conduct of any individual thereof, is being conducted in. a way contrary to
law or is reasonably likely to bring disrepute to the Business interests or to
the Company's or the Consultant's reputation, the Company may require that the
Consultant make such alterations in its conduct, personnel or structure, whether
of management, employee, consultant or sub-licensee representation, as the
Company may reasonably require, in its sole and absolute discretion, failing
which the Company, in its sole and absolute discretion, may terminate this
Agreement upon 10 calendar days' prior written notice to the Consultant. In the
event of any debate or dispute as to the reasonableness of the Company's request
or requirements, the judgment of the Company shall be deemed correct until such
time as the matter has been determined by arbitration in accordance with Article
"9" hereinbelow.
6.6 Right of ownership to the Technology and related Property. The Consultant
hereby acknowledges and agrees that any and all Technology and Business
interests, together with any products or improvements derived therefrom and any
trade marks or trade names used in connection with the same (collectively, the
"Property"), are wholly owned and controlled by the Company subject to the terms
and conditions of the Underlying Agreements. Correspondingly, neither this
Agreement, nor the operation of the research and development and the
distribution and marketing; Business contemplated by this Agreement and the
Underlying Agreements, confers or shall be deemed to confer upon the Consultant
any interest whatsoever in and to any of the Property. In this regard tire
Consultant hereby further covenants and agrees not to, during the continuance of
this Agreement, contest the title to any of the Company's Property interests, in
any way dispute or impugn the validity of the Company's Property interests or
take any action to the detriment of the Company's Business and other interests
therein. The Consultant acknowledges that, by reason of the unique nature of the
Property interests, and by reason of the Consultant's knowledge of and
association with the Property interests during the continuance of this
Agreement, the aforesaid covenant, both during the term of this Agreement and
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-12-
thereafter, is reasonable and commensurate for the protection of the legitimate
Business interests of the Company. As a final note, the Consultant hereby
further covenants and agrees to immediately notify the Company of any
infringement of or challenge to the any of the Company's Property interests as
soon as the Consultant becomes aware of the infringement or challenge.
Article 7
---------
INDEMNIFICATION AND LEGAL PROCEEDINGS
-------------------------------------
7.1 Indemnification. The Parties hereto agree to indemnify and save harmless the
other Party hereto, including its respective affiliates and their respective
directors, officers, employees and agents (each such party being an "Indemnified
Party") harmless from and against any and all losses, claims, actions, suits,
proceedings, damages, liabilities or expenses of whatever nature or kind,
including any investigation expenses incurred by any Indemnified Party, to which
an Indemnified Party may become subject by reason of the terms and conditions
of this Agreement.
7.2 No indemnification. This indemnity will not apply in respect of an
Indemnified Party in the event and to the extent that a court of competent
jurisdiction in a final judgment shall determine that the Indemnified Party was
grossly negligent or guilty of willful misconduct.
7.3 Claim of indemnification. The Parties hereto agree to waive any right they
might have of first requiring the Indemnified Party to proceed against or
enforce any other right, power, remedy, security or claim payment from any other
person before claiming this indemnity.
7.4 Notice of claim. In case any action is brought against an Indemnified Party
in respect of which indemnity may be sought against any of the Parties hereto,
the Indemnified Party will give the relevant Party hereto prompt written; notice
of any such action of which the indemnified Party has knowledge and such Party
will undertake the investigation and defense thereof on behalf of the
Indemnified Party, including the prompt Consulting of counsel acceptable to the
Indemnified Party affected and the payment of all expenses. Failure by the
Indemnified Party to so notify shall not relieve any Party hereto of such
Party's obligation of indemnification hereunder unless (and only to the extent
that) such failure results in a forfeiture by any Party hereto of substantive
rights or defenses.
7.5 Settlement. No admission of liability and zoo settlement of any action shall
be made without the consent of each of the Parties hereto and the consent of the
Indemnified Party affected, such consent not to be unreasonable withheld.
