UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30,
2014 or
[ ] 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 000-31187
INTELGENX TECHNOLOGIES
CORP.
(Exact name of small business issuer as specified
in its charter)
Delaware |
87-0638336 |
(State or other jurisdiction of |
(I.R.S. Employer Identification No.) |
incorporation or organization) |
|
6425 Abrams, Ville Saint Laurent, Quebec H4S 1X9, Canada
(Address of principal executive offices)
(514) 331-7440
(Issuer's telephone number)
(Former Name, former Address, if changed since last report)
Indicate by checkmark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer, non-accelerated filer and smaller reporting company in
Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] |
|
Accelerated filer [ ] |
Non-accelerated filer [ ] |
(Do not check if a smaller reporting company)
|
Smaller reporting company [X]
|
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13, or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE TO CORPORATE ISSUERS:
63,465,256 shares of the issuers common stock, par value
$.00001 per share, were issued and outstanding as of November 7, 2014.
1
IntelGenx Technologies Corp.
Form 10-Q
TABLE OF CONTENTS
2
IntelGenx Technologies Corp. |
|
Consolidated Interim Financial Statements |
September 30, 2014 |
(Expressed in U.S. Funds) |
(Unaudited) |
3
IntelGenx Technologies Corp. |
Consolidated Balance Sheet |
(Expressed in Thousands of U.S. Dollars ($000s) Except
Share and Per Share Data) |
(Unaudited) |
|
|
September 30, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
Assets |
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Cash and
cash equivalents |
$ |
4,376 |
|
$ |
5,005 |
|
Accounts receivable |
|
52 |
|
|
144 |
|
Prepaid
expenses |
|
75 |
|
|
133 |
|
Investment tax credits receivable |
|
234 |
|
|
268 |
|
Total Current Assets |
|
4,737 |
|
|
5,550 |
|
Leasehold Improvements and Equipment, net |
|
805 |
|
|
588 |
|
Intangible Assets (note 4) |
|
53 |
|
|
79 |
|
Total
Assets |
$ |
5,595 |
|
$ |
6,217 |
|
Liabilities |
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Accounts
payable and accrued liabilities |
|
267 |
|
|
593 |
|
Deferred license revenue (note 5) |
|
358 |
|
|
308 |
|
Total Current Liabilities |
|
625 |
|
|
901 |
|
Deferred
License Revenue, non-current portion (note 5) |
|
77 |
|
|
308 |
|
Total Liabilities |
|
702 |
|
|
1,209 |
|
Shareholders' Equity |
|
|
|
|
|
|
Capital Stock (note 6) |
|
1 |
|
|
1 |
|
Additional Paid-in-Capital |
|
22,635 |
|
|
20,934 |
|
Accumulated Deficit |
|
(17,592 |
) |
|
(16,102 |
) |
Accumulated
Other Comprehensive Income |
|
(151 |
) |
|
175 |
|
Total Shareholders Equity |
|
4,893 |
|
|
5,008 |
|
|
$ |
5,595 |
|
$ |
6,217 |
|
See accompanying notes
Approved on Behalf of the Board:
/s/ Bernd Melchers |
Director |
|
|
/s/ Horst G. Zerbe |
Director |
4
IntelGenx Technologies Corp. |
|
Consolidated Statement of Shareholders' Equity |
For the Period Ended September 30, 2014 |
(Expressed in Thousands of U.S. Dollars ($000s) Except
Share and Per Share Data) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Other |
|
|
Total |
|
|
|
Capital Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Shareholders' |
|
|
|
Number |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Profit (Loss) |
|
|
Equity |
|
Balance - December 31, 2013 |
|
60,984,267 |
|
$ |
1 |
|
$ |
20,934 |
|
$ |
(16,102 |
) |
$ |
175 |
|
$ |
5,008 |
|
Foreign currency translation adjustment |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(326 |
) |
|
(326 |
) |
Warrants exercised (note 7) |
|
2,480,988 |
|
|
- |
|
|
1,619 |
|
|
- |
|
|
- |
|
|
1,619 |
|
Stock-based compensation (note 7) |
|
- |
|
|
- |
|
|
82 |
|
|
- |
|
|
- |
|
|
82 |
|
Net loss for the period |
|
- |
|
|
- |
|
|
- |
|
|
(1,490 |
) |
|
- |
|
|
(1,490 |
) |
Balance
September 30, 2014 |
|
63,465,255 |
|
$ |
1 |
|
$ |
22,635 |
|
$ |
(17,592 |
) |
$ |
(151 |
) |
$ |
4,893 |
|
See accompanying notes
5
IntelGenx Technologies Corp. |
|
Consolidated Statement of Comprehensive Loss |
(Expressed in Thousands of U.S. Dollars ($000s) Except
Share and Per Share Data) |
(Unaudited) |
|
|
For the Three-Month Period |
|
|
For the Nine-Month Period |
|
|
|
Ended September 30, |
|
|
Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Royalties |
$ |
129 |
|
$ |
28 |
|
$ |
310 |
|
$ |
119 |
|
License and other
revenue |
|
323 |
|
|
72 |
|
|
524 |
|
|
685 |
|
Total Revenues |
|
452 |
|
|
100 |
|
|
834 |
|
|
804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expense |
|
359 |
|
|
191 |
|
|
772 |
|
|
406 |
|
Selling, general
and administrative expense |
|
521 |
|
|
491 |
|
|
1,524 |
|
|
1,341 |
|
Depreciation of tangible assets |
|
11 |
|
|
7 |
|
|
25 |
|
|
24 |
|
Amortization of intangible assets |
|
6 |
|
|
10 |
|
|
26 |
|
|
29 |
|
Total Costs and Expenses |
|
897 |
|
|
699 |
|
|
2,347 |
|
|
1,800 |
|
Loss from Operations |
|
(445 |
) |
|
(599 |
) |
|
(1,513 |
) |
|
(996 |
) |
Other Income |
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
11 |
|
|
- |
|
|
23 |
|
|
1 |
|
Total Other Income |
|
11 |
|
|
- |
|
|
23 |
|
|
1 |
|
Net Loss |
|
(434 |
) |
|
(599 |
) |
|
(1,490 |
) |
|
(995 |
) |
Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
(256 |
) |
|
73 |
|
|
(326 |
) |
|
(33 |
) |
Comprehensive Loss |
$ |
(690 |
) |
$ |
(526 |
) |
$ |
(1,816 |
) |
$ |
(1,028 |
) |
Basic and
Diluted Weighted Average Number of Shares Outstanding |
|
63,465,255 |
|
|
52,687,253 |
|
|
63,133,545 |
|
|
52,474,772 |
|
Basic and Diluted Loss Per Common Share (note 9) |
$ |
(0.01 |
) |
$ |
(0.01 |
) |
$ |
(0.03 |
) |
$ |
(0.02 |
) |
See accompanying notes
6
IntelGenx Technologies Corp. |
|
Consolidated Statement of Cash Flows |
(Expressed in thousands of U.S. Dollars ($000s) Except
Share and Per Share Data) |
(Unaudited) |
|
|
For the Three-Month Period |
|
|
For the Nine-Month Period |
|
|
|
Ended September 30, |
|
|
Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds Provided (Used) - |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(434 |
) |
$ |
(599 |
) |
$ |
(1,490 |
) |
$ |
(995 |
) |
Amortization and depreciation |
|
17 |
|
|
17 |
|
|
51 |
|
|
53 |
|
Stock-based compensation |
|
17 |
|
|
35 |
|
|
82 |
|
|
82 |
|
|
|
(400 |
) |
|
(547 |
) |
|
(1,357 |
) |
|
(860 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
1 |
|
|
305 |
|
|
92 |
|
|
1,227 |
|
Prepaid expenses |
|
18 |
|
|
(128 |
) |
|
58 |
|
|
(120 |
) |
Investment tax credits receivable |
|
(17 |
) |
|
56 |
|
|
34 |
|
|
1 |
|
Accounts payable and accrued
liabilities |
|
1 |
|
|
(23 |
) |
|
(326 |
) |
|
(745 |
) |
Deferred revenue |
|
(77 |
) |
|
(74 |
) |
|
(180 |
) |
|
(228 |
) |
Net change in assets and liabilities |
|
(74 |
) |
|
136 |
|
|
(322 |
) |
|
135 |
|
Net cash used by operating activities |
|
(474 |
) |
|
(411 |
