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 March 31, 2015
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 May 13, 2015.
IntelGenx Technologies Corp.
Form 10-Q
TABLE OF CONTENTS
|
PART I. FINANCIAL INFORMATION
|
|
Item 1. |
Financial Statements |
1 |
|
Consolidated Balance Sheet |
2
|
|
Statement of Shareholders Equity |
3 |
|
Statement of Operations and
Comprehensive Loss |
4
|
|
Statement of Cash Flows |
5 |
|
Notes to Financial Statements
|
6
|
Item 2. |
Management's Discussion and Analysis and
Results of Operations |
17 |
Item 3. |
Controls and Procedures |
24
|
|
|
|
|
PART II. OTHER INFORMATION |
|
Item 1. |
Legal Proceedings |
24 |
Item 2. |
Unregistered Sales of Equity
Securities and Use of Proceeds |
24
|
Item 3. |
Defaults upon Senior Securities |
24 |
Item 4. |
Reserved |
24
|
Item 5. |
Other Information |
24 |
Item 6. |
Exhibits |
24
|
|
Signatures |
25
|
IntelGenx Technologies Corp.
Consolidated Interim Financial Statements
March 31, 2015
(Expressed in U.S. Funds)
(Unaudited)
Contents |
|
Consolidated Balance Sheet |
2 |
Consolidated Statement of Shareholders' Equity |
3 |
Consolidated Statement of Comprehensive
Loss |
4 |
Consolidated Statement of Cash Flows |
5 |
Notes to Consolidated Financial Statements
|
6 - 12
|
1
IntelGenx Technologies Corp.
|
|
Consolidated Balance Sheet |
(Expressed in Thousands of U.S. Dollars ($000s) Except
Share and Per Share Data) |
(Unaudited) |
|
|
March 31, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
Assets |
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
3,819
|
|
$ |
4,399 |
|
Accounts receivable |
|
76 |
|
|
652 |
|
Prepaid expenses |
|
72 |
|
|
96
|
|
Investment tax credits receivable |
|
122 |
|
|
108 |
|
Total Current Assets |
|
4,089 |
|
|
5,255 |
|
Leasehold Improvements and Equipment, net |
|
1,361 |
|
|
983 |
|
Intangible Assets (note 4) |
|
25 |
|
|
46
|
|
Security
Deposit |
|
237 |
|
|
- |
|
Total Assets |
$ |
5,712 |
|
$ |
6,284 |
|
Liabilities |
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
245 |
|
|
466 |
|
Current portion of term
loan (note 7) |
|
39 |
|
|
-
|
|
Deferred license revenue (note 6) |
|
856 |
|
|
1,245 |
|
Total Current Liabilities |
|
1,140 |
|
|
1,711 |
|
Term Loan (note 7) |
|
356 |
|
|
- |
|
Total Liabilities |
|
1,496 |
|
|
1,711 |
|
Shareholders' Equity |
|
|
|
|
|
|
Capital Stock (note 8) |
|
1 |
|
|
1
|
|
Additional Paid-in-Capital (note 9) |
|
22,674 |
|
|
22,654 |
|
Accumulated Deficit |
|
(17,902 |
) |
|
(17,848 |
) |
Accumulated
Other Comprehensive Loss |
|
(557 |
) |
|
(234 |
) |
Total Shareholders Equity |
|
4,216 |
|
|
4,573 |
|
|
$ |
5,712 |
|
$ |
6,284 |
|
See accompanying notes
Approved on Behalf of the Board:
/s/ Horst G.
Zerbe
Director
/s/ Bernd
Melchers
Director
2
IntelGenx Technologies Corp.
|
|
Consolidated Statement of Shareholders' Equity
|
For the Period Ended March 31, 2015 |
(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 |
|
|
Loss |
|
|
Equity |
|
Balance - December 31, 2014 |
|
63,465,255 |
|
$ |
1 |
|
$ |
22,654 |
|
$ |
(17,848 |
)
|
$ |
(234 |
)
|
$ |
4,573
|
|
Foreign currency translation adjustment |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(323 |
) |
|
(323 |
) |
Stock-based compensation (note 9) |
|
- |
|
|
- |
|
|
20 |
|
|
- |
|
|
- |
|
|
20 |
|
Net loss for the
period |
|
- |
|
|
- |
|
|
- |
|
|
(54 |
) |
|
- |
|
|
(54 |
) |
Balance March 31, 2015 |
|
63,465,255 |
|
$ |
1 |
|
$ |
22,674 |
|
$ |
(17,902 |
) |
$ |
(557 |
) |
$ |
4,216 |
|
See accompanying notes
3
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
|
|
|
|
Ended March 31, |
|
|
|
2015 |
|
|
2014 |
|
Revenues |
|
|
|
|
|
|
Royalties |
$ |
234 |
|
$ |
97 |
|
License and other revenue |
|
391 |
|
|
125 |
|
Total Revenues |
|
625 |
|
|
222 |
|
Expenses |
|
|
|
|
|
|
Cost of royalty and license revenue |
|
84 |
|
|
- |
|
Research and development
expense |
|
117 |
|
|
188 |
|
Selling, general and administrative expense
|
|
393 |
|
|
460 |
|
Depreciation of tangible
assets |
|
7 |
|
|
7 |
|
Amortization of intangible assets |
|
9 |
|
|
9 |
|
Total Expenses |
|
610 |
|
|
664 |
|
|
|
|
|
|
|
|
Operating income (loss) |
|
15 |
|
|
(442 |
)
|
Interest income |
|
10 |
|
|
- |
|
Financing and Interest expense |
|
(79 |
) |
|
- |
|
Net Loss |
|
(54 |
) |
|
(442 |
) |
|
|
|
|
|
|
|
Other Comprehensive Loss |
|
|
|
|
|
|
Foreign currency translation adjustment |
|
(323 |
) |
|
(231 |
) |
Comprehensive
Loss |
$ |
(377 |
) |
$ |
(673 |
) |
|
|
|
|
|
|
|
Basic and
Diluted Weighted Average Number of Shares Outstanding |
|
63,465,255 |
|
|
62,064,139 |
|
Basic and Diluted Loss Per Common Share (note 11) |
$ |
(0.00 |
) |
$ |
(0.01 |
) |
See accompanying notes
4
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
|
|
|
|
Ended March 31, |
|
|
|
2015 |
|
|
2014 |
|
Funds Provided - |
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
Net loss |
$ |
(54 |
)
|
$ |
(442 |
)
|
Amortization and depreciation |
|
16 |
|
|
16 |
|
Stock-based compensation |
|
20 |
|
|
32 |
|
|
|
(18 |
) |
|
(394 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
576 |
|
|
118 |
|
Prepaid expenses |
|
24 |
|
|
41 |
|
Investment tax credits receivable |
|
(14 |
) |
|
(17 |
) |
Security deposit |
|
(237 |
)
|
|
- |
|
Accounts payable and accrued liabilities |
|