7.6 Legal proceedings. Notwithstanding that the relevant Party hereto will
undertake the investigation and defense of any action, an Indemnified Party will
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel will be at the
expense of the Indemnified Party unless:
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-13-
(a) such counsel has been authorized by the relevant Party hereto;
(b) the relevant Party hereto has not assumed the defense of the action
within a reasonable period of time after receiving notice of the
action;
(c) the named parties to any such action include that any Party hereto and
the Indemnified Party shall have been advised by counsel that there
may be a conflict of interest between any Party hereto and the
Indemnified Party; or
(d) there are one or more legal defenses available to the Indemnified
Party which are different from or in addition to those available to
any Party hereto.
7.7 Contribution. If for any reason other than the gross negligence or bad faith
of the Indemnified Party being the primary cause of the loss claim, damage,
liability, cost or expense, the foregoing indemnification is unavailable to the
Indemnified Party or insufficient to hold them harmless, the relevant Party
hereto shall contribute to the amount paid or payable by the Indemnified Party
as a result of any and all such losses, claim, damages or liabilities in such
proportion as is appropriate to reflect not only the relative benefits received
by any Party hereto on the one hand and the Indemnified Party on the other, but
also the relative fault of the Parties arid other equitable considerations which
may be relevant. Notwithstanding the foregoing, the relevant Party hereto shall
in any event contribute to the amount paid or payable by the Indemnified Party,
as a result of the loss, claim, damage, liability, cost or expense (other than a
loss, claim, damage, liability, cost or expenses, the primary cause of which is
the gross negligence or bad faith of the Indemnified Party), any excess of such
amount over the amount of the fees actually received by the Indemnified Party
hereunder.
Article 8
---------
FORCE MAJEURE
-------------
8.1 Events. If either Party hereto is at any time either during this Agreement
or thereafter prevented or delayed in complying with any provisions of this
Agreement by reason of strikes, walk-outs, labour shortages, power shortages,
fires, wars, acts of God, earthquakes, storms, floods, explosions, accidents,
protests or demonstrations by environmental lobbyists or native rights groups,
delays in transportation, breakdown of machinery, inability to obtain necessary
materials in the open market, unavailability of equipment, governmental
regulations restricting normal operations, shipping delays or any other reason
or reasons beyond the control of that Party, then the time limited for the
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-14-
performance by that Party of its respective obligations hereunder shall be
extended by a period of time equal in length to the period of each such
prevention or delay.
8.2 Notice. A Party shall within three calendar days give notice to the other
Party of each event of force majeure under section "8.1" hereinabove, and upon
cessation of such event shall furnish the other Party with notice of that event
together with particulars of the number of days by which the obligations of that
Party hereunder have been extended by virtue of such event of force majeure and
all preceding events of force majeure.
Article 9
---------
ARBITRATION
-----------
9.1 Matters for arbitration. The Parties agree that all questions or matters in
dispute with respect to this Agreement shall be submitted to arbitration
pursuant to the terms hereof.
9.2 Notice. It shall be a condition precedent to the right of any Party to
submit any matter to arbitration pursuant to the provisions hereof; that any
Party intending to refer any matter to arbitration shall have given not less
than five business days' prior written notice of its intention to do so to the
other Party together with particulars of the matter in dispute. On the
expiration of such five business days the Party who gave such notice may proceed
to refer the dispute to arbitration as provided for in section " 9.3"
hereinbelow.
9.3 Appointments. The Party desiring arbitration shall appoint one arbitrator,
and shall notify the other Party of such appointment, and the other Party shall,
within five business days after receiving such notice, appoint an arbitrator,
and the two arbitrators so named, before proceeding to act, shall, within five
business days of the appointment of the last appointed arbitrator, unanimously
agree on the appointment of a third arbitrator, to act with them and be chairman
of the arbitration herein provided for. If the other Party shall fail to appoint
an arbitrator within five business days after receiving notice of the
appointment of the first arbitrator, and if the two arbitrators appointed by the
Parties shall be unable to agree on the appointment of the chairman, the
chairman shall be appointed in accordance with the Arbitration Act. Except as
specifically otherwise provided in this section, the arbitration herein provided
for shall be conducted in accordance with such Arbitration Act. The chairman, or
in the case where only one arbitrator is appointed, the single arbitrator, shall
fix a time and place for the purpose of hearing the evidence and representations
of the Parties, and he shall preside over the arbitration and determine all
questions of procedure not provided for by the Arbitration Act or this section.
