Filed pursuant to Rule 424(b)(3)
Registration No.
333-190065
PROSPECTUS SUPPLEMENT NO. 1
(to Prospectus dated
April 22, 2015)
INTELGENX TECHNOLOGIES CORP.
Up to 7,231,123 shares of Common Stock issuable upon exercise of
7,231,123 Warrants
The prospectus supplement modifies and supplements the
prospectus of IntelGenx Technologies Corp. (the Company) dated April 22, 2015,
which relates to the issuance and sale of 7,231,123 shares of the common stock
of the Company to holders of outstanding warrants upon exercise of such
warrants. The warrants were issued on December 16, 2013 in a registered
offering. The warrants have an exercise price of $0.5646 per share and are
exercisable at any time prior to the close of business on December 15, 2018.
This prospectus supplement should be read in conjunction with,
and may not be delivered or utilized without, the prospectus, including any
amendments or supplements thereto. This prospectus supplement is qualified in
its entirety by reference to the prospectus, except to the extent that the
information in this prospectus supplement supersedes the information contained
in the prospectus.
This prospectus supplement includes the attached quarterly
report on Form 10-Q, as filed with the Securities and Exchange Commission (the
SEC) on May 14, 2015.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this prospectus supplement is October 26, 2015.
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 June 30, 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:
63,615,256 shares of the issuers common stock, par value
$.00001 per share, were issued and outstanding as of August 10, 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 |
14 |
Item 3. |
Controls and Procedures |
23 |
|
|
|
|
PART II. OTHER INFORMATION |
|
|
|
|
Item 1. |
Legal Proceedings |
23 |
Item 2. |
Unregistered Sales of Equity
Securities and Use of Proceeds |
23 |
Item 3. |
Defaults upon Senior Securities |
23 |
Item 4. |
Reserved |
23 |
Item 5. |
Other Information |
23 |
Item 6. |
Exhibits |
23 |
|
Signatures |
24 |
IntelGenx Technologies Corp.
Consolidated Interim Financial Statements
June
30, 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
- 13 |
1
IntelGenx Technologies Corp.
Consolidated Balance Sheet
(Expressed in
Thousands of U.S. Dollars ($000s) Except Share and Per Share Data)
(Unaudited)
|
|
June, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
Assets |
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
2,663 |
|
$ |
4,399 |
|
Accounts
receivable |
|
115 |
|
|
652 |
|
Prepaid expenses |
|
75 |
|
|
96 |
|
Investment tax credits
receivable |
|
48 |
|
|
108 |
|
Total Current Assets
|
|
2,901 |
|
|
5,255 |
|
Leasehold Improvements and Equipment,
net |
|
2,404 |
|
|
983 |
|
Intangible Assets
(note 4) |
|
16 |
|
|
46 |
|
Security Deposit |
|
240 |
|
|
- |
|
Total Assets |
$ |
5,561 |
|
$ |
6,284 |
|
Liabilities |
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Accounts
payable and accrued liabilities |
|
604 |
|
|
466 |
|
Current portion of term loan (note 7) |
|
60 |
|
|
- |
|
Deferred license revenue
(note 6) |
|
466 |
|
|
1,245 |
|
Total Current
Liabilities |
|
1,130 |
|
|
1,711 |
|
Term Loan (note 7) |
|
340 |
|
|
- |
|
Total Liabilities |
|
1,470 |
|
|
1,711 |
|
Shareholders' Equity |
|
|
|
|
|
|
Capital Stock (note 8)
|
|
1 |
|
|
1 |
|
Additional Paid-in-Capital (note 9)
|
|
22,768 |
|
|
22,654 |
|
Accumulated Deficit
|
|
(18,176 |
) |
|
(17,848 |
) |
Accumulated Other Comprehensive Loss |
|
(502 |
) |
|
(234 |
) |
Total Shareholders Equity |
|
4,091 |
|
|
4,573 |
|
|
$ |
5,561 |
|
$ |
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 June 30, 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 |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(268 |
) |
|
(268 |
) |
Options exercised (note 9)
|
|
75,000 |
|
|
|
|
|
34 |
|
|
- |
|
|
- |
|
|
34 |
|
