UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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Commission File Number
(Exact name of small business issuer as specified in its charter)
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Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
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APPLICABLE TO CORPORATE ISSUERS:
IntelGenx Technologies Corp.
Form 10-Q
TABLE OF CONTENTS
IntelGenx Technologies Corp.
Consolidated Financial Statements
March 31, 2024
(Expressed in U.S. Funds)
(Unaudited)
Contents
IntelGenx Technologies Corp.
Consolidated Balance Sheet
(Expressed in Thousands of U.S. Dollars ($'000) Except Share and Per Share Data)
(Unaudited)
| March 31, 2024 | December 31, 2023 | |||||
| Assets | ||||||
| Current | ||||||
| Cash | $ | $ | ||||
| Accounts receivable | ||||||
| Prepaid expenses | ||||||
| Investment tax credits receivable | ||||||
| Security deposits | ||||||
| Inventory (note 4) | ||||||
| Total current assets | ||||||
| Leasehold improvements and equipment, net (note 5) | ||||||
| Security deposits | ||||||
| Operating lease right-of-use-asset | ||||||
| Total assets | $ | $ | ||||
| Liabilities | ||||||
| Current | ||||||
| Accounts payable and accrued liabilities | ||||||
| Accrued interest expense (note 9) | ||||||
| Current portion of operating lease liability (note 13) | ||||||
| Current portion of finance lease liability (note 13) | ||||||
| Deferred revenue | ||||||
| Convertible notes (note 7) | ||||||
| Term loan (note 8) | ||||||
| Loan payable (note 9) | ||||||
| Total current liabilities | ||||||
| Loan payable (note 9) | ||||||
| Convertible notes (note 7) | ||||||
| Operating lease liability (note 13) | ||||||
| Finance lease liability (note 13) | ||||||
| Total liabilities | ||||||
| Contingencies (note 16) | ||||||
|
Shareholders' deficit |
||||||
| Capital stock, common shares, $ |
||||||
| Additional paid-in capital (note 11) | ||||||
| Accumulated deficit | ( |
) | ( |
) | ||
| Accumulated other comprehensive loss | ( |
) | ( |
) | ||
| Total shareholders' deficit | ( |
) | ( |
) | ||
| $ | $ |
See accompanying notes
Approved on Behalf of the Board:
/s/ Bernd J. Melchers Director /s/ Horst G. Zerbe Director
2
IntelGenx Technologies Corp.
Consolidated Statement of Shareholders' Deficit
Period Ended March 31, 2024
(Expressed in Thousands of U.S. Dollars ($'000) Except Share and Per Share Data)
(Unaudited)
| Accumulated | ||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||
| Capital Stock | Paid-In | Accumulated | Comprehensive | Shareholders' | ||||||||||||||
| Number | Amount | Capital | Deficit | Loss | Deficit | |||||||||||||
| Balance - December 31, 2023 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||
| Other comprehensive income | - | - | - | - | ||||||||||||||
| Issuance of warrants to atai Life Sciences (net of transaction costs of $ |
- | - | - | - | ||||||||||||||
| Stock-based compensation (note 11) | - | - | - | - | ||||||||||||||
| Net loss for the period | - | - | - | ( |
) | - | ( |
) | ||||||||||
| Balance - March 31, 2024 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||
See accompanying notes
3
Consolidated Statement of Comprehensive Loss
(Expressed in Thousands of U.S. Dollars ($'000) Except Share and Per Share Data)
(Unaudited)
| For the Three-Month Period Ended March 31, |
||||||
| 2024 | 2023 | |||||
| Revenues (note 12) | $ | $ | ||||
| Total revenues | ||||||
| Expenses | ||||||
| Research and development expense | ||||||
| Manufacturing expense | ||||||
| Selling, general and administrative expense | ||||||
| Depreciation of tangible assets | ||||||
| Total expenses | ||||||
| Operating loss | ( |
) | ( |
) | ||
| Interest income | ||||||
| Financing and interest expense | ( |
) | ( |
) | ||
| Net financing and interest expense | ( |
) | ( |
) | ||
| Net loss | ( |
) | ( |
) | ||
| Other comprehensive income | ||||||
| Change in fair value | ||||||
| Foreign currency translation adjustment | ||||||
| Comprehensive loss | $ | ( |
) | $ | ( |
) |
| Basic and diluted: | ||||||
| Weighted average number of shares outstanding | ||||||
| Basic and diluted loss per common share (note 15) | $ | ( |
) | $ | ( |
) |
See accompanying notes
4
IntelGenx Technologies Corp.
Consolidated Statement of Cash Flows
(Expressed in thousands of U.S. Dollars ($000's) Except Share and Per Share Data)
(Unaudited)
| For the Three-Month Period | ||||||
| Ended March 31, | ||||||
| 2024 | 2023 | |||||
| Funds (used) provided - | ||||||
| Operating activities | ||||||
| Net loss | $ | ( |
) | $ | ( |
) |
| Depreciation of tangible assets | ||||||
| Stock-based compensation | ||||||
| Accretion expense | ||||||
| DSU expense | ||||||
| Lease non-cash expense | ( |
) | ||||
| ( |
) | ( |
) | |||
| Changes in non-cash items related to operations: | ||||||
| Accounts receivable | ||||||
| Prepaid expenses | ( |
) | ( |
) | ||
| Investment tax credits receivable | ( |
) | ( |
) | ||
| Inventory | ( |
) | ( |
) | ||
| Accounts payable and accrued liabilities | ||||||
| Accrued interest expense | ||||||
| Deferred revenues | ( |
) | ||||
| Net change in non-cash items related to operations | ||||||
| Net cash used in operating activities | ( |
) | ( |
) | ||
| Financing activities | ||||||
| Finance lease payments | ( |
) | ( |
) | ||
| Issuance of convertible loan | ||||||
| Transaction costs of convertible loan | ( |
) | ||||
| Net proceeds from convertible notes | ||||||
| Transaction costs of convertible notes | ( |
) | ||||
| Net cash provided by financing activities | ||||||
| Investing activities | ||||||
| Additions to leasehold improvements and equipment | ( |
) | ||||
| Net cash used in investing activities | ( |
) | ||||
| (Decrease) increase in cash | ( |
) | ||||
| Effect of foreign exchange on cash | ( |
) | ||||
| Cash | ||||||
| Beginning of period | ||||||
| End of period | $ | $ | ||||
See accompanying notes
5
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal and recurring nature.