After hearing any evidence and representations that the Parties may submit, the
single arbitrator, or the arbitrators, as the case may be, shall make an award
and reduce the same to writing, and deliver one copy thereof to each of the
Parties. The expense of the arbitration shall be paid as specified in the award.
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-15-
9.4 Award. The Parties agree that the award of a majority of the arbitrators, or
in the case of a single arbitrator, of such arbitrator, shall be final and
binding upon each of them.
Article 10
----------
GENERAL PROVISIONS
------------------
10.1 Entire agreement. This Agreement constitutes the entire agreement to date
between the Parties hereto and supersedes every previous agreement, expectation,
negotiation, representation or understanding, whether oral or written, express
or implied, statutory or otherwise, between the Parties with respect to the
subject matter of this Agreement and including, without limitation, the entire
Original Agreement itself.
10.2 No assignment. This Agreement may not be assigned by either Party except
with the prior written consent of the other Party.
10.3 Notice. Each notice, demand or other communication required or permitted to
be given under this Agreement shall be in writing and shall be sent by prepaid
registered mail deposited in a recognized post office and addressed to the Party
entitled to receive the same, or delivered to such Party, at the address for
such. Party specified on the front page of this Agreement. The date of receipt
of such notice, demand or other communication shall be the date of delivery
thereof if delivered, or, if given by registered mail as aforesaid, shall be
deemed conclusively to be the third day after the same shall have been so
mailed, except in the case of interruption of postal services for any reason
whatsoever, in which case the date of receipt shall be the date on which the
notice, demand or other communication is actually received by the addressee.
Either Party may at any tune and from time to time notify the other Party in
writing of a change of address and the new address to which notice shall be
given to it thereafter until further change.
10.4 Time of the essence. Time will be of the essence of this, Agreement.
10.5 Enurement. This Agreement will enure to the benefit of and will be binding
upon the Parties hereto and their respective heirs, executors, administrators
and assigns.
10.6 Currency. Unless otherwise stipulated, all payments required to be made
pursuant to the provisions of this Agreement and all money amount references
contained herein are in lawful currency of the United States of America.
10.7 Regulatory Authorities. This Agreement is subject to the prior Regulatory
Approval, if required, of each of the Regulatory Authorities.
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-16-
10.8 Further assurances. The Parties will from tune to three after the execution
of this Agreement make, do, execute or cause or permit to be made, done or
executed, all such further and other acts, deeds, things, devices and assurances
in law whatsoever as may be required to carry out the true intention and to give
full force and effect to this Agreement.
10.9 Representation and costs. It is hereby acknowledged by each of the Parties
hereto that, as between the Company and the Consultant herein, Devlin Jensen
acts solely for the Company, and that the Consultant has been advised by both
Devlin Jensen and the Company to obtain independent legal advice with respect to
the Consultant's review and execution of this Agreement. In addition, it is
hereby further acknowledged and agreed by the Parties hereto that each Party to
this Agreement will bear and pay its own costs, legal and otherwise, in
connection with its respective preparation, review and execution of this
Agreement and, in particular, that the costs involved in the preparation of this
Agreement, and all documentation necessarily incidental thereto, by Devlin
Jensen shall be at the cost of the Company.
10.10 Applicable law. The situs of this Agreement is Vancouver, British
Columbia, and for all purposes this Agreement will be governed exclusively by
and construed and enforced in accordance with the laws and courts prevailing in
the Province of British Columbia.
