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 15, 2016,
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 10, 2016.
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.
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.
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 [
]
63,615,256 shares of the issuers common stock, par value
$.00001 per share, were issued and outstanding as of May 10, 2016.
Introduction to Managements Discussion and Analysis
This Managements Discussion and Analysis of Financial
Condition and Results of Operations (MD&A) comments on our business
operations, performance, financial position and other matters for the
three-month periods ended March 31, 2016 and 2015.
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 MD&A should be read in conjunction with the
accompanying unaudited Consolidated Financial Statements and Notes thereto. We
also encourage you to refer to Companys MD&A for the year ended December
31, 2015. In preparing this MD&A, we have taken into account information
available to us up to May 10, 2016, the date of this MD&A, unless otherwise
indicated.
Additional information relating to the Company, including our
Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (the
2015 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.
Cautionary Statement Concerning Forward-Looking Statements
Certain statements included or incorporated by reference in
this MD&A constitute forward-looking statements within the meaning of
applicable securities laws. All statements contained in this MD&A that are
not clearly historical in nature are forward-looking, and the words
anticipate, believe, continue, expect, estimate, intend, may,
plan, will, shall and other similar expressions are generally intended to
identify forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
All forward-looking statements are based on our beliefs and assumptions based on
information available at the time the assumption was made. These forward-looking
statements are not based on historical facts but on managements expectations
regarding future growth, results of operations, performance, future capital and
other expenditures (including the amount, nature and sources of funding
thereof), competitive advantages, business prospects and opportunities.
Forward-looking statements involve significant known and unknown risks,
uncertainties, assumptions and other factors that may cause our actual results,
levels of activity, performance or achievements to differ materially from those
implied by forward-looking statements. These factors should be considered
carefully and you should not place undue reliance on the forward-looking
statements. Although the forward-looking statements contained in this MD&A
or incorporated by reference herein are based upon what management believes to
be reasonable assumptions, there is no assurance that actual results will be
consistent with these forward-looking statements. These forward-looking
statements are made as of the date of this MD&A or as of the date specified
in the documents incorporated by reference herein, as the case may be.
We
undertake no obligation to update any forwardlooking statements to reflect
events or circumstances after the date on which such statements were made or to
reflect the occurrence of unanticipated events, except as may be required by
applicable securities laws.
The factors set forth in Item 1A., "Risk
Factors" of the 2015 Form 10-K, as well as any cautionary language in this
MD&A, provide examples of risks, uncertainties and events that may cause our
actual results to differ materially from the expectations we describe in our
forward-looking statements. Before you invest in the common stock, you should be
aware that the occurrence of the events described as risk factors and elsewhere
in this report could have a material adverse effect on our business, operating
results and financial condition.
15
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.
The 505(b)(2) pathway is also the regulatory approach to be followed if an
applicant intends to file an application for a product containing a drug that is
already approved by the FDA for a certain indication and for which the applicant
is seeking approval for a new indication or for a new use, the approval of which
is required to be supported by new clinical trials, other than bioavailability
studies. We have implemented a strategy under which we actively look for such
so-called repurposing opportunities and determine whether our proprietary
VersaFilm technology adds value to the product. We currently have two such drug
repurposing projects in our development pipeline.
We continue to develop the existing products in our pipeline
and may also perform research and development on other potential products as
opportunities arise.
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, we are financing the project from cash
in hand and a government-backed bank financing of up to CAD$3.5 million with a
Canadian bank (the Bank) as well as a CAD$1 million loan from Investissement
Québec (IQ).
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.
16
Most recent key developments
In the first quarter of 2016, we made significant progress in
many areas starting with the strengthening of our management team by making
several key appointments.
As previously disclosed in our Form 8K filings and the 2016
Proxy Statement, on January 22, 2016, we appointed Mr. Robert Bechard to the
position of Vice President, Corporate Development and Ms. Nadine Paiement to the
position of Vice President, Research and Development of IntelGenx Corp.