These financial statements should be read in conjunction with the audited consolidated financial statements at December 31, 2023. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. IntelGenx Technologies Corp. (and collectively with IntelGenx Corp., our wholly-owned Canadian subsidiary, "IntelGenx" or the "Company") prepares its consolidated 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 IntelGenx Technologies Corp. and IntelGenx Corp. 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 Company's 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. Going Concern
The Company has financed its operations to date primarily through public offerings of its common stock, proceeds from issuance of convertible notes and debentures, bank loans, royalty, up-front and milestone payments, license fees, proceeds from exercise of warrants and options, and research and development revenues. The Company has devoted substantially all of its resources to its drug development efforts, conducting clinical trials to further advance the product pipeline, the expansion of its facilities, protecting its intellectual property and general and administrative functions relating to these operations. The future success of the Company is dependent on its ability to develop its product pipeline and ultimately upon its ability to attain profitable operations. As of March 31, 2024, the Company had approximately $
Depending on the strategic alternatives available and if the Company is unable to raise further capital when needed or on attractive terms, or if it is unable to procure partnership arrangements to advance its programs, the Company would be forced to potentially delay, reduce or eliminate some of its research and development programs and commercial activities.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The accompanying consolidated financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due.
6
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
3. Significant Accounting Policies
Revenue Recognition
The Company may enter into licensing and collaboration agreements for product development, licensing, supply and manufacturing for its product pipeline. The terms of the agreements may include non-refundable signing and licensing fees, milestone payments and royalties on any product sales derived from collaborations. These contracts are analyzed to identify all performance obligations forming part of these contracts. The transaction price of the contract is then determined. The transaction price is allocated between all performance obligations on a residual standalone selling price basis. The stand-alone selling price is estimated based on the comparable market prices, expected cost plus margin and the Company's historical experience.
Revenue is measured based on a consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
The following is a description of principal activities - separated by nature - from which the Company generates its revenue.
Product revenue
The Company recognizes revenue from the sale of its products when the following conditions are met; delivery has occurred; the price is fixed or determinable; the collectability is reasonable assured and persuasive evidence of an arrangement exists.
Research and Development Revenue
Revenues with corporate collaborators are recognized as the performance obligations are satisfied over time, and the related expenditures are incurred pursuant to the terms of the agreement.
7
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
3. Summary of Significant Accounting Policies (Cont'd)
Licensing and Collaboration Arrangements
Licenses are considered to be right-to-use licenses. As such, the Company recognizes the licenses revenues at a point in time, upon granting the licenses.
Milestone payments are considered variable consideration. As such, the Company estimates variable consideration at the most likely amount to which we expect to be entitled. The estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, research and other revenues in the period during which the adjustment is recognized. The process of successfully achieving the criteria for the milestone payments is highly uncertain. Consequently, there is significant risk that the Company may not earn all of the milestone payments for each of its contracts.
Royalties are typically calculated as a percentage of net sales realized by the Company's licensees of its products (including their sub-licensees), as specifically defined in each agreement. The licensees' sales generally consist of revenues from product sales of the Company's product pipeline and net sales are determined by deducting the
following: estimates for chargebacks, rebates, sales incentives and allowances, returns and losses and other customary deductions in each region where the Company has licensees. Revenues arising from royalties are considered variable consideration. As such, the Company estimates variable consideration at the most likely amount to which we expect to be entitled. The estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
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 |
|
| Laboratory and office equipment | |
| Computer equipment | |
| On the |
|
| Leasehold improvements |
|
| Manufacturing equipment |
|
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.
8
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
3. Summary of Significant Accounting Policies (Cont'd)
Leases
Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any one of these criteria.
Substantially all of the Company's operating leases are comprised of office space and property leases. The finance leases are comprised of laboratory equipment leases.
For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease.
The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. The lease liability is initially measured as the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's secured incremental borrowing rate for the same term as the underlying lease.
Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.
Lease modifications result in remeasurement of the lease liability.
Lease expense for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage commissions, and is recognized on a straight-line basis over the lease term. Included in lease expense are any variable lease payments incurred in the period that were not included in the initial lease liability.
The Company has elected not to recognize right-of-use assets and lease liabilities for short-tern leases that have a term of 12 months or less. The effect of short-term leases on our right-of-use asset and lease liability was not material.
4. Inventory
Inventory as at March 31, 2024 consisted of raw materials in the amount of $
9
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
5. Leasehold Improvements and Equipment
| 2024 | 2023 | |||||||||||
| Accumulated | Net Carrying | Net Carrying | ||||||||||
| Cost | Depreciation | Amount | Amount | |||||||||
| Manufacturing equipment | $ | $ | $ | $ | ||||||||
| Laboratory and office equipment | ||||||||||||
| Computer equipment | ||||||||||||
| Leasehold improvements | ||||||||||||
| $ | $ | $ | $ |
As at March 31, 2024, no depreciation has been recorded on manufacturing equipment in the amount of $
6. Bank Indebtedness
The Company's credit facility is subject to review annually and consists of corporate credits cards of up to CAD$
7. Convertible Notes
Current liabilities
On October 15, 2020, the Company announced the closing of an offering by way of private placement to certain investors in the United States of $
On October 23, 2020, the Company announced the closing of a second tranche of the Notes to certain investors in the United States of $
10
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
7. Convertible Notes (Cont'd)
Management has determined the value of the agents' warrants to be $
The convertible notes have been recorded as a liability. Total transactions costs in the amount of $
The components of the convertible notes are as follows:
| March 31, 2024 | December 31, 2023 | |||||
| Attributed value of net proceeds to convertible notes | $ | $ | ||||
| Accretion | ||||||
| Convertible note | $ | $ |
The interest on the convertible notes for the three-month period ended March 31, 2024 amounts to $
On May 8, 2018, the Company closed its previously announced offering by way of private placement (the "Offering"). In connection with the Offering, the Company issued
Each Unit is comprised of (i)
In connection with the Offering, the Company paid to the Agents a cash commission of approximately $
The proceeds of the Units are attributed to liability and equity components based on the fair value of each component as follows:
| Gross proceeds | Transaction costs | Net proceeds | |||||||
| Common stock | $ | $ | $ | ||||||
| Convertible notes | |||||||||
| Warrants | |||||||||
| $ | $ | $ |
11
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
7. Convertible Notes (Cont'd)
On May 19, 2021, the noteholders approved the amendment of the terms of the convertible notes. The maturity date of the convertible notes was extended from June 1, 2021 to October 31, 2024, the interest rate of the notes increased from
The components of the convertible notes subsequent to the amendments are as follows:
| March 31, 2024 | December 31, 2023 | |||||
| Face value of the convertible notes | $ | $ | ||||
| Transaction costs | ( |
) | ( |
) | ||
| Accretion | ||||||
| Convertible notes | $ | $ |
The convertible notes have been recorded as a liability. Total transactions costs in the amount of $
The interest on the convertible notes for the three-month period ended March 31, 2024 amounts to $
Long-term liabilities
On August 31, 2023 the Company announced the closing of the first tranche of a non-brokered private placement (the "Offering") of units ("Units") from atai for aggregate gross proceeds of approximately US$
Pursuant to the Offering, (i) United States subscribers can subscribe for Units (the "US Units") at a price of US$
The US Notes are convertible into shares of common stock of the Company (the "Shares") at the option of the holder at a price of US$
atai, a significant shareholder and partner of the Company, subscribed for
12
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
7. Convertible Notes (Cont'd)
On September 30, 2023, the Company and atai agreed, subject to obtaining TSX approval and the Shareholder Approvals, to enter into an amendment (the "Subscription Agreement Amendment") to the subscription agreement entered into by and between the Company and atai in connection with the Offering to provide atai with the right (the "Call Option") to purchase up to an additional
IntelGenx intends to use the proceeds of the Offering to fund the Company's wholly-owned Canadian subsidiary, continuing formulation and development efforts related to ongoing collaborations between IGXT and atai as well as working capital and expenses related to the Offering.