) |
|
(1,679 |
) |
|
(725 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants and stock options |
|
- |
|
|
714 |
|
|
1,619 |
|
|
1,496 |
|
Net cash provided by
financing activities |
|
- |
|
|
714 |
|
|
1,619 |
|
|
1,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Additions to leasehold improvements and equipment |
|
(106 |
) |
|
(99 |
) |
|
(274 |
) |
|
(260 |
) |
Net cash used in investing activities |
|
(106 |
) |
|
(99 |
) |
|
(274 |
) |
|
(260 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in Cash and Cash Equivalents |
|
(580 |
) |
|
204 |
|
|
(334 |
) |
|
511 |
|
Effect of Foreign Exchange on Cash and
Cash Equivalents |
|
(222 |
) |
|
63 |
|
|
(295 |
) |
|
(19 |
) |
Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of Period |
|
5,178 |
|
|
2,284 |
|
|
5,005 |
|
|
2,059 |
|
End of Period |
$ |
4,376 |
|
$ |
2,551 |
|
$ |
4,376 |
|
$ |
2,551 |
|
See accompanying notes
7
IntelGenx Technologies Corp. |
|
Notes to Consolidated Interim Financial Statements |
September 30, 2014 |
(Expressed in U.S. Funds) |
(Unaudited) |
The accompanying unaudited consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete consolidated financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included. All such adjustments are of a normal and
recurring nature.
These financial statements should be
read in conjunction with the audited consolidated financial statements at
December 31, 2013. Operating results for the three and nine months ended
September 30, 2014 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2014. The Company prepares its
financial statements in accordance with accounting principles generally accepted
in the United States (U.S. GAAP). This basis of accounting involves the
application of accrual accounting and consequently, revenues and gains are
recognized when earned, and expenses and losses are recognized when
incurred.
The consolidated financial statements
include the accounts of the Company and its subsidiary companies. On
consolidation, all inter-entity transactions and balances have been eliminated.
The financial statements are expressed
in U.S. funds.
Management has performed an evaluation
of the Companys activities through the date and time these financial statements
were issued and concluded that there are no additional significant events
requiring recognition or disclosure.
2. |
Adoption of New Accounting
Standards |
Revenue Recognition and Disclosures
The FASB issued Update No. 2013-04,
Liabilities (Topic 405)Obligations Resulting from Joint and Several Liability
Arrangements for Which the Total Amount of the Obligation Is Fixed at the
Reporting Date. The amendments in this Update provide guidance for the
recognition, measurement, and disclosure of obligations resulting from joint and
several liability arrangements for which the total amount of the obligation
within the scope of this Update is fixed at the reporting date, except for
obligations addressed within existing guidance in U.S. GAAP. The guidance
requires an entity to measure those obligations as the sum of the amount the
reporting entity agreed to pay on the basis of its arrangement among its
co-obligors and any additional amount the reporting entity expects to pay on
behalf of its co-obligors. The guidance in this Update also requires an entity
to disclose the nature and amount of the obligation as well as other information
about those obligations. For public entities, the amendments in this ASU were
applicable for fiscal years, and interim periods within those years, beginning
after December 15, 2013. The adoption of this Statement did not have a material
effect on the Companys financial position or results of operations.
8
IntelGenx Technologies Corp. |
|
Notes to Consolidated Interim Financial Statements |
September 30, 2014 |
(Expressed in U.S. Funds) |
(Unaudited) |
2. |
Adoption of New Accounting Standards
(Contd) |
The FASB issued Update No. 2013-05,
Foreign Currency Matters (Topic 830)Parents Accounting for the Cumulative
Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of
Assets within a Foreign Entity or of an Investment in a Foreign Entity. The
amendments in this Update resolve the diversity in practice about whether
Subtopic 810-10, ConsolidationOverall, or Subtopic 830-30, Foreign Currency
MattersTranslation of Financial Statements, applies to the release of the
cumulative translation adjustment into net income when a parent either sells a
part or all of its investment in a foreign entity or no longer holds a
controlling financial interest in a subsidiary or group of assets that is a
nonprofit activity or a business (other than a sale of in substance real estate
or conveyance of oil and gas mineral rights) within a foreign entity. In
addition, the amendments in this Update resolve the diversity in practice for
the treatment of business combinations achieved in stages (sometimes also
referred to as step acquisitions) involving a foreign entity. For public
entities, the amendments in this ASU were effective prospectively for fiscal
years, and interim reporting periods within those years, beginning after
December 15, 2013. The adoption of this Statement did not have a material effect
on the Companys financial position or results of operations.
The FASB issued Update No. 2013-07,
Presentation of Financial Statements Liquidation Basis of Accounting. The
objective of this Update is to clarify when an entity should apply the
liquidation basis of accounting and to provide principles for the measurement of
assets and liabilities under the liquidation basis of accounting, as well as any
required disclosures. These amendments were effective for entities that
determine liquidation is imminent during annual reporting periods beginning
after December 15, 2013, and interim reporting periods therein. Entitles should
apply the requirements prospectively from the day that liquidation becomes
imminent. The adoption of this Statement did not have a material effect on the
Companys financial position or results of operations.
The FASB issued Update No. 2013-11,
Income Taxes (Topic 740)Presentation of an Unrecognized Tax Benefit When a Net
Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward
Exists. The amendments in this ASU provide guidance on the financial statement
presentation of an unrecognized tax benefit when a net operating loss
carryforward, similar tax loss, or tax credit carryforward exists. The
amendments were effective for fiscal years, and interim periods within those
years, beginning after December 15, 2013 and should be applied prospectively to
all unrecognized tax benefits that exist at the effective date. The adoption of
this Statement did not have a material effect on the Companys financial
position or results of operations.
