We are offering (the Offering) a minimum of CA$7,000,000 and
a maximum of CA$10,000,000 of 8% convertible unsecured subordinated debentures
(the Debentures) due June 30, 2020 (the Maturity Date) at a price of
CA$1,000 per Debenture (the Offering Price). The Debentures will bear interest
at an annual rate of 8% payable semi-annually on the last day of June and
December of each year (or the immediately following business day if any interest
payment date would not otherwise be a business day), commencing on June 30,
2017. The Debentures will be redeemable, in whole or in part, at our option on
the terms described in this registration statement. The Debentures will not be
redeemable prior to June 30, 2018 (the First Call Date). This registration
statement also relates to the offering of our shares of common stock (the
Shares) issuable upon conversion of the Debentures and issuable in lieu of
monetary interest payments.
Each Debenture will be convertible into Shares at the option of
the holder at any time prior to the close of business on the earlier of the
Maturity Date and the business day immediately preceding the date specified by
us for redemption of Debentures. During such period, each Debenture will be
convertible at a conversion price of $ per Share (the Conversion Price),
being a conversion rate of approximately Shares per CA$1,000 principal amount
of Debentures, subject to adjustment in certain events in accordance with the
Indenture (as defined herein).
We will apply to list the Debentures distributed under this
prospectus and the Shares issuable on the conversion of the Debentures or
otherwise on the TSXV. Listing will be subject to us fulfilling the
applicable listing requirements of the TSXV, including distribution of the
Debentures to a minimum number of public holders.
Our common stock is quoted on the OTCQX under the symbol IGXT
and on the TSX Venture Exchange (the TSXV) under the symbol IGX. The closing
price of our common stock as quoted on the OTCQX on May 10, 2017 was $0.73, and
the closing price of our common stock on the TSXV on May 10, 2017 was CA$1.00.
Desjardins Securities Inc. (the Lead Agent), and
Laurentian Bank Securities Inc. and
their U.S. registered broker dealer affiliates (collectively with the Lead
Agent, the Agents) have agreed to conditionally offer the Debentures for sale,
on a best efforts basis, if, as and when issued by us and in accordance with the
conditions contained in the Agency Agreement. The Agents are not purchasing the
Debentures offered by us, and are not required to sell any specific number or
dollar amount of Debentures, but will assist us in this offering on a
commercially reasonable best efforts basis. We have agreed to pay the Agents a
cash fee equal to 6% of the gross proceeds of the offering of Debentures by us.
See Plan of Distribution beginning on page 77 for more information on this
offering and the arrangements with the Agents. All costs associated with the
registration will be borne by us.
This offering will terminate on [], 2017, unless the offering
is fully subscribed before that date or we decide to terminate the offering
prior to that date. In either event, the offering may be closed without further
notice to you. We expect that delivery of the Debentures being offered pursuant
to this prospectus will be made to the purchasers on or about [], 2017.
TABLE OF CONTENTS
FORWARD-LOOKING
STATEMENTS
|
6
|
PROSPECTUS SUMMARY
|
6
|
THE OFFERING
|
8
|
SUMMARY HISTORICAL FINANCIAL INFORMATION
|
10
|
RISK FACTORS
|
11
|
USE OF PROCEEDS
|
19
|
DILUTION
|
19
|
DESCRIPTION OF BUSINESS
|
20
|
DESCRIPTION OF PROPERTY
|
33
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
34
|
MARKET INFORMATION
|
52
|
DIRECTORS AND EXECUTIVE OFFICERS
|
54
|
CORPORATE GOVERNANCE
|
57
|
EXECUTIVE COMPENSATION
|
62
|
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
67
|
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
|
70
|
DESCRIPTION OF CAPITAL
STOCK
|
70
|
DESCRIPTION OF THE SECURITIES WE ARE
OFFERING
|
71
|
LEGAL PROCEEDINGS
|
76
|
PLAN OF DISTRIBUTION
|
77
|
LEGAL MATTERS
|
78
|
CERTAIN U.S. FEDERAL INCOME TAX
CONSIDERATIONS
|
78
|
CERTAIN CANADIAN FEDERAL
INCOME TAX CONSIDERATIONS
|
86
|
EXPERTS
|
90
|
CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
90
|
WHERE YOU CAN FIND
ADDITIONAL INFORMATION
|
91
|
FINANCIAL STATEMENTS
|
F-1
|
EXHIBIT INDEX
|
93
|
You should rely only on the information contained in this
prospectus and any related free writing prospectus that we may provide to you in
connection with this offering. We have not, and the Agents have not, authorized
any other person to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it. We
are not, and the Agents are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date. Neither the
delivery of this prospectus nor any sale made in connection with this prospectus
shall, under any circumstances, create any implication that there has been no
change in our affairs since the date of this prospectus or that the information
contained in this prospectus is correct as of any time after its date.
5
FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in
this prospectus constitute forward-looking statements within the meaning of
applicable securities laws. All statements contained in this registration
statement 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 prospective investors should not place undue reliance on the
forward-looking statements. Although the forward-looking statements contained in
this registration statement 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 registration
statement or as of the date specified in the documents incorporated by reference
herein, as the case may be.
Forward-looking statements relate to analyses and other
information that are based on forecasts of future results, estimates of amounts
not yet determinable and other uncertain events. Forward-looking statements, by
their nature, are based on assumptions, including those described below, and
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements to differ materially from those
expressed in the forward-looking statements. Any forecasts or forward-looking
predictions or statements cannot be relied upon due to, among other things,
changing external events and general uncertainties of the business. Results
indicated in forward-looking statements may differ materially from actual
results for a number of reasons, including without limitation, risks associated
with the ability to obtain sufficient and suitable financing to support
operations, R&D clinical trials and commercialization of products; the
ability to execute partnerships and corporate alliances; uncertainties relating
to the regulatory approval process; the ability to develop drug delivery
technologies and manufacturing processes that result in competitive advantage
and commercial viability; the impact of competitive products and pricing and the
ability to successfully compete in the targeted markets; the successful and
timely completion of pre-clinical and clinical studies; the ability to attract
and retain key personnel and key collaborators; the ability to adequately
protect proprietary information and technology from competitors; and the ability
to ensure that we do not infringe upon the rights of third parties. Material
factors or assumptions that were applied in drawing a conclusion or making an
estimate set out in the forward-looking information include the factors
identified throughout this prospectus. The forward-looking statements contained
in this prospectus represent our expectations as of the date of this prospectus,
and are subject to change after such date. We any intention or obligation to
update or revise any forward-looking statements whether as a result of new
information, future events or otherwise, except as required under applicable
securities regulations.
We undertake no obligation to update any
forward-looking 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.
Before you invest in the Debentures you should be aware that
the occurrence of the events described as risk factors and elsewhere in this
prospectus could have a material adverse effect on our business, operating
results and financial condition.
PROSPECTUS SUMMARY
This summary highlights selected information contained
elsewhere in this prospectus. To fully understand this offering, you should read
the entire prospectus carefully, including the more detailed information
regarding our company, the risks of purchasing our common stock discussed under
"risk factors," and our financial statements and the accompanying notes. In this
prospectus, the words "Corporation," "IntelGenx" "we," "us," and "our," refer
collectively to IntelGenx Technologies Corp. and IntelGenx Corp., our
wholly-owned Canadian subsidiary.
All amounts are US$ unless otherwise indicated. Unless
otherwise indicated, the term "year," "fiscal year" or "fiscal" refers to our
fiscal year ending December 31
st
.
Corporate History
Our predecessor company, Big Flash Corp., was incorporated in
Delaware on July 27, 1999. On April 28, 2006, Big Flash, through its Canadian
holding corporation, completed the acquisition of IntelGenx Corp., a Canadian
company incorporated on June 15, 2003. Big Flash did not have any operations
prior to the acquisition of IntelGenx Corp. In connection with the acquisition,
we changed our name from Big Flash Corp. to IntelGenx Technologies Corp.
IntelGenx Corp. has continued operations as our operating subsidiary.
6
Our Business
Overview
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. More recently, we have made the strategic decision to
enter the oral film market and are in the process of implementing commercial
oral film manufacturing capability. This enables us to offer our partners a
comprehensive portfolio of pharmaceutical services, including pharmaceutical
R&D, clinical monitoring, regulatory support, tech transfer and
manufacturing scale-up, and commercial manufacturing.
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.
Managing our project pipeline is a key success factor for the
Corporation. We have undertaken a strategy under which we will work with
pharmaceutical companies in order to apply our oral film technology to
pharmaceutical products for which patent protection is nearing expiration, a
strategy which is often referred to as lifecycle management. 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 have established a state-of-the-art manufacturing facility
with the intent to manufacture all our VersaFilm products in-house 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.
|
Our Offices and Other Corporate Information
Our executive offices are located at 6420 Abrams, Ville
Saint-Laurent, Quebec, H4S 1Y2, Canada, and our telephone number is (514)
331-7440. Our web site address is
http://www.IntelGenx.com
. Information
contained on our web site is not a part of this prospectus.
7
THE OFFERING
Offering:
|
Minimum: CA$7,000,000 aggregate principal amount of
Debentures
|
|
|
|
Maximum: CA$10,000,000 aggregate principal amount of
Debentures
|
|
|
Offering Price:
|
CA$1,000 per Debenture
|
|
|
Use of Proceeds:
|
The net proceeds from the Offering will be used for
capital expansion, clinical studies, product development and general
working capital requirements. See Use of Proceeds.
|
|
|
Interest Rate:
|
8% per annum. The interest will be payable semi-annually
on the last day of June and December of each year, commencing on June 30,
2017.
|
|
|
Maturity Date:
|
June 30, 2020
|
|
|
Conversion
:
|
Each Debenture will be convertible into Shares at the
option of the holder at any time prior to the Maturity Date and the
business day immediately preceding the date specified by us for redemption
of Debentures. During such period, each Debenture will be convertible at a
conversion price of $ per Share, being a conversion rate of approximately
Shares per CA$1,000 principal amount of Debentures, subject to
adjustment in certain events. Holders converting their Debentures will
receive accrued and unpaid interest thereon for the period from the date
of the latest interest payment date to, but excluding, the date of
conversion.
|
|
|
Redemption:
|
The Debentures will not be redeemable prior to June 30,
2018. On and after June 30, 2018, but prior to June 30, 2019, the
Debentures will be redeemable, in whole or in part, at a price equal to
the principal amount thereof, plus accrued and unpaid interest, at our
sole option on not more than 60 days' and not less than 30 days' prior
notice, provided that the weighted average trading price of the Shares on
the TSXV for the 20 consecutive trading days ending five trading days
preceding the date on which notice of redemption is given is not less than
125% of the conversion price of CA$●. On and after June 30, 2019 and prior
to the Maturity Date, the Debentures will be redeemable, in whole or in
part, at a price equal to the principal amount thereof, plus accrued and
unpaid interest, at our sole option on not more than 60 days' and not less
than 30 days' prior notice.
|
|
|
Purchase:
|
Provided that no Event of Default has occurred and is
continuing, the Corporation will have the right to purchase Debentures in
the market, by tender or by private contract, subject to regulatory
requirements.
|
|
|
Conversion at Corporations
Option:
|
We may, following June 30, 2018, subject to any required
regulatory approval and provided that no Event of Default has occurred and
is continuing, on not more than 60 days and not less than 30 days prior
notice, elect to satisfy its obligation to pay the principal amount of the
Debentures that are to be redeemed or the principal amount of and premium
(if any) on the Debentures that are to mature by issuing and delivering
for each CA$1,000 due, that number of freely tradeable Shares obtained by
dividing the CA$1,000 principal amount of the Debentures that is to be
redeemed or that are to mature, as the case may be, by 95% of the weighted
average trading price of the Shares on the TSXV for the 20 consecutive
trading days ending on the fifth trading day preceding the date fixed for
redemption or maturity, as the case may be. Interest accrued and unpaid on
the Debentures that are to be redeemed or that are to mature will be paid
to holders of Debentures in cash.
|
|
|
Share Interest Payment Election:
|
We may elect, from time to time, subject to any required
regulatory approval and provided that no Event of Default has occurred and
is continuing, to satisfy, subject to securing all necessary regulatory
approvals and on not more than 30 days and not less than 15 days prior
notice, all or part of its interest payment obligations by delivering
sufficient freely tradeable Shares, at a price per Share equal to the
market price (as defined by the policies of the TSXV) on the day before
the public announcement by us of our intention to satisfy its interest
payment obligations in Shares.
|
8
Change of Control:
|
Upon the occurrence of a Change of Control involving the
acquisition of voting control or direction over 66 2/3% or more of our
Shares, we will be required to make an offer to purchase, within 30 days
following the consummation of the Change of Control, all of the Debentures
at a price equal to 101% of the principal amount thereof plus accrued and
unpaid interest.
|
|
|
Rank:
|
The payment of the principal of, and interest on, the
Debentures will be subordinated in right of payment to the prior payment
in full of all of our Senior Indebtedness, including indebtedness under
our present and future bank credit facilities and any other secured
creditors. See Description of the Securities We are Offering -
Subordination.
|
|
|
Listing:
|
We will apply to list the Debentures and the Shares issuable on the conversion of the Debentures. Listing will be subject to
fulfilling the applicable listing requirements of the TSXV, including
distribution of the Debentures to a minimum number of public holders.
|
|
|
Common stock outstanding prior to
the
offering:
|
65,422,020
|
|
|
Common stock issuable on exercise
of the
Debentures
|
|
|
|
Common stock to be outstanding
after the
offering:
|
|
|
|
Risk Factors
|
See Risk Factors beginning on page 11 and other
information in this prospectus for a discussion of the factors you should
consider before you decide to invest in our securities.
|
|
|
OTCQX Ticker Symbol for
Common Stock:
|
IGXT
|
|
|
TSX Venture Exchange Symbol for
Common Stock:
|
IGX
|
(1)
Assumes the sale of all of the
Debentures offered hereby. The number of shares of common stock shown above to
be outstanding after this offering is based on 65,422,020 shares outstanding
as of March 31, 2017 and excludes:
|
|
2,960,000 shares of common stock issuable upon exercise
of outstanding stock options, at a weighted average exercise price of $0.63 per
share;
|
|
|
5,614,358 additional shares of common stock reserved
for issuance under a warrant agreement at an exercise price of $0.5646 per
share;
|
|
|
1,938,954 additional shares of common stock reserved for
future issuance under our amended and restated 2016 option plans; and
|
|
|
shares of common stock issuable upon conversion of the
Debentures offered hereby.
|
9
SUMMARY HISTORICAL FINANCIAL INFORMATION
The following tables set forth our summary historical financial
information. You should read this information together with the financial
statements and the notes thereto appearing elsewhere in this prospectus and the
information under "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
RESULTS OF OPERATIONS:
|
|
Twelve-month
|
|
|
Three-month
|
|
|
|
period
ended
|
|
|
Period ended
|
|
|
|
December 31,
|
|
|
March 31,
|
|
In U.S.$ thousands
|
|
2016
|
|
|
2017
|
|
Revenue
|
$
|
5,220
|
|
|
1,353
|
|
Cost of Royalty and License Revenue
|
|
319
|
|
|
92
|
|
Research and Development
Expenses
|
|
1,766
|
|
|
644
|
|
Selling, General and Administrative
|
|
|
|
|
|
|
Expenses
|
|
3,605
|
|
|
904
|
|
Depreciation of tangible assets
|
|
511
|
|
|
170
|
|
Operating Income (Loss)
|
|
(981
|
)
|
|
(457
|
)
|
Net Income (Loss)
|
|
(1,180
|
)
|
|
(512
|
)
|
Comprehensive Income (Loss)
|
|
(1,473
|
)
|
|
(468
|
)
|
BALANCE SHEET:
|
|
December
|
|
|
March 31,
|
|
In U.S.$ thousands
|
|
31, 2016
|
|
|
2017
|
|
Current Assets
|
$
|
6,352
|
|
|
4,966
|
|
Leasehold improvements and Equipment
|
|
5,730
|
|
|
5,833
|
|
Security Deposits
|
|
708
|
|
|
714
|
|
Current Liabilities
|
|
5,235
|
|
|
4,073
|
|
Deferred lease obligations
|
|
45
|
|
|
46
|
|
Long-term debt
|
|
2,565
|
|
|
2,410
|
|
Capital Stock
|
|
1
|
|
|
1
|
|
Additional Paid-in-Capital
|
|
23,700
|
|
|
24,207
|
|
10
RISK FACTORS
Our business faces many risks. Any of the risks discussed
below, or elsewhere in this registration statement or in our other filings with
the Securities and Exchange Commission (SEC), could have a material impact on
our business, financial condition, or results of operations.
Risks Relating To the Offering
There is currently no public market for the Debentures.
There is currently no market through which the Debentures may
be sold and purchasers may not be able to resell Debentures purchased under this
Prospectus. There can be no assurance that an active trading market will develop
for the Debentures after the Offering, or if developed, that such market will be
sustained at the price level of the Offering.
The Debentures will be unsecured, subordinated obligations
and the likelihood that purchasers of the Debentures will receive payments owing
to them under the terms of the Debentures will depend on our financial condition
and creditworthiness. The Indenture governing the Debentures contains limited
covenant protection.
The likelihood that purchasers of the Debentures will receive
payments owing to them under the terms of the Debentures will depend on our
financial condition and creditworthiness. In addition, the Debentures are
unsecured obligations and are subordinate in right of payment to all of our
existing and future Senior Indebtedness (as defined under Description of the
Securities We are Offering Subordination). Therefore, if we become bankrupt,
liquidate our assets, reorganize or enter into certain other transactions, our
assets will be available to pay its obligations with respect to the Debentures
only after it has paid all of its senior and secured indebtedness in full. There
may be insufficient assets remaining following such payments to pay amounts due
on any or all of the Debentures then outstanding. The Indenture does not
prohibit or limit our ability to incur additional debt or liabilities (including
Senior Indebtedness and secured indebtedness) or to make distributions except in
respect of cash distributions where an Event of Default caused by the failure to
pay interest when due has occurred and such default has not been cured or
waived. The Indenture does not contain any provision specifically intended to
protect holders of Debentures in the event of a future leveraged transaction.
We may not be able to purchase Debentures on a Change of
Control.
We will be required to offer to purchase all outstanding
Debentures upon the occurrence of a Change of Control. However, it is possible
that following a Change of Control, we will not have sufficient funds at that
time to make the required purchase of outstanding Debentures or that
restrictions contained in other indebtedness will restrict those purchases. See
Description of the Securities We are Offering Subordination.
The effect of certain transactions on the Debentures could
substantially lessen or eliminate the value of the conversion privilege.
In the case of certain transactions that we are involved in
that could occur in the future, the Debentures will become convertible into the
securities, cash or property receivable by a holder of Shares in the kind and
amount of securities, cash or property into which the Debentures were
convertible immediately prior to the transaction. This change could
substantially lessen or eliminate the value of the conversion privilege
associated with the Debentures in the future. For example, if we were acquired
in a cash merger, the Debentures would become convertible solely into cash and
would no longer be convertible into securities whose value would vary depending
on our future prospects and other factors. See Description of the Securities We
are Offering Change of Control.
We will have broad discretion as to the use of the net
proceeds from this offering, and we may not use the proceeds effectively.
Our management will have broad discretion as to the application
of the net proceeds. Our stockholders may not agree with the manner in which our
management chooses to allocate and spend the net proceeds. Moreover, our
management may use some of the net proceeds for corporate purposes that may not
increase our market value or profitability.
Holders of our Debentures will have no rights as common
stockholders until they acquire our common stock.
Until Debenture holders acquire shares of our common stock upon
conversion of the Debentures, the Debenture holders will have no rights with
respect to our common stock. Upon conversion of your Debentures, you will be
entitled to exercise the rights of a common stockholder only as to matters for
which the record date occurs after the conversion date.
11
We may undertake subsequent offerings which will lead to
dilution.
Our articles of incorporation and by-laws allow us to issue
Shares for such consideration and on such terms and conditions as shall be
established by the Directors, in many cases, without the approval of our
stockholders. Except as described under the heading
Plan of
Distribution
, we may issue additional Shares in subsequent offerings
(including through the sale of securities convertible into or exchangeable for
Shares) and on the exercise of stock options or other securities exercisable for
Shares. We cannot predict the size of future issuances of Shares or the effect
that future issuances and sales of Shares will have on the market price of the
Shares. Issuances of a substantial number of additional Shares, or the
perception that such issuances could occur, may adversely affect the prevailing
market price for the Shares. With any additional issuance of Shares, investors
will suffer dilution to their voting power and the Corporation may experience
dilution in its earnings per Share.
We will not be allowed to deduct interest paid by us under
the Debentures for purposes of computing our U.S. federal income tax liability.
For U.S. federal income tax purposes, we will not be allowed to
deduct interest paid by us under the Debentures because we have the right, at
our election, to pay interest due under the Debentures with Shares pursuant to
the Share Interest Payment Election.
An investment in the Debentures by a holder whose home
currency is not Canadian dollars entails significant risks.
All payments of interest on and the principal of the Debentures
and any redemption price for the Debentures will be made in Canadian dollars. An
investment in the Debentures by a holder whose home currency is not Canadian
dollars entails significant risks. These risks include the possibility of
significant changes in rates of exchange between the holders home currency and
Canadian dollars and the possibility of the imposition or subsequent
modification of foreign exchange controls. These risks generally depend on
factors over which we have no control, such as economic, financial and political
events and the supply of and demand for the relevant currencies. In the past,
rates of exchange between Canadian dollars and certain currencies have been
highly volatile, and each holder should be aware that volatility may occur in
the future. Fluctuations in any particular exchange rate that have occurred in
the past, however, are not necessarily indicative of fluctuations in the rate
that may occur during the term of the Debentures. Depreciation of Canadian
dollars against the holders home currency would result in a decrease in the
effective yield of the Debentures below its coupon rate and, in certain
circumstances, could result in a loss to the holder. If a holder is a U.S.
holder, see Certain U.S. Federal Tax Considerations U.S. Holders Foreign
Currency Considerations for the material United States federal income tax
consequences of the acquisition, ownership and disposition of the Debentures
related to the Debentures being denominated in Canadian dollars.
Risks Related to Our Business
We have a history of losses and our revenues may not be
sufficient to sustain our operations.
Even though we ceased being a development stage company in
April 2006, we are still subject to all of the risks associated with having a
limited operating history and pursuing the development of new products. Our cash
flows may be insufficient to meet expenses relating to our operations and the
development of our business, and may be insufficient to allow us to develop new
products. We currently conduct research and development using our proprietary
platform technologies to develop oral controlled release and other delivery
products. We do not know whether we will be successful in the development of
such products. We have an accumulated deficit of approximately $17,737 thousand
since our inception in 2003 through December 31, 2016. To date, these losses
have been financed principally through sales of equity securities. Our revenues
for the past five years ended December 31, 2016, December 31, 2015, December 31,
2014, December 31, 2013 and December 31, 2012 were $5.2 million, $5.1 million,
$1.7 million, $948 thousand and $1,198 thousand respectively. Revenue generated
to date has not been sufficient to sustain our operations. In order to achieve
profitability, our revenue streams will have to increase and there is no
assurance that revenues will increase to such a level.
We may incur losses associated with foreign currency
fluctuations.
The majority of our expenses are paid in Canadian dollars,
while a significant portion of our revenues are in U.S. dollars. Our financial
results are subject to the impact of currency exchange rate fluctuations.
Adverse movements in exchange rates could have a material adverse effect on our
financial condition and results of operations.
12
We may need additional capital to fulfill our business
strategies. We may also incur unforeseen costs. Failure to obtain such capital
would adversely affect our business.
We will need to expend significant capital in order to continue
with our research and development by hiring additional research staff and
acquiring additional equipment. If our cash flows from operations are
insufficient to fund our expected capital needs, or our needs are greater than
anticipated, we may be required to raise additional funds in the future through
private or public sales of equity securities or the incurrence of indebtedness.
Additional funding may not be available on favorable terms, or at all. If we
borrow additional funds, we likely will be obligated to make periodic interest
or other debt service payments and may be subject to additional restrictive
covenants. If we fail to obtain sufficient additional capital in the future, we
could be forced to curtail our growth strategy by reducing or delaying capital
expenditures, selling assets or downsizing or restructuring our operations. If
we raise additional funds through public or private sales of equity securities,
the sales may be at prices below the market price of our stock and our
shareholders may suffer significant dilution.
The loss of the services of key personnel would adversely
affect our business.
Our future success depends to a significant degree on the
skills, experience and efforts of our executive officers and senior management
staff. The loss of the services of existing personnel would be detrimental to
our research and development programs and to our overall business.
We are dependent on business partners to conduct clinical
trials of, obtain regulatory approvals for, and manufacture, market, and sell
our products.
We depend heavily on our pharmaceutical partners to pay for
part or all of the research and development expenses associated with developing
a new product and to obtain approval from regulatory bodies such as the FDA to
commercialize these products. We also depend on our partners to distribute these
products after receiving regulatory approval. Our revenues from research and
development fees, milestone payments and royalty fees are derived from our
partners. Our inability to find pharmaceutical partners who are willing to pay
us these fees in order to develop new products would negatively impact our
business and our cash flows.
We have limited experience in manufacturing, marketing and
selling pharmaceutical products. Accordingly, if we cannot maintain our existing
partnerships or establish new partnerships with respect to our other products in
development, we will have to establish our own capabilities or discontinue the
commercialization of the affected product. Developing our own capabilities would
be expensive and time consuming and could delay the commercialization of the
affected product. There can be no assurance that we would be able to develop
these capabilities.
Our existing agreements with pharmaceutical industry partners
are generally subject to termination by the counterparty on short notice upon
the occurrence of certain circumstances, including, but not limited to, the
following: a determination that the product in development is not likely to be
successfully developed or not likely to receive regulatory approval; our failure
to satisfy our obligations under the agreement, or the occurrence of a
bankruptcy event. If any of our partnerships are terminated, we may be required
to devote additional resources to the product, seek a new partner on short
notice, or abandon the product development efforts. The terms of any additional
partnerships or other arrangements that we establish may not be favorable to us.
We are also at risk that these partnerships or other
arrangements may not be successful. Factors that may affect the success of our
partnerships include the following:
|
|
Our partners may incur financial and cash-flow
difficulties that force them to limit or reduce their participation in our
joint projects;
|
|
|
Our partners may be pursuing alternative technologies or
developing alternative products that are competitive to our product,
either on their own or in partnership with others;
|
|
|
Our partners may reduce marketing or sales efforts, or
discontinue marketing or sales of our products, which may reduce our
revenues received on the products;
|
|
|
Our partners may have difficulty obtaining the raw
materials to manufacture our products in a timely and cost effective
manner or experience delays in production, which could affect the sales of
our products and our royalty revenues earned;
|
|
|
Our partners may terminate their partnerships with us.
This could make it difficult for us to attract new partners, and it could
adversely affect how the business and financial communities perceive us;
|
|
|
Our partners may pursue higher priority programs or
change the focus of their development programs, which could affect the
partners commitment to us. Pharmaceutical and biotechnology companies
historically have re-evaluated their priorities from time to time,
including following mergers and consolidations, a common occurrence in
recent years; and
|
|
|
Our partners may become the target of litigation for
purported patent or intellectual property infringement, which could delay
or prohibit commercialization of our products and which would reduce our
revenue from such products.
|
13
We face competition in our industry, and several of our
competitors have substantially greater experience and resources than we
do.
We compete with other companies within the drug delivery
industry, many of which have more capital, more extensive research and
development capabilities and greater human resources than we do. Some of these
drug delivery competitors include Monosol Rx, Tesa-Labtec GmbH, BioDelivery
Sciences International, Inc. and LTS Lohmann Therapy Systems Corp. Our
competitors may develop new or enhanced products or processes that may be more
effective, less expensive, safer or more readily available than any products or
processes that we develop, or they may develop proprietary positions that
prevent us from being able to successfully commercialize new products or
processes that we develop. As a result, our products or processes may not
compete successfully, and research and development by others may render our
products or processes obsolete or uneconomical. Competition may increase as
technological advances are made and commercial applications broaden.
We rely upon third-party manufacturers, which puts us at
risk for supplier business interruptions.
In certain instances, we may have to enter into agreements with
third party manufacturers to manufacture certain of our products once we
complete development and after we receive regulatory approval. If our
third-party manufacturers fail to perform, our ability to market products and to
generate revenue would be adversely affected. Our failure to deliver products in
a timely manner could lead to the dissatisfaction of our distribution partners
and damage our reputation, causing our distribution partners to cancel existing
agreements with us and to stop doing business with us.
Any third-party manufacturers that we depend on to manufacture
our products are required to adhere to FDA regulations regarding current Good
Manufacturing Practices (cGMP), which include testing, control and documentation
requirements. Ongoing compliance with cGMP and other regulatory requirements is
monitored by periodic inspection by the FDA and comparable agencies in other
countries. Failure by our third-party manufacturers to comply with cGMP and
other regulatory requirements could result in actions against them by regulatory
agencies and jeopardize our ability to obtain products on a timely basis.
We are in the process of establishing our own manufacturing
facility for the future manufacture of VersaFilm products, which requires
considerable financial investment and, if we are unsuccessful, could have a
material adverse effect on our business, financial condition or results of
operations.
We currently manufacture products only for clinical and testing
purposes in our own facility and we do not manufacture products for commercial
use. In order to establish ourselves as a full-service partner for our thin film
products, we invested approximately $6.5 million to establish a state-of-the-art
manufacturing facility for the commercial manufacture of products developed
using our VersaFilm drug delivery technology. We anticipate the manufacturing
facility to be qualified and ready for regulatory approval in the second half of
2017.
With our current manufacturing equipment, we are only able to
manufacture products that do not contain flammable organic solvents. Since
several of our film products are solvent-based, we are in the process of
acquiring manufacturing equipment that is capable of handling organic solvents,
and we are expanding our manufacturing facility in order to create the space
required for this new manufacturing equipment.
We have limited expertise in establishing and operating a
manufacturing facility and although we have contracted with architects,
engineers and construction contractors specialized in the planning and
construction of pharmaceutical facilities, there can be no guarantee that the
project can be completed within the time or budget allocated. In addition, we
may be unable to attract suitably qualified personnel for our manufacturing
facility at acceptable terms and conditions of employment.
In addition, before we can begin commercial manufacture of our
VersaFilm products for sale in the United States, we must obtain FDA regulatory
approval for the product, which requires a successful inspection of our
manufacturing facilities, processes and quality systems by various health
authorities in addition to other product-related approvals. Further,
pharmaceutical manufacturing facilities are continuously subject to inspection
by the FDA and other health authorities before and after product approval. Due
to the complexity of the processes used to manufacture our VersaFilm products,
we may be unable initially or at any future time to pass federal, state or
international regulatory inspections in a cost effective manner. If we are
unable to comply with manufacturing regulations, we may be subject to fines,
unanticipated compliance expenses, recall or seizure of any approved products,
total or partial suspension of production and/or enforcement actions, including
injunctions, and criminal or civil prosecution.
The manufacture of our products is heavily regulated by
governmental health authorities, including the FDA. We must ensure that all
manufacturing processes comply with current Good Manufacturing Practices
(cGMP) and other applicable regulations. If we fail to comply fully with these
requirements and the health authorities' expectations, then we could be required
to shut down our production facilities or production lines, or could be
prevented from importing our products from one country to another. This could
lead to product shortages, or to our being entirely unable to supply products to
patients for an extended period of time. Such shortages or shut downs could lead
to significant losses of sales revenue and to potential third-party litigation.
In addition, health authorities have in some cases imposed significant penalties
for such failures to comply with cGMP. A failure to comply fully
with cGMP could also lead to a delay in the approval of new products to be
manufactured at our manufacturing facility.
14
Any disruption in the supply of our future products could have
a material adverse effect on our business, financial condition or results of
operations.
We have no timely ability to replace our future VersaFilm
manufacturing capabilities.
If our manufacturing facility suffers any type of prolonged
interruption, whether caused by regulator action, equipment failure, critical
facility services, fire, natural disaster or any other event that causes the
cessation of manufacturing activities, we would be exposed to long-term loss of
sales and profits. There are no facilities capable of contract manufacturing our
VersaFilm products at short notice. If we suffer an interruption to our
manufacturing of VersaFilm products, we may have to find a contract
manufacturer capable of supplying our needs, although this would require
completing a Manufacturing Site Change process, which takes considerable time
and is costly. Replacement of our manufacturing capabilities will have a
material adverse effect on our business and financial condition or results of
operations.
We depend on a limited number of suppliers for API.
Generally, only a single source of API is qualified for use in each product due
to the costs and time required to validate a second source of supply. Changes in
API suppliers must usually be approved through a Prior Approval Supplement by
the FDA.
Our ability to manufacture products is dependent, in part, upon
ingredients and components supplied by others, including international
suppliers. Any disruption in the supply of these ingredients or components or
any problems in their quality could materially affect our ability to manufacture
our products and could result in legal liabilities that could materially affect
our ability to realize profits or otherwise harm our business, financial, and
operating results. As the API typically comprises the majority of a product's
manufactured cost, and qualifying an alternative is costly and time-consuming,
API suppliers must be selected carefully based on quality, reliability of supply
and long-term financial stability.
We are subject to extensive government regulation including
the requirement of approval before our products may be marketed. Even if we
obtain marketing approval, our products will be subject to ongoing regulatory
review.
We, our partners, our products, and our product candidates are
subject to extensive regulation by governmental authorities in the United States
and other countries. Failure to comply with applicable requirements could result
in warning letters, fines and other civil penalties, delays in approving or
refusal to approve a product candidate, product recall or seizure, withdrawal of
product approvals, interruption of manufacturing or clinical trials, operating
restrictions, injunctions, and criminal prosecution.
Our products cannot be marketed in the United States without
FDA approval. Obtaining FDA approval requires substantial time, effort, and
financial resources, and there can be no assurance that any approval will be
granted on a timely basis, if at all. With most of our products, we rely on our
partners for the preparation of applications and for obtaining regulatory
approvals. If the FDA does not approve our product candidates in a timely
fashion, or does not approve them at all, our business and financial condition
may be adversely affected. Further, the terms of approval of any marketing
application, including the labeling content, may be more restrictive than we
desire and could affect the marketability of our or our partner`s products.
Subsequent discovery of problems with an approved product may result in
restrictions on the product or its withdrawal from the market. In addition, both
before and after regulatory approval, we, our partners, our products, and our
product candidates are subject to numerous FDA requirements regarding testing,
manufacturing, quality control, cGMP, adverse event reporting, labeling,
advertising, promotion, distribution, and export. Our partners and we are
subject to surveillance and periodic inspections to ascertain compliance with
these regulations. Further, the relevant law and regulations may change in ways
that could affect us, our partners, our products, and our product candidates.
Failure to comply with regulatory requirements could have a material adverse
impact on our business.
Regulations regarding the manufacture and sale of our future
products are subject to change. We cannot predict what impact, if any, such
changes may have on our business, financial condition or results of operations.
Failure to comply with applicable regulatory requirements could have a material
adverse effect on our business, financial condition and results of operations.
Additionally, the time required for obtaining regulatory
approval is uncertain. We may encounter delays or product rejections based upon
changes in FDA policies, including cGMP, during periods of product development.
We may encounter similar delays in countries outside of the United States. We
may not be able to obtain these regulatory acceptances on a timely basis, or at
all.
The failure to obtain timely regulatory acceptance of our
products, any product marketing limitations, or any product withdrawals would
have a material adverse effect on our business, financial condition and results
of operations. In addition, before it grants approvals, the FDA or any foreign regulatory authority may impose numerous other
requirements with which we must comply. Regulatory acceptance, if granted, may
include significant limitations on the indicated uses for which the product may
be marketed. FDA enforcement policy strictly prohibits the marketing of accepted
products for unapproved uses. Product acceptance could be withdrawn or civil
and/or criminal sanctions could be imposed for our failure to comply with
regulatory standards or the occurrence of unforeseen problems following initial
marketing.
15
We may not be able to expand or enhance our existing product
lines with new products limiting our ability to grow.
If we are not successful in the development and introduction of
new products, our ability to grow will be impeded. We may not be able to
identify products to enhance or expand our product lines. Even if we can
identify potential products, our investment in research and development might be
significant before we can bring the products to market. Moreover, even if we
identify a potential product and expend significant dollars on development, we
may never be able to bring the product to market or achieve market acceptance
for such product. As a result, we may never recover our expenses.
The market may not be receptive to products incorporating
our drug delivery technologies.
The commercial success of any of our products that are approved
for marketing by the FDA and other regulatory authorities will depend upon their
acceptance by the medical community and third party payers as clinically useful,
cost-effective and safe. To date, only two products based upon our technologies
have been marketed in the United States, which limits our ability to provide
guidance or assurance as to market acceptance.
Factors that we believe could materially affect market
acceptance of these products include:
|
|
The timing of the receipt of marketing approvals and the
countries in which such approvals are obtained;
|
|
|
The safety and efficacy of the product as compared to
competitive products;
|
|
|
The relative convenience and ease of administration as
compared to competitive products;
|
|
|
The strength of marketing distribution support; and
|
|
|
The cost-effectiveness of the product and the ability to
receive third party reimbursement.
|
We are subject to environmental regulations, and any failure
to comply may result in substantial fines and sanctions.
Our operations are subject to Canadian and international
environmental laws and regulations governing, among other things, emissions to
air, discharges to waters and the generation, handling, storage, transportation,
treatment and disposal of raw materials, waste and other materials. Many of
these laws and regulations provide for substantial fines and criminal sanctions
for violations. We believe that we are and have been operating our business and
facility in a manner that complies in all material respects with environmental,
health and safety laws and regulations; however, we may incur material costs or
liabilities if we fail to operate in full compliance. We do not maintain
environmental damage insurance coverage with respect to the products which we
manufacture.
The decision to establish commercial film manufacturing
capability may require us to make significant expenditures in the future to
comply with evolving environmental, health and safety requirements, including
new requirements that may be adopted or imposed in the future. To meet changing
licensing and regulatory standards, we may have to make significant additional
site or operational modifications that could involve substantial expenditures or
reduction or suspension of some of our operations. We cannot be certain that we
have identified all environmental and health and safety matters affecting our
activities and in the future our environmental, health and safety problems, and
the costs to remediate them, may be materially greater than we expect.
Risks Related to Our Intellectual Property
If we are not able to adequately protect our intellectual
property, we may not be able to compete effectively.
Our success depends, to a significant degree, upon the
protection of our proprietary technologies. While we currently own 8 patents and
have an additional 18 pending patent applications in several jurisdictions, we
will need to pursue additional protection for our intellectual property as we
develop new products and enhance existing products. We may not be able to obtain
appropriate protection for our intellectual property in a timely manner, or at
all. Our inability to obtain appropriate protections for our intellectual
property may allow competitors to enter our markets and produce or sell the same
or similar products.
16
If we are forced to resort to legal proceedings to enforce our
intellectual property rights, the proceedings could be burdensome and expensive.
In addition, our proprietary rights could be at risk if we are unsuccessful in,
or cannot afford to pursue, those proceedings.
We also rely on trade secrets and contract law to protect some
of our proprietary technology. We have entered into confidentiality and
invention agreements with our employees and consultants. Nevertheless, these
agreements may not be honored and they may not effectively protect our right to
our un-patented trade secrets and know-how. Moreover, others may independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to our trade secrets and know-how.
We may need to obtain licenses to patents or other proprietary
rights from third parties. We may not be able to obtain the licenses required
under any patents or proprietary rights or they may not be available on
acceptable terms. If we do not obtain required licenses, we may encounter delays
in product development or find that the development, manufacture or sale of
products requiring licenses could be foreclosed. We may, from time to time,
support and collaborate in research conducted by universities and governmental
research organizations. We may not be able to acquire exclusive rights to the
inventions or technical information derived from these collaborations, and
disputes may arise over rights in derivative or related research programs
conducted by us or our partners.
If we infringe on the rights of third parties, we may not be
able to sell our products, and we may have to defend against litigation and pay
damages.
If a competitor were to assert that our products infringe on
its patent or other intellectual property rights, we could incur substantial
litigation costs and be forced to pay substantial damages. Such litigation costs
could be as a result of direct litigation against us, or as a result of
litigation against one or more of our partners to whom we have contractually
agreed to indemnify in the event that our intellectual property is the cause of
a successful litigious action against our partner. Third-party infringement
claims, regardless of their outcome, would not only consume significant
financial resources, but would also divert our managements time and attention.
Such claims could also cause our customers or potential customers to purchase
competitors products or defer or limit their purchase or use of our affected
products until resolution of the claim. If any of our products are found to
violate third-party intellectual property rights, we may have to re-engineer one
or more of our products, or we may have to obtain licenses from third parties to
continue offering our products without substantial re-engineering. Our efforts
to re-engineer or obtain licenses could require significant expenditures and may
not be successful.
Our controlled release products that are generic versions of
branded controlled release products that are covered by one or more patents may
be subject to litigation, which could delay FDA approval and commercial launch
of our products.
We expect to file or have our partners file NDAs or ANDAs for
our controlled release products under development that are covered by one or
more patents of the branded product. It is likely that the owners of the patents
covering the brand name product or the sponsors of the NDA with respect to the
branded product will sue or undertake regulatory initiatives to preserve
marketing exclusivity. Any significant delay in obtaining FDA approval to market
our products as a result of litigation, as well as the expense of such
litigation, whether or not we or our partners are successful, could have a
materially adverse effect on our business, financial condition and results of
operations.
Risks Related to Our Securities:
The price of our common stock could be subject to
significant fluctuations.
Any of the following factors could affect the market price of
our common stock:
|
|
Our failure to achieve and maintain profitability;
|
|
|
Changes in earnings estimates and recommendations by
financial analysts;
|
|
|
Actual or anticipated variations in our quarterly results
of operations;
|
|
|
Changes in market valuations of similar companies;
|
|
|
Announcements by us or our competitors of significant
contracts, new products, acquisitions, commercial relationships, joint
ventures or capital commitments;
|
|
|
The loss of major customers or product or component
suppliers;
|
|
|
The loss of significant partnering relationships; and
|
|
|
General market, political and economic conditions.
|
17
We have a significant number of convertible securities
outstanding that could be exercised in the future. Subsequent resale of these
and other shares could cause our stock price to decline. This could also make it
more difficult to raise funds at acceptable levels pursuant to future securities
offerings.
Our common stock is a high risk investment.
Our common stock was quoted on the OTC Bulletin Board under the
symbol IGXT from January 2007 until June 2012 and, subsequent to our upgrade
in June 2012, has been quoted on the OTCQX. Our common stock has also been
listed on the TSXV under the symbol IGX since May 2008.
There is a limited trading market for our common stock, which
may affect the ability of shareholders to sell our common stock and the prices
at which they may be able to sell our common stock.
The market price of our common stock has been volatile and
fluctuates widely in response to various factors which are beyond our control.
The price of our common stock is not necessarily indicative of our operating
performance or long term business prospects. In addition, the securities markets
have from time to time experienced significant price and volume fluctuations
that are unrelated to the operating performance of particular companies. These
market fluctuations may also materially and adversely affect the market price of
our common stock.
In the United States, our common stock is considered a penny
stock. The SEC has adopted regulations which generally define a penny stock
to be an equity security that has a market price of less than $5.00 per share or
an exercise price of less than $5.00 per share, subject to specific exemptions.
This designation requires any broker or dealer selling these securities to
disclose certain information concerning the transaction, obtain a written
agreement from the purchaser and determine that the purchaser is reasonably
suitable to purchase the securities. These rules may restrict the ability of
brokers or dealers to sell our common stock and may affect the ability of
investors to sell their shares.
As a result of the foregoing, our common stock should be
considered a high risk investment.
The application of the penny stock rules to our common
stock could limit the trading and liquidity of our common stock, adversely
affect the market price of our common stock and increase stockholder transaction
costs to sell those shares.
As long as the trading price of our common stock is below $5.00
per share, the open market trading of our common stock will be subject to the
penny stock rules, unless we otherwise qualify for an exemption from the
penny stock definition. The penny stock rules impose additional sales
practice requirements on certain broker-dealers who sell securities to persons
other than established customers and accredited investors (generally those with
assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000
together with their spouse). These regulations, if they apply, require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the associated risks. Under these
regulations, certain brokers who recommend such securities to persons other than
established customers or certain accredited investors must make a special
written suitability determination regarding such a purchaser and receive such
purchasers written agreement to a transaction prior to sale. These regulations
may have the effect of limiting the trading activity of our common stock,
reducing the liquidity of an investment in our common stock and increasing the
transaction costs for sales and purchases of our common stock as compared to
other securities.
We became public by means of a reverse merger, and as a
result we are subject to the risks associated with the prior activities of the
public company with which we merged.
Additional risks may exist because we became public through a
reverse merger with a shell corporation. Although the shell did not have any
operations or assets and we performed a due diligence review of the public
company, there can be no assurance that we will not be exposed to undisclosed
liabilities resulting from the prior operations of our company.
Our limited cash resources restrict our ability to pay cash
dividends.
Since our inception, we have not paid any cash dividends on our
common stock. We currently intend to retain future earnings, if any, to support
operations and to finance the growth and development of our business. Therefore,
we do not expect to pay cash dividends in the foreseeable future. Any future
determination relating to our dividend policy will be made at the discretion of
our Board of Directors and will depend on a number of factors, including future
earnings, capital requirements, financial conditions and future prospect and
other factors that the Board of Directors may deem relevant. If we do not pay
any dividends on our common stock, our shareholders will be able to profit from
an investment only if the price of the stock appreciates before the shareholder
sells it. Investors seeking cash dividends should not purchase our common
stock.
18
If we are the subject of securities analyst reports or if
any securities analyst downgrades our common stock or our sector, the price of
our common stock could be negatively affected.
Securities analysts may publish reports about us or our
industry containing information about us that may affect the trading price of
our common stock. In addition, if a securities or industry analyst downgrades
the outlook for our stock or one of our competitors stocks, the trading price
of our common stock may also be negatively affected.
USE OF PROCEEDS
We estimate that the net proceeds
from the Minimum Offering (after deducting the Agency fee of CA$420,000 and
before deducting the estimated expenses of this Offering of CA$350,000) will be
approximately CA$6,580,000. We estimate that the net proceeds from the Maximum
Offering (after deducting the Agency fee of CA$600,000 and before deducting the
estimated expenses of this Offering of CA$350,000) will be approximately
CA$9,400,000.
We intend to use the net proceeds
from the Offering as follows:
Use of net proceeds
|
|
Minimum Offering
|
|
|
Maximum Offering
|
|
Capital expansion
|
|
CA$1,800,000
|
|
|
CA$1,800,000
|
|
Clinical Studies
|
|
CA$1,400,000
|
|
|
CA$1,400,000
|
|
Product development
|
|
CA$600,000
|
|
|
CA$600,000
|
|
General working capital requirements
(1)
|
|
CA$2,780,000
|
|
|
CA$5,600,000
|
|
TOTAL
|
|
CA
$6,580,000
|
|
|
CA
$9,400,000
|
|
(1)
Our monthly general working capital requirements are expected to be
of $400,000 during the next 24 months.
The funds allocated to capital expenses will be allocated to
the second phase of the expansion of the manufacturing capability of the
Corporation and to clinical studies will contribute to the cost for the phase II
proof of concept study using montelukast in a repurposing opportunity for
treatment of cognitive diseases. In addition it will support smaller phase I
clinical studies for other projects in development such as Apomorphine and
Loxapine. It is anticipated that the phase II proof of concept study will be
commenced within the next 12 months.
Product development includes but is not limited to development
of new and innovative formulations, analytical method development and testing of
the different prototypes for content and stability and manufacturing process
development at small and larger scale. It is anticipated that these development
efforts will be conducted over the next 12 to 18 months.
DILUTION
If you convert your Debentures into shares of our common stock,
your interest will be diluted to the extent of the difference between the
conversion price per share at which you convert your Debentures in this Offering
and the net tangible book value per share of our common stock immediately after
such conversion. Our net tangible book value of our common stock at December 31,
2016 was approximately $ ________, or approximately $_______per share of common
stock based upon ______ shares outstanding at December 31, 2016. Our historical
net tangible book value per share is calculated by subtracting our total
liabilities, goodwill and intangible assets from our total assets and dividing
this amount by the number of shares of our common stock outstanding on December
31, 2016.
19
After giving effect to the offering of the Debentures and the
issuance of _______ shares of our common stock upon conversion of the Debentures
at the initial conversion price of $_____ per share, our net tangible book value
at December 31, 2016 would have been $_____, or $______ per share of common
stock. This represents an immediate increase in net tangible book value of
$_____ per share to our existing stockholders and an immediate dilution in net
tangible book value of $______ per share to new investors in this offering.
Initial Conversion Price
|
|
|
|
$
|
___
|
|
Net tangible book value per share as of
December 31, 2016
|
$
|
____
|
|
|
|
|
Increase in net tangible book
value per share attributable to new investors
|
|
___
|
|
|
|
|
As adjusted net tangible book value per share
after giving effect to this offering and the
conversion of the Debentures
|
|
|
|
|
___
|
|
Dilution per share to new
investors
|
|
|
|
|
$
|
___
|
|
The number of shares of common stock shown above to be
outstanding after this Offering is based on 64,812,020 shares outstanding as of
December 31, 2016 and excludes as of such date:
|
|
2,710,000 shares of common stock issuable upon exercise of
outstanding stock options, at a weighted average exercise price of $0.63 per
share;
|
|
|
|
|
|
6,174,358 additional shares of common stock reserved for issuance
under a warrant agreement at an exercise price of $0.5646 per share; and
|
|
|
|
|
|
2,238,954 additional shares of common stock reserved for future
issuance under our amended and restated 2016 option plans.
|
To the extent that outstanding stock options and warrants are
exercised, there will be further dilution to new investors. In addition, you may
experience further dilution upon our election to repay the Debentures in shares
of common stock. See Description of Notes. We may also choose to raise
additional capital due to market conditions or strategic considerations even if
we believe we have sufficient funds for our current or future operating plans.