The proceeds of the Units are attributed to liability and equity components based on the fair value of each component as follows:
| Gross proceeds | Transaction costs | Net proceeds | |||||||
| Convertible notes | $ | $ | $ | ||||||
| Warrants | |||||||||
| $ | $ | $ |
The convertible notes have been recorded as a liability. Total transactions costs in the amount of $
The components of the convertible notes are as follows:
| March 31, 2024 | December 31, 2023 | |||||
| Attributed value of net proceeds to convertible notes | $ | $ | ||||
| Accretion | ||||||
| Convertible notes | $ | $ |
The interest on the convertible notes for the three-month period ended March 31, 2024 amounts to $
The proceeds of the Units are attributed to liability and equity components based on the fair value of each component. Management has determined the value attributed to the warrants to be $
13
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
7. Convertible Notes (Cont'd)
On March 21, 2023, the Company announced the closing of an offering by way of private placement to certain investors in the United States of $
Management has determined the value of the agents' warrants to be $
The convertible notes have been recorded as a liability. Total transactions costs in the amount of $
The components of the convertible notes are as follows:
| March 31, 2024 | December 31, 2023 | |||||
| Face value of the convertible notes | $ | $ | ||||
| Transaction costs | ( |
) | ( |
) | ||
| Accretion | ||||||
| Convertible notes | $ | $ |
The interest on the convertible notes for the three-month period ended March 31, 2024 amounts to $
On August 5, 2021, the Company announced the closing of an offering by way of private placement to certain investors in the United States of $
Management has determined the value of the agents' warrants to be $
The convertible notes have been recorded as a liability. Total transactions costs in the amount of $
14
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
7. Convertible Notes (Cont'd)
The components of the convertible notes are as follows:
|
March 31, 2024 |
December 31, 2023 |
|||||
| Face value of the convertible notes | $ | $ | ||||
| Transaction costs | ( |
) | ( |
) | ||
| Accretion | ||||||
| Convertible notes | $ | $ |
The interest on the convertible notes for the three-month period ended March 31, 2024 amounts to $
8. Term loan
On December 5, 2023, atai Life Sciences ("atai") has granted to the Company a secured term loan for $
9. Loan Payable
Current liabilities
atai Life Sciences ("atai") has granted to the Company a secured loan in the amount of $
On August 31, 2023, the Company entered into an amending agreement (the "Amending Agreement") in respect of the amended and restated loan agreement dated as of September 14, 2021 (the "Loan Agreement") between the Company, as borrower, and atai, as lender pursuant to which, among other things, the maturity date of the Loan Agreement was extended from January 5, 2024 to
On September 30, 2023, the Company and atai also agreed, subject to obtaining TSX and Shareholder approvals, to enter into a second amendment to the Loan Agreement (the "Second Amendment") to provide, among other things, for the ability for atai to convert the principal and accrued interest outstanding under the Loan Agreement into Shares. On November 28, 2023, the Company announced shareholder approvals of the financing transactions. As a result, atai has the ability to convert the principal and accrued interest under the Loan Agreement into shares of common stock of the Company (the "Shares") at a price of US$
15
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
9. Loan Payable (Cont'd)
The loan bears interest at
The components of the Company's debt subsequent to the extinguishment are as follows
| March 31, 2024 | December 31, 2023 | |||||
| Attributed value of the loan payable | $ | $ | ||||
| Transaction costs | ( |
) | ( |
) | ||
| Accretion | ||||||
| Loan payable | $ |
Long-term liabilities
On March 11, 2024, the Company announced that it entered into a third amended and restated loan agreement dated as of March 8, 2024 (amending the second amended and restated loan agreement dated as of September 30, 2023) (the "Loan Agreement") with atai, pursuant to which, among other things, atai has agreed to make (i) one (1) additional term loan in the amount of US$
The Loan Agreement provides for the ability for atai to convert (the "Conversion Feature"), from time to time, (i) the principal outstanding under the First Tranche Loan into shares of common stock of the Company (the "Shares") at a conversion price of US$
Additionally, the Company may elect, with the consent of atai, to pay any accrued but unpaid interest on the Additional Term Loans in Shares at a price per Share equal to the 5-day VWAP of the Shares ending on the day that is the second business day before the day the interest becomes due and payable, less the maximum permissible discount under the applicable TSX rules.