Stock-based compensation (note 9) |
|
- |
|
|
- |
|
|
80 |
|
|
- |
|
|
- |
|
|
80 |
|
Net loss for the period |
|
- |
|
|
- |
|
|
- |
|
|
(328 |
) |
|
- |
|
|
(328 |
) |
Balance June 30, 2015 |
|
63,540,255 |
|
$ |
1 |
|
$ |
22,768 |
|
$ |
(18,176 |
) |
$ |
(502 |
) |
$ |
4,091 |
|
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 |
|
|
For the
Six-Month Period |
|
|
|
Ended June 30, |
|
|
Ended June 30, |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Royalties |
$ |
192 |
|
$ |
84 |
|
$ |
426 |
|
$ |
181 |
|
License and other
revenue |
|
393 |
|
|
76 |
|
|
784 |
|
|
201 |
|
Total Revenues |
|
585 |
|
|
160 |
|
|
1,210 |
|
|
382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of royalty and license revenue |
|
19 |
|
|
- |
|
|
103 |
|
|
- |
|
Research and development expense |
|
252 |
|
|
225 |
|
|
369 |
|
|
413 |
|
Selling, general and administrative expense |
|
559 |
|
|
543 |
|
|
952 |
|
|
1,003 |
|
Depreciation of tangible assets |
|
6 |
|
|
7 |
|
|
13 |
|
|
14 |
|
Amortization of
intangible assets |
|
10 |
|
|
11 |
|
|
19 |
|
|
20 |
|
Total Expenses |
|
846 |
|
|
786 |
|
|
1,456 |
|
|
1,450 |
|
Operating loss |
|
(261 |
) |
|
(626 |
) |
|
(246 |
) |
|
(1,068 |
) |
Interest income |
|
3 |
|
|
12 |
|
|
13 |
|
|
12 |
|
Financing and Interest expense |
|
(17 |
) |
|
- |
|
|
(95 |
) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
(275 |
) |
|
(614 |
) |
|
(328 |
) |
|
(1,056 |
) |
Other Comprehensive Loss |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment |
|
55 |
|
|
161 |
|
|
(268 |
) |
|
(70 |
) |
Comprehensive Loss |
$ |
(220 |
) |
$ |
(453 |
) |
$ |
(596 |
) |
$ |
(1,126 |
) |
Basic and Diluted Weighted Average Number of
Shares Outstanding |
|
63,501,519 |
|
|
63,187,029 |
|
|
63,483,487 |
|
|
62,628,686 |
|
Basic and Diluted Loss Per Common Share (note 9) |
$ |
(0.00 |
) |
$ |
(0.01 |
) |
$ |
(0.01 |
) |
$ |
(0.02 |
) |
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 |
|
|
For the
Six-Month Period |
|
|
|
Ended June 30, |
|
|
Ended June 30, |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds Provided (Used)
- |
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(275 |
) |
$ |
(614 |
) |
$ |
(328 |
) |
$ |
(1,056 |
) |
Amortization and depreciation |
|
16 |
|
|
18 |
|
|
32 |
|
|
34 |
|
Stock-based compensation |
|
59 |
|
|
33 |
|
|
80 |
|
|
65 |
|
|
|
(200 |
) |
|
(563 |
) |
|
(216 |
) |
|
(957 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
(39 |
) |
|
(27 |
) |
|
537 |
|
|
91 |
|
Prepaid expenses
|
|
(3 |
) |
|
1 |
|
|
21 |
|
|
40 |
|
Investment tax credits receivable
|
|
74 |
|
|
68 |
|
|
60 |
|
|
51 |
|
Security deposit
|
|
(3 |
) |
|
- |
|
|
(240 |
) |
|
- |
|
Accounts payable and accrued
liabilities |
|
359 |
|
|
(17 |
) |
|
138 |
|
|
(327 |
) |
Deferred revenue |
|
(390 |
) |
|
(77 |
) |
|
(779 |
) |
|
(104 |
) |
Net
change in assets and liabilities |
|
(2 |
) |
|
(52 |
) |
|
(263 |
) |
|
(249 |
) |
Net cash used by operating
activities |
|
(202 |
) |
|
(615 |
) |
|
(479 |
) |
|
(1,206 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of term loans |
|
4 |
|
|
- |
|
|
399 |
|
|
- |
|
Proceeds from exercise of warrants and stock
options |
|
34 |
|
|
555 |
|
|
34 |
|
|
1,619 |
|
Net cash provided by financing
activities |
|
38 |
|
|
555 |
|
|
433 |
|
|
1,619 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and equipment |
|
(1,039 |
) |
|
(63 |
) |
|
(1,425 |
) |
|
(168 |
) |
Net cash used in investing
activities |
|
(1,039 |
) |
|
(63 |
) |
|
(1,425 |
) |
|
(168 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in
Cash and Cash Equivalents |
|
(1,203 |
) |
|
(123 |
) |
|
(1,471 |
) |
|
245 |
|
Effect of Foreign Exchange on Cash and
Cash Equivalents |
|
47 |
|
|
135 |
|
|
(265 |
) |
|
(72 |
) |
Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of Period |
|
3,819 |
|
|
5,166 |
|
|
4,399 |
|
|
5,005 |
|
End of Period |
$ |
2,663 |
|
$ |