10.11 Severability and construction. Each Article, section, paragraph, term aid
provision of this Agreement, and any portion thereof, shall be considered
severable, and if, for any reason, any portion of this Agreement is determined
to be invalid, contrary to or in conflict with any applicable present or future
law, rule or regulation in a final unappealable ruling issued by any court,
agency or tribunal with valid jurisdiction in a proceeding to which any Party
hereto is a party, that ruling shall not impair the operation of, or have any
other effect upon, such other portions of this Agreement as may remain otherwise
intelligible (all of which shall remain binding on the Parties and continue to
be given full force and effect as of the date upon which the ruling becomes
final).
10.12 Captions. The captions, section numbers and Article numbers appearing in
this Agreement are inserted for convenience of reference only and shall in no
way define, limit, construe or describe the scope or intent of this Agreement
nor in any way affect this Agreement.
10.13 Counterparts. This Agreement may be signed by the Parties hereto in as
many counterparts as may be necessary, and via facsimile if necessary, each of
which so signed being deemed to be an original and such counterparts together
constituting one and the same instrument and, notwithstanding the date of
execution, being deemed to bear the execution date as set forth on the front
page of this Agreement.
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
-17-
10.14 No partnership or agency. The Parties have not created a partnership and
nothing contained in this Agreement shall in any manner whatsoever constitute
any Party the partner, agent or legal representative of the other Party, nor
create any fiduciary relationship between there for any purpose whatsoever.
10.15 Consents and waivers. No consent or waiver expressed or implied by either
Party in respect of any breach or default by the other in the performance by
such other of its obligations hereunder shall:
(a) be valid unless it is in writing and stated to be a consent or waiver
pursuant to this section;
(b) be relied upon as a consent to or waiver of any other breach or
default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
(d) eliminate or modify the need for a specific consent or waiver pursuant
to this section in any other or subsequent instance.
IN WITNESS WHEREOF the Parties hereto have hereunto set their respective
hands and seals as at the Effective Date as hereinabove determined.
The COMMON SEAL of )
GENEMAX PHARMACEUTICALS INC., )
- ----------------------------- )
the Company herein, )
was hereunto affixed in the presence of ) (C/S)
/s/ ?????????????????? )
- -------------------------------------------)
Authorized Signatory )
The COMMON SEAL of )
ALAN LINDSAY AND ASSOCIATES LTD., )
- ----------------------------- )
the Consultant herein, )
was hereunto affixed in the presence of ) (C/S)
/s/ ?????????????????? )
- -------------------------------------------)
Authorized Signatory )
-Amended Service Agreement-Allan Lindsay and Associates-
-Genemax Pharmaceuticals, Inc.-
EXHIBIT 10.21
STOCK OPTION PLAN
For:
GENEMAX CORP.
GeneMax Corp.
435 Martin Street, Suite 2000
Blaine, Washington, U.S.A., 98230
GENEMAX CORP.
STOCK OPTION PLAN
This stock option plan (the "Plan") is adopted in consideration of services
rendered and to be rendered by key personnel to GeneMax Corp., its subsidiaries
and affiliates.
1. Definitions.
The terms used in this Plan shall, unless otherwise indicated or required
by the particular context, have the following meanings:
Board: The Board of Directors of GeneMax Corp.
Common Stock: The U.S. $0.001 par value common stock of GeneMax
Corp.
Company: GeneMax Corp., a corporation incorporated under the
laws of the State of Nevada, U.S.A., and any
successors in interest by merger, operation of law,
assignment or purchase of all or substantially all
of the property, assets or business of the Company.
Date of Grant: The date on which an Option (see hereinbelow) is
granted under the Plan.
Fair Market Value: The Fair Market Value of the Option Shares. Such
Fair Market Value as of any date shall be reasonably
determined by the Board; provided, however, that if
there is a public market for the Common Stock, the
Fair Market Value of the Option Shares as of any
date shall not be less than the closing price for
the Common Stock on the last trading day preceding
the date of grant; provided, further, that if the
Company's shares are not listed on any exchange the
Fair Market Value of such shares shall not be less
than the average of the means between the bid and
asked prices quoted on each such date by any two
independent persons or entities making a market for
the Common Stock, such persons or entities to be
selected by the Board. Fair Market Value shall be
determined without regard to any restriction other
than a restriction which, by its terms, will never
lapse.