To the extent that additional capital is raised through the sale of equity or
convertible debt securities, the issuance of these securities could result in
further dilution to our stockholders.
DESCRIPTION OF BUSINESS
Overview
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. More recently, we have made the strategic decision to
enter the oral film market and are in the process of implementing commercial
oral film manufacturing capability. This enables us to offer our partners a
comprehensive portfolio of pharmaceutical services, including pharmaceutical
R&D, clinical monitoring, regulatory support, tech transfer and
manufacturing scale-up, and commercial manufacturing.
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.
Managing our project pipeline is a key success factor for the
Corporation. We have undertaken a strategy under which we will work with
pharmaceutical companies in order to apply our oral film technology to
pharmaceutical products for which patent protection is nearing expiration, a
strategy which is often referred to as lifecycle management. 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.
20
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 have established a state-of-the-art manufacturing facility
with the intent to manufacture all our VersaFilm products in-house 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.
|
Technology Platforms
Our product development efforts are based upon three delivery
platform technologies: (1) VersaFilm, an Oral Film technology, (2) VersaTab, a
Multilayer Tablet technology, and (3) AdVersa®, a Mucoadhesive Tablet
technology.
VersaFilm is a drug delivery platform technology that enables
the development of oral thin films, improving product performance:
|
|
Rapid disintegration without the need for water;
|
|
|
Quicker buccal or sublingual absorption;
|
|
|
Potential for faster onset of action and increased
bioavailability;
|
|
|
Potential for reduced adverse effects by bypassing
first-pass metabolism;
|
|
|
Easy administration for patients who have problems in
swallowing: pediatric, geriatric, fear choking and/or suffering from
nausea (e.g., nausea resulting from chemotherapy, radiotherapy or any
surgical treatment);
|
|
|
Pleasant taste;
|
|
|
Small and thin size, making it convenient for consumers.
|
Our VersaFilm technology consists of a thin (25-35 micron)
polymeric film comprised of United States Pharmacopeia (USP) components that are
approved by the FDA for use in food, pharmaceutical, and cosmetic products.
Derived from the edible film technology used for breath strips and initially
developed for the instant delivery of savory flavors to food substrates, the
VersaFilm technology is designed to provide a rapid response compared to
existing conventional tablets. Our VersaFilm technology is intended for
indications requiring rapid onset of action, such as migraine, opioid
dependence, chronic pain, motion sickness, erectile dysfunction, and nausea.
Our VersaTab platform technology allows for the development of
oral controlled-release products. It is designed to be versatile and to reduce
manufacturing costs as compared to competing oral extended-release delivery
technologies. Our VersaFilm technology allows for the instant delivery of
pharmaceuticals to the oral cavity, while our AdVersa® allows for the controlled
release of active substances to the oral mucosa.
Our VersaTab technology represents a new generation of
controlled release layered tablets designed to modulate the release of active
compounds. The technology is based on a multilayer tablet with an active core
layer and erodible cover layers. The release of the active drug from the core
matrix initially occurs in a first-order fashion. As the cover layers start to
erode, their permeability for the active ingredient through the cover layers
increases. Thus, the Multilayer Tablet can produce quasi-linear (zero-order)
kinetics for releasing a chemical compound over a desired period of time. The
erosion rate of the cover layers can be customized according to the
physico-chemical properties of the active drug. In addition, our multilayer
technology offers the opportunity to develop combination products in a
regulatory-compliant format. Combination products are made up of two or more
active ingredients that are combined into a single dosage form.
Our Mucoadhesive Tablet is a drug delivery system capable of
adhering to the oral mucosa and releasing the drug onto the site of application
at a controlled rate. The Mucoadhesive Tablet is designed to provide the
following advantages relative to competing technologies: (i) it avoids the first pass effect, whereby the liver metabolizes the active
ingredient and greatly reduces the level of drug reaching the systemic
circulation, (ii) it leads to a higher absorption rate in the oral cavity as
compared to the conventional oral route, and (iii) it achieves a rapid onset of
action for the drug. Our AdVersa® technology is designed to be versatile in
order to permit the site of application, residence time, and rate of release of
the drug to be modulated to achieve the desired results.
21
Product Portfolio
Our product portfolio includes a blend of generic and branded
products based on our proprietary delivery technology (generic products are
essentially copies of products that have already received FDA approval). Of the
fourteen projects currently in our product portfolio, three utilize our
VersaTab technology, ten utilize our VersaFilm technology, and one utilizes
our AdVersa® technology.
INT0001/2004: This is the most advanced generic product
involving our multilayer tablet technology. Equivalency with the reference
product Toprol XL® and its European equivalent Beloc-ZOK® has been demonstrated
in-vitro. The product has been tested in phase I studies. In November 2016 we
entered into a License and Development Agreement with Chemo Group to advance the
commercialization of our Versa Tab product. The manufacturing technology
transfer to Chemo is currently ongoing.
INT0004/2006: We developed a new, higher strength of the
antidepressant Bupropion HCl, the active ingredient in Wellbutrin XL®, and, in
November 2011, the FDA approved the drug for patients with Major Depressive
Disorder. In February 2012, we entered into an agreement with Edgemont
Pharmaceuticals LLC (Edgemont) for commercialization of the product in the
United States. Under the terms of the agreement, Edgemont obtained certain
exclusive rights to market and sell the product in the U.S. In exchange we
received a $1.0 million upfront payment, received launch related milestones
totaling up to $4.0 million, and are eligible for additional milestones of up to
a further $23.5 million upon achieving certain sales and exclusivity targets. We
also receive tiered double-digit royalties on the net sales of the product. The
agreement has no expiry date but may be terminated in the event of, without
limitation (i) failure by either us or Edgemont to perform our respective
obligations under the agreement; (ii) if either party files a petition for
bankruptcy or insolvency or otherwise winds up, liquidates or dissolves its
business, or (iii) otherwise by mutual consent of the parties. The agreement
also contains customary confidentiality, indemnification and intellectual
property protection provisions.
The product was launched in the U.S. in October 2012 under the
brand name Forfivo XL®. As of December 31, 2015 we had received an upfront
payment of $1 million and a $1 million milestone payment related to the launch.
The commercialization of Forfivo XL® triggered a launch-related milestone
payment of $3 million from IntelGenx licensing partner Edgemont due to Edgemont
reaching in July 2015, $7 million of cumulative net trade sales of Forfivo XL®
over the preceding 12 months. From that $3 million milestone payment, $1 million
was received in Q3 2015. Of the remaining balance of $2 million, $1 million was
received in Q4 2015 and $1 million was received in Q1 2016. We commenced
receiving royalty payments in the first quarter of 2013. We recorded $433
thousand for the cost of royalty and license revenue in the twelve-month period
ended December 31, 2015 compared with $61 in the same period of 2014.
In August 2013, we announced receipt of a Paragraph IV
Certification Letter from Wockhardt Bio AG, advising of the submission of an
Abbreviated New Drug Application ("ANDA") to the FDA requesting authorization to
manufacture and market generic versions of Forfivo XL® 450 mg tablets in the
U.S. In November 2014 we announced that the Paragraph IV litigation with
Wockhardt had been settled and that, under the terms of the settlement,
Wockhardt has been granted the right, with effect from January 15, 2018, to be
the exclusive marketer and distributor of an authorized generic of Forfivo XL®
in the U.S.
In December 2014 we announced that Edgemont had exercised its
right to extend the license for the exclusive marketing of Forfivo XL® 450 mg
tablets. In exchange, we received milestone payments of $650 thousand in
December 2014 and $600 thousand in February 2015. All other financial
obligations contained in the license agreement entered into by Edgemont and
IntelGenx in February 2012, specifically launch-related and sales milestones,
together with the contractual royalty rates on net sales of the product,
remained in effect.
On August 5th, 2016, we announced that we had sold our U.S.
royalty on future sales of Forfivo XL® to SWK Holdings Corporation (SWK) for $6
million (CA$8 million). Forfivo XL® (Bupropion extended-release) is the first
450 mg bupropion HCl tablet indicated for Major Depressive Disorder, approved by
the FDA. As per terms of the agreement, we received $6 million from SKW at
closing. In return for, (i) 100% of any and all royalties (as defined in the
Edgemont Pharmaceuticals, LLC License Agreement) or similar royalty amounts
received on or after April 1, 2016, (ii) 100% of the $2 million milestone
payment upon Edgemont reaching annual net sales of $15 million, and (iii) 35% of
all potential future milestone payments. Patent protection for Forfivo XL® in
the United States expires in 2027 with an authorized generic entering the market
in January 2018.
22
SWK is a specialized finance company with a focus on the global
healthcare sector. SWK partners with ethical product marketers and royalty
holders to provide flexible financing solutions at an attractive cost of capital
to create long-term value for both SWK's business partners and its
investors.
INT0007/2006: We are developing an oral film product based on
our VersaFilm technology containing the active ingredient Tadalafil. The
product is intended for the treatment of erectile dysfunction (ED). The results
of a phase I pilot study that was conducted in the second quarter of 2015
confirmed that the product is bioequivalent with the brand product, Cialis®. We
are currently manufacturing submission batches that are intended to support a
505(b)(2) NDA filing with the FDA with a target submission date of about
mid-2017 and a PDUFA date expected to be approximately mid-2018.
On November 21, 2016, we announced the signing of a binding
term sheet for a license to Eli Lilly and Companys tadalafil dosing patent,
United States Patent No. 6,943,166 (the '166 dosing patent). Any exclusivity
associated with the tadalafil compound patent is not affected by this
agreement.
Subject to FDA approval, this license allows us to
commercialize a Tadalafil ED VersaFilm product in the U.S. prior to the
expiration of the '166 dosing patent. This license terminates all our current
tadalafil-related litigation activities.
We are currently actively seeking a partner for the
commercialization of our Tadalafil ED VersaFilm product.
INT0008/2007: We developed this oral film product based on our
VersaFilm technology. In March 2013 we submitted a 505(b)(2) new drug
application (NDA) to the FDA for our novel oral thin-film formulation of
Rizatriptan, the active drug in Maxalt-MLT® orally disintegrating tablets.
Maxalt-MLT® is a leading branded anti-migraine product marketed by Merck &
Co. The thin-film formulation of Rizatriptan was developed in accordance with a
co-development and commercialization agreement with RedHill Biopharma Ltd.
(RedHill). The product uses our proprietary immediate release VersaFilm oral
drug delivery technology. In December 2011, we received approval by Health
Canada to conduct a pivotal bioequivalence study to determine if our product is
safe and bioequivalent with the FDA approved reference product, Maxalt-MLT®. The
trial was conducted in the second quarter of 2012 and was a randomized,
two-period, two-way crossover study in healthy male and female subjects. The
study results indicate that the product is safe, and that the 90% confidence
intervals of the three relevant parameters Cmax, AUC(0-t) and AUC(0-infinity)
are well within the 80 125 acceptance range for bioequivalency.
In June 2013 the FDA assigned a Prescription Drug User Fee Act
(PDUFA) action date of February 3, 2014 for the review of the NDA for
marketing approval and in February 2014 we received a Complete Response Letter
(CRL) from the FDA informing us that certain questions and deficiencies remain
that preclude the approval of the application in its present form. The questions
raised by the FDA in the CRL regarding the NDA for our anti-migraine VersaFilm
product primarily relate to third party Chemistry, Manufacturing and Controls
(CMC) and to the packaging and labeling of the product. No questions or
deficiencies were raised relating to the product's safety and the FDA's CRL does
not require additional clinical studies.
In March 2014 we submitted our response to the FDA's CRL and in
April, 2014 the FDA requested additional CMC data. We also reported that the
supplier of the active pharmaceutical ingredient (API) of the product has been
issued with an Import Alert by the FDA. The Import Alert bans the import into
the USA of all raw materials from the suppliers manufacturing facility, which
therefore prohibits the import of any products using these raw materials, and
effectively prevents our VersaFilm product from being approved by the FDA. We
have identified a new source of API which is currently used to manufacture new
submission lots to support the re-submission of the NDA filing in mid 2017 with
PDUFA date expected by early 2018.
In October 2014 we announced the submission of a Marketing
Authorization Application (MAA) to the German Federal Institute for Drugs and
Medical Devices (BfArM) seeking European marketing approval of our oral thin
film formulation of Rizatriptan for acute migraines, under the brand name
RIZAPORT®. The brand name RIZAPORT® was also conditionally approved by the FDA
as part of the NDA review process in the U.S. The MAA was submitted under the
European Decentralized Procedure (DCP) with Germany as the reference member
state. The submission is supported by several studies, including a comparative
bioavailability study which successfully established the bioequivalence between
RIZAPORT® and the European reference drug. BfArM validated the MAA and initiated
the formal review process of the application on November 25, 2014. BfArM granted
national marketing approval on November 9, 2015 for RIZAPORT® under the DCP.
On September 10, 2015 we announced the positive outcome of the
DCP confirming that RIZAPORT is approvable in Europe. The announcement followed
the issuance of the Final Assessment Report from the Reference Member State
(RMS), the Federal Institute for Drugs and Medical Devices of Germany (BfArM),
and the agreement of all the Concerned Member States (CMS) in DCP that RIZAPORT®
is approvable. With the decision, the regulatory process entered its final phase
known as the national licensing phase during which the National Agencies in the
individual countries will issue the marketing licenses that allow RIZAPORT® to
be marketed in each country.
23
On November 9, 2015 we announced that the Federal Institute for
Drugs and Medical Devices of Germany (BfArM) has granted marketing authorization
of RIZAPORT® 5mg and 10mg, an oral thin film formulation of rizatriptan benzoate
for the treatment of acute migraines. The national approval of RIZAPORT® in
Germany was granted under the European Decentralized Procedure (DCP), in which
Germany served as the Reference Member State. This authorization was the first
national marketing approval of RIZAPORT®. Marketing authorization in Luxemburg,
the Concerned Member State, is expected to follow. IntelGenx and RedHill intend
to continue to work together to obtain national phase approvals in other
European DCP territories.
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 valid until 2034.
On July 5, 2016, we announced the signing of the definitive
agreement with Grupo Juste S.A.Q.F. (now Exeltis Healthcare, S.L. (Exeltis))
for the commercialization of RIZAPORT®, our proprietary oral thin film for the
treatment of acute migraines, in the country of Spain. All commercial
manufacturing of RIZAPORT® will take place at our new state-of-the-art
manufacturing facility in Canada. Grupo Juste (Exeltis) 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 drugs, in Europe, Latin America and other
territories.
According to the definitive agreement, Grupo Juste (Exeltis)
has obtained exclusive rights to register, promote and distribute RIZAPORT® in
Spain. In exchange, we and Redhill Biopharma will receive upfront and milestone
payments, together with a share of the net sales of RIZAPORT®. 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.
Through our partner Grupo Juste (Exeltis), the product was
submitted in Spain in September 2016 for approval using a decentralized
procedure. Approval in Spain is currently expected for Q4 2017.
On December 14, 2016, we, together with our partner RedHill,
announced the signing of an exclusive license agreement with Pharmatronic Co.
for the commercialization of RIZAPORT® in the Republic of Korea (South Korea).
Under the terms of the agreement, RedHill granted Pharmatronic Co. the exclusive
rights to register and commercialize RIZAPORT® in South Korea. IntelGenx and
RedHill have received an upfront payment and will be eligible to receive
additional milestone payments upon achievement of certain predefined regulatory
and commercial targets, as well as tiered royalties. The initial term of the
definitive agreement with Pharmatronic Co. is for ten years from the date of
first commercial sale and shall automatically renew for an additional two-year
term. Commercial launch in South Korea is estimated to take place in the first
quarter of 2019.
INT0010/2006: We initially entered into an agreement with
Cynapsus Therapeutics Inc. (formerly Cannasat Therapeutics Inc., Cynapsus) for
the development of a buccal muco-adhesive tablet product containing a
cannabinoid-based drug for the treatment of neuropathic pain and nausea in
cancer patients undergoing chemotherapy. In 2009, we completed a clinical
biostudy on the muco-adhesive tablet we developed which is based on our
proprietary AdVersa technology. The study results indicated improved
bioavailability and reduced first-pass metabolization of the drug. In the fourth
quarter of 2010, we acquired from Cynapsus full control of, and interest in,
this project going forward. We also obtained worldwide rights to U.S. Patent
7,592,328 and all corresponding foreign patents and patent applications to
exclusively develop and further provide intellectual property protection for
this project.
Subsequent to the 2016 fiscal year end, on February 9, 2017, we
announced the signing of a binding term sheet with Tetra Bio-Pharma Inc.
(Tetra) for the development and commercialization of a drug product containing
dronabinol. Under the binding term sheet, Tetra will have exclusive rights to
sell the product in North America with a right of first negotiation for outside
the U.S. and Canada.
As per the Binding Term Sheet, we received a non-refundable
exclusive negotiation payment from Tetra. We will also be entitled to receive an
upfront payment along with set milestone payments based on the completion of an
efficacy study, approvals from FDA and Health Canada and launching of the
product.
We will be responsible for the research and development of the
product, including optimization of the prototype, scale-up activities and
preparation of a phase II proof of concept clinical study and will develop the
product as an oral mucoadhesive tablet based on our proprietary AdVersa®
controlled-release technology. Tetra will be responsible for funding the product
development, and will own and control all regulatory approvals, including the
application and any other marketing authorizations. Tetra will also be
responsible for all aspects of commercializing the drug product.
24
INT0027/2011: We developed this oral film product based on our
VersaFilm technology. In accordance with a co-development and commercialization
agreement with Par Pharmaceutical Companies, Inc. (Par), we developed an oral
film product based on our proprietary VersaFilm technology. The product is a
generic formulation of buprenorphine and naloxone Sublingual Film, indicated for
the treatment of opioid dependence. A bioequivalent film formulation was
developed, scaled-up, and pivotal batches manufactured and tested during a
subsequent pivotal clinical study. An ANDA was filed with the FDA by Par in July
2013.
In August 2013 we were notified that, in response to filing of
the ANDA, we were named as a codefendant in a lawsuit pursuant to Paragraph IV
litigation filed by Reckitt Benckiser Pharmaceuticals and Monosol RX in the U.S.
District Court for the District of Delaware alleging infringement of U.S. Patent
Nos. 8,475,832, 8,603,514 and 8,017,150, each of which relate to Suboxone®. We
believe the ANDA product does not infringe those or any other patents, and will
vigorously defend ourselves in this matter. In accordance with the terms of the
co-development and commercialization agreement, Par is financially responsible
for the costs of this defense. Since Paragraph IV litigation is a regular part
of the ANDA process, we do not expect any unanticipated impact on our already
planned development schedule. In June 2016, an opinion from the district court
was obtained on the validity and infringement of the 3 orange book patents. The
court ruled that the product is not infringing on two out of the three patents.
Subsequently, appeals were filed by both parties.
In December 2014, Reckitt Benckiser Pharmaceuticals and Monosol
RX filed a lawsuit for patent infringement in the U.S. District Court for the
District of Delaware relating to the Suboxone® ANDA product. We were named as a
codefendant in this action alleging patent infringement United States Patent
Nos. 8,900,497 (the 497 patent) and 8,906,277 (the 277 patent), each of
which relate to a process for making a uniform oral film (the process
patents). The trial for the process patents was held in November 2016. We
believe the ANDA product relating to Suboxone® does not infringe those process
patents or any other patents, and will vigorously defend ourselves in this
matter. In accordance with the terms of the co-development and commercialization
agreement, Par is financially responsible for the costs of this defense.
On July 11, 2016, we announced the receipt of the notice of
appeal for the buprenorphine/naloxone sublingual film product for the treatment
of opiate addiction by Par and the Corporation to the United States Court of
Appeals for the Federal Circuit from the final judgment issued by the U.S.
District Court for the District of Delaware on June 28, 2016.
The ruling in the U.S. District Court of Delaware in the ANDA
litigation of Par and the Corporation against Indivior PLC and Monosol Rx, LLC
resulted in Par and the Corporation prevailing on the non-infringement of the
U.S. Patent No. 8,017,150, which is set to expire in 2023, and on the invalidity
(all claims) and non-infringement (certain claims) of the U.S. Patent No.
8,475,832, which is set to expire in 2030. The Court also ruled that Par's ANDA
product would infringe the asserted claims of U.S. Patent No. 8,603,514, one of
the Orange Book listed patents for Suboxone Film, and that the asserted claims
of U.S. Patent No. 8,603,514 were not shown to be invalid.
In late January 2017 we received a CRL from the FDA requesting
more information on the APIs and the finished product.
INT0036/2013: Loxapine is for the treatment of anxiety and
aggression in patients suffering from schizophrenia or bipolar 1 disorder.
Loxapine oral film will utilize 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
dosage form that can be used to effectively treat acute agitation associated
with schizophrenia or bipolar 1 disorder in non-institutionalized patients while
reducing the risk of pulmonary problems is needed as it 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. Our first clinical study on this product, completed in Q4 2014,
suggested improved bioavailability compared to the currently approved tablet. In
late 2015 we completed a second pilot clinical study which demonstrated that
buccal absorption of the drug from the loxapine oral film results in a
significantly higher bioavailability of the drug compared to oral tablets. We
are currently optimizing the film to further improve time to reach peak plasma
concentrations.
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.
INT0037/2013: A product based on one of our proprietary
technologies has been developed and we are currently preparing submission
batches in support of a marketing application to the FDA. The product was being
developed in accordance with another development and commercialization agreement
with Par Pharmaceutical, Inc. On September 18, 2015, Par was acquired by Endo
International plc. As a result of this acquisition, there was a conflict for Par
to remain as the partner for these products. As such, the product was returned
to the Corporation with full rights and no requirement for any compensation for
work paid by Par. We continue to work closely with Par on the opioid dependence
product and are pleased the relationship is on excellent terms.
25
On September 12, 2016, we announced that we had entered into a
licensing, development and supply agreement with Chemo Group (Chemo) granting
Chemo the exclusive license to commercialize two generic products for the USA
market and one product on a worldwide basis. Under the terms of the agreement,
Chemo has obtained certain exclusive rights to market and sell our products in
exchange for upfront and milestone payments, together with a share of the
profits of commercialization. Chemo also has a right of first negotiation to
obtain the exclusive commercialization rights for two of the products to include
any country outside the USA. Preparation of Scale-up activities for the product
are currently ongoing.
INT0039/2013: A product based on one of our proprietary
technologies has complete development and phase I clinical trial with positive
data. The product was being developed in accordance with another development and
commercialization agreement with Par Pharmaceutical, Inc. On September 18, 2015,
Par was acquired by Endo International plc. As a result of this acquisition,
there was a conflict for Par to remain as the partner for this product. As such,
the product was returned to us with full rights and no requirement for any
compensation for work paid by Par. We continue to work closely with Par on the
opioid dependence product and are pleased the relationship is on excellent
terms.
On September 12, 2016, we announced that we had entered into a
licensing, development and supply agreement with Chemo granting Chemo the
exclusive license to commercialize two generic products for the U.S. market and
one product on a worldwide basis. Under the terms of the agreement, Chemo has
obtained certain exclusive rights to market and sell our products in exchange
for upfront and milestone payments, together with a share of the profits of
commercialization. Chemo also has a right of first negotiation to obtain the
exclusive commercialization rights for two of the products to include any
country outside the U.S. Preparation scale-up and submission activities are
currently ongoing.
INT0040/2014: An oral film product based on our proprietary
edible film technology is currently in the optimization development stage. In
order to protect our competitive advantage, no further details of the product
can be disclosed at this stage.
On December 27, 2016, we announced that we have entered into a
co-development and commercialization agreement with Endo Ventures Ltd. for this
product utilizing our proprietary VersaFilm for the U.S. market. Under the
agreement, Endo has obtained certain exclusive rights to market and sell our
product in the U.S. We received an upfront payment and will receive future
milestone payments. Endo and IntelGenx will share the profits of
commercialization.
INT0041/2015: An oral film product based on our proprietary
edible film technology is currently in the development stage. In order to
protect our competitive advantage, no further details of the product can be
disclosed at this stage.
INT0042/2015: An oral film product based on our proprietary
edible film technology is currently in the early development stage. In order to
protect our competitive advantage, no further details of the product can be
disclosed at this stage.
INT0043/2015: We are currently developing an oral film
containing montelukast as an active ingredient based on our proprietary edible
film technology VersaFilm .In pre-clinical studies, it was discovered that
montelukast has the potential to rejuvenate the brain in aged rats.
We are collaborating with Dr. Ludwig Aigner, a neuroscientist
who is a member of our Scientific Advisory Board and head of the Institute of
Molecular Regenerative Medicine at the Paracelsus Medical University in
Salzburg, Austria. Dr. Aigner has made major contributions in the field of brain
and spinal cord regeneration over the last 25 years. He was the first to develop
tools to visualize neurogenesis in living animals and identified signaling
mechanisms that are crucially involved in limiting brain regeneration. One of
these mechanisms, leukotriene signaling, is related to asthma. In consequence,
Dr. Aigner and his team recently demonstrated that the anti-asthmatic drug
montelukast structurally and functionally rejuvenates the aged brain. His main
aim is to develop molecular and cellular therapies for patients with
neurodegenerative diseases and for the aged population.
On July 13, 2016, we announced the initiation of a phase 1
clinical trial of montelukast, a unique drug repurposing opportunity for the
treatment of degenerative diseases of the brain, such as: mild cognitive
impairment and Alzheimers disease, the most prominent form of dementia. The
objectives of the trial were to demonstrate that our oral film product will
provide therapeutically effective blood levels of montelukast, and that
montelukast when delivered using our oral film crosses the blood brain
barrier.
On August 22, 2016, we announced the successful completion of
the pilot clinical study for our Montelukast VersaFilm that demonstrated a
significantly improved pharmacokinetic profile against the reference product.
The study data confirmed that buccal absorption of the drug from the Montelukast
film product resulted in a significantly improved bioavailability of the drug
compared to the commercial tablet. In addition, the study data confirmed that
Montelukast crosses the blood brain barrier when administered using our
Versafilm delivery technology.
We commenced preparation for a phase II-a proof-of-concept
(POC) study. We expect the results from the study to be available in Q4/2017.
We are also actively working on securing the IP of our product by filing
numerous patent applications. Based on the outcome of this first efficacy trial in humans, we will be actively seeking a
partnership or alliance opportunity to further advance developmental work and
commercialization of this product.
26
INT0044/2016: A product based on one of our VersaTabTM
proprietary technologies currently in the early development stage. In order to
protect our competitive advantage, no further details of the product can be
disclosed at this stage.
On December 1st, 2016, we announced that we had strengthened
our relationship with Chemo by signing a term sheet for the co-development and
commercialization of a generic tablet in the area of CNS (central nervous
system) on a worldwide basis. According to Global Data, worldwide sales in 2015
of the CNS related product exceeded $4 billion.
As per the agreement we received an upfront payment and will be
entitled to receive development costs of the product and future milestone
payments. Chemo and IntelGenx will also share the profits of commercialization.
The definitive agreement was signed on December 30, 2016.
The current status of each of our products as of the date of
this registration statement is summarized in the following table:
Product
|
Indication
|
Status of Development
|
INT0001/2004
|
Anti-hypertension
|
Technology transfer ongoing
|
INT0004/2006
|
Antidepressant
|
FDA-approved November 2011. Commercially launched in USA
as Forfivo XL
®
in October 2012. In 2016 we sold the royalty
revenue to SWK.
|
INT0007/2006
|
Erectile dysfunction
|
Submission preparation ongoing
|
INT0008/2008
|
Migraine
|
Submission preparation ongoing at IntelGenx. Submission
currently under review by Spanish authorities.
|
INT0010/2006
|
Pain
|
Formulation optimization, scale-up preparation and
clinical study evaluation
|
INT0027/2011
|
Opioid dependence
|
ANDA submitted to FDA in July 2013. CRL received and
under review.
|
INT0036/2012
|
Schizophrenia
|
Formulation development ongoing
|
INT0037/2013
|
Undisclosed
|
Product developed. Preparing manufacture of submission
batches.
|
INT0039/2013
|
Undisclosed
|
Product developed. Preparing manufacture of submission
batches
|
INT0040/2013
|
Undisclosed
|
Formulation development ongoing
|
INT0041/2015
|
Undisclosed
|
Formulation development ongoing
|
INT0042/2015
|
Undisclosed
|
Formulation development ongoing
|
INT0043/2015
|
Alzheimer
|
Formulation development completed in preparation for
clinical phase II proof of concept
|
INT0044/2016
|
Undisclosed
|
Formulation development ongoing
|
Growth Strategy
Our primary growth strategies include: (1) identifying
lifecycle management opportunities for existing market leading pharmaceutical
products, (2) developing oral film products that provide tangible patient
benefits, (3) development of new drug delivery technologies, (4) repurposing
existing drugs for new indications, (5) developing generic drugs where high
technology barriers to entry exist in reproducing branded films, and (6)
manufacturing our VersaFilm products for commercial sale. In addition, our
service portfolio also includes contract manufacturing services as contract manufacturing presents an attractive short
term revenue opportunity and increases the utilization of the manufacturing
factory, thus further absorbing overhead costs.
27
Lifecycle Management Opportunities
We are seeking to position our delivery technologies as an
opportunity for lifecycle management of products for which patent protection of
the active ingredient is nearing expiration. While the patent for the underlying
substance cannot be extended, patent protection can be obtained for a new and
improved formulation by filing an application with the FDA under Section
505(b)(2) of the U.S. Federal Food, Drug and Cosmetic Act. Such applications,
known as a 505(b)(2) NDA, are permitted for new drug products that incorporate
previously approved active ingredients, even if the proposed new drug
incorporates an approved active ingredient in a novel formulation or for a new
indication. A 505(b)(2) NDA may include information regarding safety and
efficacy of a proposed drug that comes from studies not conducted by or for the
applicant. The first formulation for a respective active ingredient filed with
the FDA under a 505(b)(2) application may qualify for up to three years of
market exclusivity upon approval. Based upon a review of past partnerships
between third party drug delivery companies and pharmaceutical companies,
management believes that drug delivery companies which possess innovative
technologies to develop these special dosage formulations present an attractive
opportunity to pharmaceutical companies. Accordingly, we believe 505(b)(2)
products represent a viable business opportunity for us.
Product Opportunities that provide Tangible Patient Benefits
Our focus will be on developing oral film products leveraging
our VersaFilm technology that provide tangible patient benefits versus existing
drug delivery forms. Patients with difficulties swallowing medication,
pediatrics or geriatrics may benefit from oral films due to the ease of use.
Similarly, we are working on oral films to improve bio-availability and/or
response time versus existing drugs and thereby reducing side effects.
Development of New Drug Delivery Technologies
The rapidly disintegrating film technology contained in our
VersaFilm, and our AdVersa® mucosal adhesive tablet, are two examples of our
efforts to develop alternate technology platforms. As we work with various
partners on different products, we seek opportunities to develop new proprietary
technologies.
Repurposing Existing Drugs
We are working on the repurposing of already approved drugs for
new indications using our VersaFilm film technology. This program represents a
viable growth strategy for us as it will allow for reduced development costs,
improved success rates and shorter approval times. We believe that through our
repurposing program we will be able minimize the risk of developmental failure
and create value for us and potential partners.
Generic Drugs with High Barriers to Entry
We plan to pursue the development of generic drugs that have
certain barriers to entry, e.g., where product development and manufacturing is
complex and can limit the number of potential entrants into the generic market.
We plan to pursue such projects only if the number of potential competitors is
deemed relatively insignificant.
VersaFilm Manufacturing
We are in the process of establishing a state-of-the-art
manufacturing facility for the future manufacture of our VersaFilm products.
Construction of the manufacturing and laboratories is now completed and
equipment is being prepared to begin manufacturing in 2017. 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
development partners a full service from product conception through to supply of
the finished product.
With our current manufacturing equipment, we are only able to
manufacture products that do not contain flammable organic solvents. Since
several of our film products are solvent-based, we are in the process of
acquiring manufacturing equipment that is capable of handling organic solvents,
and we are expanding our manufacturing facility in order to create the space
required for this new manufacturing equipment.
28
Competition
The pharmaceutical industry is highly competitive and is
subject to the rapid emergence of new technologies, governmental regulations,
healthcare legislation, availability of financing, patent litigation and other
factors. Many of our competitors, including Monosol Rx, Tesa-Labtec GmbH,
BioDelivery Sciences International, Inc. and LTS Lohmann Therapy Systems Corp.,
have longer operating histories and greater financial, technical, marketing,
legal and other resources than we have. In addition, many of our competitors
have significantly greater experience than we have in conducting clinical trials
of pharmaceutical products, obtaining FDA and other regulatory approvals of
products, and marketing and selling products that have been approved. We expect
that we will be subject to competition from numerous other companies that
currently operate or are planning to enter the markets in which we compete.
The key factors affecting the development and commercialization
of our drug delivery products are likely to include, among other factors:
|
|
The regulatory requirements;
|
|
|
The safety and efficacy of our products;
|
|
|
The relative speed with which we can develop products;
|
|
|
Generic competition for any product that we develop;
|
|
|
Our ability to defend our existing intellectual property
and to broaden our intellectual property and technology base;
|
|
|
Our ability to differentiate our products;
|
|
|
Our ability to develop products that can be manufactured
on a cost effective basis;
|
|
|
Our ability to manufacture our products in compliance
with current Good Manufacturing Practices (cGMP) and any other
regulatory requirements; and
|
|
|
Our ability to obtain financing.
|
In order to establish ourselves as a viable industry partner,
we plan to continue to invest in our research and development activities and in
our manufacturing technology expertise, in order to further strengthen our
technology base and to develop the ability to manufacture our VersaFilm
products ourselves, and our VersaTab and AdVersa® products through our
manufacturing partners, at competitive costs.
Our Competitive Strengths
We believe that our key competitive strengths include:
|
|
Our comprehensive full services;
|
|
|
Our diversified pipeline;
|
|
|
Our ability to swiftly develop products through
to regulatory approval; and
|
|
|
The versatility of our drug delivery
technologies.
|
Manufacturing Partnership
While we previously manufactured products only for testing
purposes in our own laboratories, we have now started to manufacture products
for pivotal clinical trials, and we are undertaking steps to manufacture
products for commercial use. In order to establish ourselves as a full-service
partner for our thin film products, we have completed the construction of a new,
state-of-the-art oral film manufacturing facility and are in the process of
preparing the equipment and finalizing plans to commercially manufacture our
products using our VersaFilm drug delivery technology. VersaFilm is our
proprietary immediate release polymeric film technology. It is comprised of a
thin polymeric film using United States Pharmacopeia (USP) components that are
safe and approved by the FDA for use in food, pharmaceutical and cosmetic
products. We have completed construction of our manufacturing facility and
expect it to be fully operational in 2017.
We are currently not a commercial manufacturer and we do not
usually purchase large quantities of raw materials. Our manufacturing partners,
however, may purchase significant quantities of raw materials, some of which may
have long lead times. If raw materials cannot be supplied to our manufacturing
partners in a timely and cost effective manner, our manufacturing partners may
experience delays in production that may lead to reduced supplies of commercial
products being available for sale or distribution. Such shortages could have a
detrimental effect on sales of the products and a corresponding reduction on our
royalty revenues earned.
29
Dependence on Major Customers
We currently rely on a few major customers for our end
products. We also currently depend upon a limited number of partners to develop
our products, to provide funding for the development of our products, to assist
in obtaining regulatory approvals that are required in order to commercialize
these products, and to market and sell our products.
Intellectual Property and Patent Protection
We protect our intellectual property and technology by using
the following methods: (i) applying for patent protection in the United States
and in the appropriate foreign markets, (ii) non-disclosure agreements, license
agreements and appropriate contractual restrictions and controls on the
distribution of information, and (iii) trade secrets, common law trademark
rights and trademark registrations. We plan to file core technology patents
covering the use of our platform technologies in any pharmaceutical products.
We have obtained 8 patents and have an additional 18 pending
patent applications, as described below. The patents expire 20 years after
submission of the initial application. In the U.S. the term of the patent
sometimes extends over the 20 year period. The initial term of 20 years is
extended by a period (the patent term adjustment) determined by the USPTO
according to the delays in the prosecution of the patent application that are
not applicant delays.
|
|
|
Date submitted / issued /
|
Patent
No.
|
Title
|
Subject
|
expiration
|
|
|
|
|
6,231,957
|
Rapidly disintegrating flavor wafer
for flavor enrichment
|
The
composition, manufacturing, and use of rapidly
disintegrating flavored
films for releasing flavors to
certain substrates
|
Issued
May 15, 2001
Expires May 6, 2019
|
|
|
|
|
US
6,660,292
|
Rapidly disintegrating film
for precooked foods
|
Composition and manufacturing of flavored films for
releasing flavors to precooked food substrates
|
Issued December 9, 2003
Expires June 19, 2021
|
|
|
|
|
US
7,132,113
|
Flavored film
|
Composition and manufacturing method of
multi-layered
films
|
Issued November 7, 2006
Expires April 16, 2022
|
|
|
|
|
US
8,691,272
|
Multilayer tablet
|
Formulation of multilayered tablets
|
Issued April 8, 2014
Expires January 28, 2033
|
|
|
|
|
US
8,703,191
|
Controlled release pharmaceutical
tablets
|
Formulation of tablets containing bupropion
and
mecamylamine
|
Issued April 22, 2014
Expires January 10, 2032
|
|
|
|
|
US
7,674,479
|
Sustained-release bupropion and
bupropion /
mecamylamine tablets
|
Formulation and method of making tablets
containing
bupropion and mecamylamine
|
Issued March 9, 2010
Expires July 25, 2027
|
|
|
|
|
US
8,735,374
|
Oral mucoadhesive dosage form
|
Direct compression formulation for buccal and
sublingual dosage forms
|
Issued May 27, 2014
Expires April 15, 2032
|
|
|
|
|
US
9,301,948
|
Instantly wettable oral film dosage
form without
surfactant or polyalcohol
|
Formulation of oral films containing active
pharmaceutical ingredients
|
Issued April 05, 2016
Expires July 30, 2033
|
30
US Appl. 13/079,348
|
Solid oral dosage forms comprising
tadalafil
|
Formulation of oral films containing tadalafil
|
Filed April 4, 2011
|
|
|
|
|
US
Appl. 12/963,132
|
Oral film dosage forms and methods
for making same
|
Optimization of film strip technology
|
Filed December 8, 2010
|
|
|
|
|
US
Appl. 14/630,699
|
Film dosage forms containing amorphous
active agents
|
Film containing amorphous agent
|
Filed February 25, 2015
|
|
|
|
|
US
Appl. 14/554,332
|
Film dosage forms with extended release
mucoadhesive
particles
|
Film containing mucoadhesive particle
|
Filed November 26, 2014
|
|
|
|
|
US
Appl. 13/748,241
|
Oral film dosage forms and methods for
making same
|
Optimization of film strip technology
|
Filed January 23, 2013
|
|
|
|
|
US
Appl. 15/216,903
|
Film dosage forms containing amorphous
active agents
|
Film containing amorphous agent
|
Filed July 22, 2016
|
|
|
|
|
PCT Appl.
WO2016134454
|
Film dosage forms containing amorphous
active agents
|
Film containing amorphous agent
|
Filed January 29, 2016
|
|
|
|
|
PCT Appl.
WO2016123696
|
Oral dosage film exhibiting enhanced
mucosal
penetration
|
Formulation of oral films without conventional
penetration enhancer
|
Filed January 22, 2016
|
|
|
|
|
US
Appl. 14/612,433
|
Oral dosage film exhibiting enhanced
mucosal
penetration
|
Formulation of oral films without conventional
penetration enhancer
|
Filed February 3, 2015
|
|
|
|
|
Japanese Appl.
JP2016527262
|
Immediately wet oral films dosage forms
have no
surfactant and a polyhydric alcohol
|
Formulation of oral films containing active
pharmaceutical ingredients
|
Filed July 30, 2014
|
|
|
|
|
Korean Appl.
KR20167005581
|
Immediately wet oral films dosage forms
have no
surfactant and a polyhydric alcohol
|
Formulation of oral films containing active
pharmaceutical ingredients
|
Filed July 30, 2014
|
|
|
|
|
EU
Appl.
EP3,027,179
|
Immediately wet oral films dosage forms
have no
surfactant and a polyhydric alcohol
|
Formulation of oral films containing active
pharmaceutical ingredients
|
Filed July 30, 2014
|
|
|
|
|
Chinese Appl.
CN105530921
|
Immediately wet oral films dosage forms
have no
surfactant and a polyhydric alcohol
|
Formulation of oral films containing active
pharmaceutical ingredients
|
Filed July 30, 2014
|
31
Singapore Appl.
SG11201600455X
|
Immediately wet oral films dosage
forms
have no surfactant and a polyhydric alcohol
|
Formulation of oral films
containing active
pharmaceutical ingredients
|
Filed July 30, 2014
|
|
|
|
|
Australian Appl.
AU2014298130
|
Immediately wet oral films dosage forms
have no
surfactant and a polyhydric alcohol
|
Formulation of oral films containing active
pharmaceutical ingredients
|
Filed July 30, 2014
|
|
|
|
|
Canadian Appl.
CA2,919,442
|
Immediately wet oral films dosage forms
have no
surfactant and a polyhydric alcohol
|
Formulation of oral films containing active
pharmaceutical ingredients
|
Filed July 30, 2014
|
|
|
|
|
Canadian Appl.
CA2797444
|
Solid oral dosage forms comprising tadalafil
|
Formulation of oral films containing tadalafil
|
Filed November 3, 2011
|
|
|
|
|
EU
Appl.
EP1,968,562
|
Multilayer tablet
|
Formulation of multilayered tablets
|
Filed November 22, 2007
|
Government Regulation
The pharmaceutical industry is highly regulated. The products
we participate in developing require certain regulatory approvals. In the United
States, drugs are subject to rigorous regulation by the FDA. The U.S. Federal
Food, Drug, and Cosmetic Act, and other federal and state statutes and
regulations, govern, among other things, the research, development, testing,
manufacture, storage, record keeping, packaging, labeling, adverse event
reporting, advertising, promotion, marketing, distribution, and import and
export of pharmaceutical products. Failure to comply with applicable regulatory
requirements may subject a company to a variety of administrative or
judicially-imposed sanctions and/or the inability to obtain or maintain required
approvals or to market drugs. The steps ordinarily required before a new
pharmaceutical product may be marketed in the United States include:
|
|
Preclinical laboratory tests, animal studies and
formulation studies under FDAs good laboratory practices regulations, or
GLPs;
|
|
|
The submission to the FDA of an investigational new drug
application, or IND, which must become effective before human clinical
trials may begin;
|
|
|
The completion of adequate and well-controlled clinical
trials according to good clinical practice regulations, or GCPs, to
establish the safety and efficacy of the product for each indication for
which approval is sought;
|
|
|
After successful completion of the required clinical
testing, submission to the FDA of a NDA, or an ANDA, for generic drugs. In
certain cases, an application for marketing approval may include
information regarding safety and efficacy of a proposed drug that comes
from studies not conducted by or for the applicant. Such applications,
known as a 505(b)(2) NDA, are permitted for new drug products that
incorporate previously approved active ingredients, even if the proposed
new drug incorporates an approved active ingredient in a novel formulation
or for a new indication;
|
|
|
Satisfactory completion of an FDA pre-approval inspection
of the manufacturing facility or facilities at which the product is to be
produced, to assess compliance with cGMPs to assure that the facilities,
methods and controls are adequate to preserve the drugs identity,
strength, quality and purity; and
|
|
|
FDA review and approval of the NDA or ANDA.
|
The cost of complying with the foregoing requirements,
including preparing and submitting an NDA or ANDA, may be substantial.
Accordingly, we typically rely upon our partners in the pharmaceutical industry
to spearhead and bear the costs of the FDA approval process.
32
We also seek to mitigate regulatory costs by focusing on
505(b)(2) NDA opportunities. By applying our drug delivery technology to
existing drugs, we seek to develop products with lower research &
development (R&D) expenses and shorter time-to-market timelines as
compared to regular NDA products.
Research and Development Expense
Our R&D expenses, net of R&D tax credits, for the year
ended December 31, 2016 increased by $733 thousand to $1,766 thousand, compared
with $1,033 thousand for the year ended December 31, 2015. The increase in
R&D expenditure is explained in the section of this registration statement
entitled Managements Discussion and Analysis of Financial Condition and
Results of Operations.
Environmental Regulatory Compliance
We believe that we are in compliance with environmental
regulations applicable to our research and development and manufacturing
facility located in Ville Saint Laurent, Quebec.
Employees
As of the date of this filing, we have 25 full-time and four
part-time employees. None of our employees are covered by collective bargaining
agreements. We believe that our relations with our employees are very good.
DESCRIPTION OF PROPERTY
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 CA$110 thousand
(approximately $84 thousand) per year, which will increase at a rate of CA$0.25
($0.19) per square foot/per year, every two years. Approximately 9,500 square
feet of the new facility is being used to establish manufacturing capabilities
for our VersaFilm thin film products, approximately 4,000 square feet for our
R&D activities, and approximately 3,500 square feet for administration.
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 CA$2.9 million (approximately $2.2 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 CA$1 million loan from IQ.
33
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Introduction to Managements Discussion and
Analysis
The purpose of this section, Managements Discussion and
Analysis of Financial Condition and Results of Operations, is to provide a
narrative explanation of the financial statements that enables investors to
better understand our business, to enhance our overall financial disclosure, to
provide the context within which our financial information may be analyzed, and
to provide information about the quality of, and potential variability of, our
financial condition, results of operations and cash flows. Unless otherwise
indicated, all financial and statistical information included herein relates to
our continuing operations. Unless otherwise indicated or the context otherwise
requires, the words, IntelGenx, Corporation, 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 interim
consolidated financial statements and Notes thereto and audited Consolidated
Financial Statements and Notes thereto, as applicable.
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.
Our primary growth strategies include: (1) identifying
lifecycle management opportunities for existing market leading pharmaceutical
products, (2) repurposing existing drugs for new indications, (3) developing
generic drugs where high technology barriers to entry exist in reproducing
branded films, (4) manufacturing our VersaFilm products for commercial sale and
(5) development of new drug delivery technologies.
34
Lifecycle Management Opportunities
We are seeking to position our delivery technologies as an
opportunity for lifecycle management of products for which patent protection of
the active ingredient is nearing expiration. While the patent for the underlying
substance cannot be extended, patent protection can be obtained for a new and
improved formulation by filing an application with the FDA under Section
505(b)(2) of the U.S. Federal Food, Drug and Cosmetic Act. Such applications,
known as a 505(b)(2) NDA, are permitted for new drug products that incorporate
previously approved active ingredients, even if the proposed new drug
incorporates an approved active ingredient in a novel formulation or for a new
indication. A 505(b)(2) NDA may include information regarding safety and
efficacy of a proposed drug that comes from studies not conducted by or for the
applicant. The first formulation for a respective active ingredient filed with
the FDA under a 505(b)(2) application may qualify for up to three years of
market exclusivity upon approval. Based upon a review of past partnerships
between third party drug delivery companies and pharmaceutical companies,
management believes that drug delivery companies which possess innovative
technologies to develop these special dosage formulations present an attractive
opportunity to pharmaceutical companies. Accordingly, we believe 505(b)(2)
products represent a viable business opportunity for us.
Repurposing Existing Drugs
We are working on the repurposing of already approved drugs for
new indications using our VersaFilm film technology. This program represents a
viable growth strategy for us as it will allow for reduced development costs,
improved success rates and shorter approval times. We believe that through our
repurposing program we will be able minimize the risk of developmental failure
and create value for us and potential partners.
Generic Drugs with High Barriers to Entry
We plan to pursue the development of generic drugs that have
certain barriers to entry, e.g., where product development and manufacturing is
complex and can limit the number of potential entrants into the generic market.
We plan to pursue such projects only if the number of potential competitors is
deemed relatively insignificant.
VersaFilm Manufacturing
We have established a state-of-the-art manufacturing facility
with the intent to manufacture all our VersaFilm products in house 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 development partners a full service from product
conception through to supply of the finished product.
Most recent key developments
On January 4, 2017, the Company announced the signing of a
definitive agreement with Chemo Group for the co-development and
commercialization of a generic tablet in the area of CNS (central nervous
system) on a worldwide basis. According to Global Data, worldwide sales in 2015
of the CNS related product exceeded $4 billion. This definitive agreement signed
December 30, 2016 follows the binding term sheet announced on December 1, 2016.
Under the agreement, IntelGenx is entitled to an upfront payment, development
costs of the product and future milestone payments. Chemo and IntelGenx will
also share the profits of commercialization.