3. |
Significant Accounting
Policies |
Recently Issued Accounting
Pronouncements
ASU 2014-15, Presentation of Financial
Statements Going Concern (Subtopic 205-40): Disclosure of Uncertainties about
an Entitys Ability to Continue as a Going Concern
The FASB has issued ASU No. 2014-15
which is intended to define managements responsibility to evaluate whether
there is substantial doubt about an organizations ability to continue as a
going concern and to provide related footnote disclosures. This ASU provides
guidance to an organizations management, with principles and definitions that
are intended to reduce diversity in the timing and content of disclosures that
are commonly provided by organizations today in the
financial statement footnotes. The amendments are effective for annual periods
ending after December 15, 2016, and interim periods within annual periods
beginning after December 15, 2016. Early application is permitted for annual or
interim reporting periods for which the financial statements have not previously
been issued. The Company is currently evaluating the impact of this update on
its consolidated financial statements.
9
IntelGenx Technologies Corp. |
|
Notes to Consolidated Interim Financial Statements |
September 30, 2014 |
(Expressed in U.S. Funds) |
(Unaudited) |
3. |
Significant Accounting Policies
(Contd) |
ASU 2014-13, Consolidation (Topic 810):
Measuring the Financial Assets and the Financial Liabilities of a Consolidated
Collateralized Financing Entity
The FASB has issued ASU No. 2014-13
which will apply to a reporting entity that is required to consolidate a
collateralized financing entity under the Variable Interest Entities guidance.
The fair value of the financial assets of a collateralized financing entity, as
determined under GAAP, may differ from the fair value of its financial
liabilities even when the financial liabilities have recourse only to the
financial assets. Before this ASU, there was no specific guidance in GAAP on how
a reporting entity should account for that difference. The amendments in this
ASU provide an alternative to Topic 820, Fair Value Measurement, for measuring
the financial assets and the financial liabilities of a consolidated
collateralized financing entity to eliminate that difference. The amendments in
this ASU are effective for public business entities for annual periods, and
interim periods within those annual periods, beginning after December 15, 2015.
Early adoption is permitted as of the beginning of an annual period. The
adoption of ASU 2014-13 is not expected to have a material effect on the
Companys financial position or results of operations.
ASU 2014-12, Compensation Stock
Compensation (Topic 718): Accounting for shared-based payments when the terms of
an award provide that a performance target could be achieved after the requisite
service period.
The FASB has issued ASU No. 2014-12
which requires that a performance target that affects vesting and that could be
achieved after the requisite service period be treated as a performance
condition. A reporting entity should apply existing guidance in Topic 718, Compensation Stock Compensation, as it relates to awards with
performance conditions that affect vesting to account for such awards. The
performance target should not be reflected in estimating the grant-date fair
value of the award. Compensation cost should be recognized in the period in
which it becomes probable that the performance target will be achieved. The
amendments in this ASU are effective for annual periods and interim periods
within those annual periods beginning after December 15, 2015. Earlier adoption
is permitted. The adoption of ASU-2014-12 is not expected to have material
effect on the Companys financial position or results of operations.
ASU No. 2014-09, Revenues from
Contracts with Customers (Topic 606)
The FASB and IASB (the Boards) have
issued converged standards on revenue recognition. ASU No. 2014-09 affects any
entity using U.S. GAAP that either enters into contracts with customers to
transfer goods or services or enters into contracts for the transfer of
nonfinancial assets unless those contracts are within the scope of other
standards. This ASU will supersede the revenue recognition requirements in Topic
605, Revenue Recognition and most industry-specific guidance. The core
principle of the guidance is that an entity should recognize revenue to depict
the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. To achieve that core principle,
an entity should apply the following steps:
10
IntelGenx Technologies Corp. |
|
Notes to Consolidated Interim Financial Statements |
September 30, 2014 |
(Expressed in U.S. Funds) |
(Unaudited) |
3. |
Significant Accounting Policies (Contd) |
|
|
|
|
|
Step 1: Identify the contract(s) with a
customer. |
|
|
Step 2: Identify the performance obligations in the
contract. |
|
|
Step 3: Determine the transaction price. |
|
|
Step 4: Allocate the transaction price to the performance
obligations in the contract. |
|
|
Step 5: Recognize revenue when (or as) the entity
satisfies a performance obligation. |
For a public entity, the amendments in
this ASU are effective for annual reporting periods beginning after December 15,
2016, including interim periods within that reporting period. This ASU is to be
applied retrospectively, with certain practical expedients allowed. Early
application is not permitted. The Company is currently evaluating the impact of
this update on its consolidated financial statements.
ASU No. 2014-08, Presentation of
Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360):
Reporting Discontinued Operations and Disclosures of Disposals of Components of
an Entity
The FASB has issued ASU No. 2014-08
which enhance convergence between U.S. GAAP and International Financial
Reporting Standards (IFRS). The amendments in the ASU change the criteria for
reporting discontinued operations while enhancing disclosures in this area. It
also addresses sources of confusion and inconsistent application related to
financial reporting of discontinued operations guidance in U.S. GAAP. Under the
new guidance, only disposals representing a strategic shift in operations should
be presented as discontinued operations. Those strategic shifts should have a
major effect on the organizations operations and financial results. Examples
include a disposal of a major geographic area, a major line of business, or a
major equity method investment. In addition, the new guidance requires expanded
disclosures about discontinued operations that will provide financial statement
users with more information about the assets, liabilities, income, and expenses
of discontinued operations. The amendments in the ASU are effective in the first
quarter of 2015 for public organizations with calendar year ends. Early adoption
is permitted. The adoption of ASU-2014-08 is not expected to have material
effect on the Companys financial position or results of operations.
As of September 30, 2014 NDA
acquisition costs of $53 thousand (December 31, 2013 - $79 thousand) were
recorded as intangible assets on the Companys balance sheet and represent the
net book value of the final progress payment related to the acquisition of 100%
ownership of Forfivo XL®. The asset is being amortized over its estimated useful
life of 39 months. The Company commenced amortization upon commercial launch of
the product in October 2012.
11
IntelGenx Technologies Corp. |
|
Notes to Consolidated Interim Financial Statements |
September 30, 2014 |
(Expressed in U.S. Funds) |
(Unaudited) |
5. |
Deferred License Revenue |
Deferred license revenue represents
upfront payments received for the granting of licenses to the Companys patents,
intellectual property, and proprietary technology, for commercialization.
Deferred license revenue is recognized in income over the period where sales of
the licensed products will occur.
Upon entering into the licensing
agreement with Edgemont Pharmaceuticals the Company received an upfront fee of
$1 million, which the Company recognized as deferred license revenue. The
deferred license revenue is being amortized in income over a period of 39
months, which is the minimum period where sales of Forfivo XL® are expected to
be exclusive.
In January, 2014 IntelGenx entered into
a development and commercialization agreement with Par Pharmaceutical, Inc. for
two products. The Company received $100 thousand upon execution of the
agreement, of which $50 thousand has been recognized as deferred revenue until
certain development milestones have been achieved.