On March 2, 2016, we appointed Dr. Dana Matzen to the position
of Vice President, Business Development of IntelGenx Corp.
On February 10, 2016, we announced the submission of the patent
application with the U.S. patent office for an oral film dosage form containing
Loxapine for the treatment of anxiety and aggression in patients suffering from
schizophrenia or bipolar 1 disorder.
The product utilizes the company's proprietary VersaFilm
technology, allowing for an improved product to offer patients significant
therapeutic benefits compared to existing medications. A fast acting loxapine
oral film that can be used to effectively treat acute agitation
while reducing the risk of pulmonary problems associated with schizophrenia or
bipolar 1 disorder in non-institutionalized patients. A loxapine oral film could
substantially reduce the potential risks of violence and injury to patients and
others by preventing or reducing the duration and severity of an episode of
acute agitation.
IntelGenx has demonstrated in a successful pilot study that
buccal absorption of the drug from the loxapine oral film results in a
significantly higher bioavailability of the drug compared to oral tablets.
IntelGenx is currently optimizing the film to further improve time to reach peak
plasma concentrations. According to Datamonitor, sales of schizophrenia drugs
across the seven major markets (the US, Japan, France, Germany, Italy, Spain,
and the UK) were estimated at $5.2 billion in 2012 and by 2021, the market is
forecast to grow to $6.9 billion at a compound annual growth rate (CAGR) of 3.3%
.
On February 18, 2016, we announced that the USPTO had granted a
patent protecting Rizaport, an oral thin film formulation of rizatriptan
benzoate for the treatment of acute migraines. This patent protects the
composition of Rizaport and will be listed in the Orange Book upon approval of
the product by the FDA.
The patent application, entitled "Instantly Wettable
Oral Film Dosage Form Without Surfactant or Polyalcohol" covers rapidly
disintegrating film oral dosage forms and is expected to be valid until 2034
once granted.
On March 24, 2016, we announced the signing of a term sheet
with a global pharmaceutical company for the development and commercialization
of up to three products utilizing IntelGenx' proprietary VersaFilm technology.
Pursuant to the term sheet, IntelGenx granted an exclusive negotiation period
during which time the parties will conduct diligence and work towards entry into
a definitive agreement. IntelGenx receives $100,000 at the time of signing the
term sheet, in consideration for granting an exclusive negotiation right. If
entered into, IntelGenx expects the definitive agreement to be finalized by the
second quarter of 2016.
According to the term sheet, IntelGenx will grant exclusive
rights to market and sell up to three products in the United States. The term
sheet contemplates that IntelGenx will receive, in consideration for such
exclusive rights, upfront and milestone payments, together with a share of
profits, and also contemplates transfer of development costs to the
counter-party. Entry into a definitive agreement remains subject to satisfaction
of diligence by each party.
On March 29, 2016, we announced the signing of a binding term
sheet agreement with Grupo Juste S.A.Q.F for the commercialization of RIZAPORT,
a unique oral thin film for the treatment of acute migraines in the country of
Spain. The definitive agreement plans to be signed within 60
days of the execution of the binding term sheet. Financial terms of the
agreement were not disclosed.
17
Grupo Juste is a prominent private Spanish company with over 90
years of experience in the research, development and commercialization of
proprietary pharmaceutical products, including migraine and other central
nervous system (CNS) drugs, in Europe, Latin America and other territories.
According to the term sheet, Grupo Juste will have obtained
exclusive rights to market and sell RIZAPORT in Spain. In exchange, IntelGenx
and RedHill will receive upfront and milestone payments, together with a share
of the profits of commercialization. Commercial launch in Spain is estimated to
take place in the second half of 2017. The initial term of the definitive
agreement shall be for ten years from the date of first commercial sale of the
product and shall automatically renew for one additional two-year term. The
binding term sheet will give Grupo Juste the territory of Spain, with the right
of first refusal for Belize, Caribbean, Chile, Colombia, Costa Rica, Dominican
Republic, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Middle
East and Morocco.