16
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
9. Loan Payable (Cont'd)
Concurrently to entering into the Loan Agreement, the Company has issued
The proceeds of the loan are attributed to liability and equity components based on the fair value of each component as follows:
| Gross proceeds | Transaction costs | Net proceeds | |||||||
| Loan payable | $ | $ | $ | ||||||
| Warrants | |||||||||
| $ | $ | $ |
The loan payable has been recorded as a liability. Total transactions costs in the amount of $
The components of the loan payable are as follows:
| March 31, 2024 | |||
| Attributed value of net proceeds to loan payable | $ | ||
| Transaction costs | ( |
) | |
| Accretion | |||
| Loan payable | $ |
The interest on the loan payable for the three-month period ended March 31, 2024 amounts to $
The proceeds of the loan are attributed to liability and equity components based on the fair value of each component. Management has determined the value attributed to the warrants to be $
Atai is an insider of the Company as a result of its beneficial ownership of, or control or discretion over, directly or indirectly, greater than
17
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
10. Capital Stock
|
March 31, 2024 |
December 31, 2023 |
|||||
| Authorized - | ||||||
|
|
||||||
| Issued - | ||||||
|
|
$ | $ |
On November 28, 2023, the shareholders of the Company approved an amendment to increase the total number of authorized shares of capital stock of the Company from
11. Additional Paid-In Capital
Stock options
On January 29, 2024,
On January 29, 2024, the Company granted
On January 29, 2023,
Compensation expenses for stock-based compensation of $
18
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
11. Additional Paid-In Capital (Cont'd)
Warrants
Deferred Share Units ("DSUs")
On January 25, 2024,
On January 29, 2023,
During the three-month period ended March 31, 2024,
Performance and Restricted Share Units ("PRSUs")
On January 29, 2023, the Company granted
The PRSUs were accounted for at their fair value, as determined by the Binomial Lattice valuation model, of approximately $
On January 29, 2024,
On April 4, 2023,
19
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
12. Revenues
The following table presents our revenues disaggregated by revenue source. Sales and usage-based taxes are excluded from revenues:
| March 31, 2024 | March 31, 2023 | |||||
| Research and development agreements | $ | $ | ||||
| Royalties on product sales | ||||||
| $ | $ |
The following table presents our revenues disaggregated by timing of recognition:
| March 31, 2024 | March 31, 2023 | |||||
| Product and services transferred at point in time | $ | $ | ||||
| Products and services transferred over time | ||||||
| $ | $ |
The following table presents our revenues disaggregated by geography, based on the billing addresses of our customers:
| March 31, 2024 | March 31, 2023 | |||||
| Europe | $ | $ | ||||
| United States | ||||||
| $ | $ |
Remaining performance obligations
As at March 31, 2024, the aggregate amount of the transaction price allocated to the remaining performance obligation is $
The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about the remaining performance obligations that have original expected durations of one year or less.
20
|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
13. Leases
Operating leases
Substantially all our operating lease right-of-use assets and operating lease liability represents leases for office space and property to conduct our business.
The operating lease expense for the three-month period ended March 31, 2024 included in general and administrative expenses is $
The weighted average remaining lease term and the weighted average discount rate for operating leases at March 31, 2024 were
The following table reconciles the undiscounted cash flows for the operating leases as at March 31, 2024 to the operating lease liabilities recorded on the balance sheet:
| Operating Leases | |||
| 2024 | |||
| 2025 | |||
| 2026 | |||
| Total undiscounted lease payments | |||
| Less: Interest | |||
| Present value of lease liabilities | $ |
| Current portion of operating lease liability | $ | ||
| Operating lease liability | $ |
Finance leases
Substantially all our finance lease right-of-use assets and finance lease liability represents leases for laboratory equipment to conduct our business.
The cash outflows from finance leases for the three-month period ended March 31, 2024 was $
The weighted average remaining lease term and the weighted average discount rate for finance leases at March 31, 2024 were
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|
IntelGenx Technologies Corp. Notes to Consolidated Interim Financial Statements |
13. Leases (Cont'd)
The following table reconciles the undiscounted cash flows for the finance leases as at March 31, 2024 to the finance lease liabilities recorded on the balance sheet:
| Finance Leases | |||
| 2024 | $ | ||
| 2025 | |||
| Total undiscounted lease payments | |||
| Less: Interest | |||
| Present value of lease liabilities | $ |
| Current portion of finance lease liability | $ | ||
| Finance lease liability | $ |
14. Related Party Transactions
Included in management salaries are $
Also included in general and administrative expenses for the three-month period ended March 31, 2024 are director fees of $
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.
15. Basic and Diluted Loss Per Common Share
Basic and diluted loss per common share is calculated based on the weighted average number of shares outstanding during the period. The warrants, share-based compensation and convertible debenture and notes have been excluded from the calculation of diluted loss per share since they are anti-dilutive.
16. Contingencies
The government authorities have assessed the Company with respect to sales taxes claimed on certain expenses between 2017 and 2020, which the government is denying. The sales tax assessments amount to $
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Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
Introduction to Management's Discussion and Analysis
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") comments on our business operations, performance, financial position and other matters for the three-month periods ended March 31, 2024 and 2023.
Unless otherwise indicated, all financial and statistical information included herein relates to continuing operations of the Company. Unless otherwise indicated or the context otherwise requires, the words, "IntelGenx, "Company", "we", "us", and "our" refer to IntelGenx Technologies Corp. and its subsidiaries, including IntelGenx Corp.
This MD&A should be read in conjunction with the accompanying unaudited Consolidated Financial Statements and Notes thereto. We also encourage you to refer to the Company’s MD&A for the year ended December 31, 2023. In preparing this MD&A, we have taken into account information available to us up to May 15, 2024, the date of this MD&A, unless otherwise indicated.
Additional information relating to the Company, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the "2023 Form 10-K"), is available on SEDAR at www.sedar.com and on the U.S. Securities and Exchange Commission (the "SEC") website at www.sec.gov.
All dollar amounts are expressed in U.S. dollars, unless otherwise noted.
Cautionary Statement Concerning Forward-Looking Statements
Certain statements included or incorporated by reference in this MD&A constitute forward-looking statements within the meaning of applicable securities laws. All statements contained in this MD&A that are not clearly historical in nature are forward-looking, and the words "anticipate", "believe", "continue", "expect", "estimate", "intend", "may", "plan", "will", "shall" and other similar expressions are generally intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All forward-looking statements are based on our beliefs and assumptions based on information available at the time the assumption was made. These forward-looking statements are not based on historical facts but on management's expectations regarding future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Forward-looking statements involve significant known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those implied by forward-looking statements. These factors should be considered carefully and you should not place undue reliance on the forward-looking statements. Although the forward-looking statements contained in this MD&A or incorporated by reference herein are based upon what management believes to be reasonable assumptions, there is no assurance that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this MD&A or as of the date specified in the documents incorporated by reference herein, as the case may be. We undertake no obligation to update any 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. The factors set forth in Item 1A., "Risk Factors" of the 2023 Form 10-K, as well as any cautionary language in this MD&A, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Before you invest in the common stock, you should be aware that the occurrence of the events described as risk factors and elsewhere in this report could have a material adverse effect on our business, operating results and financial condition.