5,178 |
|
$ |
2,663 |
|
$ |
5,178 |
|
See accompanying notes
5
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
June 30, 2015
(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, 2014. Operating results for the three months and six months ended
June 30, 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
June 30, 2015
(Expressed in U.S. Funds)
(Unaudited)
3. |
Significant Accounting
Policies |
Recently Issued Accounting
Pronouncements
ASU 2015-05, Intangibles - Goodwill
and Other - Internal-Use Software (Subtopic 350-40): Customers Accounting for
Fees Paid in a Cloud Computing Arrangement
The amendments in ASU 2015-05 provide
guidance to customers about whether a cloud computing arrangement includes a
software license. If a cloud computing arrangement includes a software license,
then the customer should account for the software license element of the
arrangement consistent with the acquisition of other software licenses. If a
cloud computing arrangement does not include a software license, the customer
should account for the arrangement as a service contract. The amendments do not
change the accounting for a customers accounting for service contracts. As a
result of the amendments, all software licenses within the scope of Subtopic
350-40 will be accounted for consistent with other licenses of intangible
assets.
The amendments are effective for public
business entities for annual periods, including interim periods within those
annual periods, beginning after December 15, 2015. Early adoption is permitted.
An entity can elect to adopt the amendments either: (1) prospectively to all
arrangements entered into or materially modified after the effective date; or
(2) retrospectively. The adoption of this Statement is not expected to have a
material effect on the Company`s financial position or results of operations.
ASU 2015-04, Compensation -
Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of
an Employers Defined Benefit Obligation and Plan Assets
The amendments in ASU 2015-04 permit an
entity with a fiscal year-end that does not coincide with a month-end a
practical expedient that permits the entity to measure defined benefit plan
assets and obligations using the month-end that is closest to the entitys
fiscal year-end and apply that practical expedient consistently from year to
year. The practical expedient should be applied consistently to all plans if an
entity has more than one plan.
The amendments are effective for public
business entities for financial statements issued for fiscal years beginning
after December 15, 2015, and interim periods within those fiscal years. Earlier
adoption is permitted. The amendments should be applied prospectively. The
adoption of this Statement is not expected to have a material effect on the
Company`s financial position or results of operations.
ASU 2015-03, Interest - Imputation
of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance
Costs
The amendments in ASU 2015-03 are
intended to simplify the presentation of debt issuance costs. These amendments
require that debt issuance costs related to a recognized debt liability be
presented in the balance sheet as a direct deduction from the carrying amount of
that debt liability, consistent with debt discounts. The recognition and
measurement guidance for debt issuance costs are not affected by the amendments
in this ASU.
The amendments are effective for public
business entities for financial statements issued for fiscal years beginning
after December 15, 2015, and interim periods within those fiscal years. Early
adoption is permitted for financial statements that have not been previously issued. 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
June 30, 2015
(Expressed in U.S. Funds)
(Unaudited)
3. |
Significant Accounting Policies
(Contd) |
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.