On January 19, 2017, the Company announced the grant of 300,000
options to the Company's board of directors to acquire a total of 300,000 common
shares under the 2016 Stock Option Plan. Of the total stock options granted,
50,000 were granted to each of the following non-employee directors: Bernard
Boudreau, John Marinucci, Ian Troup, Bernd Melchers, Clemens Mayr and Mark
Nawacki. The options were granted as part of the annual compensation for
non-employee directors. The options have an exercise price of US$0.89
(CAD$1.16), vest immediately, and expire on January 17, 2027.
On March 13, 2017, the Company announced that it had retained
Kilmer Lucas Inc. to provide the Company with select Canadian and U.S. investor
relations and strategic advisory services. Kilmer Lucas is an arm's length
third party to IntelGenx, and it does not have any interest, directly
or indirectly, in IntelGenx, or any right or intent to acquire such an interest.
The agreement between IntelGenx and Kilmer Lucas had an initial term of 90 days,
following which the agreement can be terminated for any reason by either party.
Kilmer Lucas will be paid out of IntelGenx' immediately available funds.
Effective March 13, 2017, Kilmer Lucas replaced IntelGenx' previous in-house
Director of IR.
35
Kilmer Lucas is a healthcare-only investor relations and
capital markets advisory company with offices in New York, San Francisco and
Toronto. It takes a holistic approach to building a customized investor
relations strategy that begins with a deep understanding of a company's
corporate and financial goals. Kilmer Lucas seeks to leverage its longstanding
relationships and strong track record to positively influence investor
perceptions, maximize stock valuations and lower the cost of capital needed to
fund its clients' growth. Kilmer Lucas also publishes its own popular healthcare
investor news blog,
BioTuesdays
. To-date,
BioTuesdays
has profiled
more than 350 life sciences companies, providing invaluable exposure for
innovative technologies and compelling investment stories that may have
otherwise gone unnoticed.
On March 28, 2017, the Company announced that Eli Lilly and
Company granted IntelGenx' VersaFilm an exclusive license for tadalafil film
product under erectile dysfunction (ED) dosing patent, United States Patent No.
6,943,166 (the '166 dosing patent). Any exclusivity associated with the
tadalafil compound patent expiring is not affected by this agreement.
Subject to U.S. Food and Drug Administration (FDA) approval,
this exclusive license allows IntelGenx to commercialize its Tadalafil ED
VersaFilm product in the U.S. prior to the expiration of the '166 dosing
patent. With this license, IntelGenx is the only company that has a free and
clear pathway to launch a tadalafil film product for the treatment of ED in the
U.S. The exclusivity provides an outstanding competitive advantage to IntelGenx'
Tadalafil ED VersaFilm product and IntelGenx will continue its efforts to
securing a strategic partnership for the commercialization of Tadalafil
VersaFilm.
IntelGenx has developed a proprietary process and formulation
for manufacturing the Tadalafil ED VersaFilm product and plans to supply the
product to multiple markets around the world.
On April 3, 2017, the Company and Tetra Bio-Pharma Inc.
announced the signing of a definitive agreement for the development and
commercialization of a drug product containing the cannabinoid Dronabinol for
the management of anorexia and cancer chemotherapy-related pain. This definitive
agreement effective March 31, 2017 follows the binding term sheet between the
two companies that was announced on February 9, 2017.
Pursuant to the definitive agreement, Tetra has exclusive
rights to sell the Product in North America, with a right of first negotiation
for territories outside of the United States and Canada. Tetra will make an
upfront payment to IntelGenx, in addition to set future milestone and royalty
payments, based on the completion of an efficacy study, approvals from the U.S.
Food and Drug Association and Health Canada, and the commercial launch of the
Product. IntelGenx will be responsible for the research and development of the
Product, including clinical studies, and will develop the product as an oral
mucoadhesive tablet based on its proprietary AdVersa
®
controlled-release technology. Tetra will be responsible for funding the product
development, and will own and control all regulatory approvals, including the
related applications, and any other marketing authorizations. Tetra will also be
responsible for all aspects of commercializing the Product.
Subsequent to the quarter end, on April 5, 2017, the Company
filed a preliminary short form prospectus in Canada with respect to an offering of a
minimum of Cdn$7,000,000 and a maximum of Cdn$10,000,000 aggregate principal
amount of 8% convertible unsecured subordinated debentures due June 30, 2020 at
a price of Cdn$1,000 per Debenture. Concurrently with the filing of the
Prospectus, the Corporation has filed a registration statement on Form S-1 with
the United States Securities and Exchange Commission to register the Debentures
and the shares of common stock underlying the Debentures.
36
The Offering is being conducted on a commercially reasonable
best efforts basis by a syndicate of agents led by Desjardins Capital Markets
and including Laurentian Bank Securities Inc. The Offering will be conducted in
the provinces of British Columbia, Alberta, Manitoba, Ontario and Québec.
The Debentures will bear interest at an annual rate of 8%,
payable semi-annually on the last day of June and December of each year,
commencing on June 30, 2017. The size of the Offering and the conversion price
will be determined in the context of the market prior to filing of a (final)
short form prospectus.
The net proceeds from the Offering will be used for capital
expansion, clinical studies, product development and general working capital
requirements.
The Corporation will apply to list the Debentures and the
shares of common stock issuable on the conversion of the Debentures or pursuant
to other terms of the Debentures on the TSX Venture Exchange (the
"
TSXV
"). A copy of the Prospectus is available under the
Corporation's profile at www.sedar.com and a copy of the Registration Statement
can be obtained from the SEC's website at www.sec.gov or by request to
Desjardins Capital Markets at ecm@vmd.desjardins.com. The Offering is subject to
certain customary conditions including, but not limited to, the receipt of all
necessary approvals, including the approval of the TSXV and the SEC declaring
the Registration Statement effective.
A registration statement relating to these securities has been
filed with the SEC but has not yet become effective. These securities may not be
sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. No offer to buy the securities can be accepted and
no part of the purchase price can be received until the registration statement
has become effective, and any such offer may be withdrawn or revoked, without
obligation or commitment of any kind, at any time prior to notice of its
acceptance given after the effective date.
Corporate related developments
Expansion to the existing Manufacturing Facility
The Company has initiated an expansion project to the existing
manufacturing facility. This expansion became necessary following requests by
commercial partners to increase manufacturing capacity and provide solvent film
manufacturing capabilities. The new facility should create a fivefold increase
of our production capacity in addition to offering a one-stop shopping
opportunity to our partners. It should also significantly lower the acquisition
cost for our partners and provide better protection of our Intellectual
Property.
The Company has already entered into a lease agreement for an
additional 11,000 square feet of expansion space and the preparation for a
facility expansion is already ongoing.
All amounts are expressed in thousands of U.S. dollars
unless otherwise stated.
Managements Discussion and Analysis for the fiscal
quarter ended March 31, 2017
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, 2017 report an
accumulated other comprehensive loss due to foreign currency translation
adjustments of $975 due to the fluctuations in the rates used to prepare our
financial statements, $44 of which positively impacted our comprehensive loss
for the three-month period ended March 31, 2017. The following Management
Discussion and Analysis takes this into consideration whenever material.
37
Reconciliation of Comprehensive 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.
IntelGenx obtains its Adjusted EBITDA measurement by adding to
comprehensive 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
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Comprehensive Loss
|
$
|
(468
|
)
|
$
|
(707
|
)
|
Add (deduct):
|
|
|
|
|
|
|
Depreciation
|
|
170
|
|
|
87
|
|
Finance costs
|
|
57
|
|
|
40
|
|
Finance income
|
|
(2
|
)
|
|
-
|
|
Share-based compensation
|
|
170
|
|
|
63
|
|
Foreign currency translation adjustment
|
|
(44
|
)
|
|
(39
|
)
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
(117
|
)
|
|
(556
|
)
|
Adjusted Earnings before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA)
Adjusted EBITDA increased by $439 for the three-month period
ended March 31, 2017 to ($117) compared to ($556) for the three-month period
ended March 31, 2016. The increase in Adjusted EBITDA of $439 for the three
month period ended March 31, 2017 is mainly attributable to an increase in
revenues of $535 partially offset by an increase in R&D expenses of $157
before consideration of stock-based compensation.
Results of operations for the three-month period ended March
31, 2017 compared with the three-month period ended March 31, 2016.
38
|
|
Three-month period
|
|
|
|
ended March 31,
|
|
In U.S.$ thousands
|
|
2017
|
|
|
2016
|
|
Revenue
|
$
|
1,353
|
|
$
|
818
|
|
|
|
|
|
|
|
|
Cost of Royalty and License
Revenue
|
|
92
|
|
|
65
|
|
Research and Development Expenses
|
|
644
|
|
|
481
|
|
Selling, General and
Administrative Expenses
|
|
904
|
|
|
891
|
|
Depreciation of tangible assets
|
|
170
|
|
|
87
|
|
Operating Loss
|
|
(457
|
)
|
|
(706
|
)
|
Net Loss
|
|
(512
|
)
|
|
(746
|
)
|
Comprehensive Loss
|
|
(468
|
)
|
|
(707
|
)
|
Revenue
Total revenues for the three-month period ended March 31, 2017
amounted to $1,353, representing an increase of $535 or 65% compared to $818 for
the three-month period ended March 31, 2016. The increase for the three-month
period ended March 31, 2017 compared to the last years corresponding period is
mainly attributable to the increase in upfront and deferred revenues on
monetization of $914 offset by a decrease in royalties of $379.
Cost of royalty and license revenue
We recorded $92 for the cost of royalty and license revenue in
the three-month period ended March 31, 2017 compared with $65 in the same period
of 2016. 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.
Following the monetization of Forfivo XL
®
s royalties, we are
required to record 10% of the deferred revenues from the monetization as cost of
royalty and license revenue until December 31, 2017 which represented $92 for
the first quarter of 2017.
Research and development (R&D) expenses
R&D expenses for the three-month period ended March 31,
2017 amounted to $644, representing an increase of $163 or 34%, compared to $481
for the three-month period ended March 31, 2016.
39
The increase in R&D expenses for the three-month period
ended March 31, 2017 is mainly attributable to increases in manufacturing scale
up activities of $49, study costs of $111, license fees of $42, lab supplies of
$47 and R&D salaries of $85. The increase was partially offset by a
reduction in patent costs of $171.
In the three-month period ended March 31, 2017 we recorded
estimated Research and Development Tax Credits and refunds of $30, compared with
$22 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,
2017 amounted to $904, representing an increase of $13 or 1%, compared to $891
for the three-month period ended March 31, 2016.
The increase in SG&A expenses for the three-month period
ended March 31, 2017 is mainly attributable to an increase in investor relation
expenses $41, partially offset by a decrease in office and general expenses of
$23.
Depreciation of tangible assets
In the three-month period ended March 31, 2017 we recorded an
expense of $170 for the depreciation of tangible assets, compared with an
expense of $87 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, 2017 amounted to $170
compared to $63 for the three-month period ended March 31, 2016.
We expensed approximately $49 in the three-month period ended
March 31, 2017 for options granted to our employees in 2015 and 2016 under the
2006/2016 Stock Option Plan, approximately $119 for options granted non-employee
directors in 2015, 2016 and 2017, and approximately $2 for options granted to a
consultant in 2016, compared with $28, $35, and $nil respectively that was
expensed in the same period of the previous year.
There remains approximately $238 in stock based compensation to
be expensed in fiscal 2017 and 2018, of which $229 relates to the issuance of
options to our employees and directors during 2015 to 2017 and $9 relates to the
issuance of options to a consultant in 2016. We anticipate the issuance of
additional options and warrants in the future, which will continue to result in
stock-based compensation expense.
Key items from the balance sheet
|
|
March 31,
|
|
|
December
|
|
|
Increase/
|
|
|
Increase/
|
|
In U.S.$ thousands
|
|
2017
|
|
|
31, 2016
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
Current Assets
|
$
|
4,966
|
|
$
|
6,352
|
|
$
|
-1,386
|
|
|
-22%
|
|
Leasehold improvements and Equipment
|
|
5,833
|
|
|
5,730
|
|
|
103
|
|
|
2%
|
|
Security Deposits
|
|
714
|
|
|
708
|
|
|
6
|
|
|
1%
|
|
Current Liabilities
|
|
4,073
|
|
|
5,235
|
|
|
-1,162
|
|
|
-22%
|
|
Long-term debt
|
|
2,410
|
|
|
2,565
|
|
|
-155
|
|
|
-6%
|
|
Capital Stock
|
|
1
|
|
|
1
|
|
|
0
|
|
|
0%
|
|
Additional Paid-in- Capital
|
|
24,207
|
|
|
23,700
|
|
|
507
|
|
|
2%
|
|
40
Current assets
Current assets totaled $4,966 as at March 31, 2017 compared
with $6,352 at December 31, 2016. The decrease of $1,386 is mainly attributable
to a decrease in cash and cash equivalents of approximately $312 and a decrease
in short term investments of $252 as well as a decrease in accounts receivable
of approximately $616.
Cash and cash equivalents
Cash and cash equivalents totaled $300 as at March 31, 2017
representing a decrease of $312 compared with the balance of $612 as at December
31, 2016. The decrease in cash on hand relates to net cash used by operating
activities of $523 and unrealized foreign exchange loss of $101, offset by net
cash provided by financing activities of $234 and net cash provided by investing
activities of $78.
Accounts receivable
Accounts receivable totaled $428 as at March 31, 2017
representing a decrease of $616 compared with the balance of $1,044 as at
December 31, 2016. The main reason for the decrease is related to the collection
in Q1 2017 of upfront payments accounted for as at December 31, 2016.
Prepaid expenses
As at March 31, 2017 prepaid expenses totaled $428 compared
with $566 as of December 31, 2016. The decrease in prepaid expenses is
attributable to the advance payments in December 2016 of certain expenses that
relate to services to be provided in the remainder of the year.
Investment tax credits receivable
R&D investment tax credits receivable totaled approximately
$178 as at March 31, 2017 compared with $246 as at December 31, 2016. The
decrease is attributable to the collection of the 2015 tax credits offset by the
accrual estimated and recorded for the first quarter of 2017.
Leasehold improvements and equipment
As at March 31, 2017, the net book value of leasehold
improvements and equipment amounted to $5,833, compared to $5,730 at December
31, 2016. In the three-month period ended March 31, 2017 additions to assets
totaled $222 and mainly comprised of $210 for manufacturing equipment, $7 for
computer equipment, $3 for leasehold improvements, and $2 for office
furniture.
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, 2017.
Security deposits in the amount of CAD$650 for the term loans were also recorded
as at March 31, 2017.
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities totaled $613 as at
March 31, 2017 compared with $897 as at December 31, 2016. The decrease is
mainly attributable to the December 31, 2016 bonus accruals paid out in Q1 2017.
Long-term debt
Long-term debt totaled $3,120 as at March 31, 2017 (December
31, 2016 - $3,269). An amount of $2,519 is attributable to term loan from 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. The reimbursement of
the term loan started in September 2015 and should be fully reimbursed by
October 2021.
41
An amount of $601 is attributable to a second loan secured by a
second ranking on all present and future property of the Company. The
reimbursement of the loan started in January 2017 and should be fully reimbursed
by March 2021.
Shareholders equity
As at March 31, 2017 we had accumulated a deficit of $18,249
compared with an accumulated deficit of $17,737 as at December 31, 2016. Total
assets amounted to $11,513 and shareholders equity totaled $4,984 as at March
31, 2017, compared with total assets and shareholders equity of $12,790 and
$4,945 respectively, as at December 31, 2016.
Capital stock
As at March 31, 2017 capital stock amounted to $0.654 (December
31, 2016: $0.648) . 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 $24,207 as at March 31,
2017, as compared to $23,700 as at December 31, 2016. Additional paid in capital
increased by $507 from which $337 came from proceeds from exercise of warrants
and stock options and $170 from stock based compensation attributable to the
amortization of stock options granted to employees and directors.
Taxation
As at December 31, 2016, the date of our latest annual tax
return, we had Canadian and provincial net operating losses of approximately
$7,585 (December 31, 2015: $6,462) and $7,763 (December 31, 2015: $6,725)
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 2036. A portion of the net operating losses may expire before
they can be utilized.
As at December 31, 2016, we had non-refundable tax credits of
$1,190 thousand (2015: $1,022 thousand) of which $8 thousand is expiring in
2026, $10 thousand is expiring in 2027, $168 thousand is expiring in 2028, $147
thousand is expiring in 2029, $126 thousand is expiring in 2030, $133 thousand
is expiring in 2031, $167 thousand is expiring in 2032 and $111 thousand is
expiring in 2033, $84 thousand expiring in 2034 and $99 thousand is expiring in
2035 and $137 thousand expiring in 2036. We also had undeducted research and
development expenses of $5,438 thousand (2015: $4,563 thousand) with no
expiration date.
The deferred tax benefit of these items was not recognized in
the accounts as it has been fully provided for.
Key items from the statement of cash flows
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
In U.S.$ thousands
|
|
March 31,
|
|
|
March 31,
|
|
|
Increase/
|
|
|
Increase/
|
|
|
|
2017
|
|
|
2016
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
Operating Activities
|
$
|
(523
|
)
|
$
|
(1,056
|
)
|
$
|
533
|
|
|
50 %
|
|
Financing Activities
|
|
234
|
|
|
375
|
|
|
(141
|
)
|
|
(38%
|
)
|
Investing Activities
|
|
78
|
|
|
(290
|
)
|
|
368
|
|
|
127 %
|
|
Cash and cash equivalents - end of period
|
|
300
|
|
|
2,067
|
|
|
(1,767
|
)
|
|
(85%
|
)
|
42
Statement of cash flows
Net cash used in operating activities was $523 for the
three-month period ended March 31, 2017, compared to $1,056 for the three-month
period ended March 31, 2016. For the three-month period ended March 31, 2017,
net cash used by operating activities consisted of a net loss of $512 (2016:
$746) and a decrease in non-cash operating elements of working capital of $351
(2016: $460).
The net cash provided by financing activities was $234 for the
three-month period ended March 31, 2017, compared to $375 provided in the same
period of the previous year. An amount of $337 derives from proceeds from
exercise of warrants and stock options offset by repayment of term loans for an
amount of $103.
Net cash provided by investing activities amounted to $78 for
the three-month period ended March 31, 2017 compared to a negative $290 in the
same period of 2016. The net cash provided by investing activities for the
three-month period ended March 31, 2017 relates to the redemption of short term
investments of $300 (2016: $Nil), offset by the purchase of fixed assets of $222
(2016: $290).
The balance of cash and cash equivalents as at March 31, 2017
amounted to $300, compared to $2,067 at March 31, 2016.
Off-balance sheet arrangements
We have no off-balance
sheet arrangements.
Managements Discussion and Analysis for the year ended
December 31, 2016
2016 Key Developments
Anti-depressant tablet,
Forfivo XL®
On August 5
th
, 2016, we announced that we had sold
our U.S. royalty on future sales of Forfivo XL
®
to SWK Holdings
Corporation (SWK) for $6 million (CA$8 million). Forfivo XL
®
(Bupropion extended-release) is the first 450 mg bupropion HCl tablet indicated
for Major Depressive Disorder, approved by the FDA. As per terms of the
agreement, we received $6 million from SKW at closing. In return for, (i) 100%
of any and all royalties (as defined in the Edgemont Pharmaceuticals, LLC
License Agreement) or similar royalty amounts received on or after April 1,
2016, (ii) 100% of the $2 million milestone payment upon Edgemont reaching
annual net sales of $15 million, and (iii) 35% of all potential future milestone
payments. Patent protection for Forfivo XL
®
in the United States
expires in 2027 with an authorized generic entering the market in January 2018.
43
SWK is a specialized finance company with a focus on the global
healthcare sector. SWK partners with ethical product marketers and royalty
holders to provide flexible financing solutions at an attractive cost of capital
to create long-term value for both SWKs business partners and its investors.
Anti-migraine VersaFilm
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 valid until 2034.
On July 5, 2016, we announced the signing of the definitive
agreement with Grupo Juste S.A.Q.F. (now Exeltis Healthcare, S.L. (Exeltis))
for the commercialization of RIZAPORT®, our proprietary oral thin film for the
treatment of acute migraines, in the country of Spain. All commercial
manufacturing of RIZAPORT® will take place at our new state-of-the-art
manufacturing facility in Canada. Grupo Juste (Exeltis) 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 drugs, in Europe, Latin America and other
territories. According to the definitive agreement, Grupo Juste (Exeltis) has
obtained exclusive rights to register, promote and distribute RIZAPORT® in
Spain. In exchange, we and Redhill Biopharma will receive upfront and milestone
payments, together with a share of the net sales of RIZAPORT®. 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.
Through our partner Grupo Juste, (Exeltis) the product was
submitted in Spain in September 2016 for approval using a decentralized
procedure. Approval in Spain is currently expected for Q4 2017.
On December 14, 2016, we, together with our partner RedHill
Biopharma, announced the signing of an exclusive license agreement with
Pharmatronic Co. for the commercialization of RIZAPORT® in the Republic of Korea
(South Korea). Under the terms of the agreement, RedHill granted Pharmatronic
Co. the exclusive rights to register and commercialize RIZAPORT® in South Korea.
IntelGenx and RedHill have received an upfront payment and will be eligible to
receive additional milestone payments upon achievement of certain predefined
regulatory and commercial targets, as well as tiered royalties. IntelGenx will
supply the commercial product to Pharmatronic. The initial term of the
definitive agreement with Pharmatronic Co. is for ten years from the date of
first commercial sale and shall automatically renew for an additional two-year
term. Commercial launch in South Korea is estimated to take place in the first
quarter of 2019.
Erectile Dysfunction VersaFilm
On November 21, 2016, we announced the signing of a binding
term sheet for a non-exclusive license to Eli Lilly and Companys tadalafil
dosing patent, United States Patent No. 6,943,166 (the 166 dosing patent). Any
exclusivity associated with the tadalafil compound patent is not affected by
this agreement. Subsequently, an agreement was reached with Lilly to render the
license exclusive.
Subject to FDA approval, this license allows us to
commercialize a Tadalafil ED VersaFilm product in the U.S. prior to the
expiration of the 166 dosing patent. This license terminates all our current
tadalafil-related litigation activities.
Opioid dependence VersaFilm
On July 11, 2016, we announced the receipt of the notice of
appeal for the buprenorphine/naloxone sublingual film product for the treatment
of opiate addiction by Par Pharmaceutical, Inc. (Par) and the Corporation to the
United States Court of Appeals for the Federal Circuit from the final judgment
issued by the U.S. District Court for the District of Delaware on June 28,
2016.
The ruling in the U.S. District Court of Delaware in the ANDA
litigation of Par and the Corporation against Indivior PLC and Monosol Rx, LLC
resulted in Par and the Corporation prevailing on the non-infringement of the
U.S. Patent No. 8,017,150, which is set to expire in 2023, and on the invalidity
(all claims) and non-infringement (certain claims) of the U.S. Patent No.
8,475,832, which is set to expire in 2030. The Court also ruled that Pars ANDA
product would infringe the asserted claims of U.S. Patent No. 8,603,514, one of
the Orange Book listed patents for Suboxone Film, and that the asserted claims
of U.S. Patent No. 8,603,514 were not shown to be invalid.
44
Undisclosed projects
On September 12, 2016, we announced that we had entered into a
licensing, development and supply agreement with Chemo Group (Chemo) granting
Chemo the exclusive license to commercialize two generic products for the USA
market and one product on a worldwide basis. Under the terms of the agreement,
Chemo has obtained certain exclusive rights to market and sell our products in
exchange for upfront and milestone payments, together with a share of the
profits of U.S. Preparation of Scale-up activities for the product are currently
ongoing.
On December 1
st
, 2016, we announced that we had
strengthened our relationship with Chemo Group by signing a term sheet for the
co-development and commercialization of a generic tablet in the area of CNS
(central nervous system) on a worldwide basis. According to Global Data,
worldwide sales in 2015 of the CNS related product exceeded $4 billion. As per
the agreement we received an upfront payment and will be entitled to receive
development costs of the product and future milestone payments. Chemo and
IntelGenx will also share the profits of commercialization. The definitive
agreement was signed on December 30, 2016
On December 27, 2016, we announced that we have entered into a
co-development and commercialization agreement with Endo Ventures Ltd. for this
product utilizing our proprietary VersaFilm for the U.S. market. Under the
agreement, Endo has obtained certain exclusive rights to market and sell our
product in the U.S. We received an upfront payment and will receive future
milestone payments. Endo and IntelGenx will share the profits of
commercialization.
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 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 are paying base rent of approximately CA$110 thousand
(approximately $84 thousand) per year, which will increase at a rate of CA$0.25
($0.19) per square foot /per year, every two years.
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 CA$2.9 million (approximately $2.2 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 CA$1 million loan from IQ.
Construction was successfully completed in Q1, 2016. As of
December 31, 2016, we had received CA$4 million in cash as part of a credit
facility (approximately $3.2 million) negotiated with the Bank. The credit
facility is supported by a 50% guarantee under the Export Guarantee Program from
Export Development Canada, Canadas export credit agency.
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 fiscal year ended December 31, 2016 report an
accumulated other comprehensive loss due to foreign currency translation
adjustments of $1,019 due to the fluctuations in the rates used to prepare our
financial statements, $293 of which negatively impacted our comprehensive income
for the fiscal year ended December 31, 2016. The following Management Discussion
and Analysis takes this into consideration whenever material.
Reconciliation of Comprehensive (Loss) Income 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. We use
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. We use
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 we believe it
provides us with meaningful information on our financial condition and operating
results.
45
IntelGenx obtains its Adjusted EBITDA measurement by adding to
comprehensive (loss) income, 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. We believe 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 our 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
Corporation may vary significantly from one period to another. As such, Adjusted
EBITDA provides improved continuity with respect to the comparison of the
Corporations 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
|
|
|
Twelve-month period
|
|
|
|
ended December 31,
|
|
|
ended December 31,
|
|
In U.S.$ thousands
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Comprehensive (loss) income
|
|
(22
|
)
|
|
233
|
|
|
(1,473
|
)
|
|
799
|
|
Add (deduct):
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
150
|
|
|
123
|
|
|
511
|
|
|
171
|
|
Finance costs
|
|
57
|
|
|
22
|
|
|
203
|
|
|
123
|
|
Finance income
|
|
(2
|
)
|
|
(8
|
)
|
|
(4
|
)
|
|
(28
|
)
|
Share-based compensation
|
|
54
|
|
|
25
|
|
|
195
|
|
|
130
|
|
Foreign currency
translation adjustment
|
|
398
|
|
|
34
|
|
|
293
|
|
|
492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
635
|
|
|
429
|
|
|
(275
|
)
|
|
1,687
|
|
Adjusted Earnings before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA)
Adjusted EBITDA increased by $206 for the three-month period
ended December 31, 2016 to $635 compared to $429 for the three-month period
ended December 31, 2015. Adjusted EBITDA decreased by $1,962 for the twelvemonth
period ended December 31, 2016 to negative $275 compared to $1,687 for the
twelve-month period ended December 31, 2015. The increase in Adjusted EBITDA of
$206 for the threemonth period ended December 31, 2016 is mainly attributable
to an increase in revenues of $409 partially offset by an increase in R&D
expenses of $77 and an increase in SG&A expenses of $176. The decrease in
Adjusted EBITDA of $1,962 for the twelve-month period ended December 31, 2016 is
mainly attributable to an increase in R&D expenses of $733 and an increase
in SG&A expenses of $1,533 partially offset by an increase in revenues of
$125.
Results of operations for the three month and twelve month
periods ended December 31, 2016 compared with the three month and
twelve
month periods ended December 31, 2015.
|
|
Three-month
period
|
|
|
Twelve-month period
|
|
|
|
ended
December 31,
|
|
|
ended
December 31,
|
|
In U.S.$ thousands
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Revenue
|
$
|
1,911
|
|
$
|
1,502
|
|
$
|
5,220
|
|
$
|
5,095
|
|
Cost of Royalty and License Revenue
|
|
91
|
|
|
141
|
|
|
319
|
|
|
433
|
|
Research and Development
Expenses
|
|
471
|
|
|
390
|
|
|
1,766
|
|
|
1,033
|
|
Selling, General and Administrative Expenses
|
|
768
|
|
|
567
|
|
|
3,605
|
|
|
2,072
|
|
Depreciation of tangible
assets
|
|
150
|
|
|
106
|
|
|
511
|
|
|
125
|
|
Amortization of intangible assets
|
|
-
|
|
|
17
|
|
|
-
|
|
|
46
|
|
Operating Income
(Loss)
|
|
431
|
|
|
281
|
|
|
(981
|
)
|
|
1,386
|
|
Net Income (Loss)
|
|
376
|
|
|
267
|
|
|
(1,180
|
)
|
|
1,291
|
|
Comprehensive Income
(Loss)
|
|
(22
|
)
|
|
233
|
|
|
(1,473
|
)
|
|
799
|
|
46
Revenue
Total revenues for the three-month period ended December 31,
2016 amounted to $1,911, representing an increase of $409 or 27% compared to
$1,502 for the three-month period ended December 31, 2015. Total revenues for
the twelve-month period ended December 31, 2016 amounted to $5,220 representing
an increase of $125 or 2% compared to $5,095 for the twelve-month period ended
December 31, 2015. The increase for the three-month period ended December 31,
2016 compared to the last years corresponding period is mainly attributable to
upfront payments received in Q4 2016. The increase for the twelve-month period
ended December 31, 2016 compared to the last years corresponding period is also
mainly attributable to upfront payments received during 2016. The main
differences between the three-month and twelve-month periods of 2016 vs 2015 is
mainly the source of revenues that went from royalties and milestones in 2015 to
deferred revenues from monetization of Forfivo and upfront payments from
multiple agreements signed in 2016.
Cost of royalty and license revenue
We recorded $91 for the cost of royalty and license revenue in
the three-month period ended December 31, 2016 compared with $141 in the same
period of 2015. We recorded $319 for the cost of royalty and license revenue in
the twelve-month period ended December 31, 2016 compared with $433 in the same
period of 2015. 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 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.
Research and development (R&D) expenses
R&D expenses for the three-month period ended December 31,
2016 amounted to $471, representing an increase of $81 or 21%, compared to $390
for the three-month period ended December 31, 2015. R&D expenses for the
twelvemonth period ended December 31, 2016 amounted to $1,766, representing an
increase of $733 or 71%, compared to $1,033 recorded in the same period of
2015.
The increase in R&D expenses for the three-month period
ended December 31, 2016 is mainly attributable to an increase in R&D
salaries of $96 and laboratory supplies of $79 partially offset by a decrease in
patent expenses of $59. The increase in R&D expenses for the twelvemonth
period ended December 31, 2016 is mainly attributable to an increase in patent
expenses of $290, an increase in R&D salaries of $206 for new hires,
laboratory supplies of $99, analytical costs of $78 as well as an increase in
study costs of $48.
47
In the twelve-month period ended December 31, 2016 we recorded
estimated Research and Development Tax Credits of $148, compared with $105 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 December 31,
2016 amounted to $768, representing an increase of $201 or 35%, compared to $567
for the three-month period ended December 31, 2015. SG&A expenses for the
twelve-month period ended December 31, 2016 amounted to $3,605, representing an
increase of $1,533 or 74%, compared to $2,072 recorded in the same period of
2015.
The increase in SG&A expenses for the three-month period
ended December 31, 2016 is mainly attributable to an increase in administration
salaries of $119 as well as an increase in business development salaries of $49.
The increase in SG&A expenses for the twelve-month period ended December 31,
2016 is mainly attributable to an increase in administration salaries of $585,
business development salaries of $205 and business development expenses of $188
as well as an increase in professional fees of $163, rent and utilities of $115
and finally an increase in office and general expenses of $95.
Depreciation of tangible assets
In the three-month period ended December 31, 2016 we recorded
an expense of $150 for the depreciation of tangible assets, compared with an
expense of $106 thousand for the same period of the previous year. In the
twelve-month period ended December 31, 2016 we recorded an expense of $511 for
the depreciation of tangible assets, compared with an expense of $125 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 December 31, 2016 amounted to $54
compared to $25 for the three-month period ended December 31, 2015. Share-based
compensation warrants and share-based payments expense for the twelve-month
period ended December 31, 2016 amounted to $195 compared to $130 for the
twelve-month period ended December 31, 2015.
We expensed approximately $141 in the twelve-month period ended
December 31, 2016 for options granted to our employees in 2014, 2015 and 2016
under the 2006 and 2016 Stock Option Plans, and approximately $52 for options
granted to non-employee directors in 2014, 2015 and 2016, compared with $60 and
$70 respectively that was expensed in the same period of the previous year.
There remains approximately $320 in stock based compensation to
be expensed in fiscal 2016 and 2017, $309 of which relates to the issuance of
options to our employees and directors during 2014 to 2016 and $11 relates to
the issuance of options to a consultant. We anticipate the issuance of
additional options and warrants in the future, which will continue to result in
stock-based compensation expense.
Key items from the balance sheet
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
|
December
|
|
|
December
|
|
|
Increase/
|
|
|
Increase/
|
|
In U.S.$ thousands
|
|
31, 2016
|
|
|
31, 2015
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
Current Assets
|
$
|
6,352
|
|
$
|
4,172
|
|
$
|
2,180
|
|
|
52%
|
|
Leasehold improvements and Equipment
|
|
5,730
|
|
|
4,238
|
|
|
1,492
|
|
|
35%
|
|
Security Deposits
|
|
708
|
|
|
506
|
|
|
202
|
|
|
40%
|
|
Current Liabilities
|
|
5,235
|
|
|
1,779
|
|
|
3,456
|
|
|
194%
|
|
Deferred lease obligations
|
|
45
|
|
|
27
|
|
|
18
|
|
|
67%
|
|
Long-term debt
|
|
2,565
|
|
|
1,546
|
|
|
1,019
|
|
|
66%
|
|
Capital Stock
|
|
1
|
|
|
1
|
|
|
0
|
|
|
0%
|
|
Additional Paid-in-Capital
|
|
23,700
|
|
|
22,846
|
|
|
854
|
|
|
4%
|
|
48
Current assets
Current assets totaled $6,352 at December 31, 2016 compared
with $4,172 at December 31, 2015. The increase of $2,180 is mainly attributable
to an increase in short term financial investments of $3,884 as well as an
increase in prepaid expenses of $496 partially offset by a decrease in cash and
cash equivalents of $2,253.
Cash and cash equivalents
Cash and cash equivalents totaled $612 as at December 31, 2016
representing a decrease of $2,253 compared with the balance of $2,865 as at
December 31, 2015. The decrease in cash on hand relates to net cash used in
investing activities of ($5,910) as well an unrealized foreign exchange loss of
$4, partially offset by net cash provided by operating activities of $1,729 as
well as net cash provided by financing activities of $1,924.
The cash provided by financing activities derives from a loan
negotiated with the Lender secured by a first ranking movable hypothec on all of
our present and future movable property and a 50% guarantee by Export
Development Canada, a Canadian Crown corporation export credit agency.
Accounts receivable
Accounts receivable totaled $1,044 as at December 31, 2016
representing a decrease of $96 compared with the balance of $1,140 as at
December 31, 2015. The main component of this years accounts receivable is
composed of upfront payments on agreements signed in Q4 2016 received in Q1
2017.
Prepaid expenses
As at December 31, 2016 prepaid expenses totaled $566 compared
with $70 as of December 31, 2015. The increase in prepaid expenses is mainly
attributable to the 10% prepayment to Cary Pharmaceuticals following the
monetization of Forfivo to SWK Holding.
Investment tax credits receivable
R&D investment tax credits receivable totaled approximately
$246 as at December 31, 2016 compared with $97 as at December 31, 2015. The
increase relates to the accrual estimated and recorded for the twelve-month
period ended December 31, 2016.
Leasehold improvements and equipment
As at December 31, 2016, the net book value of leasehold
improvements and equipment amounted to $5,730, compared to $4,238 at December
31, 2015. In the twelve-month period ended December 31, 2016 additions to assets
totaled $2,326 and mainly comprised of $1,651 for manufacturing and packaging
equipment for our new, state-of-the-art, VersaFilm manufacturing facility, and
$483 for leasehold improvements related to our new manufacturing facility at
6420 Abrams, St-Laurent, Quebec, Canada, $176 for laboratory and office
equipment and $16 for computer equipment.
Security deposit
A security deposit in the amount of CA$300 ($223) 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 December 31, 2016 and
2015. Security deposits in the amount of CA$650 ($484) and CA$400 ($289) for the
term loans were also recorded as at December 31, 2016 and 2015,
respectively.
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities totaled $897 as at
December 31, 2016 (December 31, 2015 - $1,595) and is mainly attributable to
accounts payable and accrued payroll.
49
Long-term debt
Long-term debt totaled $3,269 as at December 31, 2016 (December
31, 2015 - $1,730). An amount of $2,636 is attributable to term loan from the
lender secured by a first ranking movable hypothec on all of our present and
future movable property and a 50% guarantee by Export Development Canada, a
Canadian Crown corporation export credit agency.
An amount of $633 is attributable to a second loan secured by a
second ranking on all of our present and future property reimbursable in monthly
principal payments starting January 2017 to March 2021.
Shareholders equity
As at December 31, 2016 we had accumulated a deficit of $17,737
compared with an accumulated deficit of $16,557 as at December 31, 2015. Total
assets amounted to $12,790 and shareholders equity totaled $4,945 as at
December 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 December 31, 2016 capital stock amounted to $0.648
(December 31, 2015: $0.636) . 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 $23,700 as at December 31,
2016, as compared to $22,846 at December 31, 2015. Additional paid in capital
increased by $596 for warrants exercised, increased by $63 for options
exercised, and increased by $195 for stock based compensation attributable to
the expensing of stock options granted to employees and directors.
Taxation
As at December 31, 2016, the date of our latest annual tax
return, we had Canadian and provincial net operating losses of approximately
$7,585 (December 31, 2015: $6,462) and $7,763 (December 31, 2015: $6,725)
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 2036. A portion of the net operating losses may expire before
they can be utilized.
As at December 31, 2016, we had non-refundable tax credits of
$1,190 thousand (2015: $1,022 thousand) of which $8 thousand is expiring in
2026, $10 thousand is expiring in 2027, $168 thousand is expiring in 2028, $147
thousand is expiring in 2029, $126 thousand is expiring in 2030, $133 thousand
is expiring in 2031, $167 thousand is expiring in 2032 and $111 thousand is
expiring in 2033, $84 thousand expiring in 2034 and $99 thousand is expiring in
2035 and $137 thousand expiring in 2036. We also had undeducted research and
development expenses of $5,438 thousand (2015: $4,563 thousand) with no
expiration date.
The deferred tax benefit of these items was not recognized in
the accounts as it has been fully provided for.
Key items from the statement of cash flows
In U.S.$ thousands
|
|
December
|
|
|
December
|
|
|
Increase/
|
|
|
Percentage
|
|
|
|
31, 2016
|
|
|
31, 2015
|
|
|
(Decrease)
|
|
|
Increase/
(Decrease)
|
|
Operating Activities
|
$
|
1,729
|
|
$
|
546
|
|
$
|
1,183
|
|
|
217%
|
|
Financing Activities
|
|
1,924
|
|
|
1,792
|
|
|
132
|
|
|
7%
|
|
Investing Activities
|
|
(5,910
|
)
|
|
(3,380
|
)
|
|
(2,530
|
)
|
|
75%
|
|
Cash and cash equivalents end of period
|
|
612
|
|
|
2,865
|
|
|
(2,253
|
)
|
|
(79%
|
)
|
50
Statement of cash flows
Net cash provided by operating activities was $1,729 for the
twelve-month period ended December 31, 2016, compared to $546 for the twelve
month period ended December 31, 2015. For the twelve-month period ended December
31, 2016, net cash used by operating activities consisted of a net loss of
($1,180) (2015: $1,291) and an increase in non-cash operating elements of
working capital of $2,203 compared with decrease of ($1,046) for the
twelve-month period ended December 31, 2015.
The net cash provided by financing activities was $1,924 for
the twelve-month period ended December 31, 2016, compared to $1,792 provided in
the same period of the previous year. An amount of $1,940 derives from several
disbursements of a term loan negotiated with the partially offset by loan
repayment of ($675). Finally, proceeds from exercise of warrants and options
generated an inflow of $659.
Net cash used in investing activities amounted to ($5,910) for
the twelve-month period ended December 31, 2016 compared to ($3,380) in same
period of 2015. The net cash used in investing activities for the twelve-month
period ended December 31, 2016 relates to the purchase fixed assets
for ($2,326) as well as net acquisitions of short-term investments of ($3,584).
The balance of cash and cash equivalents as at December 31,
2016 amounted to $612, compared to $2,865 at December 31, 2015.
Commitments
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, Québec. The Lease has a 10 year and 6-month term commencing
September 1, 2015. IntelGenx has retained two options to extend the with each
option being for an additional five years. Under the terms of the lease
IntelGenx is required to pay base rent of approximately CA$110 thousand
(approximately $82 thousand) per year, which will increase at a rate of CA$0.25
($0.19) per square foot / year every years.
The aggregate minimum rentals, exclusive of other occupancy
charges, for property leases expiring in 2026, are approximately $824 thousand,
as follows:
2017
|
$
|
83
|
|
2018
|
|
85
|
|
2019
|
|
87
|
|
2020
|
|
89
|
|
2021
|
|
90
|
|
Thereafter
|
|
390
|
|
Subsequent events
Subsequent to the end of the year, on March 6, 2017 IntelGenx
executed an agreement to lease approximately an additional 11,000 square feet in
a property located at 6410 Abrams, St-Laurent, Quebec (the Lease). The lease
has an 8 year and 5-month term commencing on October 1, 2017 and IntelGenx has
retained two options to extend the Lease, with each option being for an
additional five years. Under the terms of the Lease IntelGenx will be required
to pay base rent of approximately CA$74 thousand (approximately $55 thousand)
per year, which will increase at a rate of CA$0.25 ($0.19) per square foot every
two years. IntelGenx plans to use the newly leased space to expand its
manufacture of oral film VersaFilm TM.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements as contemplated by
Item 303 (A)(4)(ii) of Regulation S-K under the Securities Act.
51
MARKET INFORMATION
Our common stock was quoted on the OTC Bulletin Board under the
symbol IGXT from January 2007 until June 2012 and, subsequent to our upgrade
in June 2012, has been quoted on the OTCQX. Our common stock has also been
listed on the TSXV under the symbol IGX since May 2008. The table below sets
forth the high and low bid prices of our common stock as reported by the OTCQX
and the TSX for the periods indicated. These prices represent inter-dealer
quotations without retail markup, markdown, or commission and may not
necessarily represent actual transactions.
|
|
OTCQX
|
|
|
TSXV
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
|
(U.S.$)
|
|
|
(U.S.$)
|
|
|
(CA$)
|
|
|
(CA$)
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
$
|
0.89
|
|
$
|
0.68
|
|
$
|
1.20
|
|
$
|
0.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
$
|
0.81
|
|
$
|
0.55
|
|
$
|
1.09
|
|
$
|
0.76
|
|
Third Quarter
|
$
|
1.00
|
|
$
|
0.45
|
|
$
|
1.35
|
|
$
|
0.61
|
|
Second Quarter
|
$
|
0.59
|
|
$
|
0.49
|
|
$
|
0.75
|
|
$
|
0.65
|
|
First Quarter
|
$
|
0.63
|
|
$
|
0.37
|
|
$
|
0.85
|
|
$
|
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
$
|
0.58
|
|
$
|
0.46
|
|
$
|
0.76
|
|
$
|
0.59
|
|
Third Quarter
|
$
|
0.60
|
|
$
|
0.40
|
|
$
|
0.81
|
|
$
|
0.66
|
|
Second Quarter
|
$
|
0.73
|
|
$
|
0.56
|
|
$
|
0.98
|
|
$
|
0.63
|
|
First Quarter
|
$
|
0.90
|
|
$
|
0.52
|
|
$
|
1.10
|
|
$
|
0.61
|
|
Number of Shareholders
On May 10, 2017 there were approximately 46 holders of record
of our common stock, one of which was Cede & Co., a nominee for Depository
Trust Company, and one of which was The Canadian Depository for Securities
Limited, or CDS. All of our common shares held by brokerage firms, banks and
other financial institutions in the United States and Canada as nominees for
beneficial owners are considered to be held of record by Cede & Co. in
respect of brokerage firms, banks and other financial institutions in the United
States, and by CDS in respect of brokerage firms, banks and other financial
institutions located in Canada. Cede & Co. and CDS are each considered to be
one shareholder of record.
Dividend Policy
We have never declared or paid any cash dividends on our common
stock. We currently intend to retain any earnings to support operations and to
finance the growth and development of our business. Therefore, we do not expect
to pay cash dividends in the foreseeable future. Any future determination
relating to our dividend policy will be made at the discretion of our Board of
Directors and will depend on a number of factors, including future earnings,
capital requirements, financial conditions and future prospect and other factors
that the board of directors may deem relevant.
52
Equity Compensation Plan Information as of December 31,
2016
|
Number of Securities
to
be issued upon exercise
of outstanding options,
warrants and
rights
(a)
|
Weighted-average exercise
price of outstanding options,
warrants and rights
(b)
|
Number of securities
remaining
available for future issuance under
equity compensation
plans
(excluding securities reflected in column (a))
(c)
|
Equity Compensation Plans Approved by Security Holders
|
1,785,000
(1)
|
$0.54
|
0
(2)
|
Equity Compensation Plans Not Approved by Security
Holders
|
1,175,000
(2)
|
$0.78
|
1,938,954
(3)
|
Total
|
2,960,000
|
$0.63
|
1,938,954
|
(1)
|
Includes shares of our common stock issuable pursuant to
options granted under the 2006 Stock Option Plan.
|
(2)
|
On May 9, 2016, our Board adopted the 2016 Stock Option
Plan which amended and restated the 2006 Stock Option Plan, which expired
in August 2016. As a result of the adoption of the 2016 Stock Option Plan,
no additional options will be granted under the 2006 Stock Option Plan and
all previously granted options will be governed by the 2016 Stock Option
Plan. Due to the nature of the changes made to the 2006 Stock Option Plan
it was determined that no stockholder approvals were required by the
TSXV.
|
(3)
|
Represents the maximum number of shares of our common
stock available for grants under our 2016 Stock Option Plan as of December
31, 2016.
|
2016 Stock Option Plan
The 2016 Stock Option Plan was adopted by our Board in order to
make the terms of our stock option plan more consistent with the requirements of
the TSXV and to remove certain provisions which would have enabled us to grant
incentive stock options in compliance with Section 422 of the Internal Revenue
Code. The 2016 Stock Option Plan permits the granting of options to our
officers, employees, directors and eligible consultants. A total of 6,361,525
shares of common stock were reserved for issuance under this plan, which
includes stock options granted under the previous 2006 Stock Option Plan.
Options may be granted under the 2016 Stock Option Plan on terms and at prices
as determined by the Board except that the options cannot be granted at less
than the market closing price of the common stock on the TSXV on the date prior
to the grant. Each option will be exercisable after the period or periods
specified in the option agreement, but no option may be exercised after the
expiration of 10 years from the date of grant. The 2016 Stock Option Plan
provides the Board with more flexibility when setting the vesting schedule for
options which was otherwise fixed in the 2006 Stock Option Plan.
53
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of May
10, 2017 concerning our directors and officers. The biographies of each of the
director nominees below contain information regarding the individuals service
as a director, business experience, director positions held currently or at any
time during the last five years, information regarding involvement in certain
legal or administrative proceedings, if applicable, and the experiences,
qualifications, attributes or skills that caused the Board of Directors to
determine that the person should serve as a director for the Corporation.
Name
|
Age
|
Position
|
Position since
|
Horst G. Zerbe
(3)
|
70
|
President and Chief Executive
Officer,
Chairman of the Board
|
April 2006 (except
January
to July 2014) April 2006
|
Andre Godin
|
54
|
Executive Vice President and Chief Financial
Officer
|
August 2015
|
John Durham
(4)
|
62
|
Vice President, Manufacturing
Operations
|
January 2015
|
Nadine Paiement
(4)
|
40
|
Vice President, Research and Development
Director, Research and Development
|
January 2016 June 2005
|
Dana Matzen
(4)
|
39
|
Vice President, Business and
Corporate Development
|
March 2016
|
J. Bernard Boudreau
(2)
(3)
|
72
|
Director
Vice Chairman of the Board
|
June 2006
March 2014
|
Ian (John) Troup
(2)
(1)
|
74
|
Director
|
May 2008
|
Bernd J. Melchers
(1)
|
65
|
Director
|
April 2009
|
John Marinucci
(1)
(2) (3)
|
60
|
Director
|
August 2010
|
Clemens Mayr
(2)
|
48
|
Director
|
August 2015
|
Mark Nawacki
|
48
|
Director
|
August 2016
|
Ingrid Zerbe
(5)
|
62
|
Corporate Secretary
|
April 2006
|
|
(1)
|
Audit Committee member
|
|
(2)
|
Compensation Committee member
|
|
(3)
|
Corporate Governance and Nomination Committee
|
|
(4)
|
VP of Canadian subsidiary IntelGenx Corp.
|
|
(5)
|
Director of Canadian subsidiary IntelGenx
Corp.
|
All directors hold office until the next annual meeting of
shareholders and until their successors have been duly elected and qualified.
There are no agreements with respect to the election of directors. Officers are
appointed annually by the Board and each executive officer serves at the
discretion of the board.
Horst G. Zerbe, Ph.D.