Incentive Stock
Option: An Option as described in Section 9 hereinbelow
intended to qualify under section 422 of the United
States Internal Revenue Code of 1986, as amended.
Key Person: A person designated by the Board upon whose
judgment, initiative and efforts the Company or a
Related Company may rely, who shall include any
Director, Officer, employee or consultant of the
Company. A Key Person may include a corporation that
is wholly-owned and controlled by a Key Person who
is eligible for an Option grant, but in no other
case may the Company grant an option to a legal
entity other than an individual.
Option: The rights granted to a Key Person to purchase
Common Stock pursuant to the terms and conditions of
an Option Agreement (see hereinbelow).
Option Agreement: The written agreement (and any amendment or
supplement thereto) between the Company and a Key
Person designating the terms and conditions of an
Option.
Option Shares: The shares of Common Stock underlying an Option
granted to a Key Person.
Optionee: A Key Person who has been granted an Option.
Related Company: Any subsidiary or affiliate of the Company or of any
subsidiary of the Company. The determination of
whether a corporation is a Related Company shall be
made without regard to whether the entity or the
relationship between the entity and the Company now
exists or comes into existence hereafter.
2. Purpose and scope.
(a) The purpose of the Plan is to advance the interests of the Company and
its stockholders by affording Key Persons, upon whose judgment,
initiative and efforts the Company may rely for the successful conduct
of their businesses an opportunity for investment in the Company and
the incentive advantages inherent in stock ownership in the Company.
(b) This Plan authorizes the Board to grant Options to purchase shares of
Common Stock to Key Persons selected by the Board while considering
criteria such as employment position or other relationship with the
Company, duties and responsibilities, ability, productivity, length of
service or association, morale, interest in the Company,
recommendations by supervisors and other matters.
3. Administration of the Plan.
The Plan shall be administered by the Board. The Board shall have the
authority granted to it under this section and under each other section of the
Plan.
In accordance with and subject to the provisions of the Plan, the Board is
hereby authorized to provide for the granting, vesting, exercise and method of
exercise of any Options all on such terms (which may vary between Options and
Optionees granted from time to time) as the Board shall determine. In addition,
and without limiting the generality of the foregoing, the Board shall select the
Optionees and shall determine: (i) the number of shares of Common Stock to be
subject to each Option, however, in no event may the maximum number of shares
reserved for any one individual exceed 15% of the issued and outstanding share
capital of the Company; (ii) the time at which each Option is to be granted;
(iii) the purchase price for the Option Shares; (iv) the Option period; and (v)
the manner in which the Option becomes exercisable or terminated. In addition,
the Board shall fix such other terms of each Option as it may deem necessary or
desirable. The Board may determine the form of Option Agreement to evidence each
Option.
The Board from time to time may adopt such rules and regulations for
carrying out the purposes of the Plan as it may deem proper and in the best
interests of the Company subject to the rules and policies of any exchange or
over-the-counter market which is applicable to the Company.
The Board may from time to time make such changes in and additions to the
Plan as it may deem proper, subject to the prior approval of any exchange or
over-the-counter market which is applicable to the Company, and in the best
interests of the Company; provided, however, that no such change or addition
shall impair any Option previously granted under the Plan. If the shares are not
listed on any exchange, then such approval is not necessary.
Each determination, interpretation or other action made or taken by the
Board shall be final, conclusive and binding on all persons, including without
limitation, the Company, the stockholders, directors, officers and employees of
the Company and the Related Companies, and the Optionees and their respective
successors in interest.