As a result of this policy, the Company
has a deferred revenue balance of $435 thousand at September 30, 2014 (December
31, 2013 - $616 thousand) that has not been recognized as revenue.
|
|
|
September 30, |
|
|
December 31, |
|
|
|
|
2014 |
|
|
2013 |
|
|
Authorized - |
|
|
|
|
|
|
|
100,000,000 common shares of $0.00001 par value |
|
|
|
|
|
|
|
20,000,000 preferred shares of
$0.00001 par value |
|
|
|
|
|
|
|
Issued - |
|
|
|
|
|
|
|
63,465,255 (December 31, 2013 - 60,984,267) common
shares |
$ |
635 |
|
$ |
610 |
|
12
IntelGenx Technologies Corp. |
|
Notes to Consolidated Interim Financial Statements |
September 30, 2014 |
(Expressed in U.S. Funds) |
(Unaudited) |
7. |
Additional Paid-In Capital |
Stock options
No stock options were exercised during
the nine month period ended September 30, 2014. During the nine month period
ended September 30, 2013 a total of 75,000 stock options were exercised for
75,000 common shares having a par value of $0 thousand in aggregate, for cash
consideration of $31 thousand, resulting in an increase in additional paid-in
capital of $31 thousand.
Compensation expenses for stock-based
compensation of $82 thousand and $82 thousand were recorded during the nine
month periods ended September 30, 2014 and 2013 respectively. The entire amount
expensed in 2014 relates to stock options granted to employees and directors. Of
the amount expensed in 2013, $67 thousand relates to stock options granted to
employees and directors and $15 thousand relates to options granted to
independent third party consultants. As at September 30, 2014 the Company has
$56 thousand (2013 - $202 thousand) of unrecognized stock-based compensation.
Warrants
During the nine month period ended
September 30, 2014 a total of 2,480,988 (2013 - 3,098,500) warrants were
exercised for 2,480,988 (2013 - 3,098,500) common shares having a par value of
$0 thousand in aggregate, for cash consideration of $1,619 thousand (2013 -
$1,465 thousand), resulting in an increase in additional paid-in capital of
$1,619 thousand (2013 - $1,465 thousand).
8. |
Related Party Transactions |
Included in management salaries are $30
thousand (2013 - $8 thousand) for options granted to the Chief Executive
Officer, $Nil (2013 - $24 thousand) for options granted to the Chief Operating
Officer, $33 thousand (2013 - $19 thousand) for options granted to the Chief
Financial Officer and $11 thousand (2013 - $8 thousand) for options granted to
non-employee directors, with all options being granted under the 2006 Stock
Option Plan.
Also included in management salaries
are director fees of $139 thousand (2013 - $63 thousand) for attendance to board
meetings and audit committee meetings.
In addition, during the first nine
months of 2013 the Company paid $66 thousand in fees to a director under a
management consultancy agreement. No such fees were paid during the first nine
months of 2014.
The above related party transactions
have been measured at the exchange amount which is the amount of the
consideration established and agreed to by the related parties.
9. |
Basic and Diluted Loss Per Common
Share |
Basic and diluted loss per common share
is calculated based on the weighted average number of shares outstanding during
the period. The warrants and stock options have been excluded from the
calculation of diluted loss per share since they are anti-dilutive.
13
Item 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction to managements discussion and analysis
The purpose of this section, Managements Discussion and
Analysis of Financial Condition and Results of Operations, is to provide a
narrative explanation of the financial statements that enables investors to
better understand the business of the Company, to enhance the Companys overall
financial disclosures, to provide the context within which the Companys
financial information may be analyzed, and to provide information about the
quality of, and potential variability of, the Companys financial condition,
results of operations and cash flows. Unless otherwise indicated, all financial
and statistical information included herein relates to continuing operations of
the Company. Unless otherwise indicated or the context otherwise requires, the
words, IntelGenx, Company, we, us, and our refer to IntelGenx
Technologies Corp. and its subsidiaries, including IntelGenx Corp. This
information should be read in conjunction with the accompanying unaudited
Consolidated Financial Statements and Notes thereto.
Company background
We are a drug delivery company established in 2003 and
headquartered in Montreal, Quebec, Canada. Our focus is on the development of
novel oral immediate-release and controlled-release products for the
pharmaceutical market. Our business strategy is to develop pharmaceutical
products based on our proprietary drug delivery technologies and, once the
viability of a product has been demonstrated, to license the commercial rights
to partners in the pharmaceutical industry. In certain cases, we rely upon
partners in the pharmaceutical industry to fund development of the licensed
products, complete the regulatory approval process with the U.S. Food and Drug
Administration (FDA) or other regulatory agencies relating to the licensed
products, and assume responsibility for marketing and distributing such
products.
In addition, we may choose to pursue the development of certain
products until the project reaches the marketing and distribution stage. We will
assess the potential for successful development of a product and associated
costs, and then determine at which stage it is most prudent to seek a partner,
balancing such costs against the potential for additional returns earned by
partnering later in the development process.
We have also undertaken a strategy under which we will work
with pharmaceutical companies in order to develop new dosage forms for
pharmaceutical products for which patent protection is nearing expiration. Under
§(505)(b)(2) of the Food, Drug, and Cosmetics Act, the FDA may grant market
exclusivity for a term of up to three years of exclusivity following approval of
a listed drug that contains previously approved active ingredients but is
approved in a new dosage, dosage form, route of administration or combination,
or for a new use, the approval of which was required to be supported by new
clinical trials, other than bioavailability studies, conducted by or for the
sponsor.
We are continuing to develop the existing products in our
pipeline and may also perform research and development on other potential
products as opportunities arise.
We currently purchase and/or lease, on an as-needed basis, the
equipment necessary for performing research and development activities related
to our products.
We plan to hire new personnel, primarily in the areas of
research and development, manufacturing, and administration on an as-needed
basis as we enter into partnership agreements, establish our pilot plant
VersaFilm manufacturing capability, and increase our research and development
activities.
14
Key developments
Anti-migraine VersaFilm product
On February 4, 2014, together with our
co-development partner RedHill Biopharma Ltd. ("RedHill") (IntelGenx and RedHill
together, the Companies), we announced receipt of a Complete Response Letter
("CRL") from the FDA regarding the New Drug Application ("NDA") for our
VersaFilm product for the treatment of acute migraines. The anti-migraine
VersaFilm product is a proprietary oral thin film formulation of rizatriptan
benzoate, a 5-HT1 receptor agonist and the active drug in Merck & Co.'s
Maxalt®. The questions raised by the FDA in the CRL regarding the NDA for the
anti-migraine VersaFilm product primarily relate to Chemistry, Manufacturing
and Controls ("CMC") and to the packaging and labeling of the product.
On March 3, 2014 the Companies
announced the submission of a response to the FDAs CRL and on April 24, 2014
the Companies reported that the FDA had acknowledged receipt of our response and
has requested additional CMC data, which the Companies believe they can supply
based on available information. The Companies further reported that the supplier
of the active pharmaceutical ingredient (API) of the product is currently
holding compliance discussions with the FDA following a temporary import ban of
the API. These discussions are independent of RedHill and IntelGenx and are not
specific to our anti-migraine VersaFilm product. The Companies are diligently
working on a variety of options to ensure continued supply of the raw material
regardless of the result of these compliance discussions and have already
identified and audited an alternative active pharmaceutical ingredient (API)
supplier.