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Company Background
We are a drug delivery company established in 2003 and headquartered in Montreal, Quebec, Canada. Our focus is on the contract development and manufacturing of novel oral thin film products for the pharmaceutical market. More recently, we have made the strategic decision to enter the psychedelic market by entering into a strategic partnership agreement with atai Life Sciences. The Company has applied and is operating under a contract development and manufacturing organization ("CDMO") business model. As a full-service CDMO, we are offering partners a comprehensive portfolio of pharmaceutical services, including pharmaceutical research and development ("R&D"), clinical monitoring, regulatory support, tech transfer, manufacturing scale-up and commercial manufacturing.
Our business strategy is to leverage our proprietary drug delivery technologies and develop pharmaceutical products with tangible benefits for patients, for our partners and, once a developed product launches, retain the exclusive manufacturing rights.
Our primary growth strategy is based on providing CDMO services to the pharmaceutical industry. In order to successfully execute our business strategy, it will be essential to create and maintain a fully compliant manufacturing environment capable of meeting customer expectations regarding cGMP compliance and manufacturing capacity.
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 Section 505(b)(2) of the Federal Food, Drug, and Cosmetics Act (the "FDCA") ("Section 505(b)(2)"), the U.S. Food and Drug Administration (the "FDA") may grant market exclusivity for a term of up to three years 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 a combination.
The Section 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 R&D on other potential products as opportunities arise.
We have established a state-of-the-art manufacturing facility with the intent to manufacture all of our VersaFilm™ products in-house as we believe that this:
• represents a profitable business opportunity;
• will reduce our dependency upon third-party contract manufacturers, thereby protecting our manufacturing process know-how and intellectual property; and
• allows us to offer our clients and development partners a full service from product conception through to supply of the finished product.
We initiated a project to expand the existing manufacturing facility, the timing of which will be dictated in part by the completion of agreements with our commercial partners. This expansion might become necessary in order to meet expected production volumes from our commercial partners. The new facility should create a fourfold increase of our production capacity in addition to offering a one-stop shopping opportunity to our partners and provide better protection of our Intellectual Property.
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Technology Platforms
Our main product development efforts are based upon three delivery platform technologies: (1) VersaFilm™, an oral film technology, (2) the VetaFilmTM technology platform for veterinary applications, and (3) DisinteQTM a disintegrating oral film technology.
VersaFilm™ is a drug delivery platform technology that enables the development of oral thin films, improving product performance through:
• 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 swallowing tablets or capsules; pediatric and geriatric patients as well as patients who fear choking and/or are suffering from nausea (e.g., nausea resulting from chemotherapy, radiotherapy or any surgical treatment);
• pleasant taste; and
• 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 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 and improved bioavailability 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 or for drug that have a low oral bioavailability and require transmucosal absorption.
Our VetaFilm™ platform technology is designed for the application in companion animals. Dose acceptance and compliance are often a challenge for the care giver which can be overcome with our newly designed VetaFilm™ platform. VetaFilm™ is specifically formulated with flavors that are appealing to pets and to achieve rapid adhesion to the oral mucosa of the animal to achieve compliance.
Our DISINTEQ™ oral disintegrating film formulations will provide different dissolution characteristics compared to VersaFilm®. Instead of quickly dissolving in the oral cavity, DISINTEQ™ formulations disintegrate at a controlled rate. This will allow a slower release of the drug into the oral cavity thereby avoiding saturation of the oral mucosal membranes and increasing mucosal absorption.
Product Opportunities that provide Tangible Patient Benefits
We offer our services to develop 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. We have also identified the Animal Health sector, particularly the companion animal segment, as an area where our proprietary oral film technology can significantly improve the administration of medication to animals.
Development of New Drug Delivery Technologies
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The rapidly disintegrating film technology contained in our VersaFilm™, is an example 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.
Most recent key developments
On February 5, 2024, the Company announced positive results from a proof-of-concept ("POC") study to assess the palatability, owner-perceived acceptability, and ease of repeated administration of IntelGenx's VetaFilm™ platform in healthy dogs and cats. The POC study was conducted through a research collaboration with the University of Prince Edward Island, one of North America's leading veterinary universities.
On February 20, 2024, the Company announced the launch of a Regulation A offering of up to 2,000,000 shares of Series A Convertible Cumulative Preferred Stock ("Series A Preferred Stock"), par value $0.00001 per share, at an offering price of $10.00 per share (the "Offering"), for a maximum Offering amount of $20,000,000.
Holders of the Series A Preferred Stock will be entitled to receive cumulative dividends in the amount of $0.20 per share each quarter, or 8% per year. Each share of Series A Preferred Stock will be convertible into twenty (20) shares of our common stock ("Common Stock) at the option of the holder, subject to certain conditions in accordance with the requirements of the Toronto Stock Exchange. Commencing on the fifth anniversary of the initial closing of this offering and continuing indefinitely thereafter, the Company shall have a right to call for redemption the outstanding shares of the Series A Preferred Stock at a call price equal to 150% of the original issue price of the Series A Preferred Stock, and correspondingly, each holder of shares of the Series A Preferred Stock shall have a right to sell the shares of Series A Preferred Stock held by such holder back to the Company at a price equal to 150% of the original issue purchase price of such shares. The Series A Preferred Stock being offered will rank, as to dividend rights and rights upon the Company's liquidation, dissolution, or winding up, senior to the Common Stock.
On March 11, 2024, the Company announced that it entered into a third amended and restated loan agreement dated as of March 8, 2024 (amending the second amended and restated loan agreement dated as of September 30, 2023) (the "Loan Agreement") with atai, pursuant to which, among other things, atai has agreed to make (i) one (1) additional term loan in the amount of US$1,000,000, which loan was disbursed within three (3) business days of the execution of the Loan Agreement (the "First Tranche Loan"), and (ii) one (1) additional term loan in the amount of US$1,000,000, which loan was disbursed subsequent to the end of the quarter on April 19, 2024, upon the achievement of a pre-defined milestone (the "Second Tranche Loan" and collectively with the Second Tranche Loan, the "Additional Term Loans"). The Additional Term Loans will mature on February 1, 2026.
The Loan Agreement provides for the ability for atai to convert (the "Conversion Feature"), from time to time, (i) the principal outstanding under the First Tranche Loan into shares of common stock of the Company (the "Shares") at a conversion price of US$0.185 per Share (the "Conversion Price"), and (ii) the principal outstanding under the Second Tranche Loan into Shares at a conversion price equal to the greater of (a) the Conversion Price and (b) the 5-day volume-weighted average price (the "5-day VWAP") of the Shares on the TSX ending on the day preceding the disbursement by atai of the Second Tranche Loan to the Company or IntelGenx, less the maximum permissible discount under the applicable TSX rules.