(221 |
) |
|
(309 |
) |
Deferred revenue |
|
(389 |
) |
|
(27 |
) |
Net change in assets and
liabilities |
|
(261 |
) |
|
(194 |
) |
Net cash used by
operating activities |
|
(279 |
) |
|
(588 |
) |
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
Issuance of
term loans |
|
395 |
|
|
- |
|
Proceeds
from exercise of warrants |
|
- |
|
|
1,064 |
|
Net cash provided by
financing activities |
|
395 |
|
|
1,064 |
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
Additions
to property and equipment |
|
(384 |
) |
|
(105 |
) |
Net cash used in
investing activities |
|
(384 |
) |
|
(105 |
) |
Increase (Decrease) in Cash and Cash
Equivalents |
|
(268 |
)
|
|
371 |
|
Effect of Foreign Exchange on Cash and Cash Equivalents
|
|
(312 |
) |
|
(210 |
) |
Cash and Cash Equivalents |
|
|
|
|
|
|
Beginning of Period |
|
4,399 |
|
|
5,005 |
|
End of Period
|
$ |
3,819 |
|
$ |
5,166 |
|
See accompanying notes
5
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Interim Financial Statements
|
March 31, 2015 |
(Expressed in U.S. Funds) |
(Unaudited) |
1. |
Basis of Presentation |
|
|
|
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, 2014.
Operating results for the three months ended March 31, 2015 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2015. 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 |
|
|
|
The FASB issued ASU No. 2014-08 which enhances
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 expands 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 were effective in
the first quarter of 2015 for public organizations with calendar year
ends. The adoption of this Statement did not have a material effect on the
Company`s financial position or results of operations.
|
6
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Interim Financial Statements
|
March 31, 2015 |
(Expressed in U.S. Funds) |
(Unaudited) |
3. |
Significant Accounting Policies |
|
|
|
Recently Issued Accounting
Pronouncements |
|
|
|
ASU 2015-02, Consolidation (Topic 810): Amendments to
the Consolidation Analysis |
|
|
|
The amendments in ASU 2015-02 are intended to improve
targeted areas of consolidation guidance for legal entities such as
limited partnerships, limited liability corporations, and securitization
structures. The new standard reduces the number of consolidation models
and improves current GAAP by: |
|
|
|
-Placing more emphasis on risk of loss when determining a
controlling financial interest. |
|
|
|
-Reducing the frequency of the application of
related-party guidance when determining a controlling financial interest
in a variable interest entity (VIE). |
|
|
|
-Changing consolidation conclusions for public and
private companies in several industries that typically make use of limited
partnerships or VIEs. |
|
|
|
The amendments are effective for public business entities
for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2015. Early adoption is permitted, including adoption
in an interim period. ASU 2015-02 may be applied retrospectively in
previously issued financial statements. The adoption of this Statement is
not expected to have a material effect on the Company`s financial position
or results of operations. |
|
|
|
ASU 2015-01, Income Statement - Extraordinary and
Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation
by Eliminating the Concept of Extraordinary Items |
|
|
|
The amendments in ASU 2015-01 eliminate from U.S. GAAP
the concept of extraordinary items. Subtopic 225-20, Income Statement -
Extraordinary and Unusual Items, required that an entity separately
classify, present, and disclose extraordinary events and transactions. The
FASB heard from stakeholders that the concept of extraordinary items
causes uncertainty because it is unclear when an item should be considered
both unusual and infrequent. Additionally, some stakeholders said that
although users find information about unusual or infrequent events and
transactions useful, they do not find the extraordinary item
classification and presentation necessary to identify those events and
transactions. Other stakeholders noted that it is extremely rare in
current practice for a transaction or event to meet the requirements to be
presented as an extraordinary item. This ASU will also align more closely
U.S. GAAP income statement presentation guidance with IAS 1,
Presentation of Financial Statements, which prohibits the
presentation and disclosure of extraordinary items. The amendments are
effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2015. A reporting entity may apply the
amendments prospectively. A reporting entity also may apply the amendments
retrospectively to all prior periods presented in the financial
statements. Early adoption is permitted provided that the guidance is
applied from the beginning of the fiscal year of adoption. The adoption of
this Statement is not expected to have a material effect on the Company`s
financial position or results of operations. |
7
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Interim Financial Statements
|
March 31, 2015 |
(Expressed in U.S. Funds) |
(Unaudited) |
3. |
Significant Accounting Policies (Contd)
|
|
|
|
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 Statement on its consolidated financial statements.