On April 28, 2014 the Companies
announced the commencement of a comparative bioavailability clinical study
comparing the anti-migraine VersaFilm product to the European reference drug.
The study is intended to support the planned submission of a European Marketing
Authorization Application and follows a positive scientific advice meeting with
the German Federal Institute for Drugs and Medical Devices announced by RedHill
in November 2013.
On May 21, 2014 the Companies announced
positive results from the comparative bioavailability study.
Subsequent to the end of the quarter,
on October 1, 2014 the Companies announced that they have submitted a Marketing
Authorization Application ("MAA") to the German Federal Institute for Drugs and
Medical Devices ("BfArM") seeking European marketing approval of their oral thin
film formulation of rizatriptan for acute migraines, under the brand name
RIZAPORT®. The brand name RIZAPORT® was also conditionally approved by the FDA
as part of the NDA review process in the U.S.
Par Pharmaceutical, Inc.
On January 13, 2014 we announced the
execution of a second development and commercialization agreement with Par
Pharmaceutical, Inc. ("Par") for two new products utilizing our proprietary oral
drug delivery platforms.
Under the terms of the agreement, Par
has obtained certain exclusive rights to market and sell our products in the
USA. In exchange we received an upfront payment and will receive milestone
payments, together with a share of the profits upon commercialization. In
accordance with confidentiality clauses contained in the agreement, the
specifics of the products and the financial terms remain confidential.
Erectile Dysfunction VersaFilm product
On February 24, 2014 we announced the
completion of a pilot biostudy with our proprietary VersaFilm tadalafil product
for erectile dysfunction that indicated bioequivalence with the leading brand
reference listed drug (RLD) tadalafil product.
15
This was a randomized, two-period,
two-way crossover study in healthy male subjects. The study was designed to
determine whether VersaFilm tadalafil was bioequivalent as measured by industry
standard pharmacokinetic measures of peak plasma concentration (Cmax) and area
under the curve (AUC). The study results demonstrated that VersaFilm tadalafil
was within an acceptable range of bioequivalency with the RLD on both of these
measures.
The successful outcome of this study
enables us to finalize the optimization of the formulation and subsequently move
on to pivotal activities.
Government Funding for CNS VersaFilm product
On April 30, 2014 we announced
financial support from the National Research Council of Canada Industrial
Research Assistance Program (NRC-IRAP). In addition to advisory services and
technological expertise, the funding provided by NRC-IRAP will support further
development of a product for the treatment of central nervous system (CNS)
diseases and disorders. The product will be based upon our proprietary, oral
thin film, VersaFilm, technology.
Subsequent to the end of the quarter,
on November 3, 2014 we announced the successful completion of a pilot clinical
study for INT0036 that demonstrated a significantly improved pharmacokinetic
profile against the reference product. The study data confirm that buccal
absorption of the drug from the INT0036 film product results in a significantly
higher bioavailability of the drug compared to oral tablets. Therapeutically
relevant plasma concentrations are therefore reached significantly faster with
the VersaFilm product compared to conventional tablets. We also announced that
the product, INT0036, is indicated for the treatment of schizophrenia.
In order to maintain our competitive
advantage, we are unable to disclose further details related to this project at
this time.
U.S. patent allowances
On February 26, 2014 we announced
receipt of a Notice of Allowance ("NOA") from the United States Patent and
Trademark Office ("USPTO") for U.S. Patent Application Serial No. 11/647,033
entitled "Multilayer tablet" which covers the technology used in our
hypertension product currently under development. A second NOA has been received
for U.S. Patent Application Serial No. 11/782,838 entitled "Controlled-release
pharmaceutical tablets" which is related to the drug delivery technology used in
Forfivo XL®, our first FDA-approved product currently commercialized in the U.S.
These two NOA's conclude the examination of each U.S. patent application and
will result in the issuance of two U.S. patents after administrative processes
are completed.
On April 16, 2014 we announced receipt
of a further NOA from the USPTO for U.S. Patent Application Serial No.
12/836,810 entitled "Oral mucoadhesive dosage form" which covers IntelGenx'
proprietary AdVersa mucoadhesive drug delivery technology. This NOA concludes
the examination of the U.S. patent application and will result in the issuance
of a U.S. patent after the administrative process is completed.
Equity Analyst Coverage by H.C. Wainwright
On July 1, 2014 we announced that H.C.
Wainwright initiated equity analyst coverage of IntelGenx with a "buy" rating
and price target of $2. The stock closed at US$0.70 on the OTCQX and at CAD$0.74
on the TSX-V on Friday, June 27, 2014.
A copy of the initiation report can be
accessed by clicking:
https://hcwco.bluematrix.com/docs/pdf/ff51024b-71e2-47c5-ab58-7d05118ab4aa.pdf.
16
All reports on us prepared by analysts
represent the views of such analysts and are not necessarily those of IntelGenx.
We are not responsible for the content, accuracy or timelines provided by
analysts.
Currency rate fluctuations
Our operating currency is Canadian dollars, while our reporting
currency is U.S. dollars. Accordingly, our results of operations and balance
sheet position have been affected by currency rate fluctuations. The following
management discussion and analysis takes this into consideration whenever
material. In summary, when comparing the currency rates used to prepare our
financial statements for Q3, 2014 with the currency rates used to prepare the
same period of the previous year, the strengthened US dollar results in an
unrealized loss of approximately $232 thousand on our cash position at September
30, 2014, but reduces our net loss from operations by approximately $91 thousand
for the nine month period ending September 30, 2014.
Results of operations for the nine month period ended
September 30, 2014 compared with the nine month period ended September 30,
2013.
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
In U.S.$ thousands |
|
2014 |
|
|
2013 |
|
|
Increase/ |
|
|
Increase/ |
|
|
|
|
|
|
|
|
|
(Decrease) |
|
|
(Decrease) |
|
Revenue |
$ |
834 |
|
$ |
804 |
|
$ |
30 |
|
|
4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and Development Expenses |
|
772 |
|
|
406 |
|
|
366 |
|
|
90% |
|
Selling, General and Administrative Expenses |
|
1,524 |
|
|
1,341 |
|
|
183 |
|
|
14% |
|
Depreciation of tangible assets |
|
25 |
|
|
24 |
|
|
1 |
|
|
4% |
|
Amortization of intangible assets |
|
26 |
|
|
29 |
|
|
(3 |
) |
|
(10% |
) |
Net Loss |
|
(1,490 |
) |
|
(995 |
) |
|
495 |
|
|
50% |
|
Revenue
Total revenue increased from $804 thousand in the first nine
months of 2013 to $834 thousand in the first nine months of 2014.