8
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
June 30, 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.
9
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
June 30, 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.
As of June 30, 2015 NDA acquisition
costs of $16 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.
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 June 30, 2015, the Company has not drawn on its
credit facility.
10
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
June 30, 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 $466 thousand at June 30, 2015 (December 31,
2014 - $1,245 thousand) that has not been recognized as revenue.
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. 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.
|
|
|
June 30, 2015 |
|
|
June 30, 2014 |
|
|
|
|
$ |
|
|
$ |
|
|
Term loan |
|
400 |
|
|
0 |
|
|
Current portion |
|
60 |
|
|
0 |
|
|
|
|
340 |
|
|
0 |
|
11
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
June 30, 2015
(Expressed in U.S. Funds)
(Unaudited)
Principal repayments due in each of the
next five years are as follows:
|
2015 |
$ |
20 |
|
|
2016 |
|
80 |
|
|
2017 |
|
80 |
|
|
2018 |
|
80 |
|
|
2019 |
|
80 |
|
|
Thereafter |
|
60 |
|
|
|
|
June 30, |
|
|
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 - |
|
|
|
|
|
|
|
63,540,255 (December 31, 2014 - 63,465,255) common
shares |
$ |
635 |
|
$ |
635 |
|
9. |
Additional Paid-In Capital |
Stock options
During the six month period ended June
30, 2015 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 $34
thousand, resulting in an increase in additional paid-in capital of $34
thousand.
Compensation expenses for stock-based
compensation of $80 thousand and $65 thousand were recorded during the six month
periods ended June 30, 2015 and 2014 respectively. The entire amounts expensed
in 2015 and 2014 relate to stock options granted to employees and directors. As
at June 30, 2015 the Company has $50 thousand (2014 - $161 thousand) of
unrecognized stock-based compensation.
12
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
June 30, 2015
(Expressed in U.S. Funds)
(Unaudited)
9. |
Additional Paid-In Capital
(Contd) |
Warrants
No warrants were exercised during the
six month period ended June 30, 2015. During the six month period ended June 30,
2014 a total of 2,480,988 warrants were exercised for 2,480,988 common shares
having a par value of $0 thousand in aggregate, for cash consideration of $1,619
thousand, resulting in an increase in additional paid-in capital of $1,619
thousand.
10. |
Related Party Transactions |
Included in management salaries are $1
thousand (2014 - $29 thousand) for options granted to the Chief Executive
Officer, $3 thousand (2014: Nil) for options granted to the VP Operations and
$13 thousand (2014 - $22 thousand) for options granted to the Chief Financial
Officer. Also included are $55 thousand (2014 - $8 thousand) for options granted
to non-employee directors. All options were granted under the 2006 Stock Option
Plan.
Also included in management salaries
are director fees of $147 thousand (2014 - $88 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 and stock options have been excluded from the
calculation of diluted loss per share since they are anti-dilutive.
Subsequent to the end of the quarter,
on July 20, 2015, 600 thousand options to purchase common stock were granted to
the new Chief Financial Officer under the 2006 Stock Option Plan. The options
have an exercise price of $0.58, vest of a period of 2 years at the rate of 25%
every six months and expire 5 years after the grant date.
On July 30, 2015 75,000 stock options
were exercised for 75,000 common shares for total cash consideration of CAD$
28,500, resulting in an increase in additional paid-in capital of US$27,750.
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 (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.
14
We are in the process of establishing 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, management believes that subject to
the Company reaching the $3M Edgemont milestones, financing of the project will
come 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 May 15, 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 16,761
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 the
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 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 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.
15
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
Q2, 2015 with the rates used to prepare our financial statements for Q2, 2014,
the strengthened US dollar resulted in an unrealized loss of approximately $502
thousand on our cash position at June 30, 2015, but reduced our net loss from
operations by approximately $46 thousand for the six month period ending June
30, 2015. The following management discussion and analysis takes this into
consideration whenever material.
16
Results of operations for the six month period ended June
30, 2015 compared with the six month period ended June 30, 2014.