Additionally, the Company may elect, with the consent of atai, to pay any accrued but unpaid interest on the Additional Term Loans in Shares at a price per Share equal to the 5-day VWAP of the Shares ending on the day that is the second business day before the day the interest becomes due and payable, less the maximum permissible discount under the applicable TSX rules.
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Concurrently to entering into the Loan Agreement, the Company has issued 4,000,000 warrants (the "Warrants") to atai. The Warrants entitle atai to purchase Shares at a price of US$0.17 per Share, for a period of 36 months following their issuance.
Subsequent to the end of the quarter, on April 5, 2024, the Company announced that its co-developer, Chemo Research SL, through its agent and affiliate, Xiromed LLC ("Xiromed"), has received a Complete Response Letter ("CRL") from the U.S. Food and Drug Administration ("FDA") regarding its resubmitted abbreviated new drug application ("ANDA") for Buprenorphine Buccal Film.
The CRL includes a request for additional Pharmaceutical Quality information. The FDA confirmed that no additional inspection of IntelGenx's facility is required at this time.
Subsequent to the end of the quarter, on April 8, 2024, the Company announced that that Montelukast VersaFilmTM has been administered to the first Parkinson's Disease ("PD") patients in the Phase 2 ('MONTPARK') clinical trial.
MONTPARK (EudraCT number 2023-504278-39-00) is a Phase 2, randomized, double-blind, placebo-controlled, parallel arm, multicentre trial that will investigate the efficacy of oral high-dose Montelukast on the progression of early-to-moderate PD. The study will enroll up to 90 patients who will receive 30 mg Montelukast VersaFilmTM or placebo twice daily for 18-months, followed by a 3-month washout period. Eligible candidates must be on levodopa treatment at the time of enrolment and may also be on other dopaminergic symptomatic agents. MONTPARK is being conducted at the Karolinska University Hospital and at three other Swedish University affiliated institutions under IntelGenx's previously announced research collaboration with Per Svenningsson, MD, PhD, who is serving as the study's Lead Principal Investigator.
All amounts are expressed in thousands of U.S. dollars unless otherwise stated.
Currency rate fluctuations
Our operating currency is Canadian dollars, while our reporting currency is U.S. dollars. Accordingly, our results of operations and balance sheet position have been affected by currency rate fluctuations. In summary, our financial statements for the three-month period ended March 31, 2024 report an accumulated other comprehensive loss mainly due to foreign currency translation adjustments of $2,145 primarily due to the fluctuations in the rates used to prepare our financial statements, $308 of which positively impacted our comprehensive loss for the three-month period ended March 31, 2024. The following Management Discussion and Analysis takes this into consideration whenever material.
Reconciliation of Comprehensive Loss to Adjusted Earnings (Loss) before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA (Loss))
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 Company's financial condition and operating results.
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IntelGenx obtains its Adjusted EBITDA measurement by adding / (deducting) 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 consultant's remuneration and can vary significantly with changes in the market price of the Company's 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 Company's operating results over a period of time. Our method for calculating Adjusted EBITDA may differ from that used by other corporations.
Reconciliation of Non-US-GAAP Financial Information
| Three-month period | ||||||||||||
| ended March 31, | ||||||||||||
| 2024 | 2023 | |||||||||||
| $ | $ | |||||||||||
| Comprehensive loss | (3,719 | ) | (2,920 | ) | ||||||||
| Add (deduct): | ||||||||||||
| Depreciation | 202 | 192 | ||||||||||
| Finance costs | 792 | 319 | ||||||||||
| Finance income | - | (14 | ) | |||||||||
| Share-based compensation | 300 | 11 | ||||||||||
| Other comprehensive income | (308 | ) | (4 | ) | ||||||||
| Adjusted EBITDA (Loss) | (2,733 | ) | (2,416 | ) | ||||||||
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Adjusted Earnings (Loss) before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA Loss)
Adjusted EBITDA (Loss) increased by $317 for the three-month period ended March 31, 2024 to ($2,733) compared to ($2,416) for the three-month period ended March 31, 2023. The increase in Adjusted EBITDA (Loss) of $317 for the three-month period ended March 31, 2024 is mainly attributable to an increase in SG&A expenses of $400 before consideration of stock-based compensation, offset by a decrease in R&D expenses of $57 before consideration of stock-based compensation, a decrease in manufacturing expenses of $14 before consideration of stock-based compensation, and an increase in revenues of $12.
Results of operations for the three-month period ended March 31, 2024 compared with the three-month period ended March 31, 2023.
| Three-month period | ||||||
| ended March 31, | ||||||
| 2024 | 2023 | |||||
| $ | $ | |||||
| Revenue | 174 | 162 | ||||
| Research and development Expenses | 789 | 822 | ||||
| Manufacturing Expenses | 484 | 472 | ||||
| Selling, General and Administrative Expenses | 1,934 | 1,295 | ||||
| Depreciation of tangible assets | 202 | 192 | ||||
| Operating loss | (3,235 | ) | (2,619 | ) | ||
| Net loss | (4,027 | ) | (2,924 | ) | ||
| Comprehensive loss | (3,719 | ) | (2,920 | ) | ||
Revenue
Total revenues for the three-month period ended March 31, 2024 amounted to $174, representing an increase of $12 or 7% compared to $162 for the three-month period ended March 31, 2023. The increase for the three-month period ended March 31, 2024 compared to the last year's corresponding period is attributable to increases in R&D revenues of $7 and Royalties on Product Sales of $5.
Research and development ("R&D") expenses
R&D expenses for the three-month period ended March 31, 2024 amounted to $789, representing a decrease of $33 or 4%, compared to $822 for the three-month period ended March 31, 2023.
The decrease in R&D expenses for the three-month period ended March 31, 2024 is attributable to decreases in the allocation of the 20% credit of $33 as per the strategic development agreement with atai, consulting fees of $26, patent expenses of $16, and lab supplies of $8, offset by increases in study costs of $30 and salary expenses of $20.
In the three-month period ended March 31, 2024 we recorded estimated Research and Development Tax Credits of $37, consistent with $37 that was recorded in the same period of the previous year.
Manufacturing expenses
Manufacturing expenses for the three-month period ended March 31, 2024 amounted to $484, representing an increase of $12 or 3%, compared to $472 for the three-month period ended March 31, 2023.