Dr. Zerbe (70) is the founder of IntelGenx Corp. and has been
the President, Chief Executive Officer, and Chairman of IntelGenx Technologies
Corp. since April 2006. In addition, Dr. Zerbe has served as the President,
Chief Executive Officer and Director of IntelGenx Corp., our Canadian
Subsidiary, since 2005. Dr. Zerbe retired from his positions as President and
Chief Executive Officer on January 1, 2014, and at the request of the Board was
reappointed as President and CEO effective July 15, 2014.
Dr. Zerbe has more than 35 years of experience in the
pharmaceutical industry. He started his career at Schwarz Pharma and
subsequently at 3M Pharmaceuticals in Germany. From 1998 to 2005, he served as
the President of Smartrix Technologies Inc. in Montreal; prior thereto, from
1994 to 1998, he served as Vice President of R&D and Technology Transfer at
LTS Lohmann Therapy Systems in West Caldwell, NJ. During his assignments at 3M
and LTS, he gained considerable experience in the technology transfer and
commercial manufacturing of transdermal as well as oral film products. Dr. Zerbe
has extensive executive level experience, and has been responsible for many
strategic and business initiatives. Dr. Zerbe has been involved in new drug
development and the acquisition and disposition of new drug candidates and other
technology, licensing and distribution matters that are likely to affect our
companys own business efforts. He has published numerous scientific papers in
recognized journals and holds over 30 patents. Dr. Zerbe is married to Ingrid
Zerbe, our Corporate Secretary.
54
Andre Godin, CPA, CA.
Mr. Godin (54) has been our
Executive Vice President and Chief Financial Officer since August 2015. Mr.
Godin has more than 25 years experience in the Biotech/Pharma industry. Most
recently, from April 2014 to April 2015, he served as Interim CEO and CFO of
Neptune Technologies and Bioresources Inc. and both of its subsidiaries Acasti
and NeuroBioPharm. He started with Neptune in April of 2003 as Vice President,
Administration and Finance and was named its CFO in 2008. Prior to joining
Neptune, Mr. Godin was President of a dietary supplement corporation and a
corporate controller for a pharmaceutical corporation in OTC products. Mr. Godin
holds a Bachelor of Business Administration degree from the University of Quebec
in Montreal.
John Durham B.Sc.
,
Mr. Durham (62) has been Vice
President, Manufacturing Operations of IntelGenx Corp. since January 2015. Prior
to his appointment, from September 2013, he was engaged at IntelGenx as a
consultant where he was primarily involved in the planning and design of the
upgrade and expansion of R&D capacity and the construction of manufacturing
capability. Mr. Durhams consulting engagement was based on an agreement between
IntelGenx and Borealis Consulting Inc, a Consulting Company founded by Mr.
Durham in 2007.
Mr. Durham held executive
leadership positions with several multinational and domestic pharmaceutical
manufacturing operations. He has an extensive background in pharmaceutical
operations and quality management, together with a strong record of achievement
in a regulated business environment. From November 2011 to September 2013 Mr.
Durham was Chief Operating Officer with Pharmetics, a leading private label
manufacturer in Montreal. From May 2009, to July 2011, he was Vice President,
Technical Operations with Labopharm, a pharmaceutical company in Montreal. From
September 2007, to April 2009, Mr. Durham was Vice President, Business
Development with PharmEng, a Canadian contract manufacturing company. From May
2003, to July 2007, he was President of Draxis Pharma, a leading contract
manufacturing company in Canada, and a division of Draxis Health, which was
trading on the TSX. He was also Vice President and General Manager, from March
1997 until April 2003, with Banner Pharmacaps Canada, a contract manufacturer of
soft gelatine capsules. In addition, Mr. Durham also held positions in
operations management with Novartis from 1994 to 1997 and in quality and
operations management with Johnson and Johnson from 1983 to 1994.
Nadine Paiement, M.Sc
Ms. Paiement (40) is Vice
President, Research and Development at IntelGenx Corp. since January 2016.
Nadine Paiement has over 10 years of experience in pharmaceutical research and
development. She has been with IntelGenx since June of 2005, where she grew into
different positions including her most recent position as Senior Director,
Research and Development. Prior to joining IntelGenx, from 1999 to 2005 Ms.
Paiement worked as Formulation Scientist for Smartrix Technologies.
Nadine Paiement holds a M.Sc.
degree in Polymer Chemistry from Sherbrooke University, Montreal, Quebec and is
co-inventor of IntelGenx's Tri-Layer technology.
Dana Matzen, Ph.D.
Dr. Matzen (39) is Vice
President, Business & Corporate Development at IntelGenx Corp. since March
2016. Most recently, from May 2010 to March 2016, Dr. Matzen was Director,
Business Development at Paladin Labs, an Endo International company, based in
Montreal, Canada. During her time at Paladin, Dr. Matzen was responsible for
in-licensing business opportunities for Canada, Africa and Latin America. In
addition, Dr. Matzen was in charge for overseeing strategic initiatives for
Paladins international out-licensing business including alliance management of
over 15 existing partners worldwide. More recently, Dr. Matzen joined the
Marketing Team and led the successful launch of Iclusig in Canada.
Prior to joining Paladin, from
September 2008 to May 2010, Dr. Matzen was Life Science Specialist at L.E.K.
Consulting in London, UK and Los Angeles, U.S. From October 2006 to August 2008,
Dr. Matzen was a Postdoctoral Scholar at UCSF focusing on cellular and molecular
pharmacology. Dr. Matzen has published several peer-reviewed articles that have been referenced in over 100
publications and was awarded with the Genentech Foundation Postdoctoral
Fellowship for outstanding research.
Dr. Matzen holds a Ph. D in
Microbiology and Genetics from the University of Vienna (Max F. Perutz
Laboratories) and her Masters in Nutritional Economics from the University Kiel,
Germany.
55
J. Bernard Boudreau, QC, PC
Mr. Boudreau (72) has been a
director of IntelGenx Technologies Corp. since June 2006 and Vice-Chairman of
the Board since March 4, 2014. From 2005 to 2008, Mr. Boudreau served as the
Vice-President of Pharmeng International Inc., a pharmaceutical manufacturing
and consulting company listed on the Toronto Stock Exchange. Since 2001, he has
been President and CEO of Radcliffe Consulting and Investment Limited, a private
consulting firm located in Halifax, N.S. From 2010 to 2013 he served on the
board of directors at Pillar5 Pharma, a privately owned Canadian Company, which
was also previously one of our manufacturing partners. Mr. Boudreau has also
served on the Board of Directors of a number of public and private companies,
including Export Development Canada and the Bank of Canada.
Mr. Boudreau has a distinguished
record as a lawyer, businessman and public figure. His litigation experience
includes successful appearances at every level of the judicial system in Nova
Scotia. He was appointed as Queen's Counsel in 1985. Mr. Boudreau was first
elected to the provincial legislature of Nova Scotia in 1988. He served as Chair
of the Public Accounts Committee and opposition critic for Finance and Economic
Development. In 1993, he was re-elected as a member of government and held
responsibilities as Minister of Finance, Minister of Health, Chair of the
Cabinet Priorities and Planning Committee. Mr. Boudreau served as Government
Leader in the Senate of Canada and Member of the federal Cabinet between 1999
and 2001.
Ian (John) Troup, B.Sc.
Mr. Troup (74) has been a
director of IntelGenx Technologies Corp. since May 2008. From April 2008 to
February 2010, Mr. Troup was a Director of Vital Medix, an early stage drug
development company. In July 2007, he was appointed to the Board of Medisyn
Technologies Inc., a privately held "in silica" drug discovery and development
company. From September 1995 until his retirement in December 2003, Mr. Troup
was President and Chief Operating Officer of Upsher-Smith Laboratories, a
privately held pharmaceutical company. Prior to this, he served as President of
Schwarz Pharma in the UK for seven years, followed by serving as President of
Schwarz Pharma USA in Minnesota for an additional nine years.
Born and educated in Scotland,
Mr. Troup has worked in the pharmaceutical industry for over 35 years.
Originally an industrial chemist, he held executive positions in sales and
marketing for several leading companies. His experience includes new product
development and launch, M&A and strategic planning.
Bernd J. Melchers, B.A.
Mr. Melchers (65) has been a
director of IntelGenx Technologies Corp. since April 2009. From January 2001
until his retirement in December 2004, Mr. Melchers was Managing Director of 3M
Dyneon Holding GmbH, Germany and Global Chief Financial Officer of the worldwide
operating 3M Dyneon Group, a subsidiary of 3M Corporation headquartered in
Minnesota. Prior to this he served, from July 1995 to December 2000, as the
Controller at the European Business Center of 3M Medical Markets Europe in
Belgium. Prior to this, he held various senior Financial Manager positions at
the Medical-Surgical Division of 3M in St. Paul, Minnesota, at 3M Health Care
Products, Germany, and at 3M Pharmaceutical Products, Germany.
John Marinucci, C.A., C.P.A., ICD.D, HRCCC
Mr. Marinucci (60) has been a
Director of IntelGenx Technologies Corp. since August 2010. From April 2002
until March 2009, Mr. Marinucci was President and Chief Executive Officer at New
Flyer Industries Inc. (NFI), a publicly traded company listed on the Toronto
Stock Exchange. NFI is the largest North American manufacturer of heavy-duty
transit buses. Mr. Marinucci retired from this position on March 31, 2009 and
remains on the board of directors. Prior to this he was, from March 1994 to
April 2002, President and Chief Operating Officer at National Steel Car Limited
(NSC) and is a former President of the Canadian Association of Railway
Suppliers. He is the past Chair of CWB group and of Mohawk College. Currently,
Mr. Marinucci serves on the Board of Directors of New Flyer, Seaport Intermodal
Inc. and the CWA Foundation and is also an active board member of Pillar5
Pharma, a privately owned Canadian Company and our previous manufacturing
partner. Furthermore, he is the Founder, Chairman and Trustee of the Marinucci
Family Foundation. Mr. Marinucci is a chartered accountant and a member of the
Institute of Corporate Directors.
Clemens Mayr
Mr. Mayr (48) has been a Director of IntelGenx Technologies
Corp. since August 2015.
56
Since 2006, Clemens Mayr is a
partner of McCarthy Tétrault LLP, a leading Canadian law firm. Prior thereto, he
was partner with Ogilvy Renault LLP from 1999 to 2006 and lawyer at this firm
from 1997 to 1999. His practice focuses on M&A and capital markets, both
domestic and cross-border. In the course of his practice he has advised
corporations and boards in numerous industries, including in particular
life-sciences and technology. He currently also serves on the Board of Directors
of the Institute of Corporate Directors (Quebec Chapter).
Mr. Mayr was born in Innsbruck,
Austria. He received his LLB from the Universite de Montreal in 1990 and was
called to the Quebec bar in 1991.
Since February 2017, McCarthy Tetrault LLP has been acting as
our Canadian legal counsel.
Mark Nawacki
Mr. Nawacki (48) has been a
Director of IntelGenx Technologies Corp. since August 2016. Prior to his
appointment, from February to July 2016, Mr. Nawacki was a member of the
Scientific Advisory Board of IntelGenx Corp, which provides advice to the
companys management team. Since February 2015, Mark Nawacki is the President
and CEO of Searchlight Pharma Inc., a Canadian-based private specialty
pharmaceutical company focused on the acquisition and commercialization of
innovative and unique healthcare and pharmaceutical products. Prior to joining
Searchlight Pharma, from September 2003 to September 2014, Mr. Nawacki served as
Executive Vice President, Business and Corporate Development of Paladin Labs,
where he spent over 11 years building out Paladins commercial and geographic
footprint. Over the course of his 11-year tenure at Paladin, Mr. Nawacki helped
shape the therapeutic focus of Paladins Canadian business via licensing and
acquisitions, and built Paladins international expansion and emerging markets
strategy.
Mark holds a BA in International
Relations and Russian and East European Studies from the University of Toronto
(Trinity), MBA also from the University of Toronto, and is a Canadian-designated
CPA. He is a past member of the Board of Trustees of the Licensing Executive
Society (USA & Canada) and is a former President and Board Member of the
Canadian Healthcare Licensing Association. He also currently serves on the Board
of Kane Biotech Inc., a Canadian company publicly traded on the TSX-Venture, the
Montreal Bach Festival and The Sacred Heart School of Montreal.
Ingrid Zerbe
Mrs. Zerbe (62) is our Corporate
Secretary since 2006. Mrs. Zerbe is the founder of IntelGenx Corp., our Canadian
Subsidiary. She served as the President of IntelGenx Corp, from its
incorporation in June 2003 until December 2005. She has been a Director of the
subsidiary since its incorporation in June 2003 and a Director of the parent
company from April 2006 until August 2006. Mrs. Zerbe holds a bachelor degree in
economics from a business school in Bottrop, Germany, and a bachelor degree in
social sciences from the University of Dortmund, Germany.
Mrs. Zerbe is married to Dr.
Horst G. Zerbe, who is our President, Chief Executive Officer and Chairman of
the Board.
CORPORATE GOVERNANCE
Board Leadership Structure
Our Board is responsible for overseeing the business and
affairs of the Corporation. Members of the Board are kept informed of our
business through discussions with the Chief Executive Officer and other
officers, by reviewing materials provided to them and by participating in
regular quarterly and special meetings of the Board and its committees.
The Charter of the Board is posted on our website at
http://www.intelgenx.com
.
The Board is currently comprised of Dr. Horst G. Zerbe, who
serves as our Chairman and six directors, four of which are independent. Dr.
Zerbe is also our President and Chief Executive Officer. We believe, because of
our size, that the Corporation, like many U.S. companies, is currently best
served by having one person serve as both Chief Executive Officer and Chairman
of the Board. The Board believes that through this leadership structure, Dr.
Zerbe is able to draw on his intimate knowledge of the daily operations of the
Corporation and its relationships with partners, customers and employees to
provide the Board with leadership in setting its agenda and properly focusing
its discussions. As the individual with primary responsibility for managing our
day-to-day operations, Dr. Zerbe is also best-positioned to chair regular Board
meetings and ensure that key business issues are brought to the Boards
attention. The combined role as Chairman and Chief Executive Officer also
ensures that the Corporation presents its message and strategy to shareholders,
partners, customers, employees and other stakeholders with a unified, single
voice.
57
In 2014 the Board created the position of Vice Chairman, who
serves as the independent Lead Director. The role of Lead Director is to
facilitate the functioning of the Board, to help ensure that appropriate
processes are followed, to assist in fostering and seeking input of independent
directors, and to ensure independent director participation in all Board
decisions.
The Lead Director ensures that the Boards relationship with
management functions effectively and furthers the best interest of the
Corporation, including working with the committees appointed by the Board to
ensure they have the proper structure and appropriate assignments. The Lead
Director also regularly communicates with the Chairman and Chief Executive
Officer so that he is aware of any concern of the independent directors and any
concerns communicated by our shareholders. The role and responsibilities of the
Lead Director are in addition to and distinct from the role of the chair of each
of the committees of the Board.
The mandate of the Vice Chair (Lead Director) is posted on our
website at
http://www.intelgenx.com
.
Independence of Members of the Board of
Directors
The Board has determined that four of our directors, J. Bernard
Boudreau, Ian Troup, Bernd Melchers, and John Marinucci are independent within
the meaning of the director independence standards of both The Nasdaq Stock
Market, LLC (NASDAQ) and the Securities and Exchange Commission (SEC),
including Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as
amended.
Meetings of the Board of Directors
Our Board held four regular meetings and various Special
Meetings during our 2016 Fiscal Year. All our directors attended 100% of the
board meetings and of the committee meetings on which they served, except for
Mr. Troup who was unable to attend 50% of the regular scheduled meetings for
medical reasons but attended the Q2 and Q4 scheduled meetings as well as special
board meetings.
We encourage the members of our board to attend the Annual
General Meeting to be available to answer shareholders questions. All of our
directors attended the last Annual Meeting in May 2016.
Compensation of the Board of Directors
Directors are reimbursed for their out-of-pocket expenses
incurred in attending meetings of the Board of Directors. As described below in
"Director Compensation", during our 2016 Fiscal Year, our Directors of the Board
(except for the CEO) received an annual stipend of $27,158 (CA$36,000), the
Vice-Chairman of the Board received an additional annual stipend of $10,939
(CA$14,500), and each chairman of a Board Committee received $5,658 (CA$7,500).
Director fees are paid in quarterly installments at the beginning of each
quarter.
In November 2016, the Board resolved to compensate non-employee
directors for
their efforts on special or ad hoc committees or for board
approved initiatives that fall outside the scope of customary directors duties.
A daily (per 8 hours) per diem rate of $754 (CA$ 1,000) was established. The
Audit Committee Chair needs to approve per diem charges submitted by directors.
During fiscal year 2016, no funds were submitted or paid under the new
policy.
Effective January 2017, Directors compensation will be paid in
U.S. Dollars in lieu of Canadian dollars. The amounts will remain the same.
Furthermore, effective January 2015, the non-employee Directors
of the Board receive 50,000 options to purchase common stock which will be
granted annually to each non-employee director at the beginning of the fiscal
year.
Committees of the Board of Directors
The Board has three standing committees: the Audit Committee,
the Compensation Committee and the Corporate Governance and Nomination
Committee. Furthermore, in August 2016, we implemented an ad-hoc-Succession
Committee.
58
Audit Committee
. Our Audit
Committee is comprised of independent members of our Board and is currently
composed of Bernd Melchers, John Marinucci and Ian Troup. Clemens Mayr was a
member of the committee during fiscal year 2016 until February of 2017. Ian
Troup has newly been appointed as member of the committee in March 2017. The
Audit Committee held four meetings during our 2016 Fiscal Year.
Our Audit Committee assists our
Board in fulfilling its responsibilities for oversight and supervision of
financial and accounting matters. The chairman of the Audit Committee is Mr.
Bernd Melchers. Our Audit Committees responsibilities include, among others (i)
recommending to the Board the engagement of the external auditor and the terms
of the external auditors engagement; (ii) overseeing the work of the external
auditor, including dispute resolution between management and the external
auditor, if required; (iii) pre-approving all non-audit services to be provided
to us by our external auditor; (iv) reviewing our financial statements,
managements discussion and analysis and annual and interim earnings press
releases before this information is publicly disclosed; (v) assessing the
adequacy of procedures for our public disclosure of financial information; (vi)
establishing procedures to deal with complaints received by us relating to our
accounting and auditing matters; and (vii) reviewing our hiring policies
regarding employees of our external auditor or former auditor.
We have adopted, along with our
Audit Committee, a written charter of the Audit Committee setting out the
mandate and responsibilities of the Audit Committee which provides that the
Audit Committee convene no less than four times per year.
The Audit Committee Charter is
posted on our website at
http://www.intelgenx.com
.
Accordingly, the Audit Committee
discusses with Richter LLP, our auditors, our audited financial statements,
including, among other things, the quality of our accounting principles, the
methodologies and accounting principles applied to significant transactions, the
underlying processes and estimates used by our management in our financial
statements and the basis for the auditor's conclusions regarding the
reasonableness of those estimates, in addition to the auditor's independence.
Compensation Committee
.
Our Compensation Committee is comprised of a majority of independent members of
our Board and currently consists of the Chairman of the Compensation Committee,
John Marinucci, J. Bernard Boudreau, Ian Troup and Clemens Mayr. The
Compensation Committee held four meetings in 2016 and met during the first
quarter of 2017 to review and discuss fiscal year 2016 executive officers
performances and discuss directors and officers compensation for fiscal year
2017.
Our Compensation Committee
reviews and makes recommendations to our Board concerning the compensation of
our directors and executive officers which include the review of our executive
compensation and other human resource policies, the review and administration of
any bonuses and stock options and major changes to our benefit plans and the
review of and recommendations regarding the performance of the Chief Executive
Officer, the Executive Vice President and Chief Financial Officer, the Vice
President, Manufacturing Operations, Vice President of Business and Corporate
Development and the Vice President of Research and Development of our
Corporation and its subsidiary.
We have adopted, along with our
Compensation Committee, a written charter of the Compensation Committee setting
out the mandate and responsibilities of the Compensation Committee which
provides that the Compensation Committee convene no less than three times per
year.
The Compensation Committee
Charter is posted on our website at
http://www.intelgenx.com
.
Compensation Committee
Interlocks and Insider Participation.
As stated above, the Compensation
Committee consists of John Marinucci, J. Bernard Boudreau, Ian Troup and Clemens
Mayr. There are no interlocking relationships, as described by the Securities
and Exchange Commission, between the Compensation Committee members.
Corporate Governance and
Nomination Committee (CG&N)
. Our Corporate Governance and Nomination
Committee is comprised of members of our Board and currently consists of the
Chairman of the CG&N Committee, J. Bernard Boudreau, John Marinucci and
Horst G. Zerbe. The CG&N Committee was implemented in August 2015 and held
two meetings in 2016.
The CG&N Committee is
responsible for performing the duties set out in its Charter to enable the Board
to discharge its responsibilities and obligations with respect to identifying
and recommending candidates for election to the Board and all committees of the
Board. Furthermore, the CG&N Committee is responsible for developing an effective corporate governance system for IntelGenx
Technologies Corp., and for reviewing and assessing on an ongoing basis our
corporate governance and public disclosure.
59
In considering a potential
candidate, the CG&N Committee considers both the qualities and skills that
the Board, considered in its entirety, currently possesses and that the Board
should possess. Based on the skills and experiences already represented on the
Board, the CG&N Committee will consider the experience, personal attributes
and qualities that a candidate should possess in light of the anticipated growth
and development of the Corporation. The CG&N Committee recognizes the
benefits of promoting diversity at the Board level. Diverse perspectives linked
in common purpose contribute to innovation and growth of the Corporation. In
considering candidates and selecting nominees for the Board, diversity,
including gender diversity, is an important factor considered by the CG&N
Committee. In assessing a candidates suitability, the CG&N Committee also
takes into consideration the existing commitments of the individual to ensure
that each member has sufficient time to discharge such members duties.
Notwithstanding the fact that the
CG&N Committee is charged with the responsibility of identifying potential
new Board members, all members of the Board are eligible to put forth candidates
for the CG&N Committee to consider. Additionally, the Board may engage
recruiting firms to assist with identifying qualified candidates. Once
candidates have been approved by the CG&N Committee and their interest level
gauged, the entire Board discusses, both formally and informally, the
suitability of a particular candidate.
Stockholders may recommend
individuals to our Board for consideration as potential director candidates by
submitting their names, together with appropriate biographical information and
background materials to our principal office, 6420 Abrams, Ville St. Laurent,
Quebec H4S 1Y2, Attn: Corporate Secretary. Assuming that appropriate
biographical and background material has been provided on a timely basis, our
Board will evaluate stockholder-recommended candidates by following
substantially the same process, and applying substantially the same criteria, as
it follows for candidates submitted by others. If our Board determines to
nominate a stockholder-recommended candidate and recommends his or her election,
then his or her name will be included in our proxy card for the next annual
meeting.
We have adopted, along with our
CG&N Committee, a written charter of the CG&N Committee setting out the
mandate and responsibilities of the CG&N Committee which provides that the
Committee convene as frequently as it determines necessary but not less
frequently than twice each year.
The Corporate Governance and
Nomination Committee Charter is posted on our website at
http://www.intelgenx.com
.
Ad-hoc Succession Committee
Our ad-hoc Succession
Committee is comprised of members of our Board and currently consists of the
Vice Chairman of the Board, J. Bernard Boudreau, Clemens Mayr and Horst G.
Zerbe. The ad-hoc Succession Committee was implemented in August 2016 with the
objective to establish the framework for the search of the planned and/or
unplanned, interim or permanent successor of our current CEO and President. The
committee had met on several occasions to create an Interim CEO Replacement
Plan. The Board adopted the plan in November of 2016, which provides directions
for the temporary succession of the CEO in the event of his planned or
potentially unplanned departure or leave of absence. The decision on a CEO
successor will be made at some appropriate future date by the full Board
Boards Role in Risk Oversight
Our management has responsibility for managing day-to-day risk
and for bringing the most material risks facing the Corporation to the Boards
attention. The Board takes an active role in risk oversight related to the
Corporation both as a full Board and through its committees. To facilitate the
Boards risk oversight responsibility, management provides the Board with information about its identification,
assessment and management of critical risks and its risk mitigation strategies.
This information is communicated to the Board and its committees at regular and
special meetings, through reports, presentations and discussions with key
management personnel and representatives of outside advisors, such as our
independent auditors, as appropriate. During regular Audit Committee meetings,
committee members discuss the financial results for the most recent fiscal
quarter with the independent auditors, Chief Financial Officer and Chief
Executive Officer. The Audit Committee also meets with and provides instruction
to the independent auditors outside the presence of management. These
discussions allow the members of the Audit Committee to analyze any significant
risks that could materially impact the financial health of our business.
The Compensation Committee oversees the Corporations executive
compensation arrangements, including the identification and management of risks
that may arise from our compensation policies and practices.
Executive Compensation
The key objectives of the our executive compensation policies
are to attract and retain key executives who are important to the long-term
success of the Corporation and to provide incentives for these executives to
achieve high levels of job performance and enhancement of shareholder value. We
seek to achieve these objectives by paying its executives a competitive level of
base compensation for companies of similar size and industry and by providing
its executives an opportunity for further reward for outstanding performance in
both the short term and the long term.
60
Executive Officer
Compensation.
Our executive officer compensation program is comprised of
three elements: base salary, annual cash bonus and long-term incentive
compensation in the form of stock option grants.
Salary
. The Compensation
Committee and the Board will review base salaries for our executive officers,
taking into account individual experience, job responsibility and individual
performance during the prior year. These factors are not assigned a specific
weight in establishing individual base salaries. The Compensation Committee will
also consider our executive officers' salaries relative to salary information
for executives in similar industries and similarly sized companies.
Cash Bonuses
. The purpose
of the cash bonus component of the compensation program is to provide a direct
financial incentive in the form of cash bonuses to executives. The cash bonus is
paid on the base of individual and corporate performance.
Stock Options
. Stock
options are the primary vehicle for rewarding long-term achievement of our
goals. The objectives of the program are to align employee and shareholder
long-term interests by creating a strong and direct link between compensation
and increases in share value. Under our Stock Option Plan, the Board or the
Compensation Committee may authorize the grant of options to purchase our common
stock to our key employees. The options generally vest in increments over a
period of two years established at the time of grant.
Involvement in Certain Legal Proceedings
None of our officers or directors have, during the last ten
years: (i) been convicted in or is currently subject to a pending criminal
proceeding; (ii) been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to any federal or
state securities or banking laws including, without limitation, in any way
limiting involvement in any business activity, or finding any violation with
respect to such law, nor (iii) has any bankruptcy petition been filed by or
against the business of which such person was an executive officer or a general
partner, whether at the time of the bankruptcy or for the two years prior
thereto or been subject to any of the items set forth under Item 401(f) of
Regulation S-K, other than Mr. Boudreau who was formerly the Vice President of Pharmeng International Inc. from
2005 to 2008, which since filed for bankruptcy on April 14, 2009. He was also a
Director of Pharmeng until April 13, 2009.
Communications with the Board
Any record or beneficial owner of our common stock who wishes
to communicate with the Board should contact the Chairman of the Board or the
Chairman of the Audit Committee. If particular communications are directed to
the full Board, independent directors as a group, or individual directors, the
Chairman of the Board or the Chairman of the Audit Committee, as applicable,
will route these communications to appropriate committees or directors if the
intended recipients are clearly indicated.
Any record or beneficial owner of our common stock who has
concerns about our accounting, internal accounting controls, or auditing matters
relating to the Corporation should also contact the Audit Committee.
Written communications should be addressed to IntelGenx
Technologies Corp., 6420 Abrams, Ville St-Laurent, Quebec H4S 1Y2, Canada,
Attention: Chairman of the Board/Chairman of the Audit Committee. Communications
that are intended to be anonymous should be sent to the same address but without
indicating your name or address, and with an interior envelope addressed to the
specific committees or directors you wish to communicate with.
61
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, or
earned by our executive officers for the years indicated.
Name and
principal
position
(a)
|
Year
(b)
|
Salary ($)
(c)
|
Bonus($)
|
Option
Awards
(2)
($)
(f)
|
All Other
Compensation
($)
(i)
|
Total ($)
(j)
|
Horst G. Zerbe,
President and
CEO
|
2016
|
205,574
|
80,174
(4)
|
NIL
|
NIL
|
285,748
|
2015
|
205,301
|
76,988
|
NIL
|
NIL
|
282,289
|
Andre Godin
EVP and CFO
|
2016
|
190,109
|
57,033
(4)
|
NIL
|
NIL
|
247,142
|
2015
|
61,365
|
19,553
|
119,520
(1)
|
3,813
(3)
|
204,251
|
John Durham
VP
Manufacturing
|
2016
|
147,108
|
33,099
(4)
|
NIL
|
NIL
|
180,207
|
2015
|
144,689
|
32,555
|
23,733
(1)
|
NIL
|
200,977
|
Nadine Paiement
VP Research and
Development
|
2016
|
96,658
|
22,183
(4)
|
10,668
(1)
|
NIL
|
129,506
|
2015
|
NIL
(5)
|
NIL
|
NIL
|
NIL
|
NIL
|
Dana Matzen,
VP Corporate &
Business
Development
|
2016
|
77,435
(6)
|
17,558
(4)
|
67,312
(1)
|
NIL
|
162,305
|
2015
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
Footnotes:
|
(1)
|
In April 2015 Mr. Durham received options to purchase
100,000 shares of common stock. In August 2015, Mr. Godin received options
to purchase 600,000 shares of common Stock. In January 2016 Ms. Paiement
received options to purchase 75,000 shares of common stock. In September
2016 Ms. Matzen received options to purchase 200,000 shares of common
stock.
|
|
(2)
|
The amounts in this column represent the grant date fair
value of stock option grants in accordance with Financial Accounting
Standards Board Accounting Standards Codification Topic 718 (FASB ASC
Topic 718). The value of 100,000 option grants has been determined using
the Black-Scholes method and is based on the following assumptions: risk-
free rate of return of 0.87%, dividend rate of 0%, volatility rate of 62%
and an average term of 3.13 years. An Adjustment of 10% has been
determined for the risk of forfeiture. No adjustment has been made for
non-transferability. The value of 600,000 option grants has been
determined using the Black-Scholes method and is based on the following
assumptions: risk-free rate of return of 1.09%, dividend rate of 0%,
volatility rate of 63% and an average term of 3.13 years. An Adjustment of
20% has been determined for the risk of forfeiture. No adjustment has been
made for non-transferability. The value of 75,000 option grants has been
determined using the Black- Scholes method and is based on the following
assumptions: risk- free rate of return of 1.11%, dividend rate of 0%,
volatility rate of 63% and an average term of 3.13 years. An Adjustment of
20% has been determined for the risk of forfeiture. No adjustment has been
made for non-transferability. The value of 200,000 option grants has been
determined using the Black-Scholes method and is based on the following
assumptions: risk-free rate of return of 1.3%, dividend rate of 0%,
volatility rate of 65% and an average term of 5.63 years. An Adjustment of
20% has been determined for the risk of forfeiture. No adjustment has been
made for non-transferability.
|
|
(3)
|
Mr. Godin received compensation as Executive Vice
President and CFO from August 24 to December 31, 2015. Prior to his
employment from June to August 2015 he received consulting fees of $3,813
for services provided during this period.
|
|
(4)
|
Bonuses paid out in the first quarter of 2017
|
|
(5)
|
Ms. Paiement received compensation as Vice President
Research and Development from January to December 2016. Prior to her
appointment she was holding the position as Senior Director, Research and
Development at IntelGenx Corp.
|
|
(6)
|
Ms. Matzen, received compensation as Vice President of
Business and Corporate Development of IntelGenx Corp. from March 2016 to
October 2016, when Ms. Matzen went on maternity
leave.
|
62
Compensation Discussion and Analysis
Employment Agreements
Horst G. Zerbe.
Effective July 15, 2014, we entered into a new employment agreement with Dr.
Zerbe, our President and Chief Executive Officer (the Zerbe Agreement). The
agreement is for an indefinite period of time. Under the agreement, Dr. Zerbe is
entitled to receive: (1) a minimum base salary of CA$250,000 per year; and (2)
an annual bonus of up to 50% of base salary based upon the achievement of
specific performance targets established between Dr. Zerbe and the Board.
Pursuant to the Zerbe Agreement,
if Dr. Zerbe is terminated by the Corporation for Cause (as defined in the Zerbe
Agreement), Dr. Zerbe is not entitled to any notice, compensation or expenses
except for accrued salary, bonus or expenses. If the Corporation terminates Dr.
Zerbe without Cause, Dr. Zerbe is entitled to all accrued payments, and
Termination Benefits (as defined in the Zerbe Agreement) for an 18 month period
(the Zerbe Severance Period), which shall include, (i) a lump sum payment of
base salary for the Zerbe Severance Period, (ii) continued participation in
employee benefits plans up to the earlier of the end of the Zerbe Severance
Period or the start of subsequent employment with similar benefits, (iii)
payment of a monthly automobile allowance up to the earlier of the end of the
Zerbe Severance Period or the start of subsequent employment with similar
benefits (iii) payment of a bonus up to the date of termination of employment,
and (iv) any stock options that are unvested shall immediately vest. All such
payment must be made by the Corporation within ten days of the date of
termination by the Corporation.
If the employment is terminated
by Dr. Zerbe within 6 months following a Change in Control (as defined in the
Zerbe Agreement), then Dr. Zerbe shall receive similar benefits as if he had
been terminated without Cause. If Dr. Zerbe voluntarily terminates the Zerbe
Agreement for any other reason or due to death or disability, we shall have no
further obligations under the Zerbe Agreement except for the payment of accrued
salary, expenses and benefits.
Following his retirement as
President and Chief Executive Officer, effective January 1, 2014 and terminated
on July 14, 2014, Dr. Horst Zerbe was appointed to serve in an ad-hoc capacity
as an advisor to the Board and IntelGenx management in order to transition the
responsibilities of President and CEO to Dr. Khosla and maintain continuity of
management for a period of six months. Dr. Zerbe received compensation of
CA$58,750 (US$53,004), which was paid in equal installments, less deductions and
withholdings required by law, before July 15, 2014, and continued to receive all
employment benefits for which Dr. Zerbe was eligible as President and CEO for
the duration of this appointment.
In the first quarter of 2015,
following the recommendation of the Compensation Committee, the Board approved a
one-time cash bonus of CA$42,969 (US$38,767) for fiscal year 2014, to be paid to
Dr. Zerbe in Q1 2015. Dr. Zerbes salary was also increased to CA$262,500
effective January 1, 2015.
In the first quarter of 2016,
following the recommendation of the Compensation Committee, the Board approved a
one-time cash bonus of CA$98,438 (US$76,988) for fiscal year 2015, to be paid to
Dr. Zerbe in Q1 2016. Dr. Zerbes salary was also increased to CA$272,500
effective January 1, 2016.
In the first quarter of 2017,
following the recommendation of the Compensation Committee, the Board approved a
one-time cash bonus of CA$106,275 (US$80,174) for fiscal year 2016, to be paid
to Dr. Zerbe in Q1 2017. Dr. Zerbes salary was also increased to CA$286,125
effective January 1, 2017.
Andre Godin.
Effective August 24, 2015, we entered into an employment agreement with Mr.
Godin, our Executive Vice President and Chief Financial Officer (the Godin
Agreement). The agreement is for an indefinite period of time. Under the
agreement, Mr. Godin is entitled to receive: (1) a minimum base salary of
CA$240,000 per year; and (2) an annual bonus of up to 40% of base salary based
upon the achievement of certain performance targets.
Pursuant to the Godin Agreement,
if Mr. Godin is terminated by the Corporation for Cause (as defined in the Godin
Agreement), Mr. Godin is not entitled to any notice, compensation or expenses
except for accrued salary, bonus or expenses. If the Corporation terminates Mr.
Godin without Cause, Mr. Godin is entitled to all accrued payments, and
Termination Benefits (as defined in the Godin Agreement) for an 12 month period
(the Godin Severance Period), which shall include, (i) a lump sum payment of
base salary for the Godin Severance Period, (ii) continued participation in
employee benefits plans up to the earlier of the end of the Godin Severance
Period or the start of subsequent employment with similar benefits, (iii)
receive payment of any accrued bonus. In addition, any stock options that are
unvested shall immediately vest.
63
If the employment is terminated
by Mr. Godin within 6 months following a Change in Control (as defined in the
Godin Agreement), then Mr. Godin shall receive similar benefits as if he had
been terminated without Cause. If Mr. Godin voluntarily terminates the Godin
Agreement for any other reason or due to death or disability, the Corporation
shall have no further obligations under the Godin Agreement except for the
payment of accrued salary, expenses and benefits.
In the first quarter of 2016,
following the recommendation of the Compensation Committee, the Board approved a
one-time cash bonus of CA$25,001 (US$19,553) prorated for fiscal year 2015, to
be paid to Mr. Godin in Q1 2016. Mr. Godins salary was also increased to
CA$252,000 effective January 1, 2016.
In the first quarter of 2017,
following the recommendation of the Compensation Committee, the Board approved a
one-time cash bonus of CA$75,600 (US$57,033) for fiscal year 2016, to be paid to
Mr. Godin in Q1 2017. Mr. Godins salary was also increased to CA$264,600
effective January 1, 2017.
John Durham.
Effective January 1, 2015, IntelGenx Corp., a wholly owned subsidiary of the
Corporation entered into an employment agreement with Mr. Durham, our Vice
President, Manufacturing Operations (the Durham Agreement). The agreement is
for an indefinite period of time. Under the agreement, Mr. Durham is entitled to
receive: (1) a minimum base salary of CA$185,000 per year; and (2) an annual
bonus of up to 30% of base salary based upon the achievement of certain
performance targets.
Pursuant to the Durham Agreement,
if Mr. Durham is terminated by the Corporation for Cause (as defined in the
Durham Agreement), Mr. Durham is not entitled to any notice, compensation or
expenses except for accrued salary, bonus or expenses. If the Corporation
terminates Mr. Durham without Cause, Mr. Durham is entitled to all accrued
payments, and Termination Benefits (as defined in the Durham Agreement) for an
12 month period (the Durham Severance Period), which shall include, (i) a lump
sum payment of base salary for the Durham Severance Period, (ii) continued
participation in employee benefits plans up to the earlier of the end of the
Durham Severance Period or the start of subsequent employment with similar
benefits, (iii) receive payment of any accrued bonus. In addition, any stock
options that are unvested shall immediately vest.
If the employment is terminated
by Mr. Durham within 6 months following a Change in Control (as defined in the
Durham Agreement), then Mr. Durham shall receive similar benefits as if he had
been terminated without Cause. If Mr. Durham voluntarily terminates the Durham
Agreement for any other reason or due to death or disability, the Corporation
shall have no further obligations under the Durham Agreement except for the
payment of accrued salary, expenses and benefits.
In the first quarter of 2016,
following the recommendation of the Compensation Committee, the Board approved a
one-time cash bonus of CA$41,625 (US$32,555) for fiscal year 2015, to be paid to
Mr. Durham in Q1 2016. Mr. Durhams salary was also increased to CA$195,000
effective January 1, 2016.
In the first quarter of 2017,
following the recommendation of the Compensation Committee, the Board approved a
one-time cash bonus of CA$43,875 (US$33,099) for fiscal year 2016, to be paid to
Mr. Durham in Q1 2017. Mr. Durhams salary was also increased to CA$204,750
effective January 1, 2017.
Nadine
Paiement
.
Effective January 18, 2016, IntelGenx Corp., a wholly
owned subsidiary of the Corporation entered into an employment agreement with
Ms. Paiement, our Vice President, Research and Development (the Paiement
Agreement). The agreement is for an indefinite period of time. Under the
agreement, Ms. Paiement is entitled to receive: (1) a minimum base salary of
CA$125,000 per year; and (2) an annual bonus of up to 30% of base salary based
upon the achievement of certain performance targets.
Pursuant to the Paiement
Agreement, if Ms. Paiement is terminated for any reason other than for Cause (as
defined in the Agreement), then she shall (i) receive a lump sum payment of the
base salary that would have been payable for a 12 month period (the Severance
Period), (ii) be entitled to continued participation in employee benefit plans
ending on the earlier of the end of the Severance Period and receipt of
equivalent plans of a subsequent employer, and (iii) receive payment of any
accrued bonus. In addition, all unvested stock options shall vest immediately
(collectively the Termination Benefits). On the occurrence of a Change in
Control (as defined in the Agreement), Ms. Paiement may terminate the Agreement
within a period of six months and the Corporation shall be required to provide
her with the Termination Benefits.
64
The Agreements contain
non-competition and non-solicitation provisions for a period of twelve months on
termination of the Agreements for whatever reason whether voluntary or
involuntary.
In the first quarter of 2017,
following the recommendation of the Compensation Committee, the Board approved a
one-time cash bonus of CA$29,405 (US$22,183) for fiscal year 2016, to be paid to
Ms. Paiement in Q1 2017. Ms. Paiements salary was also increased to CA$150,000
effective January 1, 2017.
Dana Matzen.
Effective March 14, 2016 IntelGenx Corp., a wholly owned subsidiary of the
Corporation entered into an Agreement with Dana Matzen, our Vice President,
Business Development (the Matzen Agreement). The agreement is for an
indefinite period of time. Under the Agreement, Dr. Matzen is entitled to
receive (1) a minimum base salary of CA$175,000 per year which will
automatically increase to CA$210,000 after six months and (2) an annual bonus of
up to 30% of her base salary for meeting certain performance targets.
Pursuant to the Matzen Agreement,
if Dr. Matzen is terminated by the Corporation for Cause (as defined in the
Matzen Agreement), Dr. Matzen is not entitled to any notice, compensation or
expenses except for accrued salary, bonus or expenses. If the Corporation
terminates Dr. Matzen without Cause, Dr. Matzen is entitled to all accrued
payments, and Termination Benefits (as defined in the Matzen Agreement) for an
12 month period (the Matzen Severance Period) which shall include, (i) a lump
sum payment of base salary for the Matzen Severance Period plus the average of
the three (3) last years bonuses that would have been payable during the
Severance Period, (ii) continued participation in employee benefits plans up to
the earlier of the end of the Matzen Severance Period or the start of subsequent
employment with similar benefits, (iii) receive payment of any accrued bonus. In
addition, any stock options that are unvested shall immediately vest.
If the employment is terminated
by Dr. Matzen within 6 months following a Change in Control (as defined in the
Matzen Agreement), then Dr. Matzen shall receive similar benefits as if she had
been terminated without Cause. If Dr. Matzen voluntarily terminates the Matzen
Agreement for any other reason or due to death or disability, the Corporation
shall have no further obligations under the Matzen Agreement except for the
payment of accrued salary, expenses and benefits.
In the first quarter of 2017,
following the recommendation of the Compensation Committee, the Board approved a
one-time cash bonus of CA$23,274 (US$17,558) prorated for fiscal year 2016, to
be paid to Ms. Matzen in Q1 2017.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Incentive Plan Awards
The following table presents information regarding the
outstanding equity awards held by each of the named officers as of December 31,
2016, including the vesting dates for the portions of these awards that had not
vested as of that date.
OUTSTANDING EQUITY AWARDS AT
FISCAL YEAR-END
|
Name
(a)
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b)
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
|
Equity
Incentive
Plan
Awards: Number
of
Securities
Underlying
Unexercised
Unearned Options
(#)
(d)
|
Option
Exercise
Price
($)
(e)
|
Option
Expiration
Date
(f)
|
Horst G. Zerbe
|
25,000
(2)
30,000
(1)
|
NIL
NIL
|
NIL
NIL
|
0.53
0.60
|
Dec. 8, 2019
Dec. 4, 2017
|
Andre Godin
|
300,000
(3)
|
300,000
(3)
|
NIL
|
0.58
|
July 20, 2020
|
John Durham
|
75,000
(4)
|
25,000
(4)
|
NIL
|
0.62
|
April 2, 2020
|
Nadine Paiement
|
20,000
(5)
|
NIL
|
NIL
|
0.51
|
June 12, 2017
|
|
18,750
(6)
|
56,250
(6)
|
NIL
|
0.41
|
Jan. 18, 2021
|
Dana Matzen
|
NIL
|
200,000
(7)
|
NIL
|
0.73
|
Sep. 14, 2026
|
65
Footnotes:
(1)
On December 4, 2012, the Board approved the
grant of 30,000 options to purchase common stock to Dr. Horst G. Zerbe. The
options vest over two years, all of which are exercisable as of year-end 2016.
(2)
On December 8, 2014, the Board approved the
grant of 25,000 options to purchase common stock to Dr. Horst G. Zerbe. The
options vest over two years, all of which are exercisable as of year-end 2016.
(3)
On July 20, 2015, the Board approved the grant
of 600,000 options to purchase common stock to Mr. Andre Godin. The options vest
over two years, 300,000 of which were exercisable as of year-end 2016.
(4)
On April 2, 2015, the Board approved the grant
of 100,000 options to purchase common stock to Mr. John Durham. The options vest
over two years, 75,000 of which are exercisable as of year-end 2016.
(5)
On June 13, 2012, the Board approved the grant
of 20,000 options to purchase common stock to Ms. Nadine Paiement, who was our
Director of R&D at the time of the grant. The options vest over two years,
all of which were exercisable as of year-end 2016.
(6)
On January 19, 2016, the Board approved the
grant of 75,000 options to purchase common stock to Ms. Nadine Paiement. The
options vest over two years, 18,750 of which were exercisable as of year-end
2016.
(7)
On September 15, 2016, the Board approved the
grant of 200,000 options to purchase common stock to Dr. Dana Matzen. The
options vest over two years, none of which were exercisable as of year-end 2016.
Director Compensation
The following table sets forth compensation paid to each named
Director during the year end December 31, 2016.
In addition, Directors are reimbursed for reasonable expenses
incurred in their capacity as directors, including travel and other
out-of-pocket expenses incurred in connection with meetings of the Board or any
committee of the Board.
Name
(a)
|
Fees
Earned or
Paid
in
Cash
($)
(b)
|
Stock
Awards
($)
(c)
|
Option
Awards ($)
(d)
|
Non-Equity
Incentive
Plan
Compensation
($)
(e)
|
Non-Qualified
Deferred
Compensation
Earnings
($)
(f)
|
All
Other
Compensation
($)
(g)
|
Total ($)
(j)
|
Horst G.
Zerbe
(3)
|
NIL
|
NIL
|
Nil
|
NIL
|
NIL
|
NIL
|
NIL
|
J. Bernard
Boudreau
(2)(3)
|
43,755
(3)
|
NIL
|
6,692
|
NIL
|
NIL
|
NIL
|
50,447
|
John (Ian)
Troup
(1)(2)
|
27,158
(3)
|
NIL
|
6,692
|
NIL
|
NIL
|
NIL
|
33,850
|
Bernd J.
Melchers
(1)
|
32,816
(3)
|
NIL
|
6,692
|
NIL
|
NIL
|
NIL
|
39,508
|
John
Marinucci
(1)(2)(3)
|
32,816
(3)
|
NIL
|
6,692
|
NIL
|
NIL
|
NIL
|
39,508
|
Clemens
Mayr
(1)(2)(4)
|
27,158
|
NIL
|
6,692
|
NIL
|
NIL
|
NIL
|
33,850
|
Mark Nawacki
|
10,184
(5)
|
NIL
|
25,242
|
NIL
|
NIL
|
13,579
(5)
|
49,005
|
Footnotes:
|
(1)
|
Audit Committee member
|
|
(2)
|
Compensation Committee member
|
|
(3)
|
CG&N Committee
|
|
(4)
|
Mr. Mayr was a member of the Audit Committee during
fiscal year 2016.
|
|
(5)
|
Mr. Nawacki received director fees commencing August
2016. Prior to his appointment, from February 2016 to July 2016, Mr.
Nawacki received compensation as a member of the Scientific Advisory Board
of IntelGenx Corp.
|
66
Effective April 1, 2015, our Directors of the Board (except for
the CEO) received an annual stipend of CA$36,000, the Vice-Chairman of the Board
received an additional stipend of CA$14,500 and each Chairman of a Board
committee received additional CA$7,500. Director fees are paid in quarterly
installments at the beginning of each quarter. The cash amounts represent the
equivalent U.S. Dollar value measured at the appropriate year end exchange rate
used in the financial statements or the actual U.S. Dollar amounts paid at the
time of payment. Effective January 2017, the previous currency of Canadian
Dollar for Directors compensation changed to U.S. Dollar. The amounts will
remain the same.
In November 2016, the Board resolved to compensate non-employee
directors for
their efforts on special or ad hoc committees or for board
approved initiatives that fall outside the scope of customary directors duties.
A daily (per 8 hours) per diem rate of $754 (CA$ 1,000) was established. The
Audit Committee Chair needs to approve per diem charges submitted by directors.
No funds were submitted or paid under the new policy during fiscal year 2016.
Furthermore, effective January 2015, the non-employee Directors
of the Board receive 50,000 options to purchase common stock which will be
granted annually to each non-employee director at the beginning of the fiscal
year.
At December 31, 2016 Mr. Boudreau, Mr. Troup, Mr. Melchers, Mr.
Marinucci, Mr. Mayr and Mr. Nawacki held 160,000, 200,000, 125,000, 100,000,
87,500 and NIL vested options to purchase common stock respectively.