|
|
|
|
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 this
Statement is not expected to have a material effect on the Company`s
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 this Statement is not
expected to have a material effect on the Company`s financial position or
results of operations. |
8
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Interim Financial Statements
|
March 31, 2015 |
(Expressed in U.S. Funds) |
(Unaudited) |
3. |
Significant Accounting Policies (Contd)
|
|
|
|
|
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: |
|
|
|
|
|
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 Statement on its consolidated financial statements.
|
|
|
|
4. |
Intangible Assets |
|
|
|
|
As of March 31, 2015 NDA acquisition costs of $25
thousand (December 31, 2014 - $46 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. |
|
|
|
5. |
Bank indebtedness |
|
|
|
|
The Company's credit facility is subject to review
annually and consists of an operating demand line of credit of up to
CAD$250 thousand and corporate credits cards of up to CAD$55 thousand.
Borrowings under the operating demand line of credit bear interest at the
Banks prime lending rate plus 2%. The credit facility and term loan (see
note 7) are secured by a first ranking movable hypothec on all present and
future movable property of the Company and a 50% guarantee by Export
Development Canada, a Canadian Crown corporation export credit agency. The
terms of the banking agreement require the Company to comply with certain
debt service coverage and debt to net worth financial covenants on an
annual basis at the end of the Companys fiscal year. As at March 31,
2015, the Company has not drawn on its credit facility.
|
9
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Interim Financial Statements
|
March 31, 2015 |
(Expressed in U.S. Funds) |
(Unaudited) |
6. |
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. |
|
|
|
Pursuant to the execution of a licensing agreement for
Forfivo XL®, IntelGenx received an upfront fee from Edgemont
Pharmaceuticals (Edgemont) in the first quarter of 2012, which IntelGenx
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 the fourth quarter of 2014, Edgemont exercised its
right to extend the license for the exclusive marketing of Forfivo XL®. In
accordance with the terms for exercising such right, IntelGenx invoiced
$1.25 million to Edgemont and recognized the full amount as deferred
revenue, to be amortized in income from October 2014 through September
2015. |
|
|
|
As a result of this policy, IntelGenx has a deferred
revenue balance of $856 thousand at March 31, 2015 (December 31, 2014 -
$1,245 thousand) that has not been recognized as revenue. |
|
|
7. |
Term loan |
|
|
|
The Companys term loan facility consists of CAD$500
thousand bearing interest at the Banks prime lending rate plus 2.50%, and
CAD$3 million bearing interest at a fixed rate to be determined at
drawdown. The term loan is subject to the same security and financial
covenants as the bank indebtedness (see note 5). |
|
|
|
The CAD$3 million tranche of the term loan will be
disbursed subsequent to meeting certain conditions based upon the
Companys operating cash flow throughout the first six months of 2015
being positive. There is a moratorium on capital repayments for the first
6 months of each drawdown, at which point the term loan will be repayable
in monthly instalments over 60 months. |
|
|
|
March 31, 2015 |
|
|
March 31, 2014 |
|
|
|
|
$ |
|
|
$ |
|
|
Term loan |
|
395 |
|
|
0 |
|
|
Current portion |
|
39
|
|
|
0 |
|
|
|
|
356 |
|
|
0 |
|
10
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Interim Financial Statements
|
March 31, 2015 |
(Expressed in U.S. Funds) |
(Unaudited) |
7. |
Term loan (Contd) |
|
|
|
Principal repayments due in each of the next five years
are as follows: |
|
2015 |
$ |
20 |
|
|
2016 |
|
79 |
|
|
2017 |
|
79 |
|
|
2018 |
|
79 |
|
|
2019 |
|
79 |
|
|
Thereafter |
|
59 |
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
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, 2014 - 63,465,255) common
shares |
$ |
635 |
|
$ |
635 |
|
9. |
Additional Paid-In Capital |
|
|
|
Stock options |
|
|
|
No stock options were exercised during either of the
three month periods ended March 31, 2014 or March 31, 2015. |
|
|
|
Compensation expenses for stock-based compensation of $20
thousand and $32 thousand were recorded during the three-month periods
ended March 31, 2015 and March 31, 2014 respectively. The entire amount
expensed in each of the first quarters of 2015 and 2014 relates to stock
options granted to employees and directors. As at March 31, 2015 the
Company has $53 thousand (2014 - $194 thousand) of unrecognized
stock-based compensation. |
11
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Interim Financial Statements
|
March 31, 2015 |
(Expressed in U.S. Funds) |
(Unaudited) |
9. |
Additional Paid-In Capital (Contd) |
|
|
|
Warrants |
|
|
|
No warrants were exercised during the three month period
ended March 31, 2015. During the three month period ended March 31, 2014,
a total of 1,666,388 warrants were exercised for 1,666,388 common shares
having a par value of $0 thousand in aggregate, for cash consideration of
$1,064 thousand, resulting in an increase in additional paid-in capital of