Product related developments
Anti-depressant tablet, Forfivo
XL
®
Forfivo XL
®
, our first FDA approved product, was
launched in October 2012 and is being marketed in the United States under the
terms of a license agreement between us and Edgemont Pharmaceuticals. 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
®
. Prior to the launch of Forfivo
XL
®
, most patients in the U.S. requiring a 450mg dose of bupropion
had been taking multiple tablets to achieve their 450mg dose requirement. With
Forfivo XL
®
now available in the U.S., these patients can simplify
their dosing regimen to a single Forfivo XL
®
tablet, once-daily.
According to the official Edgemont Pharmaceuticals sales
report, net sales of Forfivo XL
®
totaled $2,500 in the first quarter
ended March 31, 2016, representing an increase of 39% compared to $1,800
recorded in the first quarter ended March 31, 2015. Net sales results for the
first quarter of 2016 were down 17% from the fourth quarter of 2015 at $3,000.
This decrease was mainly attributable to the prebuying in December 2015
compared to January and February 2016 as wholesalers placed larger orders at
year-end in anticipation of the modest January price increase. Gross sales have
since picked up in March 2016 and management believes the sales trend to continue to grow
for the remainder of 2016.
Corporate related developments
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 which
commenced 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 $83 thousand) per year, which will increase at a rate of CAD$0.25
($0.19) per square foot /per year, 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.
We also finalised negotiations on April 29, 2015 for 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 $2.5 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 construction
and renovation of facilities for the pharmaceutical industry, and has completed projects for various major pharmaceutical companies. We funded this project from cash on hand as well as a CAD$1 million loan from IQ. Construction was successfully
completed in Q1, 2016.
18
As of March 31, 2016, we had received CAD$2.2 million in cash as part of a credit facility of up to CAD$3.5 million (approximately $3.0 million) negotiated with
the Bank. The credit facility is supported by a 50% guarantee under the Export
Guarantee Program from Export Development Canada, Canada’s export credit agency. Management expects disbursement of the remaining balance to be disbursed in the first half of 2016. 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. As part of securing the credit facility, we will maintain our operating bank account with
the Bank and we will conduct all future banking transactions related to our business operations through
the Bank. 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 two packaging machines to be manufactured by Harro Höfliger Verpackungsmaschinen GmbH (“Harro Höfliger”) and installed in our new, state-of the-art, manufacturing facility. Harro
Hofliger is widely recognized as a technological leader in the supply 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 for the commercial packaging of our VersaFilm™ products, and one smaller machine for our R&D laboratories to be used for clinical trials, submission batches
and manufacturing scale up. The purchase order, in the aggregate amount of approximately €1.5 million (approximately $1.6 million), required a 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 laboratory packaging machine was delivered in Q4, 2015 and the commercial packaging machine was delivered in Q2, 2016. We intend to finance the
acquisition of these two machines with the credit facility negotiated with the
Bank, as discussed above.
All amounts are expressed in thousands of U.S. dollars unless otherwise stated.
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, our financial statements for
the three-month period ended March 31, 2016 report an accumulated other comprehensive loss due to foreign currency translation adjustments of $687 due to the fluctuations in the rates used to prepare our financial statements, $39 of which
positively impacted our comprehensive loss for the three-month period ended March 31, 2016. The following Management Discussion and Analysis takes this into consideration whenever material.
Reconciliation of Comprehensive Income (Loss) to Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA)
Adjusted EBITDA is a non-US GAAP financial measure. A reconciliation of the Adjusted EBITDA is presented in the table below. The Company uses adjusted financial measures to assess its operating performance. Securities regulations require that
companies caution readers that earnings and other measures adjusted to a basis other than US-GAAP do not have standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they should not be
considered in isolation. The Company uses Adjusted EBITDA to measure its performance from one period to the next without the variation caused by certain adjustments that could potentially distort the analysis of trends in our operating
performance, and because the Company believes it provides meaningful information
on the Companys financial condition and operating results.