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
In U.S.$ thousands |
|
|
|
|
|
|
|
Increase/ |
|
|
Increase/ |
|
|
|
2015 |
|
|
2014 |
|
|
(Decrease) |
|
|
(Decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
1,210 |
|
$ |
382 |
|
$ |
828 |
|
|
217% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Royalty and License
Revenue |
|
103 |
|
|
- |
|
|
103 |
|
|
N/A |
|
Research and Development Expenses |
|
369 |
|
|
413 |
|
|
(44 |
) |
|
(11% |
) |
Selling, General and
Administrative Expenses |
|
952 |
|
|
1,003 |
|
|
(51 |
) |
|
(5% |
) |
Depreciation of tangible assets |
|
13 |
|
|
14 |
|
|
(1 |
) |
|
(7% |
) |
Amortization of intangible
assets |
|
19 |
|
|
20 |
|
|
(1 |
) |
|
(5% |
) |
Operating Loss |
|
(246 |
) |
|
(1,068 |
) |
|
(822 |
) |
|
(77% |
) |
Net Loss |
|
(328 |
) |
|
(1,056 |
) |
|
(728 |
) |
|
(69% |
)
|
Revenue
Total revenue in the first six months increased from $382
thousand in 2014 to $1,210 thousand in 2015, representing an increase of 217%.
Of the total revenue recorded during the first six months of
2015, $1,210 thousand (2014: $332 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 $784 thousand (2014 - $153 thousand) in income during the six months
ended June 30, 2015. As at June 30, 2015, we have a deferred revenue balance of
$466 thousand (December 31, 2014: $1,245 thousand) that has not been recognized
as revenue. In addition, during the first six months of 2015 we recognized
approximately $426 thousand (2014 - $179 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 $4.7 million in the quarter ending June 30th, 2015 compared
with $1.6 million in the same period of last year, representing an increase of
194%. The number of Forfivo XL® prescriptions that were filled increased by 69%
from approximately 6,900 in the second quarter of 2014 to approximately 11,700
in the second quarter of 2015. Management expects the sales trend to continue in
the third quarter and throughout the year.
We expect sales of Forfivo XL® to continue this growth trend
throughout the year 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. |
17
Cost of royalty and license revenue
We recorded $103 thousand for the cost of royalty and license
revenue in the first six 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 $369 thousand in the six months
ended June 30, 2015, representing a decrease of $44 thousand, or 11%, compared
with the amount of $413 thousand expensed in the same period of last year. The
decrease is mainly due to the difference in the currency exchange rate compared
to 2014 since almost all of our R&D expenses are in Canadian Dollar.
Included within R&D expenses for the first six months of
2015 are R&D Salaries of $230 thousand, of which approximately $5 thousand
represents non-cash compensation. This compares to R&D salaries of $240
thousand in the first six months of 2014, of which approximately $4 thousand
represented non-cash compensation.
In the six months ended June 30, 2015 we recorded estimated
Research and Development Tax Credits and refunds of $48 thousand, compared with
$36 thousand that was recorded in the same period of the previous year.
Selling, general and administrative (SG&A) expenses
SG&A expenses decreased to $952 thousand in the six months
ended June 30, 2015, representing a decrease of $51 thousand, or 5%, compared
with the amount of $1,003 thousand expensed in the same period of last year. The
decrease is primarily attributable to the reduction in management salaries and
compensation of $187 thousand, partly offset by an increase in board
compensation of $71 thousand and an increase in professional fees of $78
thousand.
Included in SG&A expenses are approximately $20 thousand
(2014: $53 thousand) in non-cash compensation from options granted to management
and employees in 2013, 2014 and 2015, and $55 thousand (2014: $8 thousand) in
non-cash compensation from options granted to non-employee directors in 2013,
2014 and 2015.
Depreciation of tangible assets
In the six months ended June 30, 2015 we recorded an expense of
$13 thousand for the depreciation of tangible assets, compared with an expense
of $14 thousand for the same period of the previous year.
Amortization of intangible assets
The amortization of intangible assets expense for the first six
months of 2015 totaled $19 thousand, compared with $20 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.