Of the total revenue recorded during the first nine months of
2014, $534 thousand (2013: $347 thousand) relates to Forfivo XL®, our first FDA
approved product, which was launched in October 2012 under a licensing
partnership with Edgemont Pharmaceuticals LLP (Edgemont). Upon entering into
the licensing agreement, Edgemont paid us an upfront fee of $1 million, which we
recognized as deferred license revenue. The deferred license revenue is being
amortized in income over the period where sales of Forfivo XL® are expected to
be exclusive. As a result of this policy, we recognized $230 thousand in income
during the first nine months of 2014 (2013: $230 thousand). In addition, in the
nine months ended September 30, 2014 we recognized approximately $304 thousand
(2013: $117 thousand) of royalty income earned from commercial sales of Forfivo
XL®. Pursuant to the licensing agreement, royalty income is calculated as a
percentage of net trade sales generated by Edgemont, is payable to us within 40
days of the end of each calendar quarter and recorded by us as income upon
receipt.
Sales of Forfivo XL® have experienced significant quarterly
growth in 2014 to date. Net trade sales in the second quarter of 2014 grew by
55% when compared with the previous quarter, and grew by a further 31% in Q3,
2014. Net trade sales in the third quarter of 2014 were more than double those
recorded in the first quarter. Royalty income received in Q3, 2014 from sales of
Forfivo XL® totaled $127 thousand, compared with $27 thousand received in the
third quarter of 2013. Management anticipates that sales of Forfivo XL® will
continue to grow at a significant rate.
17
Revenue for the nine months ended September 30, 2014 also
includes an aggregate $300 thousand (2013: $457 thousand) in payments received
for successfully achieving certain R&D development milestones for certain
R&D development projects currently under development. We anticipate the
receipt of further milestone payments as and when we successfully achieve
further development milestones in accordance with contractual terms.
Research and development (R&D) expenses
R&D expenses, net of R&D investment tax credits,
totaled $772 thousand in the nine months ended September 30, 2014, representing
an increase of $366 thousand to the amount of $406 thousand expensed in the same
period of 2013.
The increase in R&D expenses relates primarily to the costs
incurred in the development of our second Par project, which is progressing
according to plan, and also to the costs of a pilot clinical study for our
VersaFilm product for erectile dysfunction that was completed in Q1, 2014 and
that indicated bioequivalence with the leading brand reference listed drug
tadalafil product.
Included within R&D expenses for the first nine months of
2014 are R&D Salaries of $329 thousand, of which approximately $6 thousand
represents non-cash compensation. This compares with R&D salaries of $427
thousand in the first nine months of 2013, of which approximately $6 thousand
represented non-cash compensation. The decrease in R&D salaries is primarily
attributable to the fact that we ceased, with effect from December 31, 2013, to
apportion 50% of the remuneration of our CEO to the R&D department.
In the nine months ended September 30, 2014 we recorded
estimated research and development tax credits and refunds of $63 thousand,
compared with $102 thousand that was recorded in the same period of the previous
year. The amounts of research and development tax credits and refunds recorded
by us may fluctuate from reporting period to reporting period depending upon the
level of activity surrounding projects that we are currently progressing,
together with whether or not we are able to fulfill Canadian eligibility
criteria for obtaining such tax credits and refunds.
Selling, general and administrative (SG&A) expenses
SG&A expenses totaled $1,524 thousand in the first nine
months of 2014, representing an increase of $183 thousand compared with $1,341
thousand in the first nine months of 2013.
The increase in SG&A expenses relates in part to an
increase in legal expenses of approximately $94 thousand primarily related to
our Paragraph IV litigation with Wockhardt Bio AG (Wockhardt). In August 2013
we received a Paragraph IV Certification Letter from Wockhardt, advising of the
submission of an Abbreviated New Drug Application ("ANDA") to the FDA requesting
authorization to manufacture and market generic versions of Forfivo XL®
("Forfivo") 450 mg capsules in the United States. We continue to enforce our
intellectual property rights for Forfivo XL®, which is currently protected by an
issued patent listed in the FDA's Approved Drug Products List (Orange Book).
SG&A expenses increased by a further $155 thousand for
administrative and management salaries, due to the fact that we ceased to
allocate 50% of the remuneration of our CEO to R&D expenses for fiscal 2014.
SG&A expenses also increased by approximately $80 thousand, due to the
increase in the remuneration of our Board of Directors that was effective from
April 1, 2014. However, as a result of management changes recently announced, we
do not expect the increased rate of Board remuneration to continue. Increases in
SG&A costs were partly compensated by a profit of approximately $145
thousand (2013: $16 thousand) realized on currency exchange, primarily from the
conversion of US$ to CAD$.
Included in SG&A expenses are non-cash compensation
expenses of approximately $65 thousand (2013: $53 thousand) from options granted
to management employees in 2012 and 2013, $11 thousand (2013: $20 thousand) from options granted to non-employee directors in 2013, and
$Nil (2013: $15 thousand) from options granted to consultants in 2012.
18
Depreciation of tangible assets
In the nine months ended September 30, 2014 we recorded an
expense of $25 thousand for the depreciation of tangible assets, compared with
an expense of $24 thousand for the same period of the previous year. As at
September 30, 2014 we are carrying approximately $681 thousand of tangible
assets, primarily VersaFilm manufacturing equipment, that are not being
depreciated as they are not currently in service.
Amortization of intangible assets
The amortization of intangible assets expensed for the first
nine months of 2014 totaled $26 thousand, compared with $29 thousand in the same
period of last year. The expense relates to the amortization of NDA acquisition
costs in respect of the final progress payment to acquire 100% ownership of
Forfivo XL®. Commercialization of Forfivo XL® in October 2012 triggered
amortization of the asset over its estimated useful life of 39 months.
Share-based compensation expense, warrants and stock based
payments
Share-based compensation expense, warrants and share-based
payments totaled $82 thousand for the nine months ended September 30, 2014,
compared with $82 thousand for the nine months ended September 30, 2013.
We expensed approximately $71 thousand in the first nine months
of 2014 for options granted to our employees in 2012 and 2013 under the 2006
Stock Option Plan, and approximately $11 thousand for options granted to
non-employee directors in 2013, compared with $59 thousand and $8 respectively
that was expensed in the same period of the previous year. We also expensed $15
thousand in the first nine months of 2013 for options granted to
consultants.
There remains approximately $56 thousand in stock based
compensation to be expensed in fiscal 2014 and 2015, all of which relates to the
issuance of options to our employees and directors during 2012 and 2013. We
anticipate the issuance of additional options and warrants in the future, which
will continue to result in stock-based compensation expense.
Key items from the balance sheet.
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
In U.S.$ thousands |
|
September |
|
|
December |
|
|
Increase/ |
|
|
Increase/ |
|
|
|
30, 2014 |
|
|
31, 2013 |
|
|
(Decrease) |
|
|
(Decrease) |
|
Current Assets |
$ |
4,737 |
|
$ |
5,550 |
|
$ |
(813 |
) |
|
(15% |
) |
Leasehold improvements and equipment |
|
805 |
|
|
588 |
|
|
217 |
|
|
37% |
|
Intangible Assets |
|
53 |
|
|
79 |
|
|
(26 |
) |
|
(33% |
) |
Accounts payable and accrued liabilities |
|
267 |
|
|
593 |
|
|
(326 |
) |
|
(55% |
) |
Deferred License Revenue |
|
435 |
|
|
616 |
|
|
(181 |
) |
|
(29% |
) |
Capital Stock |
|
1 |
|
|
1 |
|
|
0 |
|
|
0% |
|
Additional Paid-in-Capital |
|
22,635 |
|
|
20,934 |
|
|
1,701 |
|
|
8% |
|
19
Current assets
Current assets totaled $4,737 thousand at September 30, 2014
compared with $5,550 thousand at December 31, 2013. The decrease of $813
thousand is attributable to a decrease in cash and cash equivalents of
approximately $629 thousand, a decrease in accounts receivable of approximately
$92 thousand, a decrease in prepaid expenses of approximately $58 thousand, and
a decrease in investment tax credits receivable of approximately $34
thousand.