$1,064 thousand. |
|
|
10. |
Related Party Transactions |
|
|
|
Included in management salaries are $1 thousand (2014 -
$15 thousand) for options granted to the Chief Executive Officer and $11
thousand (2014 - $11 thousand) for options granted to the Chief Financial
Officer under the 2006 Stock Option Plan and $3 thousand (2014 - $3
thousand) for options granted to non-employee directors. |
|
|
|
Also included in management salaries are director fees of
$40 thousand (2014 - $22 thousand). |
|
|
|
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. |
|
|
11. |
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, share-based compensation and convertible notes have
been excluded from the calculation of diluted loss per share since they
are anti-dilutive. |
|
|
12. |
Subsequent Events |
|
|
|
Subsequent to the end of the quarter, on April 24, 2015
IntelGenx executed an agreement to lease approximately 17,000 square feet
in a property located at 6420 Abrams, St-Laurent, Quebec (the Lease).
The Lease has a 10 year and 6 month term commencing on September 1, 2015
and IntelGenx has retained two options to extend the Lease, with each
option being for an additional five years. Under the terms of the Lease
IntelGenx will be required to pay base rent of approximately CAD$110
thousand (approximately $87 thousand) per year, which will increase at a
rate of CAD$0.25 ($0.20) per square foot every two years. IntelGenx plans
to use the newly leased space to manufacture its oral film VersaFilm
products, to enlarge its research and development capabilities, and for
administration purposes. |
|
|
|
On April 28, 2015 IntelGenx executed an agreement for the
construction of manufacturing facilities, laboratories, and offices within
the property located at 6420 Abrams, St-Laurent, Quebec, at an aggregate
cost of CAD$2.9 million (approximately $2.3 million). IntelGenx plans to
fund this project from cash on hand. Construction is anticipated to be
completed in Q3, 2015. |
12
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 (MD&A), 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.
Additional information relating to the Company, including our
Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (the
2014 Form 10-K), is available on SEDAR at www.sedar.com and on the U.S. Securities and Exchange
Commission (the SEC) website at www.sec.gov.
All dollar amounts are expressed in U.S. dollars, unless
otherwise noted.
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 continue to develop the existing products in our pipeline
and may also perform research and development on other potential products as
opportunities arise.
13
We plan to establish a state-of-the-art manufacturing facility
for the future manufacture of our VersaFilm products as we believe that this:
|
1) |
represents a profitable business opportunity, |
|
2) |
will reduce our dependency upon third-party contract
manufacturers, thereby protecting our manufacturing process know-how and
intellectual property, and |
|
3) |
allows us to offer our clients and development partners a
full service from product conception through to supply of the finished
product. |
As previously announced, we plan to finance the project from
cash in hand and a government-backed bank financing of up to CAD$3.5 million
with BMO Bank of Montreal.
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 VersaFilm
manufacturing capability, and increase our research and development activities.
Key developments
Product-related
Anti-depressant tablet, Forfivo
XL®
On February 23, 2015 we provided an
update on sales and marketing activities for Forfivo XL®, our first FDA-approved
product that was launched in the USA in October 2012 under an exclusive
commercialization agreement with Edgemont Pharmaceuticals LLC ("Edgemont").
According to Symphony Health Solutions,
gross sales of Forfivo XL® totaled $8.9 million in the year ending December
31st, 2014, compared with sales of $2.7 million in the preceding year. The
number of Forfivo XL® prescriptions filled increased from approximately
13,617
in 2013 to 30,378 in 2014. The average month-on-month growth rate of Forfivo XL®
throughout 2014 exceeded 9%.
Forfivo XL® is indicated for treatment
of Major Depressive Disorder (MDD) and is the only extended-release bupropion
HCl product to provide a once-daily, 450mg dose in a single tablet. The active
ingredient in Forfivo XL® is bupropion, the same active ingredient used in the
well-known antidepressant product: Wellbutrin XL®.
Corporate
New Manufacturing Facility with
increased R&D and Administration space
On April 24, 2015 we entered into an
agreement to lease approximately 17,000 square feet in a property located at
6420 Abrams, St-Laurent, Quebec (the Lease). The Lease has a 10 year and 6
month term commencing on September 1, 2015 and we have retained two options to
extend the Lease, with each option being for an additional five years. Under the
terms of the Lease we are will be required to pay base rent of approximately
CAD$110 thousand (approximately $87 thousand) per year, which will increase at a
rate of CAD$0.25 ($0.20) per square foot every two years. We plan to use the
newly leased space to manufacture our oral film VersaFilm products, to enlarge
our research and development capabilities, and for administration purposes.