18
Share-based compensation expense, warrants and stock based
payments
Share-based compensation expense, warrants and share-based
payments totaled $80 thousand for the six months ended June 30, 2015, compared
with $65 thousand for the six months ended June 30, 2014.
We expensed approximately $25 thousand in the first six months
of 2015 for options granted to our employees in 2013, 2014 and 2015 under the
2006 Stock Option Plan, and approximately $55 thousand for options granted to
non-employee directors in 2013, 2014 and 2015, compared with $57 thousand and $8
respectively that was expensed in the same period of the previous year.
There remains approximately $50 thousand in stock based
compensation to be expensed in fiscal 2015, 2016 and 2017, all of which relates
to the issuance of options to our employees and directors during 2013 to
2015.
Subsequent to the end of the quarter, on July 20, 2015 600
thousand options to purchase common stock were granted to the new Chief
Financial Officer which will be expensed over 24 month, 25% every six month.
We anticipate the issuance of additional options and warrants
in the future, which will continue to result in stock-based compensation
expense.
Key items from the balance sheet.
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
In U.S.$ thousands |
|
June 30,
|
|
|
December
|
|
|
Increase/ |
|
|
Increase/ |
|
|
|
2015 |
|
|
31, 2014 |
|
|
(Decrease) |
|
|
(Decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
$ |
2,901 |
|
$ |
5,255 |
|
$ |
(2,354 |
) |
|
(45% |
) |
Leasehold improvements and Equipment |
|
2,404 |
|
|
983 |
|
|
1,412 |
|
|
144% |
|
Intangible Assets |
|
16 |
|
|
46 |
|
|
(30 |
) |
|
(65% |
) |
Security Deposit |
|
240 |
|
|
- |
|
|
240 |
|
|
N/A |
|
Current Liabilities |
|
604 |
|
|
466 |
|
|
88 |
|
|
19% |
|
Deferred License Revenue |
|
466 |
|
|
1,245 |
|
|
(779 |
) |
|
(63% |
) |
Term Loan |
|
400 |
|
|
- |
|
|
400 |
|
|
N/A |
|
Capital Stock |
|
1 |
|
|
1 |
|
|
0 |
|
|
0% |
|
Additional Paid-in-Capital
|
|
22,768 |
|
|
22,654 |
|
|
114 |
|
|
1% |
|
Current assets
Current assets totaled $2,901 thousand at June 30, 2015
compared with $5,255 thousand at December 31, 2014. The decrease of $2,354
thousand is attributable to a decrease in cash and cash equivalents of
approximately $1,736 thousand, a decrease in accounts receivable of
approximately $537 thousand, a decrease in prepaid expenses of approximately $21
thousand and finally, a decrease in investment tax credits receivable of
approximately $60 thousand.
Cash and cash equivalents
Cash and cash equivalents totaled $2,663 thousand as at June
30, 2015 representing a decrease of $1,736 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 $479
thousand, net cash used in investing activities of $1,425 thousand, and an
unrealized foreign exchange loss of $265 thousand, partly offset with net cash
provided by financing activities of $433 thousand.
19
The cash provided by financing activities derives mainly 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. 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 $115 thousand as at June 30, 2015
representing a decrease of $537 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 June 30, 2015 prepaid expenses totaled $75 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 six months of 2015,
together with the depreciation of the Canadian dollar by approximately 7.1%
between December 31, 2014 and June 30, 2015.
Investment tax credits receivable
R&D investment tax credits receivable totaled approximately
$48 thousand as at June 30, 2015 compared with $108 thousand as at December 31,
2014. The decrease relates to the accrual estimated and recorded for the six
months of 2015.
Leasehold improvements and equipment
As at June 30, 2015, the net book value of leasehold
improvements and equipment amounted to $2,404 thousand, compared to $983
thousand at December 31, 2014. In the six months ended June 30, 2015 additions
to assets totaled $1,425 thousand and comprised $567 thousand for manufacturing
and packaging equipment required for our new, state-of-the-art, VersaFilm
manufacturing facility, and $858 thousand for leasehold improvements related to
our new manufacturing facility at 6420 Abrams, St-Laurent, Quebec. In the six
months ended June 30, 2015 we recorded depreciation on leasehold improvements
and equipment of $14 thousand and incurred an unrealized foreign exchange gain
$2 thousand.