4. The Common Stock.
Save and except as may be determined by the Board at a duly constituted
meeting of the Board as set forth hereinbelow, the Board is presently authorized
to appropriate, grant Options, issue and sell for the purposes of the Plan, a
total number of shares of the Company's Common Stock not to exceed 3,500,000, or
the number and kind of shares of Common Stock or other securities which in
accordance with Section 10 shall be substituted for the shares or into which
such shares shall be adjusted. Save and except as may otherwise be determined by
the disinterested approval of the shareholders of the Company at any duly called
meeting of the shareholders of the Company, at any duly constituted Board
meeting the Board may determine that the total number of shares of the Company's
Common Stock which may be reserved for issuance for Options granted and to be
granted under this Plan, from time to time, may be to the maximum extent of up
to 100% of the Company's issued and outstanding Common Stock as at the date of
any such meeting of the Board. In this regard, and subject to the prior
disinterested approval of the shareholders of the Company at any duly called
meeting of the shareholders of the Company, the total number of shares of the
Company's Common Stock which may be reserved for issuance for Options granted
and to be granted under this Plan, from time to time, may be increased to
greater than 100% of the Company's issued and outstanding Common Stock as at the
date of notice of any such meeting of the shareholders of the Company whereat
such disinterested shareholders' approval is sought and obtained by the Company.
All or any unissued shares subject to an Option that for any reason expires or
otherwise terminates may again be made subject to Options under the Plan.
5. Eligibility.
Options will be granted only to Key Persons. Key Persons may hold more than
one Option under the Plan and may hold Options under the Plan and options
granted pursuant to other plans or otherwise.
6. Option Price and number of Option Shares.
The Board shall, at the time an Option is granted under this Plan, fix and
determine the exercise price at which Option Shares may be acquired upon the
exercise of such Option; provided, however, that any such exercise price shall
not be less than that, from time to time, permitted under the rules and policies
of any exchange or over-the-counter market which is applicable to the Company.
The number of Option Shares that may be acquired under an Option granted to
an Optionee under this Plan shall be determined by the Board as at the time the
Option is granted; provided, however, that the aggregate number of Option Shares
reserved for issuance to any one Optionee under this Plan, or any other plan of
the Company, shall not exceed 15% of the total number of issued and outstanding
Common Stock of the Company.
7. Duration, vesting and exercise of Options.
(a) The option period shall commence on the Date of Grant and shall be up
to 10 years in length subject to the limitations in this Section 7 and
the Option Agreement.
(b) During the lifetime of the Optionee the Option shall be exercisable
only by the Optionee. Subject to the limitations in paragraph (a)
hereinabove, any Option held by an Optionee at the time of his death
may be exercised by his estate within one year of his death or such
longer period as the Board may determine.
(c) The Board may determine whether an Option shall be exercisable at any
time during the option period as provided in paragraph (a) of this
Section 7 or whether the Option shall be exercisable in installments
or by vesting only. If the Board determines the latter it shall
determine the number of installments or vesting provisions and the
percentage of the Option exercisable at each installment or vesting
date. In addition, all such installments or vesting shall be
cumulative. In this regard the Company will be subject, at all times,
to any rules and policies of any exchange or over-the-counter market
which is applicable to the Company and respecting any such required
installment or vesting provisions for certain or all Optionees.
(d) In the case of an Optionee who is a director or officer of the Company
or a Related Company, if, for any reason (other than death or removal
by the Company or a Related Company), the Optionee ceases to serve in
that position for either the Company or a Related Company, any option
held by the Optionee at the time such position ceases or terminates
may, at the sole discretion of the Board, be exercised within up to 90
calendar days after the effective date that his position ceases or
terminates (subject to the limitations at paragraph (a) hereinabove),
but only to the extent that the option was exercisable according to
its terms on the date the Optionee's position ceased or terminated.
After such 90-day period any unexercised portion of an Option shall
expire.
(e) In the case of an Optionee who is an employee or consultant of the
Company or a Related Company, if, for any reason (other than death or
termination for cause by the Company or a Related Company), the
Optionee ceases to be employed by either the Company or a Related
Company, any option held by the Optionee at the time his employment
ceases or terminates may, at the sole discretion of the Board, be
exercised within up to 60 calendar days (or up to 30 calendar days
where the Optionee provided only investor relations services to the
Company or a Related Company) after the effective date that his
employment ceased or terminated (that being up to 60 calendar days (or
up to 30 calendar days) from the date that, having previously provided
to or received from the Company a notice of such cessation or
termination, as the case may be, the cessation or termination becomes
effective; and subject to the limitations at paragraph (a)
hereinabove), but only to the extent that the option was exercisable
according to its terms on the date the Optionee's employment ceased or
terminated. After such 60-day (or 30-day) period any unexercised
portion of an Option shall expire.