Directors and Officers Liability Insurance
During 2016, we carried Directors and Officers liability
insurance at an approximate annual cost of $38,113 for an insured amount of $5
million.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information concerning
the beneficial ownership of our shares of common stock by our directors and
executive officers, and by each beneficial owner of five percent (5%) or more of
our outstanding common stock. Based on information available to us, all persons
named in the table have sole voting and investment power with respect to all
shares of common stock beneficially owned by them, unless otherwise indicated.
Beneficial ownership is determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended. In computing the number of shares
beneficially owned by a person or a group and the percentage ownership of that
person or group, shares of our common stock subject to options or warrants
currently exercisable or exercisable within 60 days after the date of this
registration statement are deemed outstanding, but are not deemed outstanding
for the purpose of computing the percentage of ownership of any other person.
Applicable percentage ownership is based upon 65,422,021 shares of common stock
outstanding as of May 10, 2017. Unless otherwise indicated, the address of each
of the named persons is care of IntelGenx Technologies Corp., 6420 Abrams, Ville
St-Laurent, Quebec, H4S 1Y2.
Name and Address
|
|
Amount and
|
|
|
Percent of
|
|
|
|
Nature of
|
|
|
|
|
Of Owner
|
|
Beneficial
|
|
|
Class
|
|
|
|
Ownership
|
|
|
|
|
Horst G. Zerbe
(1)
|
|
4,642,743.5
|
(1)
|
|
7.10%
|
|
Ingrid Zerbe
(2)
|
|
5,456,356.5
|
(2)
|
|
8.34%
|
|
Bernard J. Boudreau
(3)
|
|
350,000
|
(3)
|
|
*
|
|
Ian Troup
(4)
|
|
250,000
|
(4)
|
|
*
|
|
Bernd Melchers
(5)
|
|
295,000
|
(5)
|
|
*
|
|
John Marinucci
(6)
|
|
225,000
|
(6)
|
|
*
|
|
John Durham
(7)
|
|
113,000
|
(7)
|
|
*
|
|
Andre Godin
(8)
|
|
534,500
|
(8)
|
|
*
|
|
Clemens Mayr
(9)
|
|
156,250
|
(9)
|
|
*
|
|
Nadine Paiement
(10)
|
|
107,500
|
(10)
|
|
*
|
|
Dana Matzen
(11)
|
|
50,000
|
(11)
|
|
*
|
|
Mark Nawacki
(12)
|
|
68,750
|
(12)
|
|
*
|
|
All directors and officers as a group (12 persons)
|
|
12,249,100
|
|
|
18.72%
|
|
*Less than 1%
67
(1)
In connection with the acquisition of IntelGenx
in 2006, Horst G. Zerbe became our President, Chief Executive Officer and
Director and acquired 4,709,643.5 exchangeable shares of our Canadian holding
corporation 6544631Canada Inc., a Canadian special purpose corporation which
wholly owns IntelGenx Corp. (the Exchangeable Shares). The 4,709,643.5
Exchangeable Shares are exchangeable, on a one for one basis, into shares of
common stock of IntelGenx Technologies Corp. at Horst Zerbe's discretion. On
July 28, 2011 Horst Zerbe exchanged 470,964 of the exchangeable shares into
common shares of IntelGenx Technologies Corp. In January of 2013, Horst Zerbe
sold 250,000 of those common shares on the open market. In April and August of
2015, Horst Zerbe sold 60,000 and 36,900 of those common shares respectively on
the open market. Prior to exchanging the Exchangeable Shares for shares of
common stock, Horst Zerbe has the right to vote the remaining 4,238,679.5 shares
of common stock which are currently held in trust on behalf of Horst Zerbe. All
of the 4,362,743.5 shares of common stock have not been registered for resale at
this time. In addition to the Exchangeable Shares, Horst Zerbe's beneficial
ownership includes 225,000 shares of common stock resulting from the exercise of
225,000 options to purchase common stock on November 9, 2011. On December 4,
2012 Horst Zerbe received 30,000 options to purchase common stock at an exercise
price of $0.60. The options vest over two years, 25% every six months, all of
which are exercisable within 60 days of this filing. On December 8, 2014 he also
received 25,000 options to purchase common stock at an exercise price of $0.53.
The options vested over two years, all of which are exercisable within 60 days
of this filing.
Horst Zerbe and Ingrid Zerbe are husband and wife.
(2)
In connection with the acquisition of IntelGenx
in 2006, Ingrid Zerbe became our Corporate Secretary and our Director of Finance
and Administration and acquired 4,709,643.5 Exchangeable Shares. In June of 2009
Ingrid Zerbe acquired 1,021,713 Exchangeable Shares from Joel Cohen in a private
transaction. The 5,731,356.5 Exchangeable Shares are exchangeable, on a one for
one basis, into shares of common stock of IntelGenx Technologies Corp. at Ingrid
Zerbes discretion. On July 28, 2011 Ingrid Zerbe exchanged 573,135 of the
exchangeable shares into common shares of IntelGenx Technologies Corp. In
January of 2013 Ingrid Zerbe sold 250,000 of those common shares on the open
market. In April and August of 2015, Ingrid Zerbe sold 86,900 and 163,100 of
those common shares respectively on the open market. Prior to exchanging the
Exchangeable Shares, Ingrid Zerbe has the right to vote the remaining
5,158,221.5 shares of common stock which are currently held in trust on behalf
of Ingrid Zerbe. All of the 5,231,356.5 shares of common stock have not been
registered for resale at this time. In addition to the Exchangeable Shares, Ingrid
Zerbe's beneficial ownership includes 225,000 shares of common stock resulting
from the exercise of 225,000 options to purchase common stock on November 9,
2011.
Horst Zerbe and Ingrid Zerbe are husband and wife.
(3)
Mr. Boudreau's beneficial ownership consists of
35,000 common shares resulting from the exercise of stock options at $0.70 on
August 19, 2008. On August 6, 2013, 35,000 options to purchase common shares at
an exercise price of $0.58 were granted to Mr. Boudreau. The options vested over
two years, 25% every six months, all of which are exercisable at the time of
this filing. On December 8, 2014, 25,000 options to purchase common shares at an
exercise price of $0.61 were granted to Mr. Boudreau. The options vest over two
years, 25% every six months, all of which are exercisable at the time of this
filing. On April 2, 2015, 50,000 options to purchase common shares at an
exercise price of $0.62 were granted to Mr. Boudreau. The options vested
immediately and are exercisable at the time of this filing. On January 19, 2016,
50,000 options to purchase common shares at an exercise price of $0.41 were
granted to Mr. Boudreau. The options vested immediately and are exercisable at
the time of this filing. In January of 2016, Mr. Boudreau and his wife purchased
an aggregate of 65,000 shares of common stock on the open market. On November
28, 2016, Mr. Boudreau exercised 40,000 stock options at an exercise price of
$0.54 resulting in the issuance of 40,000 common shares. On January 18, 2017,
50,000 options to purchase common shares at an exercise price of $0.89 were
granted to Mr. Boudreau. The options vested immediately and are exercisable at
the time of this filing.
(4)
Mr. Troups beneficial ownership consists of
75,000 options to purchase common shares at an exercise price of $0.52 which
were granted on December 3, 2013. The options vested over two years, 25% every
six months, all of which are exercisable at the time of this filing. On December
8, 2014, 25,000 options to purchase common stock at an exercise price of $0.53
were granted to Mr. Troup. The options vest over two years, 25% every six
months, all of which are exercisable at the time of this filing. On April 2,
2015, 50,000 options to purchase common shares at an exercise price of $0.62
were granted to Mr. Troup. The options vested immediately and are exercisable at
the time of this filing. On January 19, 2016, 50,000 options to purchase common
shares at an exercise price of $0.41 were granted to Mr. Troup. The options
vested immediately and are exercisable at the time of this filing. On January
18, 2017, 50,000 options to purchase common shares at an exercise price of $0.89
were granted to Mr. Troup. The options vested immediately and are exercisable at
the time of this filing.
68
(5)
Mr. Melchers' beneficial ownership consists of
25,000 and 20,000 shares of common stock which he purchased on the open market
on April 14, and July 27, 2011 respectively. On December 8, 2014, 25,000 options
to purchase common shares at an exercise price of $0.61 were granted to Mr.
Melchers. The options vest over two years, 25% every six months, all of which
are exercisable at the time of this filing. On April 2, 2015, 50,000 options to
purchase common shares at an exercise price of $0.62 were granted to Mr.
Melchers. The options vested immediately and are exercisable at the time of this
filing. Mr. Melcher's beneficial ownership includes 75,000 shares of common
stock resulting from the exercise of 75,000 options to purchase common stock on
May 16, 2015. On January 19, 2016, 50,000 options to purchase common shares at
an exercise price of $0.41 were granted to Mr. Melchers. The options vested
immediately and are exercisable at the time of this filing. On January 18, 2017,
50,000 options to purchase common shares at an exercise price of $0.89 were
granted to Mr. Melchers. The options vested immediately and are exercisable at
the time of this filing.
(6)
Mr. Marinuccis beneficial ownership consists of
50,000 options to purchase common stock at an exercise price of $0.62, granted
on April 2, 2015. The options vested immediately and are exercisable at the time
of this filing. Mr. Marinucci's beneficial ownership includes 75,000 shares of
common stock resulting from the exercise of 75,000 options to purchase common
stock on July 31, 2015. On January 19, 2016, 50,000 options to purchase common
shares at an exercise price of $0.41 were granted to Mr. Marinucci. The options
vested immediately and are exercisable at the time of this filing. On January
18, 2017, 50,000 options to purchase common shares at an exercise price of $0.89 were granted to Mr. Marinucci. The options
vested immediately and are exercisable at the time of this filing.
(7)
Mr. Durhams beneficial ownership consists of
100,000 options to purchase common stock at an exercise price of $0.62, granted
April 2, 2015. The options vest over two years, 25% every six months, all of
which are exercisable within 60 days of this filing. Mr. Durham's beneficial
ownership also includes 10,000 and 3,000 shares of common stock which he
purchased on the open market on September 21, 2016 and October 7, 2016
respectively.
(8)
Mr. Godins beneficial ownership consists of
600,000 options to purchase common stock at an exercise price of $0.58, granted
July 20, 2015. The options vest over two years, 25% every six months, 450,000 of
which are exercisable within 60 days of this filing. In December of 2015, Mr.
Godins ownership includes an aggregate of 44,500 shares of common stock which
he purchased on the open market. On January 20, 2016, Mr. Godin purchased 20,000
shares and on September 14, 2016 another 20,000 shares of common stock on the
open market.
(9)
Mr. Mayrs beneficial ownership consists of
75,000 options to purchase common stock at an exercise price of $0.58, granted
August 13, 2015. The options vest over two years, 25% every six months, 56,250
of which are exercisable within 60 days of this filing. On January 19, 2016,
50,000 options to purchase common stock at an exercise price of $0.41 were
granted to Mr. Mayr. The options vested immediately and are exercisable at the
time of this filing. On January 18, 2017, 50,000 options to purchase common
shares at an exercise price of $0.89 were granted to Mr. Mayr. The options
vested immediately and are exercisable at the time of this filing.
(10)
Ms. Paiement's beneficial ownership consists of
50,000 common stock resulting from the exercise of stock options at $0.41 in
November, 2011. Ms. Paiement also received 20,000 options to purchase common
stock at an exercise price of $0.51 granted June 13, 2012. The options vested
over two years, 25% every six months, all of which are exercisable within 60
days of this filing. On January 19, 2016, 75,000 options to purchase common
stock at an exercise price of $0.41 were granted to Ms. Paiement. The options
vest over two years, 25% every six months, 37,500 of which are exercisable
within 60 days of this filing.
(11)
Dr. Matzens beneficial ownership consists of
200,000 options to purchase common stock at an exercise price of $0.73, granted
September 15, 2016. The options vest over two years, 25% every six months,
50,000 of which are exercisable within 60 days of this filing.
(12)
Mr. Nawackis beneficial ownership consists of
75,000 options to purchase common stock at an exercise price of $0.73, granted
September 15, 2016. The options vest over two years, 25% every six months,
18,750 of which are exercisable within 60 days of this filing. On January 18,
2017, 50,000 options to purchase common shares at an exercise price of $0.89
were granted to Mr. Nawacki. The options vested immediately and are exercisable
at the time of this filing.
69
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Review, Approval or Ratification of Transactions with
Related Persons
Although IntelGenx has not adopted formal procedures for the
review, approval or ratification of transactions with related persons, we adhere
to a general policy that such transactions should only be entered into if they
are on terms that, on the whole, are no more favorable, or no less favorable,
than those available from unaffiliated third parties and their approval is in
accordance with applicable law. Such transactions require the approval of our
Board. The term related party transaction refers to transactions required to
be disclosed in our filings with the SEC pursuant to Item 404 of Regulation S-K.
Prior to his appointment as Director of IntelGenx Technologies
Corp., from February 2016 to July 2016, Mr. Nawacki served as a member of the
Scientific Advisory Board of IntelGenx Corp. In his capacity as consultant on
the Advisory Board, Mr. Nawacki received a total compensation of $3,579 during
this time. Mr. Nawacki received director fees commencing August 2016.
Family Relationships
Horst G. Zerbe and Ingrid Zerbe are husband and wife.
DESCRIPTION OF CAPITAL STOCK
The authorized share capital of the Corporation consists of
200,000,000 shares of common stock with a par value of US$0.00001 and 20,000,000
shares of preferred stock with a par value of US$0.00001. As at May 10, 2017,
there were 65,422,021 Shares and no preferred stock issued and outstanding.
Changes to Capital Structure
On March 8, 2017, the board of directors of the Corporation
unanimously adopted a resolution approving, subject to the approval of the
Corporations shareholders, an amendment to the constating documents of the
Corporation to increase the authorized capital of the Corporation from
100,000,000 Shares to 200,000,000 Shares. The shareholders of the Corporation
approved the amendment to the constating documents on May 9, 2017 and the
amendment went effective on May 11, 2017.
Common Stock
The holders of common stock are entitled to one vote per share
on all matters voted on by stockholders, including the election of directors.
Except as otherwise required by law, the holders of common stock exclusively
possess all voting power. The holders of common stock are entitled to dividends
as may be declared from time to time by the Board from funds available for
distribution to holders. No holder of common stock has any pre-emptive right to
subscribe to any securities of ours of any kind or class or any cumulative
voting rights. The outstanding shares of common stock are, and the shares, upon
issuance and sale as contemplated will be, duly authorized, validly issued,
fully paid and non-assessable.
Anti-Takeover Effects of Various Provisions of Delaware Law
and Our Certificate of Incorporation and By-laws
The Delaware General Corporation Law, our certificate of
incorporation and our by-laws contain provisions that may have some
anti-takeover effects and may delay, defer or prevent a tender offer or takeover
attempt that a stockholder might consider in his, her or its best interest,
including those attempts that might result in a premium over the market price
for the shares held by stockholders.
Delaware Anti-Takeover Statute
We are subject to Section 203 of the Delaware General
Corporation Law (Section 203). Subject to specific exceptions, Section 203
prohibits a publicly held Delaware corporation from engaging in a business
combination with an interested stockholder for a period of three years after
the time the stockholder becomes an interested stockholder, unless:
|
|
the business combination, or the transaction in
which the stockholder became an interested stockholder, is approved by our
board of directors prior to the time the interested stockholder attained
that status;
|
70
|
|
upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of our voting stock outstanding at the time the
transaction commenced, excluding those shares owned by persons who are
directors and also officers and employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or
|
|
|
at or after the time a stockholder became an interested
stockholder, the business combination is approved by our board of
directors and authorized at an annual or special meeting of stockholders
by the affirmative vote of at least two-thirds of our outstanding voting
stock that is not owned by the interested stockholder.
|
Business combinations include mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to various exceptions, in general, an interested stockholder is a
stockholder who, together with his, her or its affiliates and associates, owns,
or within three years did own, 15% or more of the shares of our outstanding
voting stock. These restrictions could prohibit or delay the accomplishment of
mergers or other takeover or change of control attempts with respect to us and,
therefore, may discourage attempts to acquire us.
Preferred Stock
Our board of directors is authorized to issue all and any of
the shares of preferred stock in one or more series, fix the number of shares,
determine or alter for each such series voting powers or other rights,
qualifications, limitations or restrictions thereof.
Warrants
As of the date of this prospectus, we had outstanding warrants
to purchase an aggregate of 5,614,358 shares of our common stock at an exercise
price of $0.5646. These warrants expire on December 15, 2018.
DESCRIPTION OF THE SECURITIES WE ARE OFFERING
The Offering consists of a minimum of CA$7,000,000 and a
maximum of CA$10,000,000 aggregate principal amount of 8% convertible unsecured
subordinated debentures due June 30, 2020. The following is a summary of the
material attributes and characteristics of the Debentures and is subject to, and
qualified in its entirety by, reference to the terms of a trust indenture to be
dated as of the date of Closing (the Indenture), between the Corporation, and
TSX Trust Company (the Debenture Trustee), as trustee. This summary does not
purport to be complete and is subject to and qualified in its entirety by the
terms of the Debentures and the Indenture. When used in this registration
statement under Description of the Securities We are Offering the following
terms have the respective meanings set forth below:
Change of Control
means
the acquisition by any person, or group of persons acting jointly or in concert,
of voting control or direction of an aggregate of 66 ⅔% or more of the
outstanding Shares, or securities convertible into or carrying the right to
acquire 66
2
/
3
% or more of the Shares;
Current Market Price
means the volume weighted average trading price of the Shares on the TSXV for
the 20 consecutive trading days ending on the fifth trading day preceding the
date of the applicable event;
Event of Default
has the
meaning given to it in the Indenture, and includes the occurrence and
continuation of any one or more of the following events with respect to the
Debentures: (a) failure for 10 days to pay interest on the Debentures when due;
(b) failure to pay principal or premium, if any, when due on the Debentures,
whether at maturity, upon redemption, by declaration or otherwise; (c) certain
events of bankruptcy, insolvency or reorganization of the Corporation under
bankruptcy or insolvency laws; or (d) default in the observance or performance
of any material covenant or condition of the Indenture and continuance of such
default for a period of 30 days after notice in writing has been given by the
Debenture Trustee to the Corporation specifying such default and requiring the
Corporation to rectify the same;
Interest Payment Date
means the last day of June and December in each year; and
Share Interest Payment
Election
means an election by the Corporation, subject to any required
regulatory approvals and provided that no Event of Default has occurred and is
continuing, to satisfy all or part of its interest payment obligations by
delivering sufficient freely tradeable Shares, at a price per Share equal to the
market price (as defined by the policies of the TSXV) on the day before the
public announcement by the Corporation of its intention to satisfy its interest
payment obligations in Shares.
71
Debentures, Interest Rate and Maturity
The Debentures to be issued pursuant to the Offering will be
issued under the Indenture and will be in the aggregate principal amount of a
maximum of CA$10,000,000.
The Debentures will be dated as of the closing of the Offering
and will mature on June 30, 2020. The Debentures will be issuable only in
denominations of CA$1,000 and integral multiples thereof.
The Debentures will bear interest from and including the date
of issue at 8%
per annum, which will be payable semi-annually on the last
day of June and December of each year commencing on June 30, 2017. The first
interest payment will include interest accrued from the closing of the Offering
to, but excluding June 30, 2017.
The principal amount of the Debentures will be payable in
lawful money of Canada or, at the option of the Corporation and subject to
applicable regulatory approval, by delivery of Shares as further described under
Corporation's Option upon Redemption or Maturity, Redemption" and "Purchase.
The interest on the Debentures will be payable in lawful money of Canada or, at
the option of the Corporation and subject to applicable regulatory approval, by
delivery of Shares in accordance with the Share Interest Payment Election as
described under Share Interest Payment Election.
The Debentures will be direct obligations of the Corporation
and will not be secured by any mortgage, pledge, hypothecation or other charge
and will be subordinated to other liabilities of the Corporation as described
under Subordination. The Indenture does not and will not restrict the
Corporation from incurring additional indebtedness for borrowed money or from
mortgaging, pledging or charging its properties to secure any indebtedness.
Conversion Privilege
The Debentures will be convertible into fully paid and
non-assessable Shares at the option of the holder at any time prior to the close
of business on the earlier of the Maturity Date and the business day immediately
preceding the date fixed for redemption of the Debentures, at the Conversion
Price, being a conversion rate of approximately Shares for each CA$1,000
principal amount of Debentures. No adjustment will be made for distributions on
Shares issuable upon conversion; however, holders converting their Debentures
will receive accrued and unpaid interest thereon for the period from the date of
the latest interest payment date to, but excluding, the date of conversion.
Notwithstanding the foregoing, no Debentures may be converted during the five
business days preceding the last day of June and December in each year,
commencing June 30, 2017, as the registers of the Debenture Trustee will be
closed during such periods.
Subject to the provisions thereof, the Indenture will provide
for the adjustment of the Conversion Price upon the occurrence of certain
events, including: (a) the subdivision or consolidation of the outstanding
Shares; (b) the distribution of Shares to holders of Shares by way of
distribution or otherwise other than an issue of securities to holders of Shares
who have elected to receive distributions in securities of the Corporation in
lieu of receiving cash distributions paid in the ordinary course; (c) the
issuance of options, rights or warrants to holders of Shares entitling them to acquire Shares or other securities convertible into
Shares at less than 95% of the then Current Market Price of the Shares; and (d)
the distribution to all holders of Shares of any securities or assets (other
than cash distributions and equivalent distributions in securities paid in lieu
of cash distributions in the ordinary course). There will be no adjustment of
the Conversion Price in respect of any event described in (b), (c) or (d) above
if the holders of the Debentures are allowed to participate as though they had
converted their Debentures prior to the applicable record date or effective
date. The Corporation will not be required to make adjustments in the Conversion
Price unless the cumulative effect of such adjustments would change the
Conversion Price by at least 1%.
In the case of any reclassification or capital reorganization
(other than a change resulting from consolidation or subdivision) of the Shares,
or in the case of any consolidation, combination or merger of the Corporation
with or into any other entity, or in the case of any sale or conveyance of the
properties and assets of the Corporation as, or substantially as, an entirety to
any other entity, or a liquidation, dissolution or winding-up of the
Corporation, the terms of the conversion privilege shall be adjusted so that
each holder of a Debenture shall, after such reclassification, capital
reorganization, consolidation, combination, merger, sale, conveyance,
liquidation, dissolution or winding-up, be entitled to receive the number of
Shares or other securities or other property on the exercise of the conversion
right that such holder would be entitled to receive if on the effective date
thereof, it had been the holder of the number of Shares into which the Debenture
was convertible prior to the effective date of such reclassification, capital
reorganization, consolidation, combination, merger, sale, conveyance,
liquidation, dissolution or winding-up.
No fractional Shares will be issued on any conversion, but in
lieu thereof, the Corporation shall satisfy fractional interests by a cash
payment equal to the Current Market Price of any fractional interest.
72
Redemption
The Debentures will not be redeemable prior to the First Call
Date. On and after the First Call Date, but prior to June 30, 2019, the
Debentures will be redeemable, in whole or in part, at a price equal to the
principal amount thereof, plus accrued and unpaid interest, at the Corporations
sole option on not more than 60 days and not less than 30 days prior notice,
provided that the Current Market Price on the date on which notice of redemption
is given is not less than 125% of the Conversion Price. On or after June 30,
2019 and prior to the Maturity Date, the Debentures will be redeemable, in whole
or in part, at a price equal to the principal amount thereof, plus accrued and
unpaid interest, at the Corporations sole option on not more than 60 days and
not less than 30 days prior notice.
In the case of redemption of less than all of the Debentures,
the Debentures to be redeemed will be selected by the Debenture Trustee on a pro
rata basis or in such other manner as the Debenture Trustee deems equitable,
subject to the consent of the TSXV.
Purchase
Provided that no Event of Default has occurred and is
continuing, the Corporation will have the right to purchase for cancellation
Debentures in the market, by tender or by private contract, subject to
regulatory requirements.
Corporation's Option upon Redemption or Maturity
Upon redemption by the Corporation as set forth above or at
maturity, the Corporation will repay the indebtedness represented by the
Debentures by paying to the Debenture Trustee in lawful money of Canada an
amount required to repay the principal amount of the outstanding Debentures,
together with accrued and unpaid interest thereon. The Corporation may, at its
option, on not more than 60 days and not less than 30 days prior notice and
subject to applicable regulatory approvals and the conditions set out in the
Indenture, elect to satisfy its obligation to repay all or any portion of the principal amount of and premium (if any)
on the Debentures that are to be redeemed or that are to mature, as the case may
be, by issuing and delivering freely tradeable Shares to the holders of the
Debentures. The number of Shares to be issued in respect of each Debenture will
be determined by dividing $1,000 by 95% of the Current Market Price on the date
fixed for redemption or maturity, as the case may be. No fractional Shares will
be issued on redemption or maturity but in lieu thereof the Corporation shall
satisfy fractional interests by a cash payment equal to the Current Market Price
of any fractional interest.
Share Interest Payment Election
The Corporation may elect, from time to time, subject to
regulatory approvals and provided that no Event of Default has occurred and is
continuing, to satisfy, subject to securing all necessary regulatory approvals
and on not more than 30 days and not less than 15 days prior notice, its
obligation to pay interest, net of any applicable withholding tax, as
applicable, on the Debentures (the
Interest Obligation
) on the date it
is payable under the Indenture (an
Interest Payment Date
), by issuing a
sufficient number of Shares, at a price per Share equal to the market price (as
defined by the policies of the TSXV) on the day before the public announcement
by the Corporation of its intention to satisfy all or any part of the Interest
Obligation in Shares in accordance with the Indenture.
The Indenture sets forth the procedures to be followed by the
Corporation and the Debenture Trustee in order to effect the Share Interest
Payment Election. If a Share Interest Payment Election is made, the Corporation
will deliver, for each CA$40.00 of semi-annual interest amount, that number of
freely tradable, fully paid and non-assessable Shares obtained by dividing each
CA$40.00 of interest amount by the Current Market Price of the Shares on the day
before the public announcement by the Corporation of its intention to satisfy
its Interest Payment Obligation in Shares.
Subordination
The payment of the principal of, and interest on, the
Debentures will be subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full of all Senior Indebtedness of the
Corporation, including indebtedness under the Corporations present and future
bank credit facilities and any other secured creditors. Senior Indebtedness of
the Corporation is defined in the Indenture as the principal of and premium, if
any, and interest on and other amounts in respect of all indebtedness of the
Corporation (whether outstanding as at the date of the Indenture or thereafter
incurred) other than indebtedness evidenced by the Debentures and all other
existing and future debentures or other instruments of the Corporation which, by
the terms of the instrument creating or evidencing the indebtedness, is
expressed to be
pari passu
with, or subordinate in right of payment to,
the Debentures. Subject to statutory or preferred exceptions or as may be
specified by the terms of any particular securities, each Debenture issued under
the Indenture will rank
pari passu
with each other Debenture, and with
all other present and future subordinated and unsecured indebtedness of the
Corporation except for sinking fund provisions (if any) applicable to different
series of debentures or similar obligations of the Corporation. The Debentures
will not limit the ability of the Corporation to incur additional indebtedness,
including indebtedness that ranks senior to the Debentures, or from mortgaging,
pledging or charging its properties to secure any indebtedness.
73
The Indenture will provide that in the event of any insolvency
or bankruptcy proceedings, or any receivership, liquidation, reorganization or
other similar proceedings relative to the Corporation, or to its property or
assets, or in the event of any proceedings for voluntary liquidation,
dissolution or other winding-up of the Corporation, whether or not involving
insolvency or bankruptcy, or any marshalling of the assets and liabilities of
the Corporation, then those holders of Senior Indebtedness will receive payment
in full before the holders of Debentures will be entitled to receive any payment
or distribution of any kind or character, whether in cash, property or
securities, which may be payable or deliverable in any such event in respect of
any of the Debentures or any unpaid interest accrued thereon. The Indenture will
also provide that the Corporation will not make any payment, and the holders of
the Debentures will not be entitled to demand, institute proceedings for the
collection of, or receive any payment or benefit (including, without any limitation, by set-off, combination of
accounts or realization of security or otherwise in any manner whatsoever) on
account of indebtedness represented by the Debentures (a) in a manner
inconsistent with the terms (as they exist on the date of issue) of the
Debentures or (b) at any time when an event of default has occurred under the
Senior Indebtedness and is continuing and the notice of such event of default
has been given by or on behalf of the holders of Senior Indebtedness to the
Corporation, unless the Senior Indebtedness has been repaid in full.
The Debentures will also be effectively subordinated to claims
of creditors of the Corporations subsidiaries, except to the extent the
Corporation is a creditor of such subsidiaries ranking at least
pari
passu
with such other creditors.
Change of Control of the Corporation
Within 30 days following the occurrence of a Change of Control,
the Corporation shall make an offer in writing to purchase all the Debentures
then outstanding (the Debenture Offer), at a price equal to 101% of the
principal amount thereof plus accrued and unpaid interest (the Debenture Offer
Price).
The Indenture contains notification and repurchases provisions
requiring the Corporation to give written notice to the Debenture Trustee of the
occurrence of a Change of Control within 30 days of such event together with the
Debenture Offer. The Debenture Trustee will thereafter promptly mail to each
holder of Debentures a notice of the Change of Control together with a copy of
the Debenture Offer to repurchase all the outstanding Debentures.
If 90% or more of the aggregate principal amount of the
Debentures outstanding on the date of the giving of notice of the Change of
Control have been tendered to the Corporation pursuant to the Debenture Offer,
the Corporation will have the right but not the obligation to redeem all the
remaining Debentures at the Debenture Offer Price. Notice of such redemption
must be given by the Corporation to the Debenture Trustee within 10 days
following the expiry of the Debenture Offer, and as soon as possible thereafter,
by the Debenture Trustee to the holders of the Debentures not tendered pursuant
to the Debenture Offer.
Events of Default
The Indenture will provide that an Event of Default in respect
of the Debentures will occur if any one or more of the following described
events has occurred and is continuing with respect to the Debentures: (a)
failure for 10 days to pay interest on the Debentures when due; (b) failure to
pay principal or premium, if any, when due on the Debentures, whether at
maturity, upon redemption, by declaration or otherwise; (c) certain events of
bankruptcy, insolvency or reorganization of the Corporation under bankruptcy or
insolvency laws; or (d) default in the observance or performance of any material
covenant or condition of the Indenture and continuance of such default for a
period of 30 days after notice in writing has been given by the Debenture
Trustee to the Corporation specifying such default and requiring the Corporation
to rectify the same. If an Event of Default has occurred and is continuing, the
Debenture Trustee may, in its discretion, and shall upon request of holders of
not less than 25% of the principal amount of Debentures then outstanding,
declare the principal of and interest on all outstanding Debentures to be
immediately due and payable. In certain cases, the holders of more than 50% of
the principal amount of the Debentures then outstanding may, on behalf of the
holders of all Debentures, waive any Event of Default and/or cancel any such
declaration upon such terms and conditions as such holders shall prescribe.
Offers for Debentures
The Indenture will contain provisions to the effect that if an
offer is made for the Debentures that would be a take-over bid within the
meaning of National Instrument 62-104
Take-Over Bids and Issuer Bids
and not less than 90% of the Debentures (other than Debentures held at the date
of the take-over bid by or on behalf of the offeror or associates or affiliates
of the offeror) are taken up and paid for by the offeror, the offeror will be
entitled to acquire the Debentures held by the holders of Debentures who did not
accept the offer on the terms offered by the offeror.
74
Modification
The rights of the holders of the Debentures may be modified in
accordance with the terms of the Indenture. For that purpose, among others, the
Indenture will contain certain provisions that will make binding on all holders
of Debentures resolutions passed at meetings of the holders of Debentures by
votes cast thereat by holders of not less than 66
2
/
3
%
of the principal amount of the Debentures present at the meeting or represented
by proxy, or rendered by instruments in writing signed by the holders of not
less than 66
2
/
3
% of the principal amount of the
Debentures then outstanding.
No Fractional Shares
No fractional Shares will be issued on any conversion, but in
lieu thereof, the Corporation shall satisfy fractional interests by a cash
payment equal to the Current Market Price of each such fractional interest.
Book-Entry System for Debentures
The Debentures will be issued in book-entry only form and
must be purchased or transferred through a participant in the depository service
of CDS (a Participant). On Closing, the Debenture Trustee will cause the
Debentures to be delivered to CDS and registered in the name of its nominee. It
is anticipated that the Debentures will be deposited electronically with CDS or
its nominees. Registration of interests in and transfers of the Debentures will
be made only through the depository service of CDS.
Except as described below, a purchaser acquiring a beneficial
interest in the Debentures (a Beneficial Owner) will not be entitled to a
certificate or other instrument from the Debenture Trustee or CDS evidencing
that purchasers interest therein, and such purchaser will not be shown on the
records maintained by CDS, except through a Participant. Such purchaser will
receive a confirmation of purchase from the Agents or other registered dealer
from whom Debentures are purchased.
Neither the Corporation nor the Agents will assume any
liability for: (a) any aspect of the records relating to the beneficial
ownership of the Debentures held by CDS or the payments relating thereto; (b)
maintaining, supervising or reviewing any records relating to the Debentures; or
(c) any advice or representation made by or with respect to CDS and contained in
this prospectus and relating to the rules governing CDS or any action to be
taken by CDS or at the direction of its Participants. The rules governing CDS
provide that it acts as the agent and depository for the Participants. As a
result, Participants must look solely to CDS and Beneficial Owners must look
solely to Participants for the payment of the principal and interest on the
Debentures paid by or on behalf of the Corporation to CDS.
As indirect holders of Debentures, investors should be aware
that they (subject to the situations described below): (a) may not have
Debentures registered in their name; (b) may not have physical certificates
representing their interest in the Debentures; (c) may not be able to sell the
Debentures to institutions required by law to hold physical certificates for
securities they own; and (d) may be unable to pledge Debentures as security.
The Debentures will be issued to Beneficial Owners in fully
registered and certificate form (the Debenture Certificates) only if: (a) they
are required to be so issued by applicable law; (b) the book-entry only system
ceases to exist; (c) the Corporation or CDS advises the Debenture Trustee that
CDS is no longer willing or able to properly discharge its responsibilities as
depositary with respect to the Debentures and the Corporation is unable to
locate a qualified successor; (d) the Corporation, at its option, decides to
terminate the book-entry only system through CDS; or (e) after the occurrence of
an Event of Default, Participants acting on behalf of Beneficial Owners
representing, in the aggregate, not less than 25% of the aggregate principal
amount of the Debentures then outstanding advise CDS in writing that the
continuation of a book-entry only system through CDS is no longer in their best
interest, provided the Debenture Trustee has not waived the Event of Default in
accordance with the terms of the Indenture.
Upon the occurrence of any of the events described in the
immediately preceding paragraph and receipt of a written notice from the
Corporation confirming such event has occurred, the Debenture Trustee must
notify CDS, for and on behalf of Participants and Beneficial Owners, of the
availability of Debenture Certificates. Upon receipt of instructions from CDS
for the new registrations, the Debenture Trustee will deliver the Debentures in
the form of Debenture Certificates and thereafter the Corporation will recognize
the holders of such Debenture Certificates as debentureholders under the
Indenture.
Interest on the Debentures will be paid directly to CDS while
the book-entry only system is in effect. If Debenture Certificates are issued,
interest will be paid by cheque drawn on the Corporation and sent by prepaid
mail to the registered holder or by such other means as may become customary for
the payment of interest. Payment of principal and premium, if any, including
payment in the form of Shares, if applicable, and the interest due at maturity
or on a redemption date, will be paid directly to CDS while the book-entry only
system is in effect.
75
If Debenture Certificates are issued, payment of principal and
premium, if any, including payment in the form of Shares, if applicable, and
interest due at maturity or on a redemption date, will be paid upon surrender
thereof at any office of the Debenture Trustee or as otherwise specified in the
Indenture.
Governing Law
Each of the Indenture and the Debentures will be governed by,
and will be construed in accordance with, the laws of the Province of Québec.
LEGAL PROCEEDINGS
Litigation related to Forfivo
XL
®
In August 2013, we announced receipt of a Paragraph IV
Certification Letter from Wockhardt Bio AG, advising of the submission of an
ANDA to the FDA requesting authorization to manufacture and market generic
versions of Forfivo XL
®
450 mg tablets in the U.S. In November 2014,
we announced that the Paragraph IV litigation with Wockhardt had been settled
and that, under the terms of the settlement effective November 26, 2014,
Wockhardt has been granted the rights, with effect from January 15, 2018, to be
the exclusive marketer and distributor of an authorized generic of Forfivo
XL
®
in the U.S.
Litigation related to Buprenorphine/Naloxone
In August 2013 we learned that, in response to the July 2013
filing of an ANDA by Par, for our generic formulation of buprenorphine and
naloxone Sublingual Film, indicated for the treatment of opioid dependence, we
were named as a codefendant in a lawsuit pursuant to Paragraph IV litigation
filed by Reckitt Benckiser Pharmaceuticals and Monosol RX in the U.S. District
Court for the District of Delaware alleging infringement of U.S. Patent Nos.
8,475,832 (the 832 patent), 8,603,514 (the 514 patent) and 8,017,150 (the
150 patent), each of which relate to Suboxone
®
. On June 2016 we
received a trial opinion from Judge Andrews in which the asserted claims of the
832 patent and 150 patent were found either invalid or not infringed, while at
least one of the alleged claims of the 514 patent was found valid and infringed
by the ANDA product. A post-judgment motion was filed to introduce additional
evidence related to the definition of the term dried for the judges
consideration in support of our non-infringement position concerning the ANDA
product. The additional evidence was presented during the trial on the 497
patent in November 2016. We still believe the ANDA product does not infringe the
514 patent or any other patents, and will vigorously defend ourselves in this
matter. In accordance with the terms of the co-development and commercialization
agreement, Par is financially responsible for the costs of this defense. Since
Paragraph IV litigation is a regular part of the ANDA process, we were
expecting Reckitt Benckiser and Monosol RX to launch suit, and the litigation
timeline has been incorporated in our overall launch timeline.
In December 2014, Reckitt Benckiser Pharmaceuticals and Monosol
RX filed a lawsuit for patent infringement in the U.S. District Court for the
District of Delaware relating to the Suboxone
®
ANDA product. We were
named as a codefendant in this action alleging patent infringement United States
Patent Nos. 8,900,497 (the 497 patent) and 8,906,277 (the 277 patent),
each of which relate to a process for making a uniform oral film (the process
patents). The trial for the process patent was held in November 2016. We
believe the ANDA product relating to Suboxone
®
does not infringe
those process patents or any other patents, and will vigorously defend ourselves
in this matter. In accordance with the terms of the co-development and
commercialization agreement, Par is financially responsible for the costs of
this defense.
Litigation related to INT0007 Tadalafil
VersaFilm
TM
On February 26, 2016, we filed a request for
inter
partes
reviews (or IPR) in the United States Patent and Trademark Office
(USPTO) of patent no. 6,943,166 owned by ICOS Corporation (wholly owned by Eli
Lilly & Company), the 166 patent, to challenge its validity and remove any
infringement liability concerning our tadalafil oral film. On September 1, 2016,
the USPTO decided not to institute the
inter partes
review for the 166
Patent. The USPTOs decision was purely on statutory grounds and based on a
technicality (in that the IPR was not addressing an essential element of the
claim). On October 3, 2016, we filed a Request for Rehearing, requesting
reconsideration of the USPTOs decision denying institution of the IPR. On
November 16, 2016, we withdrew our Request for Rehearing and signed a binding
term sheet with Eli Lilly & Company granting us a license for the
commercialization of our tadalafil oral film upon FDA approval of the product
and post expiration of the compound patent (US pat. No. 5,859,006).
There are no additional material pending legal proceedings to
which we are a party or to which any of our property is subject and to the best
of our knowledge, no such additional actions against us are contemplated or
threatened.
76
PLAN OF DISTRIBUTION
We have engaged the Agents pursuant to an agency agreement (the
Agency Agreement
) dated as of , 2017 to offer for sale, on a best
efforts basis, a minimum of CA$7,000,000 and a maximum of CA$10,000,000
principal amount of Debentures. The obligations of the Agents under the Agency
Agreement are conditional and may be terminated in their discretion on the basis
of their assessment of the state of the financial markets and in certain other
stated circumstances. The Offering Price was determined by arms length
negotiation between us and the Lead Agent. Any sales in the United States will
only be made by U.S. registered broker-dealers.
The minimum amount of funds to be raised under the Offering
(previously defined as the Minimum Offering) is CA$7,000,000. The Agents, in
accordance with the Agency Agreement, shall hold in trust all funds received
from subscriptions under this prospectus until the Minimum Offering has been
raised. If the Minimum Offering is not raised by , 2017, the Agents shall
return the funds to those who have subscribed to Debentures under the Offering,
without any deductions or interest.
The Agency Agreement provides that the Corporation will not
sell or issue, or announce its intention to authorize, sell or issue, or
negotiate or enter into an agreement to sell or issue any securities of the
Corporation, excluding securities issued under the Corporation's stock option
plan, currently outstanding share purchase warrants of the Corporation or other
convertible securities of the Corporation, other than pursuant to the Offering
until the date that is 90 days after the Closing, without the prior written
consent of the Lead Agent, which consent will not be unreasonably withheld or
delayed.
In addition, pursuant to the Agency Agreement, the Corporation
will agree to use its best efforts to cause its directors and senior officers to
enter into agreements in favour of the Agents, pursuant to which each of such
individuals will agree, for a period of 90 days after the Closing, not sell, or
announce its intention to authorize or sell, or negotiate or enter into an
agreement to sell any securities of the Corporation, without the prior written
consent of the Lead Agent, which consent will not be unreasonably withheld or
delayed.
Subscriptions for Debentures will be received subject to
rejection or allotment in whole or in part and the right is reserved to close
the subscription books at any time without notice. Subject to the sale in
Debentures of at least CA$7,000,000, it is expected that Closing will be held on
or about , 2017, or such other date as the Corporation and the Agents may agree
upon. The Debentures will be issued in book-entry only form and must be
purchased or transferred through a participant in the depository service of CDS.
See Description of the Securities We are Offering.
Pursuant to applicable Canadian and U.S. regulatory
restrictions, the Agents may not, throughout the period of distribution, bid for
or purchase any Shares or Debentures. These restrictions allow certain
exceptions. The Agents may only avail themselves of such exceptions on the
condition that the bid or purchase not be engaged in for the purpose of creating
actual or apparent active trading in, or raising the price of, the Shares or the
Debentures. These exceptions include a bid or purchase for Shares permitted
under the by-laws and rules of the TSXV relating to market stabilization and
passive market making activities and a bid or purchase made for and on behalf of
a customer where the order was not solicited during the period of distribution.
Pursuant to the first mentioned exception, in connection with this Offering the
Agents may undertake transactions which stabilize or maintain the market price
of the Shares or the Debentures at levels other than those which otherwise might
prevail on the open market. Such transactions, if commenced, may be discontinued
at any time.
Commissions and Expenses
The Agency Agreement provides for an Agency Fee, payable in
cash, equal to 6% of the gross proceeds of the Offering (CA$60 per CA$1,000
principal amount of Debentures), for an aggregate cash commission of CA$600,000
(assuming completion of the Maximum Offering).
We estimate the total offering expenses of this offering that
will be payable by us, excluding the Agency Fee, will be approximately
CA$350,000 which includes legal and printing costs, various other fees and
reimbursement of the Agents expenses.
Indemnification
We have agreed to indemnify the Agents and their respective
affiliates and their respective directors, officers, employees, partners,
agents, advisors and shareholders against certain liabilities. We have also
agreed to contribute to payments the Agents may be required to make in respect
of such liabilities.
Electronic Distribution
This prospectus may be made available in electronic format on
websites or through other online services maintained by the Agents, or by an
affiliate. Other than this prospectus in electronic format, the information on
the Agents websitse and any information contained in any other website
maintained by the Agents is not part of this prospectus or the registration
statement of which this prospectus forms a part, has not been approved and/or
endorsed by us or the Agents, and should not be relied upon by investors.
The foregoing does not purport to be a complete statement of
the terms and conditions of the Agency Agreement. A copy of the Agency Agreement
is included as an exhibit to the registration statement of which this prospectus
forms a part. See Where You Can Find Additional Information on page
91.
77
Other
From time to time, the Agents and their affiliates have
provided, and may in the future provide, various investment banking, financial
advisory and other services to us and our affiliates for which services they
have received, and may in the future receive, customary fees. In the course of
their businesses, the Agents and their affiliates may actively trade our
securities or loans for their own account or for the accounts of customers, and,
accordingly, the Agents and their affiliates may at any time hold long or short
positions in such securities or loans. Except for services provided in
connection with this offering, the Agents have not provided any investment
banking or other financial services during the 180-day period preceding the date
of this prospectus and we do not expect to retain the Agents to perform any
investment banking or other financial services for at least 90 days after the
date of this prospectus.
The offering of securities pursuant to this prospectus shall
also comply with the rules and regulations of the TSXV.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon
by Dorsey & Whitney, LLP and the validity of the Debentures offered hereby
will be passed upon by McCarthy Tetrault LLP.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
This section is a discussion of certain U.S. federal income tax
considerations relating to the purchase, ownership, disposition and conversion
of the Debentures and the ownership and disposition of the Shares into which the
Debentures may be converted. This summary does not provide a complete analysis
of all potential U.S. federal income tax considerations. The information
provided below is based on existing U.S. federal income tax authorities, all of
which are subject to change or differing interpretations, possibly with
retroactive effect. There can be no assurance that the Internal Revenue Service
(the IRS) will not challenge one or more of the tax consequences described
herein, and we have not obtained, nor do we intend to obtain, a ruling from the
IRS with respect to the U.S. federal income tax consequences of purchasing,
owning, disposing of or converting the Debentures or owning or disposing of the
Shares into which the Debentures may be converted. This summary generally
applies only to beneficial owners of the Debentures that purchase their
Debentures in this offering for an amount equal to the issue price of the
Debentures, which is the first price at which a substantial amount of the
Debentures is sold for money to investors (not including sales to bond houses,
brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers), and that hold the Debentures and
Shares as capital assets within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended (the Code) (generally, property held for
investment). This discussion does not purport to deal with all aspects of U.S.
federal income taxation that may be relevant to a particular beneficial owner in
light of the beneficial owners circumstances (for example, persons subject to
the alternative minimum tax provisions of the Code, or a U.S. holder (as defined
below) whose functional currency is not the U.S. dollar). Also, this summary
is not intended to be wholly applicable to all categories of investors, some of
which may be subject to special rules (such as partnerships and pass-through
entities and investors in such entities, dealers in securities or currencies,
traders in securities that elect to use a mark-to-market method of accounting,
banks, thrifts, regulated investment companies, real estate investment trusts,
insurance companies, tax-exempt entities, tax-deferred or other retirement
accounts, certain former citizens or residents of the United States, controlled
foreign corporations, passive foreign investment companies, subchapter S
corporations, persons holding the Debentures or Shares as part of a hedging,
conversion or integrated transaction or a straddle, or persons deemed to sell
the Debentures or Shares under the constructive sale provisions of the Code).
Finally, this summary does not address the potential application of the Medicare
contribution tax on net investment income, the effects of the U.S. federal
estate and gift tax laws or any applicable state, local or non-U.S.laws.
INVESTORS CONSIDERING THE PURCHASE OF THE DEBENTURES SHOULD
CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL
INCOME TAX
LAWS TO THEIR PARTICULAR SITUATIONS AND THE CONSEQUENCES OF
U.S. FEDERAL ESTATE AND GIFT TAX LAWS, STATE, LOCAL AND NON-U.S. LAWS, AND TAX
TREATIES.
As used herein, the term U.S. holder means a beneficial owner
of the Debentures or the Shares into which the Debentures may be converted that,
for U.S. federal income tax purposes, is (1) an individual who is a citizen or
resident of the United States, (2) a corporation, or an entity treated as a
corporation for U.S. federal income tax purposes, created or organized in or
under the laws of the United States or any state of the United States, or the
District of Columbia, (3) an estate the income of which is subject to U.S.
federal income taxation regardless of its source, or (4) a trust if it (x) is
subject to the primary supervision of a U.S. court and one or more U.S. persons
has the authority to control all substantial decisions of the trust or (y) has a
valid election in effect under applicable U.S. Treasury regulations to be
treated as a U.S. person.
A Non-U.S. holder is a beneficial owner of the Debentures or
the Shares into which the Debentures may be converted (other than a partnership,
including an entity or arrangement treated as a partnership for U.S. federal
income tax purposes) that is not a U.S. holder.
78
If a partnership (including an entity or arrangement, domestic
or foreign, treated as a partnership for U.S. federal income tax purposes) holds
Debenture or Shares acquired upon conversion of a Debenture, the U.S. federal
income tax treatment of a partner in the partnership will depend upon the status
of the partner and the activities of the partnership. A holder of a Debenture or
Shares acquired upon conversion of a Debenture that is a partnership, and
partners in such partnership, should consult their own tax advisors about the
U.S. federal income tax consequences of purchasing, owning, disposing of, or
converting such Debenture and owning and disposing of the Shares into which the
Debentures may be converted.