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The increase in Manufacturing expenses for the three-month period ended March 31, 2024 is attributable to increases in salary expenses of $89 due to hiring and supplies and consumables of $8, offset by decreases in storage fees of $42, quality expenses of $22, consulting fees of $12, and repairs and maintenance of $9.
Selling, general and administrative ("SG&A") expenses
SG&A expenses for the three-month period ended March 31, 2024 amounted to $1,934, representing an increase of $639 or 49%, compared to $1,295 for the three-month period ended March 31, 2023.
The increase in SG&A expenses for the three-month period ended March 31, 2024 is attributable to the variation of the foreign exchange due to the depreciation of the CA dollar vs US currency in the amount of $401, increases in salaries and compensation expenses of $266 (mainly due to the issuance and revaluation of DSUs in the quarter and the grant of RSUs), consulting fees of $33, investor relations expenses of $14, and leasehold expenses of $6, offset by decreases in professional fees of $45, insurance expense of $24, and general office expenses of $12.
Depreciation of tangible assets
In the three-month period ended March 31, 2024 we recorded an expense of $202 for the depreciation of tangible assets, compared with an expense of $192 for the same period of the previous year.
Share-based compensation expense, warrants and stock-based payments
Share-based payments expense for the three-month period ended March 31, 2024 amounted to $300 compared to $11 for the three-month period ended March 31, 2023.
We expensed approximately $299 in the three-month period ended March 31, 2024 for options/PRSUs and RSUs granted to our employees in 2022, 2023 and 2024 under the 2022 Stock Option Plan and $1 for options granted to a consultant in 2024, compared with $8 and $3, respectively that was expensed in the same period of the previous year.
There remains approximately $514 in stock-based compensation to be expensed in fiscal 2024 through 2027 of which $12 relates to the issuance of options to a consultant during 2024. We anticipate the issuance of additional options and warrants in the future, which will continue to result in stock-based compensation expense
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Key items from the balance sheet
| March 31, 2024 | December 31, 2023 |
Increase/ (Decrease) |
Percentage Increase/ (Decrease) |
|||||||||
| Current assets | $ | 2,077 | $ | 3,441 | $ | (1,364 | ) | $ | (40)% | |||
| Leasehold improvements and equipment, net | 3,682 | 3,958 | (276 | ) | (7%) | |||||||
| Security deposits | 244 | 250 | (6 | ) | (2%) | |||||||
| Operating lease right-of-use asset | 545 | 633 | (88 | ) | (14%) | |||||||
| Current liabilities (excluding convertible notes and loan payable) | 6,282 | 5,866 | 416 | 7% | ||||||||
| Loan payable | 8,319 | 7,401 | 918 | 12% | ||||||||
| Convertible notes | 7,123 | 6,995 | 128 | 2% | ||||||||
| Operating lease liability | 170 | 230 | (60 | ) | (26%) | |||||||
| Finance lease liability | 20 | 37 | (17 | ) | (46%) | |||||||
| Capital Stock | 1 | 1 | 0 | 0% | ||||||||
| Additional paid-in-capital | 69,262 | 68,662 | 600 | 1% |
Going concern
The Company has financed its operations to date primarily through public offerings of its common stock, proceeds from issuance of convertible notes and debentures, bank loans, royalty, up-front and milestone payments, license fees, proceeds from exercise of warrants and options, and research and development revenues. The Company has devoted substantially all of its resources to its drug development efforts, conducting clinical trials to further advance the product pipeline, the expansion of its facilities, protecting its intellectual property and general and administrative functions relating to these operations. The future success of the Company is dependent on its ability to develop its product pipeline and ultimately upon its ability to attain profitable operations. As of March 31, 2024, the Company had cash totaling approximately $772. The Company does not have sufficient existing cash to support operations for the next year following the issuance of these financial statements. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Therefore, management plans to explore any available strategic alternatives.
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Depending on the strategic alternatives available and if the Company is unable to raise further capital when needed or on attractive terms, or if it is unable to procure partnership arrangements to advance its programs, the Company would be forced to potentially delay, reduce or eliminate some of its research and development programs and commercial activities.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The accompanying consolidated financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due.
Current assets
Current assets totaled $2,077 as at March 31, 2024 compared with $3,441 as at December 31, 2023. The decrease of $1,364 is mainly attributable to a decrease in cash of $1,510, offset by increases in prepaid expenses of $16, investment tax credits receivable of $33, and inventory of $102.
Cash
Cash totaled $772 as at March 31, 2024 representing a decrease of $1,510 compared with the balance of $2,282 as at December 31, 2023. The decrease in cash on hand relates to net cash used in operating activities of $2,856, offset by net cash provided by financing activities of $943, and a positive foreign exchange effect of $403.
Accounts receivable
Accounts receivable totaled $618 as at March 31, 2024 representing a decrease of $4 compared with the balance of $622 as at December 31, 2023. The decrease is related to the collection of receivables offset by the invoicing of revenues incurred in the three-month period ended March 31, 2024.
Prepaid expenses
As at March 31, 2024 prepaid expenses totaled $239 compared with $223 as of December 31, 2023. The increase may be explained by advance payments made in January 2024.
Investment tax credits receivable
R&D investment tax credits receivable totaled approximately $201 as at March 31, 2024 compared with $168 as at December 31, 2023. The increase is attributable to the accrual estimated and recorded for the first three months of 2024.
Leasehold improvements and equipment
As at March 31, 2024, the net book value of leasehold improvements and equipment amounted to $3,682, compared to $3,958 at December 31, 2023. In the three-month period ended March 31, 2024 additions to assets totaled $Nil, and depreciation expense amounted to $202, offset by the variation of foreign exchange fluctuation.
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Security deposit
A security deposit in the amount of CA$300 ($221) 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, 2024. Security deposits in the amount of CA$26 ($19) for utilities and CA$5 ($4) for Cannabis license were also recorded as at March 31, 2024. Security deposit in the amount of CA$100 ($74) for Company credit cards was also recorded as at March 31, 2024 but classified as short-term.
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities totaled $3,023 as at March 31, 2024 compared with $2,661 as at December 31, 2023. The increase is attributable to an increase in trade payables for R&D and Manufacturing costs incurred.
Accrued interest expense
Accrued interest expense totaled $1,426 as at March 31, 2024 compared with $1,249 as at December 31, 2023. The increase is attributable to the fact that the interest expense has not been paid.