(f) In the case of an Optionee who is an employee or consultant of the
Company or a Related Company, if the Optionee's employment by the
Company or a Related Company ceases due to the Company's termination
of such Optionee's employment for cause, any unexercised portion of
any Option held by the Optionee shall immediately expire. For this
purpose "cause" shall mean conviction of a felony or continued
failure, after notice, by the Optionee to perform fully and adequately
the Optionee's duties.
(g) Neither the selection of any Key Person as an Optionee nor the
granting of an Option to any Optionee under this Plan shall confer
upon the Optionee any right to continue as a director, officer,
employee or consultant of the Company or a Related Company, as the
case may be, or be construed as a guarantee that the Optionee will
continue as a director, officer, employee or consultant of the Company
or a Related Company, as the case may be.
(h) Each Option shall be exercised in whole or in part by delivering to
the office of the Treasurer of the Company written notice of the
number of shares with respect to which the Option is to be exercised
and by paying in full the purchase price for the Option Shares
purchased as set forth in Section 8.
8. Payment for Option Shares.
In the case of all Option exercises, the purchase price shall be paid in
cash or certified funds upon exercise of the Option.
9. Incentive stock Options.
(a) The Board may, from time to time, and subject to the provisions of
this Plan and such other terms and conditions as the Board may
prescribe, grant to any Key Person who is an employee eligible to
receive Options one or more Incentive Stock Options to purchase the
number of shares of Common Stock allotted by the Board.
(b) The Option price per share of Common Stock deliverable upon the
exercise of an Incentive Stock Option shall be no less than the Fair
Market Value of a share of Common Stock on the Date of Grant of the
Incentive Stock Option.
(c) The Option term of each Incentive Stock Option shall be determined by
the Board and shall be set forth in the Option Agreement, provided
that the Option term shall commence no sooner than from the Date of
Grant and shall terminate no later than 10 years from the Date of
Grant and shall be subject to possible early termination as set forth
in Section 7 hereinabove.
10. Changes in Common Stock, adjustments, etc.
In the event that each of the outstanding shares of Common Stock (other
than shares held by dissenting stockholders which are not changed or exchanged)
should be changed into, or exchanged for, a different number or kind of shares
of stock or other securities of the Company, or, if further changes or exchanges
of any stock or other securities into which the Common Stock shall have been
changed, or for which it shall have been exchanged, shall be made (whether by
reason of merger, consolidation, reorganization, recapitalization, stock
dividends, reclassification, split-up, combination of shares or otherwise), then
there shall be substituted for each share of Common Stock that is subject to the
Plan, the number and kind of shares of stock or other securities into which each
outstanding share of Common Stock (other than shares held by dissenting
stockholders which are not changed or exchanged) shall be so changed or for
which each outstanding share of Common Stock (other than shares held by
dissenting stockholders) shall be so changed or for which each such share shall
be exchanged. Any securities so substituted shall be subject to similar
successive adjustments.
In the event of any such changes or exchanges, the Board shall determine
whether, in order to prevent dilution or enlargement of rights, an adjustment
should be made in the number, kind, or option price of the shares or other
securities then subject to an Option or Options granted pursuant to the Plan and
the Board shall make any such adjustment, and such adjustments shall be made and
shall be effective and binding for all purposes of the Plan.
11. Relationship of employment.
Nothing contained in the Plan, or in any Option granted pursuant to the
Plan, shall confer upon any Optionee any right with respect to employment by the
Company, or interfere in any way with the right of the Company to terminate the
Optionee's employment or services at any time.
12. Non-transferability of Option.
No Option granted under the Plan shall be transferable by the Optionee,
either voluntarily or involuntarily, except by will or the laws of descent and
distribution, and any attempt to do so shall be null and void.