Characterization of the Debentures
We believe that the Debentures should be treated as debt
instruments for U.S. federal income tax purposes. Whether the Debentures are
properly treated as debt or equity for U.S. federal income tax purposes is a
highly factual inquiry, and the IRS may take the position that the Debentures
are properly treated as equity. If the Debentures were treated as equity rather
than debt, the U.S. federal income tax consequences would be materially and
adversely different than those described herein. Holders should consult their
own tax advisors concerning the consequences of characterizing the Debentures as
debt or equity. The following discussion assumes that the Debentures will be
respected as debt.
U.S. Holders
Taxation of Interest
U.S. holders will be required to recognize as ordinary income
any stated interest paid or accrued on the Debentures, in accordance with their
regular method of tax accounting.
It is expected, and this discussion assumes, that the
Debentures will be issued without original issue discount for United States
federal income tax purposes. There can be no assurance, however, that the IRS
will agree with this conclusion.
U.S. holders should obtain a tax basis in any Shares received
under the Share Interest Payment Election equal to the interest income that was
satisfied by the receipt of such Shares.
See Foreign Currency Considerations below for additional
tax consequences related to the Debentures being denominated in Canadian dollars
and to the receipt of Shares under the Share Interest Payment Election.
Early Redemption Rights
In certain circumstances, we may choose to or may be obligated
to, redeem the Debentures prior to the Maturity Date. See Description of the
Securities We Are Offering Redemption and Purchase, and Description of the
Securities We Are Offering Change of Control of the Corporation. These
possibilities may implicate the provisions of Treasury Regulations relating to
contingent payment debt instruments. We believe there is only a remote
possibility that we will redeem the Debentures prior to the Maturity Date, and
we therefore intend to take the position that the Debentures are not contingent
payment debt instruments. U.S. holders may not take a contrary position unless
the holder discloses the contrary position to the IRS in the manner required by
applicable Treasury Regulations. Assuming the foregoing positions are respected
by the IRS, any premium paid to the holder as part of a redemption prior to the
Maturity Date, whether on a repurchase upon the occurrence of a change of
control triggering event or otherwise, is expected to be taxed as capital gain
under the rules described under Sale, Exchange or Redemption of
Debentures.
Our positions described in this section are not binding on the
IRS. If the IRS successfully challenged our positions, and the Debentures were
treated as contingent payment debt instruments, the holder would, among other
things, be required to accrue interest income based upon a comparable yield
(as defined in the Treasury Regulations) determined at the time of issuance of
the Debentures. Adjustments to such accruals would generally be required to be
made if any contingent payments are made that differ from the payments based on
a projected payment schedule (as defined in the Treasury Regulations) and to
treat any gain recognized on the sale, exchange, redemption or other disposition
of a Debenture as ordinary income rather than as capital gain. The remainder of
this discussion assumes that the positions described above are respected by the
IRS. A U.S. holder should consult its own tax advisors regarding the possible
application of the contingent payment debt instrument rules to the
Debentures.
79
Sale, Exchange, Redemption or Other Taxable Disposition
of the Debentures
A U.S. holder generally will recognize capital gain or loss if
the holder disposes of a Debenture in a sale, exchange, redemption or other
taxable disposition (other than conversion of a Debenture into Shares or into a
combination of cash and Shares, the U.S. federal income tax consequences of
which are described under Conversion of Debentures below). The U.S. holders
gain or loss will equal the difference between the amount realized by the holder
(other than amounts attributable to accrued but unpaid interest) and the
holders tax basis in the Debenture. The amount realized by the U.S. holder will
include the amount of any cash and the fair market value of any other property
received for the Debenture. The U.S. holders tax basis in the Debenture
generally will equal the amount the holder paid for the Debenture. The portion
of any amount realized that is attributable to accrued interest will not be
taken into account in computing the U.S. holders capital gain or loss. Instead,
that portion will be taxed as ordinary interest income as described above to the
extent that the U.S. holder has not previously included the accrued interest in
income. The gain or loss recognized by the U.S. holder on the disposition of the
Debenture generally will be long-term capital gain or loss if the holder held
the Debenture for more than one year, or short-term capital gain or loss if the
holder held the Debenture for one year or less, at the time of the transaction.
Long-term capital gains of non-corporate taxpayers generally are taxed at
reduced rates. Short-term capital gains are taxed at ordinary income rates. The
deductibility of capital losses is subject to limitations.
See Foreign Currency Considerations below for additional
tax consequences related to the Debentures being denominated in Canadian
dollars.
Foreign Currency Considerations
Payments of Interest in Canadian Dollars
If a U.S. holder uses the cash method of accounting for United
States federal income tax purposes, the holder will be required to include in
the holders gross income the U.S. dollar value of the Canadian dollars interest
payment on the date the holder receives it (based on the U.S. dollar spot rate
for Canadian dollars on that date), regardless of whether the holder in fact
converts the payment to U.S. dollars at that time. Such a U.S. holder will not
recognize foreign currency gain or loss with respect to receipt of such
payments, but may have foreign currency gain or loss when the holder actually
sells or otherwise disposes of the Canadian dollars, as described below.
If a U.S. holder uses the accrual method of accounting for
United States federal income tax purposes, the holder will be required to
include in the holders gross income the U.S. dollar value of the Canadian
dollars amount of interest income that accrues during an accrual period. The
U.S. dollar value of the Canadian dollars amount of accrued interest income is
generally determined by translating that income at the average U.S. dollar
exchange rate for Canadian dollars in effect during the accrual period or, if
the accrual period spans two taxable years, the partial period within the
taxable year. The U.S. holder may elect, however, to translate the holders
accrued interest income using: (i) the dollar spot rate for Canadian dollars on
the last day of the accrual period, (ii) in the case of a partial accrual
period, the spot rate on the last day of the taxable year or (iii) if the date
of receipt is within five business days of the last day of the interest accrual
period, the spot rate on the date of receipt. That election must be applied
consistently to all debt instruments the holder holds from year to year and may
not be changed without the consent of the IRS. Prior to making that election,
the holder should consult the holders own tax advisors.
If a U.S. holder uses the accrual method of accounting for
United States federal income tax purposes, the holder may recognize foreign
currency gain or loss, which generally will be taxable as ordinary income or
loss, with respect to accrued interest income on the date the holder receives
the payment of that income. The amount of foreign currency gain or loss the
holder recognizes will be the difference, if any, between the U.S. dollar value
of the payment in Canadian dollars that the holder receives in respect of the
accrued interest (based on the U.S. dollar spot rate for Canadian dollars on the
date the holder receives the payment) and the U.S. dollar value of interest
income that has accrued during the accrual period (determined as described in
the preceding paragraph).
If a U.S. holder receives a payment of interest in Shares under
the Share Interest Payment Election, then the U.S. dollar amount so received
might not be the same as the U.S. dollar amount required to be recognized as
interest income under the rules described above. U.S. holders receiving Shares
under the Share Interest Payment Election should consult their own tax advisors
regarding the foreign currency exchange gain or loss consequences of such
payment.
Exchange or Purchase of Canadian dollars
Canadian dollars received as interest on a Debenture or on a
sale, exchange, redemption or other disposition of a Debenture generally will
have a tax basis equal to the U.S. dollar value of the Canadian dollars at the
spot rate on the date of receipt. If a U.S. holder purchases Canadian dollars,
the tax basis of the Canadian dollars will generally be the U.S. dollar value of
the Canadian dollars on the date of purchase. Any foreign currency exchange gain
or loss recognized on a sale, exchange or other disposition of Canadian dollars
(including the use of Canadian dollars to purchase Debentures or upon the
exchange of Canadian dollars for U.S. dollars) generally will be treated as
ordinary income or loss. Holders should consult their own tax advisors regarding
the application of the foreign currency exchange gain or loss rules to them in
their particular circumstances.
Foreign Currency Gain or Loss on Sale or Other Disposition
of Debentures
If a U.S. holder receives Canadian dollars on the sale,
exchange, redemption or other disposition of a Debenture, the U.S. dollar amount
realized generally will be based on the U.S. dollar spot rate for Canadian
dollars on the date of the disposition. However, if the Debentures are traded on
an established securities market and the holder is a cash method U.S. holder or
an electing accrual method U.S. holder, the holder will determine the U.S.
dollar amount realized by translating the Canadian dollars received at the U.S.
dollar spot rate for Canadian dollars on the settlement date of the sale,
exchange, redemption or other disposition. If a U.S. holder is an accrual method
U.S.holder and the holder makes this election, the election must be
applied consistently to all debt instruments from year to year and cannot be
changed without the consent of the IRS. If a U.S. holder is an accrual method
U.S. holder and the holder does not make this election, the holder will
determine the U.S. dollar equivalent of the amount realized by translating that
amount at the U.S. dollar spot rate for Canadian dollars on the date of the
sale, exchange, redemption or other disposition and generally will recognize
foreign currency gain or loss (generally treated as ordinary income or loss)
equal to the difference, if any, between the U.S. dollar equivalent of the
amount realized based on the spot rates in effect on the date of disposition and
the settlement date.
80
A U.S. holder's initial tax basis in a Debenture generally will
be the holder's cost of the Debenture, which, in the case of a U.S. holder that
purchases a Debenture with Canadian dollars, will be the U.S. dollar value of
the amount of Canadian dollars paid for such Debenture at the U.S. dollar spot
rate for Canadian dollars on the date of purchase.
A U.S. holder will recognize foreign currency gain or loss
attributable to the movement in exchange rates between the time of purchase of
the Debenture and the time of disposition, including the sale, exchange or
redemption, of the Debenture. Gain or loss attributable to the movement of
exchange rates will equal the difference between (1) the U.S. dollar value of
the Canadian dollar principal amount of the Debenture, determined as of the date
the Debenture is disposed of based on the U.S. dollar spot rate for Canadian
dollars in effect on that date, and (2) the U.S. dollar value of the Canadian
dollar principal amount of such Debenture, determined on the date the holder
acquired the Debenture based on the U.S. dollar spot rate for Canadian dollars
in effect on that date. For this purpose, the principal amount of the Debenture
generally is the holders purchase price for the Debenture in Canadian dollars.
Any such gain or loss generally will be treated as ordinary income or loss, and
not as interest income or expense, and generally will be United States source
gain or loss. A U.S. holder will recognize such foreign currency gain or loss to
the extent the holder has gain or loss, respectively, on the overall sale or
taxable disposition of the Debenture.
Reportable Transaction Reporting
Under applicable Treasury regulations, a U.S. holder who
participates in reportable transactions (as defined in the Treasury
regulations) must attach to the holders United States federal income tax return
a disclosure statement on IRS Form 8886. Under the relevant rules, a U.S. holder
may be required to treat a foreign currency exchange loss from the Debentures as
a reportable transaction if this loss exceeds the relevant threshold in the
Treasury regulations. A U.S. holder should consult the holders own tax advisor
regarding the possible obligation to file IRS Form 8886 with respect to the
ownership or disposition of the Debentures, or any related transaction,
including, without limitation, the disposition of any Canadian dollars
received.
Conversion of Debentures
A U.S. holder generally will not recognize any income, gain or
loss on the conversion of a Debenture solely into Shares, except with respect to
cash received in lieu of a fractional share of Shares and the fair market value
of any Shares attributable to accrued and unpaid interest, subject to the
discussion under U.S. HoldersConstructive Distributions below regarding the
possibility that certain adjustments to the conversion rate of a Debenture may
be treated as a taxable dividend. The U.S. holders aggregate tax basis in the
Shares (including any fractional share for which cash is paid, but excluding
shares attributable to accrued and unpaid interest) will equal the U.S. holders
tax basis in the Debenture. The U.S. holders holding period in the Shares
(other than shares attributable to accrued and unpaid interest) will include the
holding period in the Debenture.
With respect to cash received in lieu of a fractional Share, a
U.S. holder will be treated as if the fractional share were issued and received
and then immediately redeemed for cash. Accordingly, the U.S. holder generally
will recognize gain or loss equal to the difference between the cash received
and that portion of the holders tax basis in the Shares attributable to the
fractional share on a proportionate basis in accordance with its relative fair
market value. Any such gain or loss generally would be capital gain or loss and
would be long-term capital gain or loss if at the time of the conversion, the
Debentures have been held for more than one year.
81
Any amounts received, including cash and the value of any
portion of Shares, attributable to accrued and unpaid interest on the Debentures
not yet included in income by a U.S. holder will be taxed as ordinary income.
The tax basis in any Shares attributable to accrued and unpaid interest will
equal the fair market value of such shares when received. The holding period in
any Shares attributable to accrued and unpaid interest will begin on the day
after the date of conversion.
A U.S. holder that converts a Debenture between a record date
for an interest payment and the next interest payment date and consequently
receives a payment of cash interest, as described in Description of
DebenturesConversion Rights, should consult its own tax advisors concerning
the appropriate treatment of such payment.
U.S. holders should consult their own tax advisors
regarding the U.S. federal income tax consequences of the conversion of
Debentures into Shares, having regard to such holder's particular circumstances.
Distributions
If, after a U.S. holder acquires Shares upon a conversion of a
Debenture, we make a distribution in respect of such Shares from our current or
accumulated earnings and profits (as determined under U.S. federal income tax
principles), the distribution will be treated as a dividend to the extent of
such current or accumulated earnings and profits and will be includible in a
U.S. holder's income at the time such holder is treated as receiving such
distribution for U.S. federal income tax purposes. If the distribution exceeds
our current and accumulated earnings and profits, the excess will be treated
first as a tax-free return of the U.S. holder's investment, up to the U.S.
holder's tax basis in its Shares (and such holder's tax basis in such Shares
would be reduced by a corresponding amount), and any remaining excess will be
treated as capital gain from the sale or exchange of the Shares (as described
below under "-U.S. Holders-Sale, Exchange or Other Taxable Disposition of
Shares"). If the U.S. holder is a U.S. corporation, it would generally be able
to claim a dividend received deduction on a portion of any distribution taxed as
a dividend, provided that certain holding period and other requirements are
satisfied. Subject to certain exceptions, dividends received by non-corporate
U.S. holders are taxed at the reduced rates applicable to long-term capital
gains, provided that certain holding period requirements are met.
Constructive Distributions
The terms of the Debentures allow for changes in the conversion
rate of the Debentures under certain circumstances. A change in conversion rate
that allows holders of the Debentures to receive more Shares on conversion may
increase such holders' proportionate interests in our earnings and profits or
assets. In that case, the holders of the Debentures may be treated as though
they received a taxable distribution. A taxable constructive distribution would
result, for example, if the conversion rate is adjusted to compensate holders of
Debentures for distributions of cash or property to our stockholders. If an
event occurs that dilutes the interests of stockholders or increases the
interests of holders of the Debentures and the conversion rate of the Debentures
is not adjusted (or not adequately adjusted), this also could be treated as a
taxable distribution to holders of the Debentures for U.S. federal income tax
purposes. Conversely, if an event occurs that dilutes the interests of holders
of the Debentures and the conversion rate is not adjusted (or not adequately
adjusted), the resulting increase in the proportionate interests of our
stockholders could be treated as a taxable distribution to the stockholders. Not
all changes in the conversion rate that result in holders of Debentures
receiving more Shares on conversion, however, increase such holders'
proportionate interests in our earnings and profits or assets. For instance, a
change in conversion rate could simply prevent the dilution of the holders'
interests upon a stock split or other change in capital structure. Under
applicable U.S. tax rules, changes of this type, if made pursuant to a bona fide
reasonable adjustment formula, are not treated as constructive stock
distributions. Any taxable constructive distribution resulting from a change to,
or failure to change, the conversion rate that is treated as a distribution would be treated for
U.S. federal income tax purposes in the same manner as an actual distribution on
Shares paid in cash or other property, as described above under "-U.S.
Holders-Distributions." Generally, a U.S. holder's adjusted tax basis in a
Debenture will be increased to the extent of any such taxable constructive
distribution is treated as a dividend. U.S. holders should consult their own tax
advisors regarding whether any taxable constructive dividends would be eligible
for the dividends received deduction (for corporate holders) or the reduced
rates described in the previous paragraph (for non-corporate holders), as the
requisite applicable holding periods might not be considered to be satisfied in
certain circumstances.
We are currently required to report the amount of any deemed
distributions on our website or to the IRS and holders of Debentures not exempt
from reporting. On April 12, 2016, the IRS proposed Treasury regulations
addressing the amount and timing of deemed distributions, obligations of
withholding agents and filing and notice obligations of issuers. If adopted as
proposed, the Treasury regulations would generally provide that (i) the amount
of a deemed distribution is the excess of the fair market value of the right to
acquire stock immediately after the conversion rate adjustment over the fair
market value of the right to acquire stock without the adjustment, (ii) the
deemed distribution occurs at the earlier of the date the adjustment occurs
under the terms of the Debenture and the date of the actual distribution of cash
or property that results in the deemed distribution, and (iii) we are required
to report the amount of any deemed distributions on our website or to the IRS
and all holders of the Debentures (including holders of the Debentures that
would otherwise be exempt from information reporting). The final Treasury
regulations will be effective for deemed distributions occurring on or after the
date of adoption, but holders of the Debentures and withholding agents may rely
on them prior to that date under certain circumstances.
82
U.S. holders should consult their own tax advisors
regarding the U.S. federal income tax consequences of (a) any adjustments to the
conversion rate of Debentures or other events that may give rise to deemed
distributions for U.S. federal income tax purposes as described above, and (b)
the finalization of the proposed Treasury regulations described above.
Sale, Exchange or Other Taxable Disposition of
Shares
A U.S. holder generally will recognize capital gain or loss on
a sale, exchange or other taxable disposition of Shares. The U.S. holders gain
or loss will equal the difference between the proceeds received by the holder
and the holders tax basis in the Shares. The proceeds received by the U.S.
holder will include the amount of any cash and the fair market value of any
other property received for the Shares. The gain or loss recognized by a U.S.
holder on a sale, exchange or other taxable disposition of Shares will be long-
term capital gain or loss if the holders holding period in the Shares is more
than one year, or short-term capital gain or loss if the holders holding period
in the Shares is one year or less, at the time of the transaction. Long-term
capital gains of non-corporate taxpayers generally are taxed at reduced rates.
Short-term capital gains are taxed at ordinary income rates. The deductibility
of capital losses is subject to limitations.
See Foreign Currency Considerations above for additional
tax consequences related to the receipt of Canadian dollars.
Non-U.S. Holders
The following discussion is limited to the U.S. federal income
tax consequences relevant to a Non-U.S. holder (as defined above).
Taxation of Interest
Subject to the discussion below, payments of interest to
Non-U.S. holders generally are subject to U.S. federal income tax at a rate of
30% (or a reduced or zero rate under the terms of an applicable income tax
treaty between the United States and the Non-U.S. holders country of
residence), collected by means of withholding by the payor.
Payments of interest on the Debentures to most Non-U.S.
holders, however, will qualify as portfolio interest, and thus, subject to the
discussion below regarding backup withholding and FATCA, will be exempt from
U.S. federal income tax, including withholding of such tax, if the Non-U.S.
holders are eligible for the portfolio interest exemption and certify their
nonresident status as described below.
The portfolio interest exemption will not apply to payments of
interest to a Non-U.S. holder that:
|
|
owns, actually or constructively, applying certain
attribution rules, shares of our stock representing at least 10% of the
total combined voting power of all classes of our stock entitled to vote;
|
|
|
|
|
|
is a controlled foreign corporation that is related,
directly or indirectly, to us through stock ownership; or
|
|
|
|
|
|
is engaged in the conduct of a trade or business in the
United States to which such interest payments are effectively connected,
and, generally, if an income tax treaty applies, such interest payments
are attributable to a U.S. permanent establishment or fixed base
maintained by the Non-U.S. holder (see the discussion under Non-U.S.
HoldersIncome or Gains Effectively Connected with a U.S. Trade or
Business below).
|
In general, a foreign corporation is a controlled foreign
corporation if more than 50% of its stock (by vote or value) is owned, actually
or constructively, by one or more U.S. persons that each owns, actually or
constructively, at least 10% of the corporations voting stock.
Each of the portfolio interest exemption, the reduction of the
withholding rate pursuant to the terms of an applicable income tax treaty and
several of the special rules for Non-U.S. holders described below apply only if
the holder certifies its nonresident status in the prescribed manner. A Non-U.S.
holder can meet this certification requirement by providing a properly executed
IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate IRS Form W-8 to us or
our paying agent prior to the payment. If the Non-U.S. holder holds the
Debenture through a financial institution or other agent acting on the holder's
behalf, the holder will be required to provide appropriate documentation to the
agent. The Non-U.S. holder's agent will then be required to provide
certification to us or our paying agent, either directly or through other
intermediaries.
Non-U.S. holders should consult their own tax advisors
regarding such holder's eligibility for the reduction or elimination of U.S.
withholding tax under applicable U.S. Federal income tax rules, as well as the
appropriate manner for certifying such eligibility, in each case having regard
to such holder's particular circumstances.
Sale, Exchange, Redemption, Conversion or Other
Disposition of Debentures or Shares
Subject to the discussion below regarding backup withholding
and FATCA, Non-U.S. holders generally will not be subject to U.S. federal income
or withholding tax on any gain realized on the sale, exchange, redemption,
conversion or other disposition of Debentures or Shares (other than with respect
to payments attributable to accrued and unpaid interest, which will be taxed as
described under Non-U.S. HoldersTaxation of Interest above), unless:
83
|
|
the gain is effectively connected with the conduct
by the Non-U.S. holder of a U.S. trade or business (and, generally, if an
income tax treaty applies, the gain is attributable to a U.S. permanent
establishment or fixed base maintained by the Non-U.S. holder), in
which case the gain would be subject to tax as described below under
Non-U.S. HoldersIncome or Gains Effectively Connected with a U.S. Trade
or Business;
|
|
|
|
|
|
the Non-U.S. holder is an individual who is present in
the United States for 183 days or more in the taxable year of disposition
and certain other conditions apply, in which case, except as otherwise
provided by an applicable income tax treaty, the gain, which may be offset
by U.S. source capital losses, would be subject to a flat 30% tax (or
lower applicable income tax treaty rate), even though the individual is
not considered a resident of the United States; or
|
|
|
|
|
|
the rules of the Foreign Investment in Real
Property Tax Act (or FIRPTA) (described below) treat the gain as
effectively connected with a U.S. trade or business.
|
The FIRPTA rules may apply to a sale, exchange, redemption,
conversion or other disposition of Debentures or Shares by a Non-U.S. holder if,
at any time during the five years before such sale, exchange, redemption,
conversion or other disposition (or, if shorter, the Non-U.S. holder's holding
period for the relevant Debentures or Shares), a "United States real property
holding corporation" (or USRPHC). In general, we would be a USRPHC if U.S. real
property interests comprised at least 50% of the sum of the fair market value of
our worldwide real property interests and assets used or held for use in a trade
or business. We believe that we have not been during the past five years,
currently are not, and will not become in the future, a USRPHC. However, under
the FIRPTA rules, interests (other than an interest solely as a creditor) in a
U.S. corporation, such as the Corporation, generally are deemed to be subject to
the FIRPTA rules unless this presumption is overturned in a prescribed manner.
There is no assurance that we will be able to establish, in the prescribed
manner, that the Debentures and Shares are not subject to the FIRPTA rules.
In the event we are determined to have constituted, or to
constitute, a USRPHC (or deemed to be a USRPHC) at any time during the five year
period ending on a sale, exchange, redemption, conversion or other disposition
of Debentures or Shares (or, if shorter, such Non-U.S. holder's holding period
in such Debentures or Shares), the Non-U.S. holder generally would be subject to
FIRPTA taxation and, in such case, any gain recognized in connection with any
such disposition would generally be treated as effectively connected income for
such Non-U.S. holder and subject to U.S. taxation at normal graduated tax rates
applicable to U.S. holders. Such Non-U.S. holder would also generally be subject
to U.S. federal income tax return filing obligations. In addition, the purchaser
of Debentures or Shares generally would be required to withhold 15% of the gross
purchase price paid for such Debentures or Shares and remit such amounts to the
IRS in accordance with the FIRPTA rules. However, if the Debentures or Shares
are considered "regularly traded on an established securities market," the
Debentures or Shares would not be treated as interests in a USRPHC (and
therefore gain recognized on a disposition would not be subject to U.S. federal
income tax) with respect to Non-U.S. holders who do not hold, actually or
constructively, more than 5% of the outstanding Debentures or Shares, as
applicable, at any time during the 5-year period ending on the date of
disposition, or such shorter period that such Debentures or Shares were held. In
addition, the purchaser of Debentures or Shares, as applicable, would not be
required to withhold tax if the Debentures or Shares, as applicable, are
considered "regularly traded on an established securities market," regardless of
whether the selling Non-U.S. holder held more than five percent of the
outstanding Shares during the applicable testing period.
We believe that the TSXV is a non-U.S. national securities
exchange which is officially recognized, sanctioned, or supervised by a
governmental authority, and, accordingly, the TSXV should be treated as an
established securities market. In such case, for so long as 100 or fewer persons
do not own 50% or more of the Debentures or Shares, as applicable, the
Debentures and Shares should be treated as "regularly traded" on the TSXV for a
calendar quarter if: (a) such Debentures or Shares, as applicable, trade, other
than in de minimis quantities, on at least 15 days during the calendar quarter;
(b) the aggregate number of Debentures or Shares, as applicable, traded during
the calendar quarter is at least 7.5%, of the average number of such Debentures
or Shares outstanding during such calendar quarter (reduced to 2.5% if there are
2,500 or more record holders of Debentures or Shares, as applicable); and (c) we
attach a statement to our U.S. federal income tax return that provides
information relating to us, the Debentures and Shares, and beneficial owners of
more than 5% of the Debentures or Shares (the "TSXV Publicly Traded Exception").
Prospective holders are cautioned that there can be no assurance that the
Debentures or the Shares will be considered "regularly traded" on the TSXV in
any particular calendar quarter.
It is unclear as of the date of this prospectus whether the
Debentures and Shares will be determined to be "regularly traded on an
established securities market" for purposes of the FIRPTA rules.
The application of the FIRPTA rules to Non-U.S. holders is
subject to uncertainty. Accordingly, Non-U.S. holders should consult with their
own tax advisors regarding the potential application of the FIRPTA rules to the
Debentures and the Shares, including the determination of whether such
Debentures and Shares are "regularly traded on an established securities market"
under such rules.
Dividends and Constructive Dividends
Dividends paid to a Non-U.S. holder on any Shares received on
conversion of a Debenture, and any taxable constructive dividends resulting from
certain adjustments (or failures to make adjustments) to the number of Shares to
be issued on conversion (as described under U.S. HoldersConstructive
Distributions above) generally will be subject to U.S. withholding tax at a 30%
rate. The withholding tax on dividends (including any taxable constructive
dividends), however, may be reduced under the terms of an applicable income tax
treaty between the United States and the Non-U.S. holders country of residence.
A Non-U.S. holder should demonstrate its eligibility for a reduced rate of
withholding under an applicable income tax treaty by timely delivering a
properly executed IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate IRS
Form W-8. A Non-U.S. holder that is eligible for a reduced rate of withholding
under the terms of an applicable income tax treaty may obtain a refund of any
excess amounts withheld by timely filing an appropriate claim for refund with
the IRS. In the case of constructive dividends, because there may be no cash
from which to withhold the required amount, withholding may apply to interest
payments or other payments or deliveries made with respect to the Debentures
(or, in some circumstances, any payments on Shares) or sales proceeds received
by, or other funds or assets of, such holder. Dividends on the Shares that are
effectively connected with a Non-U.S. holders conduct of a U.S. trade or
business are discussed below under Non-U.S. HoldersIncome or Gains
Effectively Connected with a U.S. Trade or Business.
Subject to the discussion regarding FIRPTA withholding below, a
Non-U.S. holder generally should not incur tax on a distribution in excess of
our current and accumulated earnings and profits if the excess portion of the
distribution did not exceed the adjusted tax basis of the Non-U.S. holder's
Debentures or Shares, as applicable. Instead, such excess portion of the
distribution would reduce the Non-U.S. holder's adjusted tax basis in such
interest. A Non-U.S. holder would be subject to tax on a distribution that
exceeds both our current and accumulated earnings and profits and the adjusted
tax basis in its Debentures or Shares, as applicable, if the Non-U.S. holder
otherwise would be subject to tax on gain from the disposition of such interest
as described above under "-Non-U.S. Holders- Sale, Exchange, Redemption,
Conversion or Other Disposition of Debentures or Shares". Assuming the
Debentures and Shares will be considered to be regularly traded on an
established securities market, as described above under "-Non-U.S. Holders-
Sale, Exchange, Redemption, Conversion or Other Disposition of Debentures or
Shares", we would not be required to withhold on distributions in excess of our
current and accumulated earnings and profits that are distributed to Non-U.S.
holders that own 5% or less of the outstanding Debentures or Shares, as
applicable, during the applicable testing period. However there can be no
assurance that withholding on such amounts will not be required. If withholding
is or becomes required on distributions in excess of our current and accumulated
earnings and profits, the rate of withholding is currently equal to 15% of such
amounts.
Non-U.S. holders should consult their own tax advisors
regarding such holder's eligibility for the reduction or elimination of U.S.
withholding tax under applicable U.S. federal income tax rules, the appropriate
manner for certifying such eligibility, as well as the applicability of the
FIRPTA rules to distributions, or constructive distributions, made with respect
Debentures or Shares, in each case having regard to such holder's particular
circumstances.
Income or Gains Effectively Connected With a U.S. Trade
or Business
The preceding discussion of the U.S. federal income and
withholding tax considerations of the purchase, ownership, disposition or
conversion of the Debentures and the ownership and disposition of the Shares
into which the Debentures may be converted by a Non-U.S. holder discusses the
U.S. federal income tax considerations for a Non-U.S. holder that is not engaged
in a U.S. trade or business for U.S. federal income tax purposes. If any
interest on the Debentures, dividends on Shares, or gain from the sale,
exchange, redemption, conversion or other disposition of the Debentures or
Shares is effectively connected with a U.S. trade or business conducted by the
Non-U.S. holder, then the income or gain generally will be subject to U.S.
federal income tax on a net income basis at the regular graduated rates and in
the same manner applicable to U.S. holders. If the Non-U.S. holder is eligible
for the benefits of a tax treaty between the United States and the holders
country of residence, any effectively connected income or gain generally will
be subject to U.S. federal income tax only if it is also attributable to a
permanent establishment or fixed base maintained by the holder in the United
States. Payments of interest or dividends that are effectively connected with a
U.S. trade or business (and, if an applicable tax treaty requires, attributable
to a permanent establishment or fixed base), and therefore included in the gross
income of a Non-U.S. holder, will not be subject to 30% withholding, provided
that the holder claims exemption from withholding by timely delivering a
properly executed IRS Form W-8ECI. If the Non-U.S. holder is a corporation (or
an entity treated as a corporation for U.S. federal income tax purposes), that
portion of its earnings and profits that is effectively connected with its U.S.
trade or business generally also would be subject to a branch profits tax. The
branch profits tax rate is generally 30%, although an applicable income tax
treaty might provide for a lower rate.
84
FATCA
Provisions of the Code commonly referred to as the Foreign
Account Tax Compliance Act (FATCA) may impose withholding tax on certain types
of payments made to foreign financial institutions, and non-financial foreign
entities as defined in the Code and applicable Treasury regulations. The
legislation, together with the Treasury regulations issued thereunder, generally
imposes a 30% withholding tax on interest income and constructive dividends on
the Debentures, and dividends on, or gross proceeds from the sale or other
disposition of, Shares paid to a foreign financial institution or to a
non-financial foreign entity, unless (i) the foreign financial institution
undertakes certain diligence and reporting obligations, (ii) the non-financial
foreign entity either certifies it does not have any substantial U.S. owners or
furnishes identifying information regarding each substantial U.S. owner and such
entity meets certain other specified requirements, or (iii) an exemption
applies. If the payee is a foreign financial institution and an exemption does
not apply, it must enter into an agreement with the U.S. Treasury requiring,
among other things, that it undertake to identify accounts held by certain U.S.
persons or U.S.-owned foreign entities, annually report certain information
about such accounts, and withhold 30% on payments to account holders whose
actions prevent it from complying with these reporting and other requirements.
If the applicable foreign country has entered into an intergovernmental
agreement with the United States regarding FATCA, such agreement may permit the
payee to report to that country rather than to the U.S. Treasury. FATCA
withholding generally applies to interest and constructive dividends on the
Debentures and dividends on Shares. FATCA withholding with respect to the gross
proceeds from the sale or other disposition of the Debentures or Shares will not
begin until January 1, 2019. Prospective investors should consult their tax
advisors regarding this legislation.
Backup Withholding and Information
Reporting
U.S. Holders
In general, information reporting requirements will apply to
payments to certain non-corporate U.S. holders of principal and interest on a
Debenture and of dividends on a Share and the proceeds of the sale of a
Debenture or a Share. A U.S. holder may be subject to backup withholding, at a
current rate of 28%, when the holder receives interest with respect to the
Debentures or dividends on the Shares, or when the holder receives proceeds upon
the sale, exchange, redemption or other disposition of the Debentures or the
Shares. In general, a U.S. holder can avoid this backup withholding by properly
executing, under penalties of perjury, an IRS Form W-9 or suitable substitute
form that provides:
the holders correct taxpayer
identification number; and
a certification that (a) the
holder is exempt from backup withholding because the holder is a corporation or
come within another enumerated exempt category, (b) the holder has not been
notified by the IRS that the holder is subject to backup withholding or (c) the
holder has been notified by the IRS that the holder is no longer subject to
backup withholding.
If a U.S. holder does not provide the holders correct taxpayer
identification number on IRS Form W-9 or suitable substitute form in a timely
manner, the holder may be subject to penalties imposed by the IRS.
Backup withholding will not apply, however, with respect to
payments made to certain U.S. holders, including corporations and tax-exempt
organizations, provided their exemptions from backup withholding are properly
established. Backup withholding is not an additional tax and amounts withheld
may be refunded or credited against the holders United States federal income
tax liability, provided the holder timely furnishes required information to the
IRS.
United States exempt recipients who fail to provide a Form W-9
or other appropriate documentation may be subject to FATCA withholding. See the
discussion in FATCA.
Non-U.S. Holders
United States backup withholding will not apply to Non-U.S.
holders with respect to payments of interest on a Debenture or dividends on a
Share if the holder provides the statement described in Non-U.S. Holders
Taxation of Interest and Dividends and Constructive Dividends, provided that
the payor does not have actual knowledge or reason to know that the holder is a
United States person for United States federal income tax purposes. Information
reporting requirements may apply, however, to payments of interest on a
Debenture or dividends with respect to shares.
85
Information reporting generally will not apply to any payment
of the proceeds of the sale of a Debenture or Share effected outside the United
States by a foreign office of a broker (as defined in applicable Treasury
Regulations), unless such broker:
is a United States
person;
is a foreign person 50%
or more of the gross income of which for certain periods is effectively
connected with the conduct of a trade or business in the United States;
is a controlled foreign
corporation for United States federal income tax purposes; or
is a foreign partnership,
if at any time during its tax year, one or more of its partners are United
States persons (as defined in applicable Treasury Regulations) who in the
aggregate hold more than 50% of the income or capital interests in the
partnership or if, at any time during its tax year, such foreign partnership is
engaged in a United States trade or business.
Notwithstanding the foregoing, payment of the proceeds of any
such sale of a Debenture or a Share effected outside the United States by a
foreign office of any broker that is described in the preceding sentence will
not be subject to information reporting if the broker has documentary evidence
in its records that that the holder is a non-United States person and certain
other conditions are met, or the Non-U.S. holder otherwise establishes an
exemption.
Payment of the proceeds of any sale effected outside the United
States by a foreign office of a broker is not subject to backup withholding.
Payment of the proceeds of any such sale to or through the United States office
of a broker generally is subject to information reporting and backup
withholding requirements, unless the Non-U.S. holder provides the statement
described in Non-U.S. Holders Taxation of Interest or Dividends and
Constructive Dividends or otherwise establish an exemption.
The preceding discussion of material U.S. federal income tax
consequences is for general information only and is not tax advice. Accordingly,
each investor should consult its own tax advisors as to particular tax
consequences to it of purchasing, holding and disposing of the Debentures and
the Shares, including the applicability and effect of any state, local or
Non-U.S. tax laws, and of any pending or subsequent changes in applicable laws.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following is, as of the date hereof, a summary of the
principal Canadian federal income tax considerations generally applicable to a
holder who acquires Debentures as a beneficial owner under this Offering and to
a holder who acquires Shares pursuant to a conversion, redemption or repayment
at maturity of Debentures acquired by the holder under this Offering. This
summary is only applicable to such a holder who, for purposes of the Tax Act and
at all relevant times, is resident, or is deemed to be resident, in Canada,
holds the Shares and/or Debentures as capital property and deals at arms length
and is not affiliated with the Corporation or the Agents (a
Holder
).
Generally, the Debentures and Shares will be considered to be capital property
to a Holder provided that the Holder does not hold the Debentures or Shares, as
applicable, in the course of carrying on a business of trading or dealing in
securities and has not acquired the Debentures and will not acquire the Shares
in one or more transactions considered to be an adventure or concern in the
nature of trade. The Debentures and Shares will not be Canadian securities for
the purposes of the irrevocable election under subsection 39(4) of the Tax Act
to treat all Canadian securities owned by a person as capital property and
therefore such an election will not apply to the Debentures and Shares.
86
This summary is not applicable to a Holder: (i) that is a
financial institution (as defined in the Tax Act for purposes of the
mark-to-market rules); (ii) that is a specified financial institution (as
defined in the Tax Act); (iii) an interest in which is or would be a tax
shelter investment (as defined in the Tax Act); (iv) that enters into a
derivative forward agreement or a synthetic disposition arrangement (as
defined in the Tax Act) in respect of the Debentures or Shares; (v) who has
elected to report its Canadian tax results (as defined in the Tax Act) in a
currency other than Canadian dollars; or (vi) in respect of whom the Corporation
is or will become a foreign affiliate for the purposes of the Tax Act. Any
such Holders should consult their own tax advisors with respect to an investment
in the Debentures or Shares. In addition, this summary does not address the
deductibility of interest by a Holder who has borrowed money or otherwise
incurred debt in connection with the acquisition of Debentures.
This summary is based upon the current provisions of the Tax
Act and the regulations thereunder (the
Regulations
), taking into
account all proposed amendments to the Tax Act and the Regulations publicly
announced by or on behalf of the Minister of Finance prior to the date hereof
(the
Tax Proposals
), and the Corporations understanding of the current
administrative practices and assessing policies published in writing by the
Canada Revenue Agency prior to the date hereof. This summary assumes the Tax
Proposals will be enacted in the form proposed; however, no assurance can be
given that the Tax Proposals will be enacted in the form proposed, or at all.
The summary is not exhaustive of all possible income tax considerations and,
except for the Tax Proposals, does not otherwise take into account or anticipate
any changes in the law, whether by way of legislative, governmental or judicial
decision or action, or in the administrative practices or assessing policies of
the Canada Revenue Agency, nor does it take into account tax laws of countries
other than Canada or any provincial, territorial or foreign tax legislation or
considerations, which may differ significantly from the tax considerations
described herein.
The income and other tax consequences of acquiring, holding
or disposing of Debentures and/or Shares will vary depending on the particular
circumstances of the Holder thereof, including any province or territory in
which the Holder resides or carries on business. Accordingly, this summary is of
a general nature only and is not intended to be, nor should it be construed to
be, legal or tax advice to any particular or prospective Holder, and no
representations with respect to the income tax consequences to any Holder or
prospective Holder are made. Consequently, prospective Holders should consult
their own tax advisors for advice with respect to the tax consequences to them
of acquiring Debentures pursuant to this Offering, including acquiring Shares
issuable upon conversion, redemption or maturity of the Debentures, having
regard to their particular circumstances.
For purposes of the Tax Act, all amounts relating to the
acquisition, holding or disposition of Debentures or Shares (including interest,
adjusted cost base and proceeds of disposition) must be expressed in Canadian
dollars. For purposes of the Tax Act, amounts denominated in U.S. dollars
generally must be converted into Canadian dollars using the appropriate exchange
rate determined in accordance with the detailed rules in the Tax Act in that
regard.
Interest
A Holder of Debentures that is a corporation, partnership, unit
trust or any trust of which a corporation or partnership is a beneficiary will
be required to include in computing its income for a taxation year any interest
on the Debentures that accrues (or is deemed to accrue) to the Holder to the end
of the particular taxation year or that becomes receivable by or is received by
the Holder before the end of that taxation year, including on a redemption or
repayment at maturity and including amounts, if any, deducted for non-resident
withholding tax, except to the extent that such interest was otherwise included
in the Holders income for a preceding taxation year.
Any other Holder, including an individual, will be required to
include in income for a taxation year any interest on a Debenture received or
receivable by such Holder in that taxation year (depending upon the method
regularly followed by the Holder in computing income), including on a redemption
or repayment at maturity and including amounts, if any, deducted for
non-resident withholding tax, except to the extent that the interest was
included in the Holder's income for a preceding taxation year. In addition, if
at any time a Debenture should become an investment contract, as defined in
the Tax Act, in relation to a Holder, such Holder will be required to include in
computing the Holders income for a taxation year all interest (not otherwise
required to be included in income) that accrues or is deemed to accrue on the
Holders Debentures to the end of any anniversary day, as defined in the Tax
Act, in that year to the extent such interest was not otherwise included in the
Holders income for that year or a preceding year.
The fair market value of any premium paid by the Corporation to
a Holder upon a repayment of Debentures before maturity (as a result of a
Debenture Offer made in connection with a Change of Control or otherwise),
whether such premium is paid in cash or in Shares, will generally be deemed to
be interest received at that time by such Holder to the extent that such premium
can reasonably be considered to relate to, and does not exceed the value at the
time of payment of the interest that, but for the repayment, would have been
paid or payable by the Corporation on the Debentures for taxation years of the
Corporation ending after the date of such repayment.
87
A Holder that is a Canadian-controlled private corporation
(as defined in the Tax Act) may be liable to pay an additional tax, which is
refundable, under certain circumstances, on certain investment income, including
amounts in respect of interest.
To the extent that non-resident withholding tax is payable by a
Holder in respect of interest received on the Debentures, the Holder may be
eligible for a foreign tax credit or deduction under the Tax Act to the extent
and under the circumstances described in the Tax Act. Holders should consult
their own tax advisors regarding the availability of a foreign tax credit or
deduction, having regard to their particular circumstances.
Exercise of Conversion Privilege
The conversion of a Debenture into only Shares plus any cash
not in excess of $200 in lieu of a fraction of a Share pursuant to a right of
conversion will generally be deemed not to constitute a disposition of the
Debenture pursuant to the Tax Act and, accordingly, the Holder will not realize
a capital gain or capital loss on such conversion. The Corporation does not
currently have a rights plan and the previous statement assumes that there is no
rights plan in existence at the time of conversion.
A Holders aggregate cost of the Shares acquired on conversion
of the Debentures where the Holder receives only Shares (plus cash delivered in
lieu of a fraction of a Share) will be equal to the adjusted cost base of the
Debentures converted, subject to the discussion below regarding cash in lieu of
a fraction of a Share. For the purposes of determining the adjusted cost base of
such Shares, the cost of the Shares will be averaged with the adjusted cost base
of all other Shares held by a Holder as capital property immediately before the
time of conversion.
Under the current administrative practice of the Canada Revenue
Agency, a Holder who, upon conversion of the Debentures where the Holder
receives only Shares (plus cash in lieu of a fraction of a Share), receives cash
not in excess of $200 in lieu of a fraction of a Share, may either treat this
amount as proceeds of disposition of a portion of the Debentures thereby
realizing a capital gain or capital loss, as discussed below under the heading
Dispositions of Debentures, or alternatively may reduce the adjusted cost base
of the Shares that the Holder acquires on the conversion by the amount of cash
received.
If on a conversion of a Debenture, a Holder receives
consideration wholly or partly in the form of cash (other than cash delivered in
lieu of a fraction of a Share not in excess of $200, as described above) the
Holder will be considered to have disposed of the Debenture for purposes of the
Tax Act. See Dispositions of Debentures.
Redemption or Repayment of Debentures
If the Corporation redeems a Debenture prior to maturity or
repays a Debenture upon maturity and the Holder does not exercise the conversion
privilege prior to such redemption or repayment, the Holder will be considered
to have disposed of the Debenture for proceeds of disposition equal to the
amount received by the Holder (other than the amount received or deemed to be
received on account of interest) on such redemption or repayment. If the Holder
receives Shares on redemption or repayment, the Holder will be considered to
have realized proceeds of disposition equal to the aggregate of the fair market
value of the Shares so received and the amount of any cash received in lieu of
fractional Shares. The Holder may realize a capital gain or capital loss
computed as described below under Dispositions of Debentures. The cost to the
Holder of the Shares so received will also be equal to their fair market value
at the time of acquisition, and must be averaged with the adjusted cost base of
all other Shares held as capital property immediately before the time of
redemption or repayment, as applicable, by the Holder for the purpose of
calculating the adjusted cost base of such Shares.
Dispositions of Debentures
A disposition or deemed disposition of a Debenture by a Holder
(including upon a redemption or repayment of a Debenture) will generally result
in the Holder realizing a capital gain (or capital loss) equal to the amount by
which the proceeds of disposition (adjusted as described below) net of any
reasonable costs of disposition, exceed (or are less than) the Holders adjusted
cost base thereof. Any such capital gain or capital loss will be treated, for
tax purposes, in the same manner as capital gains and capital losses arising
from a disposition of Shares which treatment is discussed below under
Dispositions of Debentures.
Upon such a disposition or deemed disposition of a Debenture,
interest accrued thereon to the date of disposition and not yet due will be
included in computing the Holders income, except to the extent such amount was
otherwise included in the Holders income, and will be excluded in computing the
Holders proceeds of disposition of the Debenture.
88
A capital gain realized by a Holder who is an individual or
trust (other than certain specified trusts) may give rise to a liability for
alternative minimum tax.
A Canadian-controlled private corporation (as defined in the
Tax Act) that disposes of Debentures may be liable to pay an additional tax,
which is refundable under certain circumstances, on certain investment income
for the year, including amounts in respect of taxable capital gains.
Dividends
The full amount of dividends received (or deemed to be
received) on the Shares by a Holder who is an individual (including a trust),
including amounts withheld for foreign withholding tax, if any, will be included
in computing the Holders income and will not be subject to the gross-up and
dividend tax credit rules normally applicable under the Tax Act to taxable
dividends received (or deemed to be received) from taxable Canadian
corporations.
Dividends received on the Shares by a Holder that is a
corporation, including amounts withheld for foreign withholding tax, if any,
will be included in computing the Holders income, and such Holder will not be
entitled to the inter-corporate dividend deduction in computing taxable income
which generally applies to dividends received from taxable Canadian
corporations.
A Canadian-controlled private corporation (as defined in the
Tax Act) may be liable to pay an additional tax, which is refundable, under
certain circumstances, on certain investment income for the year, including the
amount of such dividends.
Subject to the detailed rules in the Tax Act, a Holder may be
entitled to a foreign tax credit or deduction for any foreign withholding tax
paid with respect to dividends received by the Holder on Shares. Holders should
consult their own tax advisors with respect to the availability of a foreign tax
credit or deducting having regard to their own particular circumstances.
Dispositions of Shares
On the disposition or deemed disposition of a Share by a
Holder, the Holder will generally realize a capital gain (or a capital loss)
equal to the amount by which the proceeds of disposition in respect of such
Share, net of any reasonable costs of disposition, exceed (or are less than) the
adjusted cost base of the Share to the Holder.
For the purpose of determining the adjusted cost base to a
Holder of Shares, when a Share is acquired, the cost of the newly-acquired Share
will be averaged with the adjusted cost base of all of the Shares owned by the
Holder as capital property immediately before that acquisition. The adjusted
cost base of a Share to a Holder will be the cost to the Holder of the Share,
with certain adjustments.
One-half of the amount of any capital gain (a
taxable
capital gain
) realized by a Holder in a taxation year must be included in
computing such Holders income for that year, and one-half of any capital loss
(an
allowable capital loss
) realized by a Holder in a taxation year
must be deducted from any taxable capital gains realized by the Holder in the
year, subject to and in accordance with the provisions of the Tax Act. Allowable
capital losses in excess of taxable capital gains realized in a taxation year
may be carried back and deducted in any of the three preceding taxation years or
carried forward and deducted in any following net taxation year against taxable
capital gains realized in such years, subject to and in accordance with the
provisions of the Tax Act.
A capital gain realized by a Holder who is an individual or
trust (other than certain specified trusts) may give rise to a liability for
alternative minimum tax.
A Canadian-controlled private corporation (as defined in the
Tax Act) that disposes of Shares may be liable to pay an additional tax, which
is refundable, under certain circumstances, on certain investment income for the
year, including amounts taxable capital gains.
Foreign Property Information Reporting
Generally, a Holder that is a specified Canadian entity (as
defined in the Tax Act) for a taxation year or a fiscal period and whose total
cost amount of specified foreign property (as such terms are defined in the
Tax Act), including the Debentures and Shares, at any time in the year or fiscal
period exceeds $100,000 will be required to file an information return with the
Canada Revenue Agency for the year or period disclosing prescribed information
in respect of such property. Subject to certain exceptions, a Holder generally
will be a specified Canadian entity. The Debentures and Shares will be
specified foreign property of a Holder for these purposes. Penalties may apply
where a Holder fails to file the required information return in respect of such
Holders specified foreign property on a timely basis in accordance with the
Tax Act. Holders should consult their own tax advisors regarding compliance with
these reporting requirements.