Cash and cash equivalents
Cash and cash equivalents totaled $4,376 thousand as at
September 30, 2014 representing a decrease of $629 thousand compared with the
balance of $5,005 thousand as at December 31, 2013. The decrease in cash on hand
relates to net cash used by operating activities of $1,679 thousand, net cash
used in investing activities of $274 thousand, and an unrealized foreign
exchange loss of $295 thousand, partly offset with net cash provided by
financing activities of $1,619 thousand.
The unrealized foreign exchange loss of $295 thousand relates
to cash balances physically held in our operating currency of Canadian dollars
being converted into our reporting currency of U.S. dollars.
The cash provided by financing activities derives from the
exercise of 2,480,988 warrants that were exercised for 2,480,988 common shares
for cash consideration of $1,619 thousand.
Accounts receivable
Accounts receivable totaled $52 thousand as at September 30,
2014 representing a decrease of $92 thousand compared with the balance of $144
thousand as at December 31, 2013. The decreased balance relates to the payment
of invoices in Q1, 2014 that were issued to clients and remained outstanding at
December 31, 2013.
Prepaid expenses
As of September 30, 2014 prepaid expenses totaled $75 thousand
compared with $133 thousand as of December 31, 2013. The decrease in prepaid
expenses primarily relates to a deposit paid in December 2013 for a biostudy
undertaken in the first quarter of 2014, and a deposit paid in 2013 for R&D
machinery that was to be supplied and installed in 2014.
Investment tax credits receivable
R&D investment tax credits receivable totaled approximately
$234 thousand as at September 30, 2014 compared with $268 thousand as at
December 31, 2013. The decrease relates to the receipt in Q2, 2014 of $106
thousand, being the balance of the fiscal 2012 investment tax credit receivable,
which was partly offset by the accrual recorded for the first six months of
2014.
Leasehold improvements and equipment
As at September 30, 2014, the net book value of leasehold
improvements and equipment amounted to $805 thousand, compared to $588 thousand
at December 31, 2013. In the nine months ended September 30, 2014 additions to
assets totaled $274 thousand and comprised $53 thousand for pilot plant
manufacturing equipment for our VersaFilm products, $143 thousand for R&D
equipment, $69 thousand for leasehold improvements and $9 thousand for computer
equipment. In the nine months ended September 30, 2014 we recorded depreciation
on leasehold improvements and equipment of $25 thousand and incurred an
unrealized foreign exchange loss of $32 thousand.
20
As at September 30, 2014 we are carrying approximately $681
thousand of tangible assets, primarily VersaFilm manufacturing equipment, that
are not being depreciated as they are not currently in service.
Intangible assets
As at September 30, 2014 NDA acquisition costs of $53 thousand
(December 31, 2013 - $79 thousand) were recorded as intangible assets on our
balance sheet and are related to the acquisition of 100% ownership of Forfivo
XL®. The asset is being amortized over its expected useful life of 39 months and
amortization commenced upon commercial launch of Forfivo XL® in the fourth
quarter of 2012.
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities totaled $267 thousand
as at September 30, 2014 (December 31, 2013 - $593 thousand) and consisted of
approximately $33 thousand relating to research and development activities,
approximately $89 thousand relating to professional fees, and approximately $119
thousand relates to accrued payroll liabilities. This compares with
approximately $100 thousand relating to research and development activities,
approximately $180 thousand relating to professional fees, of which
approximately $87 thousand related to the public offering completed in December,
2013, and approximately $301 thousand relating to accrued payroll liabilities,
that was included in the accounts payable and accrued liabilities balance as at
December 31, 2013.
Deferred license revenue
Pursuant to the execution of a licensing agreement for Forfivo
XL®, we received an upfront fee from Edgemont Pharmaceuticals in the first
quarter of 2012, which we recognized as deferred license revenue. The deferred
license revenue is being amortized in income over the period where sales of
Forfivo XL® are expected to be exclusive. As a result of this policy, we have a
deferred revenue balance related to this upfront fee of $385 thousand at
September 30, 2014 (December 31, 2013: $616 thousand) that has not been
recognized as revenue, of which $77 thousand is recognized as the non-current
portion and $308 thousand is recognized in current assets as the current
portion. This compares with $308 thousand and $308 thousand respectively as at
December 31, 2013.
In January, 2014 IntelGenx entered into a development and
commercialization agreement with Par Pharmaceutical, Inc. for two products. The
Company received $100 thousand upon execution of the agreement, of which $50
thousand has been recognized in current liabilities as deferred revenue until
certain development milestones that are expected to be achieved in 2014 have
been realised.
Shareholders equity
As at September 30, 2014 we had accumulated a deficit of
$17,592 thousand compared with an accumulated deficit of $16,102 thousand as at
December 31, 2013. Total assets amounted to $5,595 thousand and shareholders
equity totaled $4,893 thousand as at September 30, 2014, compared with total
assets and shareholders equity of $6,217 thousand and $5,008 thousand
respectively, as at December 31, 2013.
Capital stock
As at September 30, 2014 capital stock amounted to $635
compared to $610 at December 31, 2013. The increase reflects the issuance of
2,480,988 shares related to the exercise of warrants, with all shares issued at
par value of $0.00001. Capital stock is disclosed at its par value with the
excess of proceeds shown in Additional paid-in-capital.
21
Additional paid-in-capital
Additional paid-in capital totaled $22,635 thousand at
September 30, 2014, compared with $20,934 thousand at December 31, 2013.
Additional paid-in capital increased by $1,619 thousand for warrants exercised
during the first quarter, and by $82 thousand for stock based compensation
attributable to the amortization of stock options granted to employees and
directors.
Taxation
As at December 31, 2013, the date of our latest annual tax
return, we had Canadian and provincial net operating losses of approximately
$8,874 thousand (2012: $8,390 thousand) and $9,040 thousand (2012: $8,566
thousand) respectively, which may be applied against earnings of future years.
Utilization of the net operating losses is subject to significant limitations
imposed by the change in control provisions. Canadian and provincial losses will
be expiring between 2027 and 2033. A portion of the net operating losses may
expire before they can be utilized.
As at December 31, 2013, we had non-refundable tax credits of
$1,098 thousand (2012 - $914 thousand) of which $22 thousand is expiring in
2017, $212 thousand is expiring in 2018, $186 thousand is expiring in 2019, $158
thousand is expiring in 2020, $169 thousand is expiring in 2021, $232 thousand
is expiring in 2022 and $119 thousand is expiring in 2023. We also had
undeducted research and development expenses of $4,354 thousand (2012: $4,464
thousand) with no expiration date.