Term loan
Term loan totaled $500 as at March 31, 2024 and as at December 31, 2023. Atai has granted to the Company a secured term loan for $500, bearing interest at 14%. Principal of and interest on this Term Loan from time to time outstanding shall be due and payable from thirty five percent (35%) of the proceeds of each closing of equity financing until the principal balance and any outstanding balance is paid in full. Regardless of whether any closing of equity financing occurs, the outstanding and remaining principal balance and interest on this term loan shall be due and payable by December 31, 2024. The interest for the three-month period ended March 31, 2024 amounts to $18 and is recorded in financing and interest expense (2023 - $Nil).
Loan payable
Loan payable totaled $8,319 as at March 31, 2024 as compared to $7,401 as at December 31, 2023. As at March 31, 2024, loan payable in the amount of $7,649 (December 31, 2023: $Nil) were classified as short-term.
atai has granted to the Company a secured loan in the amount of $9,500, bearing interest at 8%. The loan is guaranteed by the Company and secured by all present and future movable property, rights and assets of the Company, excluding any intellectual property or technology controlled or owned by the Company. The loan is convertible into shares of common stock of the Company. $8,500 of the loan will mature on January 5, 2025, and $1,000 will mature on February 1, 2026. The interest for the three-month period ended March 31, 2024 amounts to $177 and is recorded in financing and interest expense ($164 in 2023). The accretion expense for the three-month period ended March 31, 2024 amounts to $253 (2023: $Nil).
Convertible notes
Convertible notes totaled $7,123 as at March 31, 2024 as compared to $6,995 as at December 31, 2023. The convertible notes have been recorded as a liability. As at March 31, 2024, convertible notes in the amount of $2,585 (December 31, 2023: $2,557) were classified as short-term. The accretion expense for the period ended March 31, 2024 amounts to $128 ($48 in 2023). The interest on the convertible notes as at March 31, 2024 amounts to $204 ($97 in 2023) and is recorded in Financing and interest expense.
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Shareholders' deficit
As at March 31, 2024, we had accumulated a deficit of $82,484 compared with an accumulated deficit of $78,457 as at December 31, 2023. Total assets amounted to $6,548 and shareholders' deficit totaled $15,366 as at March 31, 2024, compared with total assets and shareholders' deficit of $8,282 and $12,247 respectively, as at December 31, 2023.
Capital stock
As at March 31, 2024 capital stock amounted to $1.746 (December 31, 2023: $1.746). 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 $69,262 as at March 31, 2024, as compared to $68,662 as at December 31, 2023. Additional paid in capital increased by $600 from which $300 was the value of the warrants granted to atai in connection with the Loan Agreement and $300 was from stock based compensation attributable to the amortization of stock options granted to employees.
Taxation
As at December 31, 2023, the date of our latest annual tax return, we had Canadian and provincial net operating losses of approximately $52,703 (December 31, 2022: $45,041) and $63,394 (December 31, 2022: $52,004) 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 2026 and 2043. A portion of the net operating losses may expire before they can be utilized.
As at December 31, 2023, the Company had non-refundable tax credits of $3,391 thousand (2022: $3,004 thousand) of which $8 thousand is expiring in 2026, $10 thousand is expiring in 2027, $170 thousand is expiring in 2028, $149 thousand is expiring in 2029, $127 thousand is expiring in 2030, $136 thousand is expiring in 2031, $170 thousand is expiring in 2032, $113 thousand is expiring in 2033, $86 thousand expiring in 2034, $101 thousand is expiring in 2035, $139 thousand expiring in 2036, $265 thousand is expiring in 2037, $572 thousand expiring in 2038, $346 thousand expiring in 2039, $226 thousand expiring in 2040, $231 thousand expiring in 2041, $270 thousand expiring in 2042, and $272 thousand expiring in 2043, and undeducted research and development expenses of $19,142 thousand (2022: $17,031 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.
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Key items from the statement of cash flows
| March 31, 2024 |
March 31, 2023 |
Increase/ (Decrease) |
Percentage Increase/ (Decrease) |
|||||||||
| Operating Activities | $ | (2,856 | ) | $ | (2,262 | ) | $ | (594 | ) | 26% | ||
| Financing Activities | 943 | 3,648 | (2,705 | ) | (74%) | |||||||
| Investing Activities | - | (74 | ) | (74 | ) | (100%) | ||||||
| Cash - end of period | 772 | 2,520 | (1,748 | ) | (69%) |
Statement of cash flows
Net cash used in operating activities was $2,856 for the three-month period ended March 31, 2024, compared to $2,262 for the three-month period ended March 31, 2023. For the three-month period ended March 31, 2024, net cash used by operating activities consisted of a net loss of $4,027 (2023: $2,924) before depreciation, accretion expense, stock-based compensation, DSU expense and lease non-cash expense in the amount of $1,125 (2023: $396) and an increase in non-cash operating elements of working capital of $46 (2023: $266).
The net cash provided by financing activities was $943 for the three-month period ended March 31, 2024, compared to $3,648 for the same period of 2023. For the three-month period ended March 31, 2024, an amount of $1,000 derives from issuance of a convertible loan, offset by transaction costs of convertible loan of $35 and finance lease payments for an amount of $22. For the three-month period ended March 31, 2023, an amount of $3,000 derives from the issuance of a loan and an amount of $697 derives from net proceeds from convertible notes, offset by transaction costs of convertible notes of $40 and finance lease payments of $9.
Net cash used in investing activities amounted to $Nil for the three-month period ended March 31, 2024, compared to net cash used in investing activities of $74 for the three-month period ended March 31, 2023. The net cash used in investing activities for the three-month period ended March 31, 2023 relates to the purchase of fixed assets of $74.
The balance of cash as at March 31, 2024 amounted to $772, compared to $2,520 as at March 31, 2023.
Off-balance sheet arrangements
We have no off-balance sheet arrangements.
Item 3. Controls and Procedures.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based upon that evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures are effective to cause the material information required to be disclosed by us in the reports that we file or submit under the Exchange Act to be recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. There have been no significant changes in our internal controls or in other factors which could significantly affect internal controls subsequent to the date we carried out our evaluation.
PART II
Item 1. Legal Proceedings
This Item is not applicable
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
This Item is not applicable.
Item 3. Defaults Upon Senior Securities
This Item is not applicable.
Item 4. (Reserved)
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Item 5. Other Information
This Item is not applicable.
Item 6. Exhibits
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INTELGENX TECHNOLOGIES CORP.
| Date: May 15, 2024 | By: /s/ Dwight Gorham | |
| Dwight Gorham | ||
| Chief Executive Officer | ||
| Date: May 15, 2024 | By: /s/ Andre Godin | |
| Andre Godin | ||
| Principal Accounting Officer |
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