89
Offshore Investment Fund Property
The Tax Act contains rules which may require a taxpayer to
include in income in each taxation year an amount in respect of the holding of
an offshore investment fund property. These rules could apply to a Holder in
respect of a Debenture or Share if both of two conditions are satisfied.
The first condition for such rules to apply is that the value
of the Debenture or Share may reasonably be considered to be derived, directly
or indirectly, primarily from portfolio investments in: (i) shares of one or
more corporations, (ii) indebtedness or annuities, (iii) interests in one or
more corporations, trusts, partnerships, organizations, funds or entities, (iv)
commodities, (v) real estate, (vi) Canadian or foreign resource properties,
(vii) currency of a country other than Canada, (viii) rights or options to
acquire or dispose of any of the foregoing, or (ix) any combination of the
foregoing (Investment Assets).
The second condition for such rules to apply to a Holder is
that it must be reasonable to conclude that one of the main reasons for the
Holder acquiring or holding a Debenture or Share was to derive a benefit from
portfolio investments in Investment Assets in such a manner that the taxes, if
any, on the income, profits and gains from such Investment Assets for any
particular year are significantly less than the tax that would have been
applicable under Part I of the Tax Act had the income, profits and gains been
earned directly by the Holder.
If applicable, these rules would generally require a Holder to
include in income for each taxation year in which the Holder owns a Debenture or
Share (i) an imputed return for the taxation year computed on a monthly basis
and determined by multiplying the Holders designated cost (as defined in the
Tax Act) of the Debenture or Share at the end of the month, by 1/12th of the sum
of the applicable prescribed rate for the period that includes such month plus
2%, less (ii) the Holders income for the year (other than a capital gain) from
the Debenture or Share determined without reference to these rules. Any amount
required to be included in computing a Holders income under these provisions
will be added to the adjusted cost base to the Holder of the applicable
Debenture or Share.
These rules are complex and their application depends, to a
large extent, in part, on the reasons for a Holder acquiring or holding the
Debentures or Shares. Holders are urged to consult their own tax advisors
regarding the application and consequences of these rules in their own
particular circumstances.
EXPERTS
IntelGenx Technologies Corp. financial statements for the years
ended December 31, 2016 and 2015 included in this registration statement have
been audited by Richter, LLP, Montreal, Quebec, an independent registered public
accounting firm, as stated in their report, and have been so included in
reliance upon the report of said firm and their authority as experts in
accounting and auditing. This report expresses an unqualified opinion.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
We have had no disagreements with our independent registered
public accountants with respect to accounting practices or procedures or
financial disclosure.
90
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file reports and other information with the Securities and
Exchange Commission. We have also filed a registration statement on Form S-1,
including exhibits, with the SEC with respect to the shares being offered in
this offering. This prospectus is part of the registration statement, but it
does not contain all of the information included in the registration statement
or exhibits. For further information with respect to us and our common stock, we
refer you to the registration statement and to the exhibits and schedules to the
registration statement. Statements contained in this prospectus as to the
contents of any contract or any other document referred to are not necessarily
complete, and in each instance, we refer you to the copy of the contract or
other document filed as an exhibit to the registration statement. Each of these
statements is qualified in all respects by this reference. You may inspect a
copy of the registration statement and other reports we file with the Securities
and Exchange Commission without charge at the SEC's principal office in
Washington, D.C., and copies of all or any part of the registration statement
may be obtained from the Public Reference Section of the SEC, 100 F Street NE,
Washington, D.C. 20549, upon payment of fees prescribed by the SEC. The SEC
maintains an internet site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC. The address of the Web site is http://www.sec.gov. The SEC's toll
free investor information service can be reached at 1-800-SEC-0330.
DOCUMENTS INCORPORATED BY REFERENCE
All documents that we file with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended,
after the effective date of the initial registration statement of which this
prospectus is a part and all such documents that we file with the SEC after the
date of this prospectus and before the termination of the offering of our
securities shall be deemed incorporated by reference into this prospectus and to
be a part of this prospectus from the respective dates of filing such documents.
Unless specifically stated to the contrary, none of the information that we
disclose under Items 2.02 or 7.01 of any Current Report on Form 8-K that we may
from time to time furnish to the SEC will be incorporated by reference into, or
otherwise included in, this prospectus.
Any statement contained in a document incorporated by reference
in this prospectus shall be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained in this prospectus or
in any other subsequently filed document that also is or is deemed to be
incorporated by reference in this prospectus modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this prospectus.
Copies of the documents incorporated by reference in this
Prospectus may be obtained on written or oral request without charge from our
Investor Relations Department at 6420 Abrams, Ville Saint Laurent, Quebec H4S
1Y2, Canada (telephone: (514) 331-7440).
We also maintain a web site at http://www.intelgenx.com through
which you can obtain copies of documents that we have filed with the SEC. The
contents of that site are not incorporated by reference into or otherwise a part
of this prospectus.
91
IntelGenx Technologies Corp.
Consolidated Interim Financial Statements
March 31, 2017
(Expressed in U.S. Funds)
(Unaudited)
Contents
|
|
Consolidated
Balance Sheet
|
F-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 - 14
|
F-1
IntelGenx Technologies Corp.
Consolidated
Balance Sheet
(Expressed in Thousands of U.S. Dollars ($000s) Except
Share and Per Share Data)
(Unaudited)
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Assets
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
300
|
|
$
|
612
|
|
Short-term investments
|
|
3,632
|
|
|
3,884
|
|
Accounts receivable
|
|
428
|
|
|
1,044
|
|
Prepaid expenses
|
|
428
|
|
|
566
|
|
Investment tax
credits receivable
|
|
178
|
|
|
246
|
|
Total Current Assets
|
|
4,966
|
|
|
6,352
|
|
Leasehold Improvements and
Equipment, net (note 4)
|
|
5,833
|
|
|
5,730
|
|
Security Deposits
|
|
714
|
|
|
708
|
|
Total Assets
|
$
|
11,513
|
|
$
|
12,790
|
|
Liabilities
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
613
|
|
|
897
|
|
Current portion of long-term debt (note 7)
|
|
710
|
|
|
704
|
|
Deferred revenue (note
6)
|
|
2,750
|
|
|
3,634
|
|
Total Current Liabilities
|
|
4,073
|
|
|
5,235
|
|
Deferred lease obligations
|
|
46
|
|
|
45
|
|
Long-term debt
(note 7)
|
|
2,410
|
|
|
2,565
|
|
Total Liabilities
|
|
6,529
|
|
|
7,845
|
|
|
|
|
|
|
|
|
Subsequent event (note 12)
|
|
|
|
|
|
|
Shareholders' Equity
|
|
|
|
|
|
|
Capital Stock, common shares, $0.00001 par
value; 100,000,000 shares authorized;
65,422,020 shares issued and
outstanding (2016: 64,812,020 common shares) (note 8)
|
|
1
|
|
|
1
|
|
Additional Paid-in-Capital
(note 9)
|
|
24,207
|
|
|
23,700
|
|
Accumulated Deficit
|
|
(18,249
|
)
|
|
(17,737
|
)
|
Accumulated Other Comprehensive Loss
|
|
(975
|
)
|
|
(1,019
|
)
|
Total Shareholders Equity
|
|
4,984
|
|
|
4,945
|
|
|
$
|
11,513
|
|
$
|
12,790
|
|
See accompanying notes
Approved on Behalf of the Board:
/s/ Bernd J.
Melchers
Director
/s/Horst G.
Zerbe
Director
F-2
IntelGenx
Technologies
Corp.
Consolidated
Statement
of
Shareholders'
Equity
For the Period Ended March 31, 2017
(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,
2016
|
|
64,812,020
|
|
$
|
1
|
|
$
|
23,700
|
|
$
|
(17,737
|
)
|
$
|
(1,019
|
)
|
$
|
4,945
|
|
Foreign currency translation adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
44
|
|
|
44
|
|
Warrants exercised (note 9)
|
|
560,000
|
|
|
-
|
|
|
316
|
|
|
-
|
|
|
-
|
|
|
316
|
|
Options exercised (note 9)
|
|
50,000
|
|
|
-
|
|
|
21
|
|
|
-
|
|
|
-
|
|
|
21
|
|
Stock-based compensation
(note 9)
|
|
-
|
|
|
-
|
|
|
170
|
|
|
-
|
|
|
-
|
|
|
170
|
|
Net
loss for the period
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(512
|
)
|
|
-
|
|
|
(512
|
)
|
Balance March 31, 2017
|
|
65,422,020
|
|
$
|
1
|
|
$
|
24,207
|
|
$
|
(18,249
|
)
|
$
|
(975
|
)
|
$
|
4,984
|
|
See accompanying notes
F-3
IntelGenx Technologies Corp.
Consolidated Statement of Comprehensive Loss
(Expressed in Thousands of U.S. Dollars ($000s) Except Share and Per
Share Data)
(Unaudited)
|
|
For the
Three-Month Period
|
|
|
|
Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Revenues
|
|
|
|
|
|
|
Royalties
|
$
|
-
|
|
$
|
379
|
|
License and other
revenue
|
|
1,353
|
|
|
439
|
|
Total Revenues
|
|
1,353
|
|
|
818
|
|
Expenses
|
|
|
|
|
|
|
Cost of royalty and license revenue
|
|
92
|
|
|
65
|
|
Research and development expense
|
|
644
|
|
|
481
|
|
Selling, general and administrative expense
|
|
904
|
|
|
891
|
|
Depreciation of
tangible assets
|
|
170
|
|
|
87
|
|
Total Expenses
|
|
1,810
|
|
|
1,524
|
|
|
|
|
|
|
|
|
Operating loss
|
|
(457
|
)
|
|
(706
|
)
|
Interest income
|
|
2
|
|
|
-
|
|
Financing and interest expense
|
|
(57
|
)
|
|
(40
|
)
|
Net Loss
|
|
(512
|
)
|
|
(746
|
)
|
|
|
|
|
|
|
|
Other Comprehensive Income
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
44
|
|
|
39
|
|
Comprehensive Loss
|
$
|
(468
|
)
|
$
|
(707
|
)
|
|
|
|
|
|
|
|
Basic and Diluted Weighted Average Number of Shares
Outstanding
|
|
65,305,520
|
|
|
63,615,255
|
|
Basic and Diluted Loss Per Common Share (note 11)
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
See accompanying notes
F-4
IntelGenx Technologies Corp.
Consolidated Statement of Cash Flows
(Expressed
in thousands of U.S. Dollars ($000s) Except Share and Per Share Data)
(Unaudited)
|
|
For the Three-Month Period
|
|
|
|
Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Funds Provided (Used) -
|
|
|
|
|
|
|
Operating Activities
|
|
|
|
|
|
|
Net loss
|
$
|
(512
|
)
|
$
|
(746
|
)
|
Depreciation
|
|
170
|
|
|
87
|
|
Stock-based compensation
|
|
170
|
|
|
63
|
|
|
|
(172
|
)
|
|
(596
|
)
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
Accounts receivable
|
|
616
|
|
|
650
|
|
Prepaid expenses
|
|
138
|
|
|
(12
|
)
|
Investment tax credits receivable
|
|
68
|
|
|
(29
|
)
|
Security deposits
|
|
(6
|
)
|
|
(226
|
)
|
Accounts payable and accrued liabilities
|
|
(284
|
)
|
|
(860
|
)
|
Deferred revenue
|
|
(884
|
)
|
|
-
|
|
Deferred lease obligations
|
|
1
|
|
|
17
|
|
Net change in assets
and liabilities
|
|
(351
|
)
|
|
(460
|
)
|
Net cash used in operating activities
|
|
(523
|
)
|
|
(1,056
|
)
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
Issuance
of term loans
|
|
-
|
|
|
392
|
|
Repayment of term loans
|
|
(103
|
)
|
|
(17
|
)
|
Proceeds from exercise
of warrants and stock options
|
|
337
|
|
|
-
|
|
Net cash provided by financing activities
|
|
234
|
|
|
375
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
Additions
to leasehold improvements and equipment
|
|
(222
|
)
|
|
(290
|
)
|
Redemption of short-term investments
|
|
300
|
|
|
-
|
|
Net cash provided by
(used in) investing activities
|
|
78
|
|
|
(290
|
)
|
|
|
|
|
|
|
|
Decrease in Cash and Cash
Equivalents
|
|
(211
|
)
|
|
(971
|
)
|
Effect of Foreign Exchange on Cash and Cash
Equivalents
|
|
(101
|
)
|
|
173
|
|
Cash and Cash Equivalents
|
|
|
|
|
|
|
Beginning of Period
|
|
612
|
|
|
2,865
|
|
End of Period
|
$
|
300
|
|
$
|
2,067
|
|
See accompanying notes
F-5
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
March
31, 2017
(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, 2016. Operating results for the three months ended March 31, 2017
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2017. 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 Update 2016-06,
Derivatives and Hedging Contingent Put and Call Options in Debt Instruments,
clarifying the requirements for assessing whether contingent call (put) options
that can accelerate the payment of principal on debt instruments are clearly and
closely related to their debt hosts. The amendments in this Update require an
entity performing the assessment to assess the embedded call (put) options
solely in accordance with the four-step decision sequence. For public business
entities, the amendments in this Update are effective for fiscal years beginning
after December 15, 2016, including interim periods within those fiscal years.
The adoption of this statement did not have a material effect on the Companys
financial position or results.
The FASB issued Update 2016-09,
Compensation Stock Compensation Improvements to Employee Share-Based Payment
Accounting, simplifying several aspects of the accounting for share-based
payment transactions, including income tax consequences, classification of
awards as either equity or liabilities, and classification on the statement of
cash flows. For public business entities, the amendments in this Update are
effective for fiscal years beginning after December 15, 2016, including interim
periods within those fiscal years. The adoption of this statement did not have a
material effect on the Companys financial position or results.
F-6
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
March
31, 2017
(Expressed in U.S. Funds)
(Unaudited)
2.
|
Adoption of New Accounting Standards
(Cont'd)
|
The FASB issued Update 2015-11,
Inventory: Simplifying the Measurement of Inventory, aligning the measurement of
inventory in GAAP with the measurement of inventory in International Financial
Reporting Standards (IFRS). The amendments in this Update state that an entity
should measure inventory within the scope of this update at the lower of cost
and net realizable value. Net realizable value is the estimated selling prices
in the ordinary course of business, less reasonably predictable costs of
completion, disposal, and transportation. For public business entities, the
amendments in this Update are effective for fiscal years beginning after
December 15, 2016, including interim periods within those fiscal years. The
adoption of this statement did not have a material effect on the Companys
financial position or results.
The FASB issued 2015-017, Income Taxes:
Balance Sheet Classification of Deferred Taxes, which requires that deferred tax
liabilities be classified as noncurrent in a classified statement of financial
position. For public business entities, the amendments in this Update are
effective for fiscal years beginning after December 15, 2016, including interim
periods within those fiscal years. The adoption of this statement did not have a
material effect on the Companys financial position or results.
3.
|
Significant Accounting
Policies
|
ASU 2016-18 Statement of Cash
Flows (Topic 230) Restricted Cash
In November 2016, the FASB issued ASU
2016-18 which requires that the statement of cash flows explain the change
during the period in the total cash, cash equivalents, and amounts generally
described as restricted or restricted cash equivalents. The statement is
effective for annual periods beginning after December 15, 2017, and interim
periods within those annual periods. Early adoption is permitted in any interim
or annual period and should be applied on a retrospective basis. The Company is
currently evaluating the impact of this Statement on its consolidated financial
statements.
ASU 2016-15 Statement of Cash
Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments
In August 2016, the FASB issued ASU
2016-15 which clarifies how certain cash receipts and payments are to be
presented in the Statement of cash flows. The statement is effective for annual
periods beginning after December 15, 2017, and interim periods within those
annual periods. Early adoption is permitted in any interim or annual period,
with any adjustments reflected as of the beginning of the fiscal year of
adoption. The Company is currently evaluating the impact of this Statement on
its consolidated financial statements.
F-7
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
March
31, 2017
(Expressed in U.S. Funds)
(Unaudited)
3.
|
Significant Accounting Policies
(Contd)
|
ASU 2016-01 Financial Instruments
Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and
Financial Liabilities
In January 2016, the FASB issued ASU
2016-01, which will significantly change practice for all entities. The targeted
amendments to existing guidance are expected to include:
|
1.
|
Equity investments that do not result in consolidation
and are not accounted for under the equity method would be measured at
fair value through net income, unless they qualify for the proposed
practicability exception for investments that do not have readily
determinable fair values.
|
|
|
|
|
2.
|
Changes in instrument-specific credit risk for financial
liabilities that are measured under the fair value option would be
recognized in other comprehensive income.
|
|
|
|
|
3.
|
Entities would make the assessment of the realizability
of a deferred tax asset (DTA) related to an available- for-sale (AFS) debt
security in combination with the entitys other DTAs. The guidance would
eliminate one method that is currently acceptable for assessing the
realizability of DTAs related to AFS debt securities. That is, an entity
would no longer be able to consider its intent and ability to hold debt
securities with unrealized losses until recovery.
|
|
|
|
|
4.
|
Disclosure of the fair value of financial instruments
measured at amortized cost would no longer be required for entities that
not public business entities.
|
For public business entities, the
amendments in this Update are effective for fiscal years beginning after
December 15, 2017, including interim periods within those fiscal years. The
Company is currently evaluating the impact of this Statement on its consolidated
financial statements.
ASU 2017-04 Intangibles Goodwill
and Other (Topic 350) Simplifying the Test for Goodwill Impairment
The FASB issued ASU 2017-04 which
eliminates Step 2 from the goodwill impairment test and eliminates the
requirements for any reporting unit with a zero or negative carrying amount to
perform a qualitative assessment. These amendments are effective for a public
business entity for fiscal years beginning after December 15, 2019. Early
adoption is permitted in any interim or annual period and should be applied on a
retrospective basis. The Company is currently evaluating the impact of this
Statement on its consolidated financial statements.
F-8
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
March
31, 2017
(Expressed in U.S. Funds)
(Unaudited)
3.
|
Significant Accounting Policies
(Contd)
|
ASU 2017-01 - Business Combinations
(Topic 805) Clarifying the Definition of a Business
The FASB issued ASU 2017-01 clarifies
the definition of a business and is intended to help companies evaluate whether
transactions should be accounted for as acquisitions (or disposals) of assets or
businesses.These amendments are effective for a public business entity for
fiscal years beginning after December 15, 2017, including interim periods within
those fiscal years. Early adoption is permitted under certain circumstances and
should be applied on a prospective. The Company is currently evaluating the
impact of this Statement on its consolidated financial statements.
ASU 2016-16 Income Taxes (Topic
740) Intra-Entity Transfers of Assets Other Than Inventory
The FASB issued ASU 2016-16 and
requires an entity to recognize the income tax consequences of an intra-entity
transfer of an asset other than inventory when the transfer occurs. These
amendments are effective for a public business entity for fiscal years beginning
after December 15, 2017, including interim periods within those fiscal years.
The amendments should be applied on a modified retrospective basis through a
cumulative-effect adjustment directly to retained earnings as of the beginning
of the period of adoption. The Company is currently evaluating the impact of
this Statement on its consolidated financial statements.
ASU 2016-02: Leases (Topic 842)
Section A
The FASB issued ASU 2016-02 to increase
the transparency and comparability among organizations by recognizing lease
assets and lease liabilities on the balance sheet and disclosing key information
about leasing arrangements.
These amendments are effective for a
public business entity for fiscal years beginning after December 15, 2018,
including interim periods within those fiscal years.
The Company is currently evaluating the
impact of this Statement on its consolidated financial statements.
F-9
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
March
31, 2017
(Expressed in U.S. Funds)
(Unaudited)
3.
|
Significant Accounting Policies
(Contd)
|
Revenue from Contracts with
Customers (Topic 606)
The FASB and IASB (the Boards) have
issued converged standards on revenue recognition. ASU No. 2014-09 which 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.
|
In the year ended December 31, 2016,
the FASB issued three new amendments related to Topic 606:
|
1.
|
ASU 2016-08: Revenue from Contracts with Customers (Topic
606): Principal versus Agent Considerations (Reporting Revenue Gross
versus Net) which was issued to add clarification to the implementation
guidance on principle versus agent considerations. This amendment does not
provide any changes to the previously issued ASU No. 2014-09 and is
effective for the same reporting period which was deferred by one year in
ASU 2015-14: Revenue From Contracts With Customers (Topic 606), Deferral
of the Effective Date.
|
|
|
|
|
2.
|
ASU 2016-10: Revenue from Contracts with Customers (Topic
606): Identifying Performance Obligations and Licensing which was issued
to clarifying the following two aspects of topic 606; identifying
performance obligations and the licensing implementation guidance. This
amendment does not provide any changes to the previously issued ASU No.
2014-09 and is effective for the same reporting period which was deferred
by one year in ASU 2015-14: Revenue From Contracts With Customers (Topic
606), Deferral of the Effective Date.
|
|
|
|
|
3.
|
ASU 2016-11 Revenue Recognition (Topic 605) and
Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of
Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff
Announcements at the March 3, 2016 EITF Meeting. With this amendment, the
SEC Staff is rescinding the following SEC Staff Observer comments that are
codified in Topic 605, Revenue Recognition, and Topic 932, Extractive
ActivitiesOil and Gas, effective upon adoption of Topic 606. This
amendment is effective immediately.
|
F-10
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
March
31, 2017
(Expressed in U.S. Funds)
(Unaudited)
3.
|
Significant Accounting Policies
(Contd)
|
Public business entities, certain
not-for-profit entities, and certain employee benefit plans should apply the
guidance in Update 2014-09 to annual reporting periods beginning after December
15, 2017, including interim reporting periods within that reporting period.
Earlier application is permitted only as of annual reporting periods beginning
after December 15, 2016, including interim reporting periods within that
reporting period.
This ASU is to be applied
retrospectively, with certain practical expedients allowed. The Company is
currently evaluating the impact of this Statement on its consolidated financial
statements
4.
|
Leasehold Improvements and
Equipment
|
As at March 31, 2017 no depreciation
has been recorded on manufacturing equipment in the amount of $339 as the
equipment is not ready for use.
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$75 thousand.
Borrowings under the operating demand line of credit bear interest at the Banks
prime lending rate plus 2%. The credit facility and term loan (see note 7) are
secured by a first ranking movable hypothec on all present and future movable
property of the Company and a 50% guarantee by Export Development Canada, a
Canadian Crown corporation export credit agency. The terms of the banking
agreement require the Company to comply with certain debt service coverage and
debt to net worth financial covenants on an annual basis at the end of the
Companys fiscal year. As at March 31, 2017, the Company has not drawn on its
credit facility.
On August 5, 2016, the Company sold its
U.S. royalty on future sales of Forfivo XL
®
to SWK Holdings
Corporation for $6 million. Under the terms of the agreement, SWK paid IntelGenx
$6 million at closing. In return for, (i) 100% of any and all royalties or
similar royalty amounts received on or after April 1, 2016, (ii) 100% of the $2
million milestone payment upon Edgemont reaching annual net sales of $15
million, and (iii) 35% of all potential future milestone payments.
The deferred revenue represents the
remaining, unrecognized portin of the payment received for the royalty on future
sales in the amount of $6 milliion less the Q2 royalties recognized in the
second quarter of 2016 in the amount of $352 thousand. The deferred revenue will
be recognized as other revenue on a straight-line basis until December 31,
2017.
F-11
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
March
31, 2017
(Expressed in U.S. Funds)
(Unaudited)
6.
|
Deferred Revenue (contd)
|
10% of the proceeds were paid to our
former development partner, Cary Pharmaceuticals Inc. This amount is included in
prepaid expenses and will be recognized as cost of royalty, license and other
revenue on a straight-line basis until December 31, 2017.
The components of the Companys debt
are as follows:
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
|
$
|
|
|
$
|
|
|
(in U.S. $ thousands)
|
|
|
|
|
|
|
|
Term loan facility
|
|
2,519
|
|
|
2,636
|
|
|
Secured loan
|
|
601
|
|
|
633
|
|
|
Total debt
|
|
3,120
|
|
|
3,269
|
|
|
Less: current
portion
|
|
710
|
|
|
704
|
|
|
Total long-term debt
|
|
2,410
|
|
|
2,565
|
|
The Companys term loan facility
consists of a total of CAD$4 million bearing interest at the Banks prime
lending rate plus 2.50% . The term loan is subject to the same security and
financial covenants as the bank indebtedness (see note 5).
The secured loan has a principal
balance authorized of CAD$1 million bearing interest at prime plus 7.3%,
reimbursable in monthly principal payments of CAD$17 thousand from January 2017
to March 2021. The loan is secured by a second ranking on all present and future
property of the Company. 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.
Principal repayments due in each of the
next five years are as follows:
|
2017
|
$
|
532 (CAD 709)
|
|
|
2018
|
|
710 (CAD 945)
|
|
|
2019
|
|
710 (CAD 945)
|
|
|
2020
|
|
710 (CAD 945)
|
|
|
2021
|
|
458 (CAD 610)
|
|
F-12
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
March
31, 2017
(Expressed in U.S. Funds)
(Unaudited)
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Authorized -
|
|
|
|
|
|
|
|
100,000,000 common shares of $0.00001 par value
|
|
|
|
|
|
|
|
20,000,000 preferred shares of $0.00001 par value
|
|
|
|
|
|
|
|
Issued -
|
|
|
|
|
|
|
|
65,422,020 (December 31, 2016 - 64,812,020) common
shares
|
$
|
1
|
|
$
|
1
|
|
9.
|
Additional Paid-In Capital
|
Stock options
During the three-month period ended
March 31, 2017, on January 18, 2017, 300,000 options to purchase common stock
were granted to non-employee directors under the 2016 Stock Option Plan. The
options have an exercise price of $0.89. The options vest immediately and expire
10 years after the grant date. The stock options were accounted for at their
fair value, as determined by the Black-Scholes valuation model, of approximately
$114 thousand.
During the three-month period ended
March 31, 2017 a total of 50,000 stock options were exercised for 50,000 common
shares having a par value of $0 thousand in aggregate, for cash consideration of
$21 thousand, resulting in an increase in additional paid-in capital of $21
thousand. No stock options were exercised during the three-month period ended
March 31, 2016.
Compensation expenses for stock-based
compensation of $170 thousand and $63 thousand were recorded during the
three-month periods ended March 31, 2017 and March 31, 2016 respectively. An
amount of $168 thousand expensed in the first quarter of 2017 relates to stock
options granted to employees and directors and an amount of $2 thousand relates
to stock options granted to a consultant. The entire amount expensed in the
first quarter of 2016 relates to stock options granted to employees and
directors. As at March 31, 2017 the Company has $238 thousand (2016 - $159
thousand) of unrecognized stock-based compensation.
Warrants
During the three-month period ended
March 31, 2017 a total of 560,000 warrants were exercised for 560,000 common
shares having a par value of $Nil in aggregate, for cash consideration of
approximately $316 thousand, resulting in an increase in additional paid-in
capital of approximately $316 thousand. No warrants were exercised during the
three-month period ended March 31, 2016.
F-13
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
March
31, 2017
(Expressed in U.S. Funds)
(Unaudited)
10.
|
Related Party Transactions
|
Included in management salaries are
$Nil (2016 - $1 thousand) for options granted to the Chief Executive Officer,
$15 thousand (2016 - $15 thousand) for options granted to the Chief Financial
Officer, $3 thousand (2016 - $3 thousand) for options granted to the Vice
President, Operations, $1 thousand (2016 - $1 thousand) for options granted to
the Vice-President, Research and Development, $8 thousand (2016 $Nil) for
options granted to Vice-President, Business and Corporate Development and $Nil
(2016 - $2 thousand) for options granted to the Vice President, Corporate
Development under the 2016 Stock Option Plan and $119 thousand (2016 - $35
thousand) for options granted to non-employee directors.
Also included in management salaries
are director fees of $68 thousand (2016 - $44 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. Common share equivalents from stock options and warrants are also
included in the diluted per share calculations unless the effect of the
inclusion would be antidilutive.
Subsequent to the quarter end, on April
5, 2017, the Company filed a preliminary short form prospectus with respect to
an offering of a minimum of Cdn$7,000,000 and a maximum of Cdn$10,000,000
aggregate principal amount of 8% convertible unsecured subordinated debentures
due June 30, 2020 at a price of Cdn$1,000 per Debenture. Concurrently with the
filing of the Prospectus, the Corporation has filed a registration statement on
Form S-1 with the United States Securities and Exchange Commission to register
the Debentures and the shares of common stock underlying the Debentures.
The Debentures will bear interest at an
annual rate of 8%, payable semi-annually on the last day of June and December of
each year, commencing on June 30, 2017. The size of the Offering and the
conversion price will be determined in the context of the market prior to filing
of a (final) short form prospectus. Total issue costs related to this
transaction will amount to approximately Cdn$350,000 and a commission of 6% of
the gross proceeds will be paid.
F-14
IntelGenx Technologies Corp
|
|
Consolidated Financial Statements
|
December 31, 2016 and 2015
|
|
(Expressed in U.S. Funds)
|
IntelGenx Technologies Corp
|
|
Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
Contents
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F
- 16
|
|
|
Consolidated
Balance Sheets
|
F - 17
|
|
|
Consolidated
Statements of Shareholders' Equity
|
F
- 18 - 19
|
|
|
Consolidated
Statements of Comprehensive Loss
|
F - 20
|
|
|
Consolidated
Statements of Cash Flows
|
F - 21
|
|
|
Notes
to Consolidated Financial Statements
|
F
- 22 - 45
|
F-15
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
IntelGenx
Technologies Corp.
We have audited the accompanying consolidated balance sheets of
IntelGenx Technologies Corp. as at December 31, 2016 and 2015 and the related
consolidated statements of comprehensive loss, shareholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform an audit to obtain reasonable assurance whether
the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present
fairly in all material respects, the financial position of the Company as at
December 31, 2016 and 2015 and the results of its operations and its cash flows
for the years then ended in accordance with U.S. generally accepted accounting
principles.
Richter LLP (Signed)
1
Montréal, Québec
March 28, 2017
|
|
|
|
|
1
CPA auditor, CA, public accountancy
permit No. A112505
|
|
|
|
514.934.3400
|
|
|
mtlinfo@richter.ca
|
|
|
|
|
|
Richter LLP
|
|
|
1981 McGill College
|
|
|
Mtl (Qc) H3A 0G6
|
|
|
www.richter.ca
|
Montréal, Toronto
|
|
F-16
IntelGenx Technologies Corp.
|
|
Consolidated Balance Sheets
|
As at December 31, 2016 and 2015
|
(Expressed in Thousands of U.S. Dollars ($000) Except
Share and Per Share Data)
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash
and cash equivalents
|
$
|
612
|
|
$
|
2,865
|
|
Short-term investments (note 5)
|
|
3,884
|
|
|
-
|
|
Accounts receivable
|
|
1,044
|
|
|
1,140
|
|
Prepaid expenses
|
|
566
|
|
|
70
|
|
Investment tax credits
receivable
|
|
246
|
|
|
97
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
6,352
|
|
|
4,172
|
|
|
|
|
|
|
|
|
Leasehold Improvements and Equipment, net
(note 6)
|
|
5,730
|
|
|
4,238
|
|
|
|
|
|
|
|
|
Security Deposits
|
|
708
|
|
|
506
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
12,790
|
|
$
|
8,916
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
897
|
|
|
1,595
|
|
Current portion of long-term debt (note 9)
|
|
704
|
|
|
184
|
|
Deferred revenue
(note 8)
|
|
3,634
|
|
|
-
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
5,235
|
|
|
1,779
|
|
|
|
|
|
|
|
|
Deferred lease
obligations
|
|
45
|
|
|
27
|
|
|
|
|
|
|
|
|
Long-term debt
(note 9)
|
|
2,565
|
|
|
1,546
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
7,845
|
|
|
3,352
|
|
|
|
|
|
|
|
|
Commitments (note 10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent event (note
17)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Stock, common shares,
$0.00001 par value; 100,000,000 shares authorized;
64,812,020 shares
issued and outstanding (2015: 63,615,255 common shares) (note 11)
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
Additional Paid-in-Capital
(note 12)
|
|
23,700
|
|
|
22,846
|
|
|
|
|
|
|
|
|
Accumulated Deficit
|
|
(17,737
|
)
|
|
(16,557
|
)
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
|
(1,019
|
)
|
|
(726
|
)
|
|
|
|
|
|
|
|
Total Shareholders Equity
|
|
4,945
|
|
|
5,564
|
|
|
|
|
|
|
|
|
|
$
|
12,790
|
|
$
|
8,916
|
|
See accompanying notes
Approved on Behalf of the Board:
|
|
|
|
/s/ Bernd J. Melchers
|
Director
|
/s/ Horst G. Zerbe
|
Director
|
F - 17
IntelGenx Technologies Corp.
|
|
Consolidated Statement of Shareholders' Equity
|
For the Year Ended December 31, 2015
|
(Expressed in Thousands of U.S. Dollars ($000) Except
Share and Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(492
|
)
|
|
(492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercised (note 12)
|
|
150,000
|
|
|
-
|
|
|
62
|
|
|
-
|
|
|
-
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
(note 12)
|
|
-
|
|
|
-
|
|
|
130
|
|
|
-
|
|
|
-
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,291
|
|
|
-
|
|
|
1,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2015
|
|
63,615,255
|
|
$
|
1
|
|
$
|
22,846
|
|
$
|
(16,557
|
)
|
$
|
(726
|
)
|
$
|
5,564
|
|
See accompanying notes
F - 18
IntelGenx Technologies Corp.
|
|
Consolidated Statement of Shareholders' Equity
|
For the Year Ended December 31, 2016
|
(Expressed in Thousands of U.S. Dollars ($000) Except
Share and Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Capital
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Shareholders'
|
|
|
|
Number
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31,
2015
|
|
63,615,255
|
|
$
|
1
|
|
$
|
22,846
|
|
$
|
(16,557
|
)
|
$
|
(726
|
)
|
$
|
5,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(293
|
)
|
|
(293
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants exercised (note 12)
|
|
1,056,765
|
|
|
-
|
|
|
596
|
|
|
-
|
|
|
-
|
|
|
596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercised (note 12)
|
|
140,000
|
|
|
-
|
|
|
63
|
|
|
-
|
|
|
-
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
(note 12)
|
|
-
|
|
|
-
|
|
|
195
|
|
|
-
|
|
|
-
|
|
|
195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,180
|
)
|
|
-
|
|
|
(1,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2016
|
|
64,812,020
|
|
$
|
1
|
|
$
|
23,700
|
|
$
|
(17,737
|
)
|
$
|
(1,019
|
)
|
$
|
4,945
|
|
See accompanying notes
F - 19
IntelGenx Technologies Corp.
|
|
Consolidated Statements of Comprehensive Loss
|
For the Years Ended December 31, 2016 and 2015
|
(Expressed in Thousands of U.S. Dollars ($000) Except
Share and Per Share Data)
|
|
|
2016
|
|
|
2015
|
|
Revenues
|
|
|
|
|
|
|
Royalties
|
$
|
1,041
|
|
$
|
981
|
|
License and other revenue
|
|
4,179
|
|
|
4,114
|
|
Total Revenues
|
|
5,220
|
|
|
5,095
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
Cost of royalty, license and other revenue
|
|
319
|
|
|
433
|
|
Research and development expense
|
|
1,766
|
|
|
1,033
|
|
Selling, general and administrative expense
|
|
3,605
|
|
|
2,072
|
|
Depreciation of tangible assets
|
|
511
|
|
|
125
|
|
Amortization of intangible assets
|
|
-
|
|
|
46
|
|
Total Expenses
|
|
6,201
|
|
|
3,709
|
|
|
|
|
|
|
|
|
Operating (Loss) Income
|
|
(981
|
)
|
|
1,386
|
|
|
|
|
|
|
|
|
Interest Income
|
|
4
|
|
|
28
|
|
|
|
|
|
|
|
|
Financing and Interest expense
|
|
(203
|
)
|
|
(123
|
)
|
|
|
(199
|
)
|
|
(95
|
)
|
(Loss) Income Before Income Taxes
|
|
(1,180
|
)
|
|
1,291
|
|
|
|
|
|
|
|
|
Income taxes (note 13)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
Net (Loss) Income
|
|
(1,180
|
)
|
|
1,291
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
(293
|
)
|
|
(492
|
)
|
|
|
|
|
|
|
|
Comprehensive (Loss) Income
|
$
|
(1,473
|
)
|
$
|
799
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
Weighted Average Number of Shares Outstanding
|
|
63,956,543
|
|
|
63,524,023
|
|
|
|
|
|
|
|
|
Basic (Loss) Earnings Per Common Share (note 16)
|
$
|
(0.02
|
)
|
$
|
0.01
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
Weighted Average Number of Shares Outstanding
|
|
63,956,543
|
|
|
70,855,146
|
|
|
|
|
|
|
|
|
Diluted (Loss) Earnings Per Common Share (note 16)
|
$
|
(0.02
|
)
|
$
|
0.01
|
|
See accompanying notes
F - 20
IntelGenx Technologies Corp.
|
|
Consolidated Statements of Cash Flows
|
For the Year Ended December 31, 2016 and 2015
|
(Expressed in Thousands of U.S. Dollars ($000) Except
Share and Per Share Data)
|
|
|
2016
|
|
|
2015
|
|
Funds Provided (Used)
-
Operating Activities
|
|
|
|
|
|
|
Net (Loss)
Income
|
$
|
(1,180
|
)
|
$
|
1,291
|
|
Amortization and depreciation
|
|
511
|
|
|
171
|
|
Stock-based compensation
|
|
195
|
|
|
130
|
|
|
|
(474
|
)
|
|
1,592
|
|
Changes in
assets and liabilities
|
|
|
|
|
|
|
Accounts receivable
|
|
96
|
|
|
(488
|
)
|
Prepaid expenses
|
|
(496
|
)
|
|
26
|
|
Investment tax credits receivable
|
|
(149
|
)
|
|
11
|
|
Security deposits
|
|
(202
|
)
|
|
(506
|
)
|
Accounts payable and accrued
liabilities
|
|
(698
|
)
|
|
1,129
|
|
Deferred revenue
|
|
3,634
|
|
|
(1,245
|
)
|
Deferred lease obligations
|
|
18
|
|
|
27
|
|
Net change in assets and
liabilities
|
|
2,203
|
|
|
(1,046
|
)
|
Net cash provided by operating
activities
|
|
1,729
|
|
|
546
|
|
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of term loans
|
|
1,940
|
|
|
1,752
|
|
Repayment
of term loans
|
|
(675
|
)
|
|
(22
|
)
|
Proceeds from exercise
of warrants and stock options
|
|
659
|
|
|
62
|
|
Net cash provided by financing activities
|
|
1,924
|
|
|
1,792
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
to leasehold improvements and equipment
|
|
(2,326
|
)
|
|
(3,380
|
)
|
Acquisitions of short-term investments
|
|
(5,236
|
)
|
|
-
|
|
Redemptions of short-term
investments
|
|
1,652
|
|
|
-
|
|
Net cash used in investing activities
|
|
(5,910
|
)
|
|
(3,380
|
)
|
Decrease in Cash and Cash Equivalents
|
|
(2,257
|
)
|
|
(1,042
|
)
|
Effect of Foreign Exchange
on Cash and Cash Equivalents
|
|
4
|
|
|
(492
|
)
|
Cash and Cash Equivalents
|
|
|
|
|
|
|
Beginning of Year
|
|
2,865
|
|
|
4,399
|
|
End of Year
|
$
|
612
|
|
$
|
2,865
|
|
See accompanying notes
F - 21
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
1.
|
Basis of Presentation
|
|
|
|
IntelGenx Technologies Corp. (IntelGenx or the
Company) prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America (USA).
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.
|
2.
|
Nature of Business
|
|
|
|
IntelGenx was incorporated in the State of Delaware as
Big Flash Corp. on July 27, 1999. On April 28, 2006 Big Flash Corp.
completed, through the Canadian holding corporation, the acquisition of
IntelGenx Corp., a company incorporated in Canada on June 15,
2003.
|
|
|
|
IntelGenx is a pharmaceutical company focused on the
development of novel oral immediate-release and controlled-release
products for the pharmaceutical market. More recently, the Company has
made the strategic decision to enter the oral film market and is in the
process of implementing commercial oral film manufacturing capability. The
Companys product development efforts are based upon three proprietary
delivery platforms, including an immediate release oral film VersaFilm,
a mucoadhesive tablet AdVersa, and a multilayer controlled release
tablet VersaTab. The Company has an aggressive product development
initiative that primarily focuses on addressing unmet market needs and
focuses on utilization of the U.S. Food and Drug Administrations (FDA)
505(b)(2) approval process to obtain more timely and efficient approval of
new formulations of previously approved products.
|
|
|
|
The Companys product pipeline currently consists of 14
products in various stages of development from inception through
commercialization, including products for the treatment of major
depressive disorder, opioid dependence, hypertension, erectile
dysfunction, migraine, schizophrenia, idiopathic pulmonary fibrosis, and
pain management. Of the products currently under development, 10 utilize
the
VersaFilm
technology, 3 utilize the
VersaTab
technology, and one utilizes the
AdVersa
technology.
|
F - 22
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
3.
|
Adoption of New Accounting Standards
|
|
|
|
The FASB issued Update 2015-16, Business Combinations,
which requires that an acquirer recognize adjustments to provisional
amounts that are identified during the measurement period in the reporting
period in which the adjustment amounts are determined. The amendments in
this Update require that the acquirer record, in the same periods
financial statements, the effect on earnings of changes in depreciation,
amortization, or other income effects, if any, as a result of the change
to the provisional amounts, calculated as if the accounting had been
completed at the acquisition date. The amendments in this Update require
an entity to present separately on the face of the income statement or
disclose in the notes the portion of the amount recorded in current-period
earnings by line item that would have been recorded in previous reporting
periods if the adjustment to the provisional amounts had been recognized
as of the acquisition date. The amendments in this Update apply to all
entities that have reported provisional amounts for items in a business
combination for which the accounting is incomplete by the end of the
reporting period in which the combination occurs and during the
measurement period have an adjustment to provisional amounts recognized.
For public business entities, the amendments in this Update are effective
for fiscal years beginning after December 15, 2015, including interim
periods within those fiscal years. The amendments in this Update should be
applied prospectively to adjustments to provisional amounts that occur
after the effective date of this Update with earlier application permitted
for financial statements that have not yet been issued. The adoption of
this Statement did not have a material effect on the Companys financial
position or results of operations.
|
|
|
|
The FASB issued amendments to ASU 2015-03, Interest
Imputation of Interest, which 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. The adoption of this Statement
did not have a material effect on the Companys financial position or
results of operations.
|
|
|
|
The FASB issued amendments to ASU 2015-01, Income
Statement Extraordinary and Unusual Items, eliminating 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. 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. The adoption of
this Statement did not have a material effect on the Companys financial
position or results of operations.
|
F - 23
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
3.
|
Adoption of New Accounting Standards
(contd)
|
The FASB issued ASU No. 2014-12,
Compensation Stock Compensation, 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.
The adoption of this Statement did not have a material effect on the Companys
financial position or results of operations.
The FASB issued 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, 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. For public business entities, the amendments in this ASU
are effective for fiscal years ending December 31, 2016, including interim
periods within fiscal years beginning after December 15, 2016. The adoption of
this Statement did not have a material effect on the Companys financial
position or results of operations.
4.
|
Summary of Significant Accounting
Policies
|
|
|
|
Revenue Recognition
|
|
|
|
The Company recognizes revenue from research and
development contracts as the contracted services are performed or when
milestones are achieved, recorded as other revenue, in accordance with the
terms of the specific agreements and when collection of the payment is
reasonably assured. In addition, the performance criteria for the
achievement of milestones are met if substantive effort was required to
achieve the milestone and the amount of the milestone payment appears
reasonably commensurate with the effort expended. Amounts received in
advance of the recognition criteria being met, if any, are included in
deferred income.
|
|
|
|
IntelGenx has license agreements that specify that
certain royalties are earned by the Company on sales of licensed products
in the licensed territories. Royalty revenue is recognized on an accrual
basis in accordance with the relevant license agreement.
|
|
|
|
For the year ended December 31, 2016, the Company
recognized royalty revenue earned under a licensing agreement totaling
$1,041 thousand compared to $981 thousand in 2015.
|
|
|
|
For the year ended December 31, 2016, the Company
recognized revenues as a result of sales milestones achieved under a
licensing agreement totaling $358 thousand compared to $2,808 thousand in
2015.
|
F - 24
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
4.
|
Summary of Significant Accounting Policies
(contd)
|
Use of Estimates
The preparation of financial statements
in conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period. The
financial statements include estimates based on currently available information
and management's judgment as to the outcome of future conditions and
circumstances. Significant estimates in these financial statements include the
useful lives and impairment of long-lived assets, stock-based compensation
costs, and the investment tax credits receivable. Changes in the status of
certain facts or circumstances could result in material changes to the estimates
used in the preparation of the financial statements and actual results could
differ from the estimates and assumptions.
Cash and Cash Equivalents
Cash and cash equivalents is comprised
of cash on hand and term deposits with original maturity dates of less than
three months that are stated at cost, which approximates fair value.
Accounts Receivable
The Company accounts for trade
receivables at original invoice amount less an estimate made for doubtful
receivables based on a review of all outstanding amounts on a quarterly basis.
Management determines the allowance for doubtful accounts by regularly
evaluating individual customer receivables and considering a customer's
financial condition, credit history and current economic conditions. The Company
writes off trade receivables when they are deemed uncollectible and records
recoveries of trade receivables previously written-off when they receive them.
Management has determined that no allowance for doubtful accounts is necessary
in order to adequately cover exposure to loss in its December 31, 2016 accounts
receivable (2015: $Nil).
Investment Tax Credits
Investment tax credits relating to
qualifying expenditures are recognized in the accounts at the time at which the
related expenditures are incurred and there is reasonable assurance of their
realization. Management has made estimates and assumptions in determining the
expenditures eligible for investment tax credits claimed. Investment tax credits
received in the year ended December 31, 2016 totaled $Nil (2015: $108 thousand).
F - 25
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
4.
|
Summary of Significant Accounting Policies
(Contd)
|
Leasehold Improvements and Equipment
Leasehold improvements and equipment
are recorded at cost. Provisions for depreciation are based on their estimated
useful lives using the methods as follows:
|
On the declining balance
method -
|
|
|
|
|
|
Laboratory and office equipment
|
20%
|
|
Computer equipment
|
30%
|
|
|
|
|
On the straight-line method -
|
|
|
|
|
|
Leasehold
improvements
|
over the lease term
|
|
Manufacturing equipment
|
5 10 years
|
Upon retirement or disposal, the cost
of the asset disposed of and the related accumulated depreciation are removed
from the accounts and any gain or loss is reflected in income. Expenditures for
repair and maintenance are expensed as incurred.
Security Deposits
Security deposits represent a
refundable deposit paid to the landlord in accordance with the lease agreement
and deposits held as guarantees by the Companys lenders in accordance with the
lending facilities.
Impairment of Long-lived Assets
Long-lived assets held and used by the
Company are reviewed for possible impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of the assets to the estimated undiscounted cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the asset exceeds the fair value thereof.
Deferred Lease Obligations
Rent under operating leases is charged
to expense on a straight-line basis over the lease term. Any difference between
the rent expense and the rent payable is reflected as deferred lease obligations
on the balance sheet.
F - 26
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
4.
|
Summary of Significant Accounting Policies
(Contd)
|
Deferred Lease Obligations (Contd)
Deferred lease obligations are
amortized on a straight-line basis over the term of the related leases. Lease
term includes free rent periods as well as the construction period prior to the
commencement of the lease.
Foreign Currency Translation
The Company's reporting currency is the
U.S. dollar. The Canadian dollar is the functional currency of the Company's
Canadian operations, which is translated to the United States dollar using the
current rate method. Under this method, accounts are translated as follows:
Assets and liabilities - at exchange
rates in effect at the balance sheet date;
Revenue and expenses - at average
exchange rates prevailing during the year;
Equity - at historical rates.
Gains and losses arising from foreign
currency translation are included in other comprehensive income.
Income Taxes
The Company accounts for income taxes
in accordance with FASB ASC 740 "Income Taxes". Deferred taxes are provided on
the liability method whereby deferred tax assets are recognized for deductible
temporary differences, and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
Unrecognized Tax Benefits
The Company accounts for unrecognized
tax benefits in accordance with FASB ASC 740 Income Taxes. ASC 740 prescribes
a recognition threshold that a tax position is required to meet before being
recognized in the financial statements and provides guidance on de-recognition,
measurement, classification, interest and penalties, accounting in interim
periods, disclosure and transition issues. ASC 740 contains a two-step approach
to recognizing and measuring uncertain tax positions. The first step is to
evaluate the tax position for recognition by determining if the weight of
available evidence indicates that it is more likely than not that the position
will be sustained upon ultimate settlement with a taxing authority, including
resolution of related appeals or litigation processes, if any. The second step
is to measure the tax benefit as the largest amount that is more than 50% likely
of being realized upon ultimate settlement.
Additionally, ASC 740 requires the
Company to accrue interest and related penalties, if applicable, on all tax
positions for which reserves have been established consistent with
jurisdictional tax laws. The Company elected to classify interest and penalties
related to the unrecognized tax benefits in the income tax provision.