On April 29, 2015 we entered into an
agreement for the construction of manufacturing facilities, laboratories, and
offices within the property located at 6420 Abrams, St-Laurent, Quebec, at an
aggregate cost of CAD$2.9 million (approximately $2.3 million). The construction
agreement was awarded to BTL Construction Inc. (BTL) in Quebec following a tender process
that was completed in December 2014. BTL specializes in the renovation of
existing buildings for pharmaceutical use and has completed projects for various
major pharmaceutical companies. We plan to fund this project from cash on hand.
Construction is anticipated to be completed in Q3, 2015.
14
On March 16, 2015 we received CAD$500
thousand (approximately $430 thousand) in cash as part of a credit facility of
up to CAD$3.5 million (approximately $3.0 million) negotiated with BMO Bank of
Montreal (BMO). The credit facility is supported by a 50% guarantee under the
Export Guarantee Program from Export Development Canada, Canadas export credit
agency. Management expects disbursement of the remaining CAD$3.0 million ($2.6
million) to follow after BMO has reviewed (in August 2015) our operating results
for the first 6 months of 2015. The credit facility may be drawn down in
multiple disbursements over 12 months and, after a 6 month moratorium on the
capital, has a repayment term of up to 60 months. The financial covenants of the
credit facility require us to maintain a Minimum Debt Service Coverage ratio of
1.25:1, and a Maximum Total Debt to Tangible Net Worth ratio of 2.5:1. Based
upon Managements business forecasts and projections, Management believes that
we will be able to fully comply with these financial covenants. We intend to use
the funds for the purchase and installation of new equipment for our new,
state-of the-art, manufacturing facility.
On March 16, 2015 we placed an order
for 2 packaging machines to be manufactured by Harro Höfliger
Verpackungsmaschinen GmbH (Harro Höfliger) and installed in our new, state-of
the-art, manufacturing facility. Harro Höfliger is widely recognized as a high
end supplier of production and packaging equipment, primarily to the
pharmaceutical and medical device industries, and is noted for providing
innovative, custom equipment to meet the needs of customers. Our purchase order
consists of one commercial grade packaging machine and one smaller machine for
our R&D laboratories. The purchase order, in the aggregate amount of
approximately €1.5 million (approximately $1.6 million), requires immediate
payment of a 20% deposit with a further 70% to be paid upon delivery of each
machine and the balance of 10% to be paid upon satisfactory completion of a Site
Acceptance Test of each machine. The packaging machine for our R&D
laboratories is expected to be delivered in Q3, 2015 and the commercial grade
packaging machine is expected to be delivered in Q4, 2015. We intend to finance
the acquisition of these 2 machines with the credit facility negotiated with
BMO, as discussed above.
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. In summary,
when comparing the currency rates used to prepare our financial statements for
Q1, 2015 with the rates used to prepare our financial statements for Q1, 2014,
the strengthened US dollar resulted in an unrealized loss of approximately $557
thousand on our cash position at March 31, 2015, but reduced our net loss from
operations by approximately $8 thousand for quarter ending March 31, 2015. The
following management discussion and analysis takes this into consideration
whenever material.
15
Results of operations for the three month period ended March
31, 2015 compared with the three month period ended March 31, 2014.
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
In U.S.$ thousands |
|
|
|
|
|
|
|
Increase/ |
|
|
Increase/ |
|
|
|
2015 |
|
|
2014 |
|
|
(Decrease) |
|
|
(Decrease) |
|
Revenue |
$ |
625 |
|
$ |
222 |
|
$ |
403 |
|
|
182% |
|
Cost of Royalty and License Revenue |
|
84 |
|
|
- |
|
|
84 |
|
|
N/A |
|
Research and Development Expenses |
|
117 |
|
|
188 |
|
|
(71 |
)
|
|
(38% |
)
|
Selling, General and Administrative Expenses |
|
393 |
|
|
460 |
|
|
(67 |
) |
|
(15% |
) |
Depreciation of tangible assets |
|
7 |
|
|
7 |
|
|
0 |
|
|
0% |
|
Amortization of intangible assets |
|
9 |
|
|
9 |
|
|
0 |
|
|
0% |
) |
Operating Income / (Loss) |
|
15 |
|
|
(442 |
) |
|
(427 |
) |
|
(97% |
) |
Net Loss |
|
(54 |
) |
|
(442 |
) |
|
(388 |
) |
|
(885 |
)
|
Revenue
Total revenue in the first three months increased from $222
thousand in 2014 to $625 thousand in 2015, representing an increase of 182%.
Of the total revenue recorded during the first quarter of 2015,
$625 thousand (2014: $173 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
amortized in income over the period where sales of Forfivo XL® are expected to
be exclusive. In the fourth quarter of 2014, Edgemont exercised its right to
extend the license for the exclusive marketing of Forfivo XL®. In accordance
with the terms for exercising such right, we invoiced $1.25 million to Edgemont
and recognized the full amount as deferred revenue, to be amortized in income
from October 2014 through September 2015. As a result of this policy, we
recognized $391 thousand (2014 - $77 thousand) in income during the three months
ended March 31, 2015. As at March 31, 2015, we have a deferred revenue balance
of $856 thousand (December 31, 2014: $1,245 thousand) that has not been
recognized as revenue. In addition, in Q1, 2015 we recognized approximately $234
thousand (2014 - $96 thousand) of royalty income earned from the sale of Forfivo
XL®. Forfivo XL® is indicated for the treatment of MDD and is the only
extended-release bupropion HCl product to provide a once-daily, 450mg dose in a
single tablet.