19
IntelGenx obtains its Adjusted EBITDA measurement by adding to
comprehensive income (loss), finance income and costs, depreciation and
amortization, income taxes and foreign currency translation adjustment incurred
during the period. IntelGenx also excludes the effects of certain non-monetary
transactions recorded, such as share-based compensation, for its Adjusted EBITDA
calculation. The Company believes it is useful to exclude these items as they
are either non-cash expenses, items that cannot be influenced by management in
the short term, or items that do not impact core operating performance.
Excluding these items does not imply they are necessarily nonrecurring.
Share-based compensation costs are a component of employee and consultants
remuneration and can vary significantly with changes in the market price of the
Companys shares. Foreign currency translation adjustments are a component of
other comprehensive income and can vary significantly with currency fluctuations
from one period to another. In addition, other items that do not impact core
operating performance of the Company may vary significantly from one period to
another. As such, Adjusted EBITDA provides improved continuity with respect to
the comparison of the Companys operating results over a period of time. Our
method for calculating Adjusted EBITDA may differ from that used by other
corporations.
Reconciliation of Non-U.S.-GAAP Financial Information
|
|
Three-month period
|
|
|
|
|
|
|
ended March 31,
|
|
In U.S.$ thousands
|
|
2016
|
|
|
2015
|
|
|
|
$
|
|
|
$
|
|
Comprehensive Loss
|
|
(707
|
)
|
|
(377
|
)
|
Add (deduct):
|
|
|
|
|
|
|
Depreciation and amortization
|
|
87
|
|
|
16
|
|
Finance costs
|
|
40
|
|
|
79
|
|
Finance income
|
|
-
|
|
|
(10
|
)
|
Share-based compensation
|
|
63
|
|
|
20
|
|
Foreign currency translation adjustment
|
|
(39
|
)
|
|
323
|
|
Adjusted EBITDA
|
|
(556
|
)
|
|
51
|
|
Adjusted Earnings before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA)
Adjusted EBITDA decreased by $607 for the three-month period
ended March 31, 2016 to ($556) compared to $51 for the three-month period ended
March 31, 2015. The decrease in Adjusted EBITDA of $607 for the three]month
period ended March 31, 2016 is mainly attributable to an increase in selling,
general and administrative expenses of $498 as well as an increase in research
and development expenses of $364 partially offset by an increase in revenues of
$193 and a decrease in the cost of royalty and license revenue of $19.
20
Results of operations for the three-month period ended March
31, 2016 compared with the three-month period ended March 31, 2015.
|
|
Three-month period
|
|
|
|
ended March 31,
|
|
In U.S.$ thousands
|
|
2016
|
|
|
2015
|
|
Revenue
|
$
|
818
|
|
$
|
625
|
|
|
|
|
|
|
|
|
Cost of Royalty and License Revenue
|
|
65
|
|
|
84
|
|
Research and Development Expenses
|
|
481
|
|
|
117
|
|
Selling, General and Administrative
Expenses
|
|
891
|
|
|
393
|
|
Depreciation of tangible assets
|
|
87
|
|
|
7
|
|
Amortization of intangible assets
|
|
-
|
|
|
9
|
|
Operating (Loss) Income
|
|
(706
|
)
|
|
15
|
|
Net Loss
|
|
(746
|
)
|
|
(54
|
)
|
Comprehensive Loss
|
|
(707
|
)
|
|
(377
|
)
|
Revenue
Total revenues for the three-month period ended March 31, 2016
amounted to $818, representing an increase of $193 or 31% compared to $625 for
the three-month period ended March 31, 2015. The increase for the three-month
period ended March 31, 2016 compared to the last years corresponding period is
mainly attributable to the attainment of milestones, totaling $3,000 from which
$2,667 was recorded in the last fiscal year and $333 in Q1 2016.