13. Rights as a stockholder.
No person shall have any rights as a stockholder with respect to any share
covered by an Option until that person shall become the holder of record of such
share and, except as provided in Section 10, no adjustments shall be made for
dividends or other distributions or other rights as to which there is an earlier
record date.
14. Securities laws requirements.
No Option Shares shall be issued unless and until, in the opinion of the
Company, any applicable registration requirements of the United States
Securities Act of 1933, as amended, any applicable listing requirements of any
securities exchange on which stock of the same class is then listed, and any
other requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery, have been fully complied with. Each Option and each
Option Share certificate may be imprinted with legends reflecting federal and
state securities laws restrictions and conditions, and the Company may comply
therewith and issue "stop transfer" instructions to its transfer agent and
registrar in good faith without liability.
15. Disposition of Option Shares.
Each Optionee, as a condition of exercise, shall represent, warrant and
agree, in a form of written certificate approved by the Company, as follows: (i)
that all Option Shares are being acquired solely for his own account and not on
behalf of any other person or entity; (ii) that no Option Shares will be sold or
otherwise distributed in violation of the United States Securities Act of 1933,
as amended, or any other applicable federal or state securities laws; (iii) that
if he is subject to reporting requirements under Section 16(a) of the United
States Securities Exchange Act of 1934, as amended, he will (a) furnish the
Company with a copy of each Form 4 filed by him and (b) timely file all reports
required under the federal securities laws; and (iv) that he will report all
sales of Option Shares to the Company in writing on a form prescribed by the
Company.
16. Effective date of Plan; termination date of Plan.
The Plan shall be deemed effective as of September 30, 2002. The Plan shall
terminate at midnight on September 30, 2012 except as to Options previously
granted and outstanding under the Plan at the time. No Options shall be granted
after the date on which the Plan terminates. The Plan may be abandoned or
terminated at any earlier time by the Board, except with respect to any Options
then outstanding under the Plan.
17. Other provisions.
The following provisions are also in effect under the Plan:
(a) the use of a masculine gender in the Plan shall also include within
its meaning the feminine, and the singular may include the plural, and
the plural may include the singular, unless the context clearly
indicates to the contrary;
(b) any expenses of administering the Plan shall be borne by the Company;
(c) this Plan shall be construed to be in addition to any and all other
compensation plans or programs. The adoption of the Plan by the Board
shall not be construed as creating any limitations on the power or
authority of the Board to adopt such other additional incentive or
other compensation arrangements as the Board may deem necessary or
desirable; and
(d) the validity, construction, interpretation, administration and effect
of the Plan and of its rules and regulations, and the rights of any
and all personnel having or claiming to have an interest therein or
thereunder shall be governed by and determined exclusively and solely
in accordance with the laws of the State of Nevada, U.S.A.
This Plan is dated and made effective as approved by the shareholders of
the Company on this 30th day of September, 2002.
BY ORDER OF THE BOARD OF DIRECTORS OF
GENEMAX CORP.
Per:
"Ronald L. Handford"
Ronald L. Handford
President and a Director
__________
EXHIBIT 99.2
LETTERHEAD OF GENEMAX CORP.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-KSB for fiscal year ended
December 31, 2002 of GeneMax Corp., a Nevada corporation (the "Company"), as
filed with the Securities and Exchange Commission on the date hereof (the
"Annual Report"), I, Ronald L. Handford, President and Chief Executive Officer
of the Company certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. I, Ronald L. Handford, have reviewed and read this Annual Report on
Form 10-KSB;
2. To the best of my knowledge, this Annual Report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this Annual Report;
3. To the best of my knowledge, the financial statements and other
financial information included in this Annual Report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the Company as of, and for, the periods
presented in this Annual Report;
4. I have disclosed, based on my most recent evaluation, to the Company's
auditors and board of directors performing the equivalent functions of
an audit committee:
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data
and have identified for the Company's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's
internal controls; and
5. I have indicated in this Annual Report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my
most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
/s/ Ronald L. Handford
----------------------------
Ronald L. Handford, President and Chief
Executive Officer