F - 27
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
4.
|
Summary of Significant Accounting Policies
(Contd)
|
Share-Based Payments
The Company accounts for share-based
payments to employees in accordance with the provisions of FASB ASC 718
"CompensationStock Compensation" and accordingly recognizes in its financial
statements share-based payments at their fair value. In addition, the Company
will recognize in the financial statements an expense based on the grant date
fair value of stock options granted to employees. The expense will be recognized
on a straight-line basis over the vesting period and the offsetting credit will
be recorded in additional paid-in capital. Upon exercise of options, the
consideration paid together with the amount previously recorded as additional
paid-in capital will be recognized as capital stock. The Company estimates its
forfeiture rate in order to determine its compensation expense arising from
stock-based awards. The Company uses the Black-Scholes option pricing model to
determine the fair value of the options.
The Company measures compensation
expense for its non-employee stock-based compensation under ASC 505-50,
Accounting for Equity Instruments that are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services". The fair value of
the option issued is used to measure the transaction, as this is more reliable
than the fair value of the services received. The fair value is measured at the
value of the Companys common stock on the date that the commitment for
performance by the counterparty has been reached or the counterpartys
performance is complete. The fair value of the equity instrument is charged
directly to compensation expense and additional paid-in capital. For common
stock issuances to non-employees that are fully vested and are for future
periods, the Company classifies these issuances as prepaid expenses and expenses
the prepaid expenses over the service period. At no time has the Company issued
common stock for a period that exceeds one year.
(Loss) Earnings Per Share
Basic (loss) earnings per share is
calculated based on the weighted average number of shares outstanding during the
year. Any antidilutive instruments are excluded from the calculation of diluted
(loss) earnings per share.
Fair Value Measurements
ASC 820 applies to all assets and
liabilities that are being measured and reported on a fair value basis. ASC 820
requires disclosure that establishes a framework for measuring fair value in US
GAAP, and expands disclosure about fair value measurements. This statement
enables the reader of the financial statements to assess the inputs used to
develop those measurements by establishing a hierarchy for ranking the quality
and reliability of the information used to determine fair values. The statement
requires that assets and liabilities carried at fair value be classified and
disclosed in one of the following three categories:
|
Level 1:
|
Quoted market prices in active markets for
identical assets or liabilities.
|
|
Level 2:
|
Observable market based inputs or unobservable
inputs that are corroborated by market data.
|
|
Level 3:
|
Unobservable inputs that are not corroborated
by market data.
|
F - 28
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
4.
|
Summary of Significant Accounting Policies
(Contd)
|
In determining the appropriate levels,
the Company performs a detailed analysis of the assets and liabilities that are
subject to ASC 820. At each reporting period, all assets and liabilities for
which the fair value measurement is based on significant unobservable inputs are
classified as Level 3. Short-term investments are classified as Level 1.
Fair Value of Financial Instruments
The fair value represents managements
best estimates based on a range of methodologies and assumptions. The carrying
value of receivables and payables arising in the ordinary course of business and
the investment tax credits receivable approximate fair value because of the
relatively short period of time between their origination and expected
realization.
Recent Accounting Pronouncements
ASU 2016-18 Statement of Cash
Flows (Topic 230) Restricted Cash
In November 2016, the FASB issued ASU
2016-18 which requires that the statement of cash flows explain the change
during the period in the total cash, cash equivalents, and amounts generally
described as restricted or restricted cash equivalents. The statement is
effective for annual periods beginning after December 15, 2017, and interim
periods within those annual periods. Early adoption is permitted in any interim
or annual period and should be applied on a retrospective basis. The Company is
currently evaluating the impact of this Statement on its consolidated financial
statements.
ASU 2016-15 Statement of Cash
Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments
In August 2016, the FASB issued ASU
2016-15 which clarifies how certain cash receipts and payments are to be
presented in the Statement of cash flows. The statement is effective for annual
periods beginning after December 15, 2017, and interim periods within those
annual periods. Early adoption is permitted in any interim or annual period,
with any adjustments reflected as of the beginning of the fiscal year of
adoption. The Company is currently evaluating the impact of this Statement on
its consolidated financial statements.
ASU 2016-06 - Derivatives and
Hedging (Topic 815) Contingent Put and Call Options in Debt Instruments
The amendments in this Update clarify
the requirements for assessing whether contingent call (put) options that can
accelerate the payment of principal on debt instruments are clearly and closely
related to their debt hosts. An entity performing the assessment under the
amendments in this Update is required to assess the embedded call (put) options
solely in accordance with the four-step decision sequence.
For public business entities, the
amendments in this Update are effective for financial statements issued for
fiscal years beginning after December 15, 2016, and interim periods within those
fiscal years and should be applied on a retrospective basis.
F - 29
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
4.
|
Summary of Significant Accounting Policies
(Contd)
|
ASU 2016-09 - CompensationStock
Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting
FASB issued this Update as part of its
Simplification Initiative. The areas for simplification in this Update involve
several aspects of the accounting for share-based payment transactions,
including the income tax consequences, classification of awards as either equity
or liabilities, and classification on the statement of cash flows.
For public business entities, the
amendments in this Update are effective for annual periods beginning after
December 15, 2016, and interim periods within those annual periods. Early
adoption is permitted for any entity in any interim or annual period, with any
adjustments reflected as of the beginning of the fiscal year of adoption. The
Company is currently evaluating the impact of this Statement on its consolidated
financial statements.
ASU 2016-01 Financial Instruments
Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and
Financial Liabilities
In January 2016, the FASB issued ASU
2016-01, which will significantly change practice for all entities. The targeted
amendments to existing guidance are expected to include:
|
1.
|
Equity investments that do not result in consolidation
and are not accounted for under the equity method would be measured at
fair value through net income, unless they qualify for the proposed
practicability exception for investments that do not have readily
determinable fair values.
|
|
|
|
|
2.
|
Changes in instrument-specific credit risk for financial
liabilities that are measured under the fair value option would be
recognized in other comprehensive income.
|
|
|
|
|
3.
|
Entities would make the assessment of the realizability
of a deferred tax asset (DTA) related to an available- for-sale (AFS) debt
security in combination with the entitys other DTAs. The guidance would
eliminate one method that is currently acceptable for assessing the
realizability of DTAs related to AFS debt securities. That is, an entity
would no longer be able to consider its intent and ability to hold debt
securities with unrealized losses until recovery.
|
|
|
|
|
4.
|
Disclosure of the fair value of financial instruments
measured at amortized cost would no longer be required for entities that
not public business entities.
|
For public business entities, the
amendments in this Update are effective for fiscal years beginning after
December 15, 2017, including interim periods within those fiscal years. The
Company is currently evaluating the impact of this Statement on its consolidated
financial statements.
F - 30
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
4.
|
Summary of Significant Accounting Policies
(Contd)
|
ASU 2016-02: Leases (Topic 842)
Section A
The FASB issued ASU 2016-02 to increase
the transparency and comparability among organizations by recognizing lease
assets and lease liabilities on the balance sheet and disclosing key information
about leasing arrangements.
These amendments are effective for a
public business entity for fiscal years beginning after December 15, 2018,
including interim periods within those fiscal years.
The Company is currently evaluating the
impact of this Statement on its consolidated financial statements.
Revenue from Contracts with
Customers (Topic 606):
The FASB and IASB (the Boards) have
issued converged standards on revenue recognition. ASU No. 2014-09 which 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.
|
In the year ended December 31, 2016,
the FASB issued three new amendments related to Topic 606:
|
1.
|
ASU 2016-08: Revenue from Contracts with Customers (Topic
606): Principal versus Agent Considerations (Reporting Revenue Gross
versus Net) which was issued to add clarification to the implementation
guidance on principle versus agent considerations. This amendment does not
provide any changes to the previously issued ASU No. 2014-09 and is
effective for the same reporting period which was deferred by one year in
ASU 2015-14: Revenue From Contracts With Customers (Topic 606), Deferral
of the Effective Date.
|
|
|
|
|
2.
|
ASU 2016-10: Revenue from Contracts with Customers (Topic
606): Identifying Performance Obligations and Licensing which was issued
to clarifying the following two aspects of topic 606; identifying
performance obligations and the licensing implementation guidance. This
amendment does not provide any changes to the previously issued ASU No.
2014-09 and is effective for the same reporting period which was deferred
by one year in ASU 2015-14: Revenue From Contracts With Customers (Topic
606), Deferral of the Effective Date.
|
F - 31
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
4.
|
Summary of Significant Accounting Policies
(Contd)
|
|
3.
|
ASU 2016-11 Revenue Recognition (Topic 605) and
Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of
Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff
Announcements at the March 3, 2016 EITF Meeting. With this amendment, the
SEC Staff is rescinding the following SEC Staff Observer comments that are
codified in Topic 605, Revenue Recognition, and Topic 932, Extractive
ActivitiesOil and Gas, effective upon adoption of Topic 606. This
amendment is effective immediately.
|
Public business entities, certain
not-for-profit entities, and certain employee benefit plans should apply the
guidance in Update 2014-09 to annual reporting periods beginning after December
15, 2017, including interim reporting periods within that reporting period.
Earlier application is permitted only as of annual reporting periods beginning
after December 15, 2016, including interim reporting periods within that
reporting period.
This ASU is to be applied
retrospectively, with certain practical expedients allowed. The Company is
currently evaluating the impact of this Statement on its consolidated financial
statements.
ASU 2015-11, Inventory (Topic 330):
Simplifying the Measurement of Inventory
The amendments in this Update more
closely align the measurement of inventory in GAAP with the measurement of
inventory in International Financial Reporting Standards (IFRS). An entity
should measure inventory within the scope of this Update at the lower of cost
and net realizable value. Net realizable value is the estimated selling prices
in the ordinary course of business, less reasonably predictable costs of
completion, disposal, and transportation. Subsequent measurement is unchanged
for inventory measured using LIFO or the retail inventory method.
The Board has amended some of the other
guidance in Topic 330 to more clearly articulate the requirements for the
measurement and disclosure of inventory. However, the Board does not intend for
those clarifications to result in any changes in practice. Other than the change
in the subsequent measurement guidance from the lower of cost or market to the
lower of cost and net realizable value for inventory within the scope of this
Update, there are no other substantive changes to the guidance on measurement of
inventory.
The amendments in this Update do not
apply to inventory that is measured using last-in, first-out (LIFO) or the
retail inventory method. The amendments apply to all other inventory, which
includes inventory that is measured using first-in, first-out (FIFO) or average
cost.
For public business entities, the
amendments in this Update are effective for fiscal years beginning after
December 15, 2016, including interim periods within those fiscal years. The
amendments in this Update should be applied prospectively with earlier
application permitted as of the beginning of an interim or annual reporting
period. The adoption of this Statement is not expected to have a material effect
on the Companys financial position or results of operations.
F - 32
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
4.
|
Summary of Significant Accounting Policies
(Contd)
|
ASU 2015-17 Income Taxes (Topic
740): Balance Sheet Classification of Deferred Taxes (ASU 2015-17)
In November 2015, the FASB issued ASU
2015-17, which require that deferred tax liabilities and assets be classified as
noncurrent in a classified statement of financial position.
The amendments apply to all entities
that present a classified statement of financial position. The current
requirement that deferred tax liabilities and assets of a tax-paying component
of an entity be offset and presented as a single amount is not affected by the
amendments.
For public business entities, the
amendments are effective for financial statements issued for annual periods
beginning after December 15, 2016, and interim periods within those annual
periods. The Company is currently evaluating the impact of this Statement on its
consolidated financial statements.
5.
|
Short-term investments
|
|
|
|
As at December 31, 2016, short-term investments
consisting of mutual funds (CAD$3 million) and term deposits ($1,650
million) are with a Canadian financial institution having a high credit
rating. The term deposits have a maturity date of August 17, 2017, bear
interest at 0.40% and are cashable at any
time.
|
6.
|
Leasehold improvements and
Equipment
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
Net Carrying
|
|
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Amount
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing equipment
|
$
|
2,550
|
|
$
|
121
|
|
$
|
2,429
|
|
$
|
1,050
|
|
|
Laboratory and office equipment
|
|
1,222
|
|
|
415
|
|
|
807
|
|
|
821
|
|
|
Computer equipment
|
|
66
|
|
|
43
|
|
|
23
|
|
|
17
|
|
|
Leasehold improvements
|
|
2,786
|
|
|
315
|
|
|
2,471
|
|
|
2,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,624
|
|
$
|
894
|
|
$
|
5,730
|
|
$
|
4,238
|
|
From the balance of
manufacturing equipment, an amount of $125 thousand represents assets which are
not yet in service as at December 31, 2016.
F - 33
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
7.
|
Bank Indebtedness
|
|
|
|
The Company's credit facility is subject to review
annually and consists of an operating demand line of credit of up to
CAD$250 thousand and corporate credits cards of up to CAD$75 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 9) 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 December 31,
2016, the Company was not in compliance with its financial covenants and
has not drawn on its credit facility. The Company has obtained a waiver
from the lender.
|
8.
|
Deferred Revenue
|
|
|
|
On August 5, 2016, the Company sold its U.S. royalty on
future sales of Forfivo XL
®
to SWK Holdings Corporation for $6
million. Under the terms of the agreement, SWK paid IntelGenx $6 million
at closing. In return for, (i) 100% of any and all royalties or similar
royalty amounts received on or after April 1, 2016, (ii) 100% of the $2
million milestone payment upon Edgemont reaching annual net sales of $15
million, and (iii) 35% of all potential future milestone
payments.
|
|
|
|
The deferred revenue represents the payment received for
the royalty on future sales in the amount of $6 milliion less the Q2
royalties recognized in the second quarter in the amount of $352 thousand,
less the amount recognized in other revenue during the six-month period
ended December 31, 2016. The deferred revenue will be recognized as other
revenue on a straight-line basis until December 31, 2017.
|
|
|
|
10% of the proceeds were paid to our former development
partner, Cary Pharmaceuticals Inc. This amount is included in prepaid
expenses less the portion expensed during the six-month period ended
December 31, 2016. This expense will be recognized as cost of royalty,
license and other revenue on a straight-line basis until December 31,
2017.
|
F - 34
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
9.
|
Long-term debt
|
|
|
|
The components of the Companys debt are as
follows:
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loan facility
|
|
2,636
|
|
|
1,188
|
|
|
Secured loan
|
|
633
|
|
|
542
|
|
|
Total debt
|
|
3,269
|
|
|
1,730
|
|
|
|
|
|
|
|
|
|
|
Less: current portion
|
|
704
|
|
|
184
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
2,565
|
|
|
1,546
|
|
The Companys term loan facility
consists of a total of CAD$4 million bearing interest at the Banks prime
lending rate plus 2.50% . The term loan is subject to the same security and
financial covenants as the bank indebtedness (see note 7).
The secured loan has a principal
balance authorized of CAD$1 million bearing interest at prime plus 7.3%,
reimbursable in monthly principal payments of CAD$17 thousand from January 2017
to March 2021. The loan is secured by a second ranking on all present and future
property of the Company. 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
December 31, 2016, the Company was not in compliance with its financial
covenants. The Company has obtained a waiver from the lender.
Principal repayments due in each of the
next five years are as follows:
|
2017
|
$704 (CAD 945)
|
|
|
2018
|
704 (CAD 945)
|
|
|
2019
|
704 (CAD 945)
|
|
|
2020
|
704 (CAD 945)
|
|
|
2021
|
453 (CAD 610)
|
|
10.
|
Commitments
|
|
|
|
On April 24, 2015 the Company entered into an agreement
to lease approximately 17,000 square feet in a property located at 6420
Abrams, St-Laurent, Québec. The Lease has a 10 year and 6-month term
commencing September 1, 2015. IntelGenx has retained two options to extend
the lease, with each option being for an additional five years. Under the
terms of the lease IntelGenx is required to pay base rent of approximately
CAD$110 thousand (approximately $82 thousand) per year, which will
increase at a rate of CAD$0.25 ($0.19) per square foot every two
years.
|
F - 35
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
The aggregate minimum rentals,
exclusive of other occupancy charges, for property leases expiring in 2026, are
approximately $824 thousand, as follows:
|
2017
|
$ 83
|
|
|
2018
|
85
|
|
|
2019
|
87
|
|
|
2020
|
89
|
|
|
2021
|
90
|
|
|
Thereafter
|
390
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Authorized -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000,000 common shares of
$0.00001 par value
|
|
|
|
|
|
|
|
20,000,000 preferred shares of
$0.00001 par value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,812,020 (December 31, 2015: 63,615,255) common
shares
|
$
|
1
|
|
$
|
1
|
|
Stock options
During the year ended December 31, 2016
a total of 140,000 stock options were exercised for 140,000 common shares having
a par value of $0 thousand in aggregate, for cash consideration of $63 thousand,
resulting in an increase in additional paid-in capital of $63 thousand.
During the year ended December 31, 2015
a total of 150,000 stock options were exercised for 150,000 common shares having
a par value of $0 thousand in aggregate, for cash consideration of $62 thousand,
resulting in an increase in additional paid-in capital of $62 thousand.
Stock-based compensation of $195
thousand and $130 thousand was recorded during the year ended December 31, 2016
and 2015 respectively. An amount of $193 thousand expensed in 2016 relates to
stock options granted to employees and directors and an amount of $2 thousand
relates to stock options granted to a consultant. The entire amounts expensed in
2015 relate to stock options granted to employees and directors. As at December
31, 2016 the Company has $320 thousand (2015 - $158 thousand) of unrecognized
stock-based compensation, of which $11 thousand (2015 $nil) relates to options
granted to a consultant.
F - 36
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
11.
|
Capital Stock (Contd)
|
Warrants
In the year ended December 31, 2016 a
total of 1,056,765 warrants were exercised for 1,056,765 common shares having a
par value of $Nil in aggregate, for cash consideration of approximately $596
thousand, resulting in an increase in additional paid-in capital of
approximately $596 thousand. No warrants were exercised during the year ended
December 31, 2015.
12.
|
Additional Paid-In Capital
|
|
|
|
Stock Options
|
|
|
|
On May 9, 2016, the Board of Directors of the Company
adopted the 2016 Stock Option Plan which amended and restated the 2006
Stock Option. As a result of the adoption of the 2016 Stock Option Plan,
no additional options will be granted under the 2006 Stock Option Plan and
all previously granted options will be governed by the 2016 Stock Option
Plan. The 2016 Stock Option Plan permits the granting of options to
officers, employees, directors and eligible consultants of the Company. A
total of 6,361,525 shares of common stock were reserved for issuance under
this plan, which includes stock options granted under the previous 2006
Stock Option Plan. Options may be granted under the 2016 Stock Option Plan
on terms and at prices as determined by the Board except that the options
cannot be granted at less than the market closing price of the common
stock on the TSX- V. on the date prior to the grant. Each option will be
exercisable after the period or periods specified in the option agreement,
but no option may be exercised after the expiration of 10 years from the
date of grant. The 2016 Stock Option Plan provides the Board with more
flexibility when setting the vesting schedule for options which was
otherwise fixed in the 2006 Stock Option Plan.
|
|
|
|
On April 2, 2015 the Company granted 200,000 options to
purchase common stock to four non-employee directors. The stock options
are exercisable at $0.62, and vested immediately. The stock options were
accounted for at their fair value, as determined by the Black-Scholes
valuation model, of approximately $45 thousand, using the following
assumptions:
|
|
Expected volatility
|
66%
|
|
Expected life
|
2.5 years
|
|
Risk-free interest rate
|
0.87%
|
|
Dividend yield
|
Nil
|
F - 37
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
12.
|
Additional Paid-In Capital
(Contd)
|
On April 2, 2015 the Company granted
100,000 options to purchase common stock to an officer. The stock options are
exercisable at $0.62 per share and vest over 2 years at 25% every six months.
The stock options were accounted for at their fair value, as determined by the
Black-Scholes valuation model, of approximately $24 thousand, using the
following assumptions:
|
Expected volatility
|
62%
|
|
Expected life
|
3.13 years
|
|
Risk-free interest rate
|
0.87%
|
|
Dividend yield
|
Nil
|
On July 20, 2015 the Company granted
600,000 options to purchase common stock to an employee. The stock options are
exercisable at $0.58 per share and vest over 2 years at 25% every six months.
The stock options were accounted for at their fair value, as determined by the
Black-Scholes valuation model, of approximately $120 thousand, using the
following assumptions:
|
Expected volatility
|
63%
|
|
Expected life
|
3.13 years
|
|
Risk-free interest rate
|
1.09%
|
|
Dividend yield
|
Nil
|
On August 13, 2015 the Company granted
75,000 options to purchase common stock to a non-employee director. The stock
options are exercisable at $0.58 per share and vest over 2 years at 25% every
six months. The stock options were accounted for at their fair value, as
determined by the Black-Scholes valuation model, of approximately $15 thousand,
using the following assumptions:
|
Expected volatility
|
62%
|
|
Expected life
|
3.13 years
|
|
Risk-free interest rate
|
1.06%
|
|
Dividend yield
|
Nil
|
On December 14, 2015 the Company
granted 150,000 options to purchase common stock to an employee. The stock
options are exercisable at $0.48 per share and vest over 2 years at 25% every
six months. The stock options were accounted for at their fair value, as
determined by the Black-Scholes valuation model, of approximately $25 thousand,
using the following assumptions:
|
Expected volatility
|
63%
|
|
Expected life
|
3.13 years
|
|
Risk-free interest rate
|
1.25%
|
|
Dividend yield
|
Nil
|
F - 38
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
12.
|
Additional Paid-In Capital
(Contd)
|
On January 19, 2016 the Company granted
225,000 options to purchase common stock to two officers. The stock options are
exercisable at $0.41 per share and vest over 2 years at 25% every six months.
The stock options were accounted for at their fair value, as determined by the
Black-Scholes valuation model, of approximately $32 thousand, using the
following assumptions:
|
Expected volatility
|
63%
|
|
Expected life
|
3.13 years
|
|
Risk-free interest rate
|
1.11%
|
|
Dividend yield
|
Nil
|
On January 19, 2016 the Company granted
250,000 options to purchase common stock to five non-employee directors. The
stock options are exercisable at $0.41 per share and vested immediately. The
stock options were accounted for at their fair value, as determined by the
Black-Scholes valuation model, of approximately $33 thousand, using the
following assumptions:
|
Expected volatility
|
66%
|
|
Expected life
|
2.5 years
|
|
Risk-free interest rate
|
1.11%
|
|
Dividend yield
|
Nil
|
On September 15, 2016 the Company
granted 200,000 options to purchase common stock to an officer, 325,000 options
to purchase common stock to 7 employees and 75,000 options to purchase common
stock to a non-employee director. The stock options are exercisable at $0.73 per
share and vest over 2 years at 25% every six months. The stock options were
accounted for at their fair value, as determined by the Black-Scholes valuation
model, of approximately $202 thousand, using the following assumptions:
|
Expected volatility
|
65%
|
|
Expected life
|
5.63 years
|
|
Risk-free interest rate
|
1.30%
|
|
Dividend yield
|
Nil
|
On September 15, 2016 the Company
granted 50,000 options to purchase common stock to a consultant. The stock
options are exercisable at $0.73 per share and vest over 2 years at 25% every
six months. The stock options were accounted for at their fair value, as
determined by the Black-Scholes valuation model, of approximately $16 thousand,
using the following assumptions:
|
Expected volatility
|
64%
|
|
Expected life
|
3.13 years
|
|
Risk-free interest rate
|
0.87%
|
|
Dividend yield
|
Nil
|
F - 39
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
12.
|
Additional Paid-In Capital
(Contd)
|
On December 27, 2016 the Company
granted 225,000 options to purchase common stock to 6 employees. The stock
options are exercisable at $0.76 per share and vest over 2 years at 25% every
six months. The stock options were accounted for at their fair value, as
determined by the Black-Scholes valuation model, of approximately $79 thousand,
using the following assumptions:
|
Expected volatility
|
63%
|
|
Expected life
|
5.63 years
|
|
Risk-free interest rate
|
2.20%
|
|
Dividend yield
|
Nil
|
Information with respect to employees
and directors stock option activity for 2015 and 2016 is as follows:
|
|
|
|
|
|
Weighted average
|
|
|
|
|
Number of options
|
|
|
exercise price
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Outstanding January 1, 2015
|
|
1,130,000
|
|
|
0.54
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
1,125,000
|
|
|
0.58
|
|
|
Forfeited
|
|
(410,000
|
)
|
|
(0.59
|
)
|
|
Expired
|
|
(25,000
|
)
|
|
(0.45
|
)
|
|
Exercised
|
|
(150,000
|
)
|
|
(0.41
|
)
|
|
|
|
|
|
|
|
|
|
Outstanding December 31, 2015
|
|
1,670,000
|
|
|
0.56
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
1,300,000
|
|
|
0.62
|
|
|
Forfeited
|
|
(50,000
|
)
|
|
(0.53
|
)
|
|
Expired
|
|
(120,000
|
)
|
|
(0.53
|
)
|
|
Exercised
|
|
(140,000
|
)
|
|
(0.45
|
)
|
|
|
|
|
|
|
|
|
|
Outstanding December 31, 2016
|
|
2,660,000
|
|
|
0.60
|
|
F - 40
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
12.
|
Additional Paid-In Capital
(Contd)
|
Information with respect to
consultants stock option activity for 2015 and 2016 is as follows:
|
|
|
|
|
|
Weighted average
|
|
|
|
|
Number of options
|
|
|
exercise price
|
|
|
|
|
|
|
|
$
|
|
|
Outstanding January 1, 2015
|
|
100,000
|
|
|
0.59
|
|
|
Expired
|
|
(100,000
|
)
|
|
0.59
|
|
|
Outstanding December 31, 2015
|
|
-
|
|
|
-
|
|
|
Granted
|
|
50,000
|
|
|
0.73
|
|
|
Outstanding December 31, 2016
|
|
50,000
|
|
|
0.73
|
|
Details of stock options outstanding as
at December 31, 2016 are as follows:
|
|
|
Outstanding options
|
|
|
Exercisable options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Weighted average
|
|
|
average
|
|
|
Aggregate
|
|
|
|
|
|
average
|
|
|
Aggregate
|
|
|
Exercise
|
|
Number of
|
|
|
remaining
|
|
|
exercise
|
|
|
intrinsic
|
|
|
Number of
|
|
|
exercise
|
|
|
intrinsic
|
|
|
prices
|
|
options
|
|
|
contractual life
|
|
|
price
|
|
|
value
|
|
|
options
|
|
|
price
|
|
|
value
|
|
|
$
|
|
|
|
|
(years)
|
|
|
$
|
|
|
$
|
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.41
|
|
375,000
|
|
|
0.57
|
|
|
0.06
|
|
|
|
|
|
281,250
|
|
|
0.09
|
|
|
|
|
|
0.48
|
|
150,000
|
|
|
0.22
|
|
|
0.03
|
|
|
|
|
|
75,000
|
|
|
0.03
|
|
|
|
|
|
0.51
|
|
20,000
|
|
|
0.00
|
|
|
0.00
|
|
|
|
|
|
20,000
|
|
|
0.01
|
|
|
|
|
|
0.52
|
|
25,000
|
|
|
0.00
|
|
|
0.00
|
|
|
|
|
|
25,000
|
|
|
0.01
|
|
|
|
|
|
0.52
|
|
100,000
|
|
|
0.07
|
|
|
0.02
|
|
|
|
|
|
100,000
|
|
|
0.04
|
|
|
|
|
|
0.53
|
|
125,000
|
|
|
0.14
|
|
|
0.02
|
|
|
|
|
|
125,000
|
|
|
0.05
|
|
|
|
|
|
0.58
|
|
35,000
|
|
|
0.02
|
|
|
0.01
|
|
|
|
|
|
35,000
|
|
|
0.02
|
|
|
|
|
|
0.58
|
|
600,000
|
|
|
0.79
|
|
|
0.13
|
|
|
|
|
|
300,000
|
|
|
0.13
|
|
|
|
|
|
0.58
|
|
75,000
|
|
|
0.10
|
|
|
0.02
|
|
|
|
|
|
37,500
|
|
|
0.02
|
|
|
|
|
|
0.60
|
|
30,000
|
|
|
0.01
|
|
|
0.01
|
|
|
|
|
|
30,000
|
|
|
0.01
|
|
|
|
|
|
0.62
|
|
300,000
|
|
|
0.36
|
|
|
0.07
|
|
|
|
|
|
275,000
|
|
|
0.13
|
|
|
|
|
|
0.73
|
|
600,000
|
|
|
2.16
|
|
|
0.16
|
|
|
|
|
|
-
|
|
|
-
|
|
|
|
|
|
0.73
|
|
50,000
|
|
|
0.09
|
|
|
0.01
|
|
|
|
|
|
-
|
|
|
-
|
|
|
|
|
|
0.76
|
|
225,000
|
|
|
0.83
|
|
|
0.06
|
|
|
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
2,710,000
|
|
|
5.36
|
|
|
0.60
|
|
|
485,000
|
|
|
1,303,750
|
|
|
0.53
|
|
|
320,000
|
|
F - 41
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
12.
|
Additional Paid-In Capital
(Contd)
|
Stock-based compensation expense
recognized in 2016 with regards to the stock options was $195 thousand (2015:
$130 thousand). As at December 31, 2016 the Company has $320 thousand (2015 -
$158 thousand) of unrecognized stock-based compensation, of which $11 thousand
(2015 $nil) relates to options granted to a consultant. The amount of $195
thousand will be recognized as an expense over a period of two years. A change
in control of the Company due to acquisition would cause the vesting of the
stock options granted to employees and directors to accelerate and would result
in $195 thousand being charged to stock based compensation expense.
Warrants
In the year ended December 31, 2016 a
total of 1,056,765 warrants were exercised for 1,056,765 common shares having a
par value of $Nil in aggregate, for cash consideration of approximately $596
thousand, resulting in an increase in additional paid-in capital of
approximately $596 thousand. No warrants were exercised during the year ended
December 31, 2015.
Information with respect to warrant
activity for 2015 and 2016 is as follows:
|
|
|
Number of
|
|
|
Weighted average
|
|
|
|
|
warrants
|
|
|
exercise price
|
|
|
|
|
(All Exercisable)
|
|
|
$
|
|
|
Outstanding January 1, 2015 and 2016
|
|
7,231,123
|
|
|
0.5646
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
(1,056,765
|
)
|
|
(0.5646
|
)
|
|
|
|
|
|
|
|
|
|
Outstanding - December 31, 2016
|
|
6,174,358
|
|
|
0.5646
|
|
13.
|
Income Taxes
|
|
|
|
Income taxes reported differ from the amount computed by
applying the statutory rates to net income (losses). The reasons are as
follows:
|
|
|
|
2016
|
|
|
2015
|
|
|
Statutory income taxes
|
$
|
(305
|
)
|
$
|
387
|
|
|
Net operating losses for which no tax
benefits have been recorded
|
|
201
|
|
|
-
|
|
|
Net operating losses used for
which no tax benefit had been recorded
|
|
-
|
|
|
(484
|
)
|
|
Deficiency of depreciation over capital cost
allowance
|
|
(206
|
)
|
|
(98
|
)
|
|
Non-deductible expenses
|
|
105
|
|
|
44
|
|
|
Undeducted research and development expenses
|
|
245
|
|
|
178
|
|
|
Investment tax credit
|
|
(40
|
)
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
$
|
-
|
|
F - 42
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
13.
|
Income Taxes (Contd)
|
The major components of the deferred
tax assets classified by the source of temporary differences are as follows:
|
|
|
2016
|
|
|
2015
|
|
|
Leasehold improvements and
equipment
|
$
|
201
|
|
$
|
117
|
|
|
Net operating losses carryforward
|
|
2,062
|
|
|
1,770
|
|
|
Undeducted research and
development expenses
|
|
1,501
|
|
|
1,274
|
|
|
Non-refundable tax credits carryforward
|
|
1,190
|
|
|
1,022
|
|
|
|
|
|
|
|
|
|
|
|
|
4,954
|
|
|
4,183
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
(4,954
|
)
|
|
(4,183
|
)
|
|
|
$
|
-
|
|
$
|
-
|
|
As at December 31, 2016, management
determined that enough uncertainty existed relative to the realization of
deferred income tax asset balances to warrant the application of a full
valuation allowance. Although management believes that certain of the net
operating losses will be applied against earnings in 2017, management continues
to believe that enough uncertainty exists relative to the realization of the
remaining deferred income tax asset balances such that no recognition of
deferred income tax assets is warranted.
There were Canadian and provincial net
operating losses of approximately $7,585 thousand (2015: $6,462 thousand) and
$7,763 thousand (2015: $6,725 thousand) respectively, that 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 2036. A portion
of the net operating losses may expire before they can be utilized.
As at December 31, 2016, the Company
had non-refundable tax credits of $1,190 thousand (2015: $1,022 thousand) of
which $8 thousand is expiring in 2026, $10 thousand is expiring in 2027, $168
thousand is expiring in 2028, $147 thousand is expiring in 2029, $126 thousand
is expiring in 2030, $133 thousand is expiring in 2031, $167 thousand is
expiring in 2032 and $111 thousand is expiring in 2033, $84 thousand expiring in
2034 and $99 thousand is expiring in 2035 and $137 thousand expiring in 2036 and
undeducted research and development expenses of $5,438 thousand (2015: $4,563
thousand) with no expiration date.
The deferred tax benefit of these items
was not recognized in the accounts as it has been fully provided for.
Unrecognized Tax Benefits
The Company does not have any
unrecognized tax benefits.
F - 43
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
13.
|
Income Taxes (Contd)
|
Tax Years and Examination
The Company files tax returns in each
jurisdiction in which it is registered to do business. For each jurisdiction a
statute of limitations period exists. After a statute of limitations period
expires, the respective tax authorities may no longer assess additional income
tax for the expired period. Similarly, the Company is no longer eligible to file
claims for refund for any tax that it may have overpaid. The following table
summarizes the Companys major tax jurisdictions and the tax years that remain
subject to examination by these jurisdictions as of December 31, 2016:
|
Tax Jurisdictions
|
|
Tax Years
|
|
Federal - Canada
|
|
2013 and onward
|
|
Provincial - Quebec
|
|
2013 and onward
|
|
Federal - USA
|
|
2013 onward
|
14.
|
Statement of Cash Flows
Information
|
|
In US$ thousands
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Additional Cash Flow
Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
$
|
176
|
|
$
|
23
|
|
15.
|
Related party transactions
|
|
|
|
Included in management salaries are $2 thousand (2015 -
$3 thousand) for options granted to the Chief Executive Officer, $60
thousand (2015 - $39 thousand) for options granted to the Chief Financial
Officer, $12 thousand (2015-$9 thousand) for options granted to the Vice
President, Operations, $5 thousand (2015 - $nil) for options granted to
the Vice-President, Research and Development, $21 thousand (2015 - $nil)
for options granted to the former Vice President, Corporate Development,
and $8 thousand for options granted to Vice- President, Business and
Corporate Development (2015 $nil) under the 2006 or 2016 Stock Option
Plans and $52 thousand (2015 - $70 thousand) for options granted to
non-employee directors.
|
|
|
|
Included in general and administrative expenses are
director fees of $184 thousand (2015: $179 thousand). During the year a
non-employee director rendered consulting services amounting to $14
thousand (2015 - $nil).
|
|
|
|
The above related party transactions have been measured
at the exchange amount which is the amount of the consideration
established and agreed upon by the related
parties.
|
F - 44
IntelGenx Technologies Corp.
|
|
Notes to Consolidated Financial Statements
|
December 31, 2016 and 2015
|
(Expressed in U.S. Funds)
|
16.
|
Basic and Diluted Earnings (Loss) Per Common
Share
|
|
|
|
Basic and diluted (loss) earnings per common share is
calculated based on the weighted average number of shares outstanding
during the year. Common equivalent shares from stock options and warrants
are also included in the diluted per share calculations unless the effect
of the inclusion would be antidilutive.
|
17.
|
Subsequent event
|
|
|
|
Subsequent to the end of the year, on March 6, 2017
IntelGenx executed an agreement to lease approximately an additional
11,000 square feet in a property located at 6410 Abrams, St-Laurent,
Quebec (the Lease). The lease has an 8 year and 5-month term commencing
on October 1, 2017 and IntelGenx has retained two options to extend the
Lease, with each option being for an additional five years. Under the
terms of the Lease IntelGenx will be required to pay base rent of
approximately CAD$74 thousand (approximately $55 thousand) per year, which
will increase at a rate of CAD$0.25 ($0.19) per square foot every two
years. IntelGenx plans to use the newly leased space to expand its
manufacture of oral film VersaFilm
TM
.
|
F - 45
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable
by us in connection with the distribution of the securities being registered.
All of the amounts shown are estimates, except the SEC registration fee. We have
agreed to bear all expenses (other than underwriting discounts and selling
commissions) in connection with the registration and sale of the securities
offered by the selling security holders.
SEC registration fee
|
$
|
1,080
|
|
FINRA filing fee
|
$
|
*
|
|
Legal fees and expenses
|
$
|
*
|
|
Accountants' fees and
expenses
|
$
|
*
|
|
Printing expenses
|
$
|
*
|
|
Blue sky fees and expenses
|
$
|
*
|
|
Miscellaneous expenses
|
$
|
*
|
|
Total:
|
$
|
*
|
|
* to be filed by amendment.
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the
DGCL), provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 145 further provides that a corporation similarly may indemnify any such
person serving in any such capacity who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor, against expenses
(including attorneys fees) actually and reasonably incurred in connection with
the defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation and except that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent that the Delaware
Court of Chancery or such other court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
We have agreed to indemnify our officers and directors to the
fullest extent permitted by law. Such indemnification is intended to supplement
our officers and directors liability insurance.
Our certificate of incorporation provides that no director
shall be personally liable to the corporation or its stockholders for monetary
damages for any breach of fiduciary duty by such director as a director. A
director shall be liable to the extent provided by applicable law, however, (a)
for breach of the directors duty of loyalty to the corporation or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) pursuant to Section
174 of the DGCL, or (d) for any transaction from which the director derived an
improper personal benefit.
To the extent permitted by applicable law, we are also
authorized to provide indemnification of (and advancement of expenses to) such
agents (and any other persons to which Delaware law permits us to provide
indemnification) through provisions in our bylaws, agreements with such agents
or other persons, voting of security holders or disinterested directors or
otherwise, in excess of the indemnification and advancement otherwise permitted
by Section 145 of the DGCL, subject only to limits created by applicable
Delaware law (statutory or non-statutory), with respect to actions for breach of
duty to us, our security holders and others.
92
Any repeal or modification of any of the foregoing provisions
of the indemnification provisions in our certificate of incorporation or bylaws
shall be prospective and shall not adversely affect any right or protection of a
director, officer, agent, or other person existing at the time of, or increase
the liability of any director of our company with respect to any acts or
omissions of such director occurring prior to, such repeal or modification.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or controlling persons of
our company, pursuant to the foregoing provisions, or otherwise, we have been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by a director, officer or controlling person of our company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, we will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by us is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Recent Sales of Unregistered Securities
We have not issued any unregistered securities during the past
three years.
Item 16. Exhibits and Financial Statement Schedules
The following exhibits are filed as
part of this registration statement.
EXHIBIT INDEX
Exhibit
|
Description
|
No.
|
|
1.1**
|
Form of Agency Agreement
|
2.1
|
Share exchange agreement dated April 10, 2006
(incorporated by reference to the Form 8-K/A filed on May 5, 2006)
|
3.1
|
Certificate of Incorporation (incorporated by reference
to the Form SB-2 (File No. 333-90149) filed on November 16, 1999)
Amendment to the Certificate of Incorporation (incorporated by reference
to amendment No. 2 to Form SB-2 (File No. 333-
|
3.2
|
135591) filed on August 28, 2006)
|
3.3
|
Amendment to the Certificate of Incorporation
(incorporated by reference to the Form DEF 14C filed on April 20, 2007)
|
3.4
|
By-Laws (incorporated by reference to the Form SB-2 (File
No. 333-91049) filed on November 16, 1999
|
3.5
|
Amended and Restated By-Laws (incorporated by reference
to the Form 8-K filed on March 31, 2011)
|
3.6
|
Amended and Restated By-Laws (incorporated by reference
to the Form 8-K filed on March 21, 2012)
|
3.7*
|
Certificate of Amendment to the Corporations Certificate of Incorporation
dated May 11, 2017
|
4.1**
|
Form of Indenture
|
5.1**
|
Opinion of Dorsey & Whitney LLP
|
5.2**
|
Opinion of McCarthy Tetrault LLP
|
9.1
|
Voting Trust agreement (incorporated by reference to the
Form 8-K/A filed on May 5, 2006)
|
9.2
|
Amended and Restated Unanimous Shareholders Agreement,
May 26, 2011 Horst Zerbe employment agreement dated October 1, 2014
(incorporated by reference to the Form 10-Q filed on November 12,
|
10.1 +
|
2014)
|
10.2
|
Registration rights agreement (incorporated by reference
to the Form SB-2 (File No. 333-135591) filed on July 3, 2006)
|
10.3
|
Principal's registration rights agreement (incorporated
by reference to the Form SB-2 (File No. 333-135591) filed on July 3, 2006)
|
10.4 +
|
2006 Stock Option Plan (incorporated by reference to the
Form S-8 filed on November 21, 2006)
|
10.5 +
|
Amended and Restated 2006 Stock Option Plan, May 29, 2008
(incorporated by reference to the Form 10-K filed on March 25, 2009)
|
93
10.6
|
Co-Development and Commercialization Agreement with
RedHill Biopharma Ltd. (incorporated by reference to the Form 10-Q filed
on November 9, 2010)
|
10.7 +
|
Amended and Restated 2006 Stock Option Plan (incorporated
by reference to the Form S-8 filed on November 15, 2010)
|
10.8
|
Project Transfer Agreement (incorporated by reference to
the Form 10-Q filed on May 14, 2010)
|
10.9
|
Co-development and Licensing Agreement (incorporated by
reference to the Form 10-Q filed on May 14, 2010)
|
10.10
|
License and Asset Transfer Agreement with Edgemont
Pharmaceuticals (incorporated by reference to the Form 10Q filed on May
15, 2012)
|
10.11+
|
Amended and Restated 2006 Stock Option Plan,
(incorporated by reference to the Form 8-K filed on May 9, 2013)
|
10.12
|
Engagement Letter Wainwright dated October 10, 2013,
amended December 3, 2013 (incorporated by reference to the Form S-1/A
Registration Statement filed December 16, 2013)
|
10.13
|
Amended Form of Securities Purchase Agreement
(incorporated by reference to the Form S-1/A Registration Statement filed
on December 16, 2013)
|
10.14
|
Form of Warrant (incorporated by reference to the Form
S-1 Registration Statement filed on October 25, 2013)
|
10.15
|
Form of Placement Agent Warrant (incorporated by
reference to the Form S-1/A Registration Statement filed on December 16,
2013)
|
10.16 ++
|
Development Services and Commercialization Agreement with
PAR Pharmaceuticals, dated December 19, 2011 (incorporated by reference to
the Form 10-K filed on March 11, 2014)
|
10.17 ++
|
Development Services and Commercialization Agreement with
PAR Pharmaceuticals, dated January 8, 2014 (incorporated by reference to
the Form 10-K filed on March 11, 2014)
|
10.18+
|
Employment Agreement John Durham, January 2015
(incorporated by reference to the Form 10-K filed on March 31, 2015)
|
10.19+
|
Employment Agreement Andre Godin, July 2015 (incorporated
by reference to the Form 8-K filed on July 20, 2015)
|
10.20+
|
Employment Agreement Nadine Paiement, January 2016
(incorporated by reference to the Form 10-K filed on March 30, 2016)
|
10.21+
|
Employment Agreement Dana Matzen, March 2016(incorporated
by reference to the Form 10-K filed on March 30, 2016)
|
10.22+
|
2016 Stock Option Plan May, 11 2016 (incorporated by
reference to the Form S-8 Registration Statement filed on August 3, 2016
|
10.23
|
Amended Principals Registration Rights Agreement,
November 8, 2016 (incorporated by reference to Form 10Q filed on November
10, 2016
|
21.1
|
Subsidiaries of the small business issuer (incorporated
by reference to the Form SB-2 (File No. 333-135591) filed on July 3, 2006)
|
23.1*
|
Consent of Richter LLP
|
23.2**
|
Consent of Dorsey & Whitney LLP (contained in Exhibit
5.1)
|
23.3**
|
Consent of McCarthy Tetrault LLP (contained in Exhibit
5.1)
|
* Filed herewith
** To be filed by amendment
+
Indicates management contract or employee compensation plan
++ Portions of
this exhibit have been omitted based on an application for confidential
treatment from the SEC. The omitted portions of these exhibits have been
submitted separately with the SEC
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in
which offers or sales are being made, a post-effective amendment to this
registration statement:
94
(a) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(b) To reflect in the prospectus any facts or
events arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the Calculation of Registration
Fee table in the effective registration statement; and
(c) To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
(2)
That, for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) That, for the purpose of determining liability
under the Securities Act of 1933 to any purchaser:
(a) If the Corporation is relying on Rule 430B:
(i) Each prospectus filed by the Corporation
pursuant to Rule 424(b)(3) shall be deemed to be part of the registration
statement as of the date the filed prospectus was deemed part of and included in
the registration statement; and
(ii)
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or
(b)(7) as part of a registration statement in reliance on Rule 430B relating to
an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of
providing the information required by section 10(a) of the Securities Act shall
be deemed to be part of and included in the registration statement as of the
earlier of the date such form of prospectus is first used after effectiveness or
the date of the first contract of sale of securities in the offering described
in the prospectus. As provided in Rule 430B, for liability purposes of the
issuer and any person that is at that date an underwriter, such date shall be
deemed to be a new effective date of the registration statement relating to the
securities in the registration statement to which that prospectus relates, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof; provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such effective
date, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in
any such document immediately prior to such effective date; or
(b) If the Corporation is subject to Rule 430C:
Each prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements relying on
Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be
deemed to be part of and included in the registration statement as of the date
it is first used after effectiveness; provided, however, that no statement made
in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to such
first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in
any such document immediately prior to such date of first use.
(5) That,
for the purpose of determining liability of the registrant under the Securities
Act of 1933 to any purchaser in the initial distribution of the securities: The
undersigned registrant undertakes that in a primary offering of securities of
the undersigned registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
95
(i) Any preliminary prospectus or
prospectus of the undersigned registrant relating to the offering required to be
filed pursuant to Rule 424;
(ii) Any free writing prospectus
relating to the offering prepared by or on behalf of the undersigned registrant
or used or referred to by the undersigned registrant;
(iii) The portion of any other
free writing prospectus relating to the offering containing material information
about the undersigned registrant or its securities provided by or on behalf of
the undersigned registrant; and
(iv) Any other communication that is an
offer in the offering made by the undersigned registrant to the purchaser.
(6)
For purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(7)
Insofar as Indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provision, or otherwise, the registrant has
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby
undertakes that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
96
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Ville
St-Laurent, Province of Quebec, on May 12, 2017.
INTELGENX TECHNOLOGIES CORP.
|
|
|
By:
|
/s/
Horst G. Zerbe
|
|
Horst G. Zerbe
|
|
Chief Executive Officer and President
|
|
(Principal Executive Officer)
|
|
|
By:
|
/s/
Andre Godin
|
|
Andre Godin
|
|
Chief Financial Officer (Principal Financial
and
|
|
Accounting Officer)
|
97
POWER OF ATTORNEY
Each person whose signature appears below constitutes and
appoints Horst Zerbe his or her true and lawful attorney in fact and agent, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any or all amendments
(including post effective amendments) to the Registration Statement, and to sign
any registration statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and all post effective amendments thereto,
and to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, each acting alone, or his or her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURE
|
|
TITLE
|
|
DATE
|
|
|
|
|
|
/s/ Horst G.
Zerbe
|
|
Chief Executive Officer, President and Director
|
|
May 12, 2017
|
Horst G. Zerbe
|
|
|
|
|
|
|
|
|
|
/s/ Andre Godin
|
|
Executive Vice President and Chief Financial
Officer
|
|
May 12, 2017
|
Andre Godin
|
|
|
|
|
|
|
|
|
|
/s/ *
|
|
Director
|
|
May 12, 2017
|
J. Bernard Boudreau
|
|
|
|
|
|
|
|
|
|
/s/ *
|
|
Director
|
|
May 12, 2017
|
John Marinucci
|
|
|
|
|
|
|
|
|
|
/s/ *
|
|
Director
|
|
May 12, 2017
|
Bernd J. Melchers
|
|
|
|
|
|
|
|
|
|
/s/ *
|
|
Director
|
|
May 12, 2017
|
Clemens Mayr
|
|
|
|
|
|
|
|
|
|
/s/ *
|
|
Director
|
|
May 12, 2017
|
Mark Nawacki
|
|
|
|
|
|
|
|
|
|
/s/
*
|
|
Director
|
|
May 12, 2017
|
Ian Troup
|
|
|
|
|
* By: /s/ Horst G. Zerbe
Horst G. Zerbe, Attorney-in-fact
98
IntelGenx Technologies (CE) (USOTC:IGXT)
Historical Stock Chart
From Aug 2024 to Sep 2024
IntelGenx Technologies (CE) (USOTC:IGXT)
Historical Stock Chart
From Sep 2023 to Sep 2024