The level of sales achieved for Forfivo XL® continues to
improve significantly. According to Symphony Health Solutions, gross sales of
Forfivo XL® totaled $4.0 million in the quarter ending March 31st, 2015 compared
with $1.3 million in the same period of last year, representing an increase of
194%. The number of Forfivo XL® prescriptions that were filled increased by 82%
from approximately 5,800 in the first quarter of 2014 to approximately 10,600 in
the first quarter of 2015.
We expect sales of Forfivo XL® to continue this growth trend
for the foreseeable future for the following reasons:
|
a) |
Settlement of the Paragraph IV litigation with Wockhardt
Bio AG in November 2014 should prevent the entry of generic competition
into the marketplace until early 2018, and |
|
b) |
Increased marketing activities undertaken by our
commercialization partner, Edgemont, including a recent 3-fold increase in
sales staff for the product, should maintain, if not increase,
momentum. |
16
Cost of royalty and license revenue
We recorded $84 thousand for the cost of royalty and license
revenue in the first three months of 2015, compared with $Nil in the same period
of 2014. These expenses relate to a Project Transfer Agreement that was executed
in May 2010 with one of our former development partners whereby we acquired full
rights to, and ownership of, Forfivo XL®, our novel, high strength formulation
of Bupropion hydrochloride, the active ingredient in Wellbutrin XL®. Pursuant to
the Project Transfer Agreement, and following commercial launch of Forfivo XL®
in October 2012, we are required, after recovering an aggregate $200 thousand
for management fees previously paid, to pay our former development partner 10%
of net income received from the sale of Forfivo XL®. We recovered the final
portion of the management fees in December 2014, thereby invoking payments to
our former development partner.
Research and development (R&D) expenses
R&D expenses decreased to $117 thousand in the three months
ended March 31, 2014, representing a decrease of $71 thousand, or 38%, compared
with the amount of $188 thousand expensed in the same period of last year.
R&D expenses are heavily influenced by the costs of
clinical studies, the frequency, timing and size of which vary considerably. We
did not perform any clinical studies in the first quarter of 2015, whereas in
the first quarter of 2014 we completed a pilot clinical study for our VersaFilm
product for erectile dysfunction that indicated bioequivalence with the leading
brand reference listed drug Tadalafil.
Included within R&D expenses for the first three months of
2015 are R&D Salaries of $114 thousand, of which approximately $3 thousand
represents non-cash compensation. This compares to R&D salaries of $115
thousand in the first three months of 2014, of which approximately $2 thousand
represented non-cash compensation.
In the three months ended March 31, 2015 we recorded estimated
Research and Development Tax Credits and refunds of $24 thousand, compared with
$27 thousand that was recorded in the same period of the previous year.
Selling, general and administrative (SG&A) expenses
SG&A expenses decreased to $393 thousand in the three
months ended March 31, 2015, representing a decrease of $67 thousand, or 15%,
compared with the amount of $460 thousand expensed in the same period of last
year. The decrease is primarily attributable to reduced legal expenses of $42
thousand due to settlement in November 2014 of the Paragraph IV litigation with
Wockhardt Bio AG.
Included in SG&A expenses are approximately $12 thousand
(2014: $27 thousand) in non-cash compensation from options granted to management
and employees in 2013 and 2014, and $5 thousand (2014: $3 thousand) in non-cash
compensation from options granted to non-employee directors in 2013 and
2014.
Depreciation of tangible assets
In the three months ended March 31, 2015 we recorded an expense
of $7 thousand for the depreciation of tangible assets, compared with an expense
of $7 thousand for the same period of the previous year.
Amortization of intangible assets
The amortization of intangible assets expense for the first
three months of 2015 totaled $9 thousand, compared with $9 thousand in the same
period of last year. This 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.
17
Share-based compensation expense, warrants and stock based
payments
Share-based compensation expense, warrants and share-based
payments totaled $20 thousand for the three months ended March 31, 2015,
compared with $32 thousand for the three months ended March 31, 2014.
We expensed approximately $15 thousand in the first three
months of 2015 for options granted to our employees in 2013 and 2014 under the
2006 Stock Option Plan, and approximately $5 thousand for options granted to
non-employee directors in 2013 and 2014, compared with $29 thousand and $3
respectively that was expensed in the same period of the previous year.
There remains approximately $53 thousand in stock based
compensation to be expensed in fiscal 2014 and 2015, all of which relates to the
issuance of options to our employees and directors during 2013 and 2014. We
anticipate the issuance of additional options and warrants in the future, which
will continue to result in stock-based compensation expense.
Key items from the balance sheet.