Intangible assets
As at June 30, 2015 NDA acquisition costs of $16 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.
20
Security deposit
A security deposit in the amount of CAD$300 thousand ($240
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 June
30, 2015.
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities totaled $604 thousand
as at June 30, 2015 (December 31, 2014 - $466 thousand) and include
approximately $93 thousand related to research and development activities, $43
thousand related to legal and professional fees, $355 thousand related to our
new facility located at 6420 Abrams, St-Laurent, Quebec, $106 thousand related
to accrued payroll liabilities, and $7 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 $466 thousand at June 30, 2015 (December 31, 2014: $1,245 thousand) that has
not been recognized as revenue.
Shareholders equity
As at June 30, 2015 we had accumulated a deficit of $18,176
thousand compared with an accumulated deficit of $17,848 thousand as at December
31, 2014. Total assets amounted to $5,561 thousand and shareholders equity
totaled $4,091 thousand as at June 30, 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 June 30, 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 $22,768 thousand as at June
30, 2015, as compared to $22,654 thousand at December 31, 2014. Additional paid
in capital increased by $114 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 accumulated 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.
21
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 |
|
June 30,
|
|
|
June
30, |
|
|
Increase/ |
|
|
Increase/ |
|
|
|
2015 |
|
|
2014 |
|
|
(Decrease) |
|
|
(Decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities |
$ |
(479 |
) |
$ |
(1,206 |
) |
$ |
(727 |
) |
|
(60% |
) |
Financing Activities |
|
433 |
|
|
1,619 |
|
|
(1,186 |
) |
|
(73% |
) |
Investing Activities |
|
(1,425 |
) |
|
(168 |
) |
|
1,257 |
|
|
748% |
|
Cash and cash equivalents - end of period |
|
2,663 |
|
|
5,178 |
|
|
(2,515 |
) |
|
(49% |
) |
Statement of cash flows
Net cash used by operating activities was $479 thousand in the
six months ended June 30, 2015, compared to $1,206 thousand for the six months
ended June 30, 2014. In the first six months of 2015, net cash used by operating
activities consisted of an operating loss of $216 thousand (2014: $957 thousand)
and changes in working cash balances.
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 $433 thousand
in the first six months of 2015, compared to $1,619 thousand provided in the
same period of the previous year. The net cash provided in the first six months
of 2015 derives mainly 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 six months of 2014 resulted from the exercise of
warrants.
Net cash used in investing activities amounted to $1,425
thousand in the six months ended June 30, 2015 compared to $168 thousand in the
same period of 2014. The net cash used in investing activities in the first six
months of 2015 relates exclusively to the purchase of fixed assets and comprised
$567 thousand for manufacturing and packaging equipment required for our new,
state-of-the-art, VersaFilm manufacturing facility, and $858 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 June 30, 2015
amounted to $2,663 thousand, compared to $5,178 thousand at June 30, 2014.
22
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
Exhibit 31.1 Certification of C.E.O.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
Exhibit 31.2 Certification of Principal
Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
|
Exhibit 32.1 Certification of C.E.O.
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes- Oxley Act of 2002. |
|
Exhibit 32.2 Certification of Principal
Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. |
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: August 10, 2015 |
By: |
/s/ Horst G. Zerbe |
|
|
Horst G. Zerbe |
|
|
President, C.E.O. and |
|
|
Director |
|
|
|
|
|
|
|
|
|
Date: August 10, 2015 |
By: |
/s/
Andre Godin |
|
|
Andre Godin |
|
|
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: August 10, 2015 |
/s/
Horst G. Zerbe |
|
Horst G. Zerbe |
|
Chief Executive Officer
|
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002
I, Andre Godin, 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: August 10, 2015
/s/ Andre
Godin
Andre Godin
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 June
30, 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
August 10, 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 June
30, 2015, as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Andre Godin, 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/ Andre Godin
Andre Godin
Principal Accounting Officer
June 30, 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.
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