According to the official Edgemont Pharmaceuticals sales
report, net sales of Forfivo XL
®
totaled $2,500 in the first
quarter ended March 31, 2016, representing an increase of 39% compared to $1,800
recorded in the first quarter ended March 31, 2015. Net sales results for the
first quarter of 2016 were down 17% from the fourth quarter of 2015 at $3,000.
This decrease was mainly attributable to the prebuying in December 2015
compared to January and February 2016 as wholesalers placed larger orders at
year-end in anticipation of the modest January price increase. Gross sales have
since picked up in March 2016 and management believes the sales trend to continue to grow
for the remainder of 2016.
Cost of royalty and license revenue
We recorded $65 for the cost of royalty and license revenue in
the three-month period ended March 31, 2016 compared with $84 in the same period
of 2015. This expense relates 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 for management fees previously paid, to pay
our former development partner 10% of net product sales 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.
21
Research and development (“R&D”) expenses
R&D expenses for the three-month period ended March 31, 2016 amounted to $481, representing an increase of $364 or 311%, compared to $117 for the three-month period ended March 31, 2015.
The increase in R&D expenses for the three-month period ended March 31, 2016 is mainly attributable to increases in patent costs of $203, study costs of $81 and lab supplies of $53.
In the three-month period ended March 31, 2016 we recorded estimated Research and Development Tax Credits and refunds of $22, compared with $24 that was recorded in the same period of the previous year.
Selling, general and administrative (“SG&A”) expenses
SG&A expenses for the three-month period ended March 31, 2016 amounted to $891, representing an increase of $498 or 127%, compared to $393 for the three-month period ended March 31, 2015.
The increase in SG&A expenses for the three-month period ended March 31, 2016 is mainly attributable to an increase in salaries and benefits of $274 attributable to the hiring of new executives as well as employees in manufacturing and
quality departments to support the beginning of the manufacturing operations. The increase was also attributable to an increase in stock-based compensation of $43 and an increase in professional fees of $29.
Depreciation of tangible assets
In the three-month period ended March 31, 2016 we recorded an expense of $87 for the depreciation of tangible assets, compared with an expense of $7 thousand for the same period of the previous year.
Share-based compensation expense, warrants and stock based payments
Share-based compensation warrants and share-based payments expense for the three-month period ended March 31, 2016 amounted to $63 compared to $20 for the three-month period ended March 31, 2015.
We expensed approximately $28 in the three-month period ended March 31, 2016 for options granted to our employees in 2013, 2014 and 2015 under the 2006 Stock Option Plan, and approximately $35 for options granted to non-employee directors in
2013, 2014 and 2015, compared with $17 and $3 respectively that was expensed in the same period of the previous year.
There remains approximately $159 in stock based compensation to be expensed in fiscal 2016 and 2017, all of which relates to the issuance of options to our employees and directors during 2013 to 2015. We anticipate the issuance of additional
options and warrants in the future, which will continue to result in stock-based compensation expense.
22
Key items from the balance sheet
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
|
March 31,
|
|
|
December
|
|
|
Increase/
|
|
|
Increase/
|
|
In U.S.$ thousands
|
|
2016
|
|
|
31, 2015
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
$
|
2,765
|
|
$
|
4,172
|
|
$
|
-1,407
|
|
|
-34%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold improvements and Equipment
|
|
4,441
|
|
|
4,238
|
|
|
203
|
|
|
5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security Deposit
|
|
732
|
|
|
506
|
|
|
226
|
|
|
45%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
1,061
|
|
|
1,779
|
|
|
-718
|
|
|
-40%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
1,913
|
|
|
1,546
|
|
|
367
|
|
|
24%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Stock
|
|
1
|
|
|
1
|
|
|
0
|
|
|
0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Paid-in-Capital
|
|
22,909
|
|
|
22,846
|
|
|
63
|
|
|
1%
|
|
Current assets
Current assets totaled $2,765 as at March 31, 2016 compared
with $4,172 at December 31, 2015. The decrease of $1,407 is mainly attributable
to a decrease in cash and cash equivalents of approximately $798 and a decrease
in accounts receivable of approximately $650, partially offset by an increase in
investment tax credits receivable of $29.