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
In U.S.$ thousands |
|
March 31, |
|
|
December |
|
|
Increase/ |
|
|
Increase/ |
|
|
|
2015 |
|
|
31, 2014 |
|
|
(Decrease) |
|
|
(Decrease) |
|
Current Assets |
$ |
4,089 |
|
$ |
5,255 |
|
$ |
(1,166 |
)
|
|
(22% |
)
|
Leasehold improvements and Equipment |
|
1,361 |
|
|
983 |
|
|
378 |
|
|
38% |
|
Intangible Assets |
|
25 |
|
|
46 |
|
|
(21 |
)
|
|
(46% |
)
|
Security Deposit |
|
237 |
|
|
- |
|
|
237 |
|
|
N/A |
|
Current Liabilities |
|
245 |
|
|
466 |
|
|
(221 |
)
|
|
(47% |
)
|
Deferred License Revenue |
|
856 |
|
|
1,245 |
|
|
(389 |
) |
|
(31% |
) |
Term Loan |
|
395 |
|
|
- |
|
|
395 |
|
|
N/A |
|
Capital Stock |
|
1 |
|
|
1 |
|
|
0 |
|
|
0% |
|
Additional Paid-in-Capital |
|
22,674 |
|
|
22,654 |
|
|
20 |
|
|
0% |
|
Current assets
Current assets totaled $4,089 thousand at March 31, 2015
compared with $5,255 thousand at December 31, 2014. The decrease of $1,116
thousand is attributable to a decrease in cash and cash equivalents of
approximately $580 thousand, a decrease in accounts receivable of approximately
$576 thousand and a decrease in prepaid expenses of approximately $24 thousand,
partly offset by an increase in investment tax credits receivable of
approximately $14 thousand.
Cash and cash equivalents
Cash and cash equivalents totaled $3,819 thousand as at March
31, 2015 representing a decrease of $580 thousand compared with the balance of
$4,399 thousand as at December 31, 2014. The decrease in cash on hand relates to
net cash used by operating activities of $279 thousand, net cash used in
investing activities of $384 thousand, and an unrealized foreign exchange loss of $312 thousand, partly
offset with net cash provided by financing activities of $395 thousand.
18
The cash provided by financing activities derives from the
first tranche of a term loan in the amount of CAD$500 thousand negotiated with
BMO Bank of Montreal secured by a first ranking movable hypothec on all present
and future movable property of the Company and a 50% guarantee by Export
Development Canada, a Canadian Crown corporation export credit agency. A second
tranche, in the amount of CAD$3 million, will be disbursed subsequent to meeting
certain conditions based upon the Companys operating cash flow throughout the
first six months of 2015 being positive. There is a moratorium on capital
repayments for the first 6 months of each drawdown, at which point the term loan
will be repayable in monthly instalments over 60 months.
Accounts receivable
Accounts receivable totaled $76 thousand as at March 31, 2015
representing a decrease of $576 thousand compared with the balance of $652
thousand as at December 31, 2014. In Q4, 2014 Edgemont exercised its right to
extend the license for the exclusive marketing of Forfivo XL®. In accordance
with the terms for exercising such right, IntelGenx invoiced $1.25 million to
Edgemont in Q4, 2014 and received payment of $650 thousand in December 2014 and
the balance of $600 thousand in February 2015.
Prepaid expenses
As at March 31, 2015 prepaid expenses totaled $72 thousand
compared with $96 thousand as of December 31, 2014. The decrease in prepaid
expenses is attributable to the advance payment in December 2014 of certain
expenses that related to services provided in the first quarter of 2015,
together with the depreciation of the Canadian dollar by approximately 8.4%
between December 31, 2014 and March 31, 2015.
Investment tax credits receivable
R&D investment tax credits receivable totaled approximately
$122 thousand as at March 31, 2015 compared with $108 thousand as at December
31, 2014. The increase relates to the accrual estimated and recorded for the
first quarter of 2015.
Leasehold improvements and equipment
As at March 31, 2015, the net book value of leasehold
improvements and equipment amounted to $1,361 thousand, compared to $983
thousand at December 31, 2014. In the three months ended March 31, 2015
additions to assets totaled $384 thousand and comprised $381 thousand for
manufacturing and packaging equipment required for our new, state-of-the-art,
VersaFilm manufacturing facility, and $3 thousand for leasehold improvements
related to our new manufacturing facility at 6425 Abrams, St-Laurent, Quebec. In
the three months ended March 31, 2015 we recorded depreciation on leasehold
improvements and equipment of $7 thousand and incurred an unrealized foreign
exchange gain $1 thousand.
Intangible assets
As at March 31, 2015 NDA acquisition costs of $25 thousand
(December 31, 2014 - $46 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.
19
Security deposit
A security deposit in the amount of CAD$300 thousand ($237
thousand) in respect of an agreement to lease approximately 17,000 square feet
in a property located at 6420 Abrams, St-Laurent, Quebec was recorded as at
March 31, 2015.
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities totaled $245 thousand
as at March 31, 2015 (December 31, 2014 - $466 thousand) and include
approximately $11 thousand related to research and development activities, $19
thousand related to legal and professional fees, $22 thousand related to
securing our bank financing, $4 thousand related to our new facility located at
6420 Abrams, St-Laurent, Quebec, $181 thousand related to accrued payroll
liabilities, and $8 thousand of other liabilities.