The deferred tax benefit of these items was not recognized in
the accounts as it has been fully provided for.
Key items from the statement of cash flows
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
In U.S.$ thousands |
|
September |
|
|
September |
|
|
Increase/ |
|
|
Increase/ |
|
|
|
30, 2014 |
|
|
30, 2013 |
|
|
(Decrease) |
|
|
(Decrease) |
|
Operating Activities |
$ |
(1,679 |
) |
$ |
(725 |
) |
$ |
954 |
|
|
131% |
|
Financing Activities |
|
1,619 |
|
$ |
1,496 |
|
$ |
123 |
|
|
8% |
|
Investing Activities |
|
(274 |
) |
|
(260 |
) |
|
14 |
|
|
5% |
|
Cash and cash equivalents - end of period |
|
4,376 |
|
|
2,551 |
|
|
1,825 |
|
|
72% |
|
Statement of cash flows
Net cash used by operating activities was $1,679 thousand in
the nine months ended September 30, 2014, compared with $725 thousand for the
nine months ended September 30, 2013. In the first nine months of 2014, net cash
used by operating activities consisted of an operating loss of $1,357 thousand
(2013: $860 thousand) net of non-cash related expenses of approximately $133
thousand (2013: $135 thousand), and a decrease in non-cash operating elements of
working capital of $322 thousand, compared with an increase of $135 thousand in
the same period of the previous year.
Operating activities will continue to consume our available
funds until we are able to generate increased revenues.
The net cash provided by financing activities was $1,619
thousand in the first nine months of 2014, compared with $1,496 thousand
provided in the same period of the previous year. The net cash provided in the
first nine months of 2014 resulted from the exercise of 2,480,988 warrants,
whereas the cash provided in the first nine months of 2013 resulted from the
exercise of 3,098,500 warrants and 75,000 stock options.
22
Net cash used in investing activities amounted to $274 thousand
in the nine months ended September 30, 2014 compared with $260 thousand in the
nine months ended September 30, 2013. In the first nine months of 2014 we
invested approximately $53 thousand (2013: $252 thousand) for pilot plant
manufacturing equipment for our VersaFilm products, $143 thousand (2013: $5
thousand) for R&D equipment, $69 thousand (2013: $Nil) for leasehold
improvements and $9 thousand (2013: $3 thousand) for computer equipment.
The balance of cash and cash equivalents as at September 30,
2014 amounted to $4,376 thousand, compared with $2,551 thousand at September 30,
2013.
Off-balance sheet arrangements
We have no off-balance sheet arrangements.
Item 3. |
Controls and Procedures.
|
As of the end of the period
covered by this report, we carried out an evaluation, under the supervision and
with the participation of management, including our chief executive officer and
principal financial officer, of the effectiveness of the design and operation of
our disclosure controls and procedures as defined in Rules 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934. Based upon that evaluation,
our chief executive officer and principal financial officer concluded that our
disclosure controls and procedures are effective to cause the material
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act to be recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms. There have been no
significant changes in our internal controls or in other factors which could
significantly affect internal controls subsequent to the date we carried out our
evaluation.
PART II
Item 1. |
Legal Proceedings |
|
This Item is not applicable |
|
|
Item 2. |
Unregistered Sales of Equity Securities and
Use of Proceeds |
|
This Item is not applicable. |
|
|
Item 3. |
Defaults Upon Senior Securities |
|
This Item is not applicable. |
|
|
Item 4. |
(Reserved) |
|
|
Item 5. |
Other Information |
|
This Item is not applicable.
|
23
SIGNATURES
In accordance with the
requirements of the Securities Exchange Act of 1934, the Registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
INTELGENX TECHNOLOGIES CORPORATION
Date: November 12, 2014 |
By: |
/s/
Horst G. Zerbe |
|
|
Horst G. Zerbe |
|
|
President, C.E.O. and |
|
|
Director |
|
|
|
|
|
|
|
|
|
Date: November 12, 2014 |
By: |
/s/
Paul A. Simmons |
|
|
Paul A. Simmons |
|
|
Principal Accounting Officer
|
24
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002
I, Horst G. Zerbe, Chief Executive
Officer of IntelGenx Technologies Corp. (the "registrant"), certify that:
1. I have reviewed this quarterly
report on Form 10-Q of IntelGenx Technologies Corp.;
2. Based on my knowledge, this
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 report;
3. Based on my knowledge, the
financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other
certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other
certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent functions):
a) All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal control over financial
reporting.
Date: November 12, 2014
/s/ Horst G.
Zerbe |
|
Horst G. Zerbe |
|
Interim Chief Executive Officer |
|
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002
I, Paul A. Simmons, Principal
Accounting Officer of IntelGenx Technologies Corp. (the "registrant"), certify
that:
1. I have reviewed this quarterly
report on Form 10-Q of IntelGenx Technologies Corp. ;
2. Based on my knowledge, this
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 report;
3. Based on my knowledge, the
financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other
certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other
certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent functions):
a) All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal control over financial
reporting.
Date: November 12, 2014
/s/ Paul A.
Simmons |
|
Paul A. Simmons |
|
Principal Accounting Officer |
|
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 Quarterly
Report of IntelGenx Technologies Corporation (the "Company") on Form 10-Q for
the period ending September 30, 2014, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Horst G. Zerbe, Chief Executive
Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted
pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge and belief:
(1) The Report fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
(2) The information contained in
the Report fairly presents, in all material respects, the financial condition
and result of operations of the Company.
/s/ Horst G. Zerbe
|
|
Horst G. Zerbe |
|
Interim Chief Executive Officer |
|
November 12, 2014 |
|
A signed original of this written
statement required by Section 906, or other document authenticating,
acknowledging, or otherwise adopting the signature that appears in typed form
within the electronic version of this written statement has been provided to the
Company and will be retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request. The foregoing certifications are
accompanying the Company's Form 10-Q solely pursuant to section 906 of the
Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63
of title 18, United States Code) and is not being filed as part of the Form 10-Q
or as a separate disclosure document.
Exhibit 32.2
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 Quarterly
Report of IntelGenx Technologies Corporation(the "Company") on Form 10-Q for the
period ending September 30, 2014, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Paul A. Simmons, Principal
Accounting Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as
adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that, to the
best of my knowledge and belief:
(1) The Report fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
(2) The information contained in
the Report fairly presents, in all material respects, the financial condition
and result of operations of the Company.
/s/ Paul A.
Simmons |
|
Paul A. Simmons |
|
Principal Accounting Officer |
|
November 12, 2014 |
|
A signed original of this written
statement required by Section 906, or other document authenticating,
acknowledging, or otherwise adopting the signature that appears in typed form
within the electronic version of this written statement has been provided to the
Company and will be retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request. The foregoing certifications are
accompanying the Company's Form 10-Q solely pursuant to section 906 of the
Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63
of title 18, United States Code) and is not being filed as part of the Form 10-Q
or as a separate disclosure document.
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