Cash and cash equivalents
Cash and cash equivalents totaled $2,067 as at March 31, 2016
representing a decrease of $798 compared with the balance of $2,865 as at
December 31, 2015. The decrease in cash on hand relates to net cash used by
operating activities of $1,056 as well as net cash used in investing activities
of $290, partially offset by net cash provided by financing activities of $375
and an unrealized foreign exchange gain of $173.
The cash provided by financing activities derives from an
additional loan disbursement in the amount of $392 negotiated with the Lender
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. Further disbursements will be
received in the second quarter of the 2016 fiscal year for up to CAD3,500. 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 installments over 60
months.
Accounts receivable
Accounts receivable totaled $490 as at March 31, 2016
representing a decrease of $650 compared with the balance of $1,140 as at
December 31, 2015. The main reason for the decrease is related to the remaining
balance of $1,000 received in Q1 2016 from Edgemonts $3,000 milestone payment.
Prepaid expenses
As at March 31, 2016 prepaid expenses totaled $82 compared with
$70 as of December 31, 2015. The increase in prepaid expenses is attributable to
the advance payment in January 2016 of certain expenses that relate to services
to be provided in the remainder of the year.
23
Investment tax credits receivable
R&D investment tax credits receivable totaled approximately $126 as at March 31, 2016 compared with $97 as at December 31, 2015. The increase relates to the accrual estimated and recorded for the first quarter of 2016.
Leasehold improvements and equipment
As at March 31, 2016, the net book value of leasehold improvements and equipment amounted to $4,441, compared to $4,238 at December 31, 2015. In the three-month period ended March 31, 2016 additions to assets totaled $290 and mainly
comprised of $160 for manufacturing and packaging equipment required for our new, state-of-the-art, VersaFilm™ manufacturing facility, and $52 for leasehold improvements related to our new manufacturing facility at 6420 Abrams,
St-Laurent, Quebec, Canada, and $53 for laboratory equipment.
Security deposit
A security deposit in the amount of CAD$300 in respect of an agreement to lease approximately 17,000 square feet in a property located at 6420 Abrams, St-Laurent, Quebec, Canada was recorded as at March 31, 2016. Security deposits in the amount
of CAD$650 for the term loans were also recorded as at March 31, 2016.
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities totaled $735 as at March 31, 2016 compared with $1,595 as at December 31, 2015. The decrease is mainly attributable to the outstanding amount due to the construction Company related to our new
facility located at 6420 Abrams, St-Laurent, Quebec that was paid in the three-month period ended March 31, 2016.
Long-term debt
Long-term debt totaled $2,239 as at March 31, 2016 (December 31, 2015 - $1,730). An amount of $1,661 is attributable to
the term loan from the Bank 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. Further disbursements will be received in the second quarter of the 2016 fiscal year. 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 installments over 60 months.
An amount of $578 is attributable to a second loan secured by a second ranking on all present and future property of the Company reimbursable in monthly principal payments starting January 2017 to December 2021.
Shareholders’ equity
As at March 31, 2016 we had accumulated a deficit of $17,303 compared with an accumulated deficit of $16,557 as at December 31, 2015. Total assets amounted to $7,938 and shareholders’ equity totaled $4,920 as at March 31, 2016,
compared with total assets and shareholders’ equity of $8,916 and $5,564 respectively, as at December 31, 2015.
Capital stock
As at March 31, 2016 capital stock amounted to $0.636 (December 31, 2015: $0.636) . Capital stock is disclosed at its par value with the excess of proceeds shown in Additional Paid-in-Capital.