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.
In the fourth quarter of 2014, Edgemont exercised its right to
extend the license for the exclusive marketing of Forfivo XL®. In accordance
with the terms for exercising such right, IntelGenx invoiced $1.25 million to
Edgemont and recognized the full amount as deferred revenue, to be amortized in
income from October 2014 through September 2015.
As a result of this policy, we have a deferred revenue balance
of $856 thousand at March 31, 2015 (December 31, 2014: $1,245 thousand) that has
not been recognized as revenue
Shareholders equity
As at March 31, 2015 we had accumulated a deficit of $17,902
thousand compared with an accumulated deficit of $17,848 thousand as at December
31, 2014. Total assets amounted to $5,712 thousand and shareholders equity
totaled $4,216 thousand as at March 31, 2015, compared with total assets and
shareholders equity of $6,284 thousand and $4,573 thousand respectively, as at
December 31, 2014.
Capital stock
As at March 31, 2015 capital stock amounted to $635 (December
31, 2014: $635). Capital stock is disclosed at its par value with the excess of
proceeds shown in Additional Paid-in-Capital.
Additional paid-in-capital
Additional paid-in capital totaled $22,674 thousand at March
31, 2015, as compared to $22,654 thousand at December 31, 2014. Additional paid
in capital increased by $20 thousand for stock based compensation, all of which
is attributable to the amortization of stock options granted to employees and
directors
Taxation
As at December 31, 2014, the date of our latest annual tax
return, we had Canadian and provincial net operating losses of approximately $9,530 thousand (December 31, 2013:
$8,874 thousand) and $9,683 thousand (December 31, 2013: $9,040 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 2034. A portion of the net operating losses may expire before
they can be utilized.
20
As at December 31, 2014, we had non refundable tax credits of
$1,100 thousand (December 31, 2013: $1,098 thousand) of which $20 thousand is
expiring in 2017, $194 thousand is expiring in 2018, $170 thousand is expiring
in 2019, $145 thousand is expiring in 2020, $154 thousand is expiring in 2021,
$193 thousand is expiring in 2022 and $129 thousand is expiring in 2023 and $95
thousand is expiring in 2024. We also had undeducted research and development
expenses of $4,805 thousand (December 31, 2013: $4,354 thousand) with no
expiration date.
The deferred tax benefit of these items was not recognized in
the accounts as it has been fully provided for.
Key items from the statement of cash flows
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
In U.S.$ thousands |
|
March 31, |
|
|
March 31, |
|
|
Increase/ |
|
|
Increase/ |
|
|
|
2015 |
|
|
2014 |
|
|
(Decrease) |
|
|
(Decrease) |
|
Operating Activities |
$ |
(279 |
)
|
$ |
(588 |
)
|
$ |
(309 |
)
|
|
(53% |
)
|
Financing Activities |
|
395 |
|
|
1,064 |
|
|
(669 |
) |
|
(63% |
) |
Investing Activities |
|
(384 |
)
|
|
(105 |
)
|
|
279 |
|
|
266% |
|
Cash and cash equivalents - end of period |
|
3,819 |
|
|
5,166 |
|
|
(1,347 |
) |
|
(26% |
)
|
Statement of cash flows
Net cash used by operating activities was $279 thousand in the
three months ended March 31, 2015, compared to $588 thousand for the three
months ended March 31, 2014. In the first three months of 2015, net cash used by
operating activities consisted of an operating loss of $18 thousand (2014: $394
thousand) and an increase in non-cash operating elements of working capital of
$261 thousand compared with an increase of $194 thousand in the first three
months of 2014.
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 $395 thousand
in the first three months of 2015, compared to $1,064 thousand provided in the
same period of the previous year. The net cash provided in the first three
months of 2015 derives from the first tranche of a term loan in the amount of
CAD$500 thousand negotiated with BMO Bank of Montreal, whereas the net cash
provided in the first three months of 2014 resulted from the exercise of
warrants.
Net cash used in investing activities amounted to $384 thousand
in the three months ended March 31, 2015 compared to $105 thousand in the same
period of 2014. The net cash used in investing activities in the first three
months of 2015 relates exclusively to the purchase of fixed assets and comprised
$381 thousand for manufacturing and packaging equipment required for our new,
state-of-the-art, VersaFilm manufacturing facility, and $3 thousand for
leasehold improvements related to our new manufacturing facility at 6425 Abrams,
St-Laurent, Quebec.
The balance of cash and cash equivalents as at March 31, 2015
amounted to $3,819 thousand, compared to $5,166 thousand at March 31, 2014.
21
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.
Item 6. Exhibits
22
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: May 14, 2015 |
By: /s/ Horst G.
Zerbe
|
|
Horst G.
Zerbe |
|
President,
C.E.O. and |
|
Director
|
|
|
|
|
|
|
Date: May 14, 2015 |
By: /s/ Paul A.
Simmons |
|
Paul A.
Simmons |
|
Principal
Accounting Officer |
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: May 14, 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: May 14, 2015
/s/ Paul A.
Simmons
Paul A. Simmons
Principal Accounting Officer
Exhibit 32.1
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
March 31, 2015, 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
May 14, 2015
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 March
31, 2015, 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
March 31,
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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