24
Additional paid-in-capital
Additional paid-in capital totaled $22,909 as at March 31,
2016, as compared to $22,846 as at December 31, 2015. Additional paid in capital
increased by $63 for stock based compensation attributable to the amortization
of stock options granted to employees and directors.
Taxation
As at December 31, 2015, the date of our latest annual tax
return, we had Canadian and provincial net operating losses of approximately
$6,462 (December 31, 2014: $9,530) and $6,725 (December 31, 2014: $9,683)
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 2035. A portion of the net operating losses may expire before
they can be utilized.
As at December 31, 2015, we had non-refundable tax credits of
$1,022 (December 31, 2014: $1,100) of which $8 is expiring in 2026, $9 is
expiring in 2027, $163 is expiring in 2028, $143 is expiring in 2029, $122 is
expiring in 2030, $129 is expiring in 2031, $162 is expiring in 2032, $108 is
expiring in 2033, $82 expiring in 2034 and $96 is expiring in 2035. We also had
undeducted research and development expenses of $6,315 (December 31, 2014:
$4,805) with no expiration date.
The deferred tax benefit of these items was not recognized in
the accounts as it has been fully provided for.
Key items from the statement of cash flows
|
|
March 31,
|
|
|
March 31,
|
|
|
Increase/
|
|
|
Percentage
|
|
In U.S.$ thousands
|
|
2016
|
|
|
2015
|
|
|
(Decrease)
|
|
|
Increase/
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease)
|
|
Operating Activities
|
$
|
(1,056
|
)
|
$
|
(279
|
)
|
$
|
777
|
|
|
278%
|
|
Financing Activities
|
|
375
|
|
|
395
|
|
|
(20
|
)
|
|
(5%
|
)
|
Investing Activities
|
|
(290
|
)
|
|
(384
|
)
|
|
(94
|
)
|
|
(24%
|
)
|
Cash and cash equivalents - end of period
|
|
2,067
|
|
|
3,819
|
|
|
(1,752
|
)
|
|
(46%
|
)
|
Statement of cash flows
Net cash used in operating activities was $1,056 for the
three-month period ended March 31, 2016, compared to $279 for the three-month
period ended March 31, 2015. For the three-month period ended March 31, 2016,
net cash used by operating activities consisted of a net loss of $596 (2015:
$18) and a decrease in non-cash operating elements of working capital of $460
(2015: $261).
The net cash provided by financing activities was $375 for the
three-month period ended March 31, 2016, compared to $395 provided in the same
period of the previous year. An amount of $392 derives from a disbursement of a
term loan negotiated with the Bank for the three-month period ended March 31,
2016 (2015: $395).
Net cash used in investing activities amounted to $290 for the
three-month period ended March 31, 2016 compared to $384 in the same period of
2015. The net cash used in investing activities for the three-month period ended
March 31, 2016 relates exclusively to the purchase of fixed assets and mainly
comprised of $160 for manufacturing and packaging equipment required for our
new, state-of-the-art, VersaFilm manufacturing facility, and $52 for leasehold
improvements related to our new manufacturing facility at 6420 Abrams,
St-Laurent, Quebec, and $53 for laboratory equipment.
25
The balance of cash and cash equivalents as at March 31, 2016
amounted to $2,067, compared to $3,819 at March 31, 2015.
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.
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 10, 2016
|
By:
|
/s/
|
Horst G. Zerbe
|
|
|
|
------------------------------------
|
|
|
|
Horst G. Zerbe
|
|
|
|
President, C.E.O. and
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
Date: May 10, 2016
|
By:
|
/s/
|
Andre Godin
|
|
|
|
------------------------------------
|
|
|
|
Andre Godin
|
|
|
|
Principal Accounting
Officer
|
27
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 10, 2016
|
/
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: May 10, 2016
/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 March 31, 2016, 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
Chief Executive Officer
May 10, 2016
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, 2016, 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
May 10, 2016
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.