IntelGenx Technologies Corp. - Annual Report: 2021 (Form 10-K)

Cautionary Statement Concerning Forward-Looking Statements

Certain statements included or incorporated by reference in this report constitute forward-looking statements within the meaning of applicable securities laws. All statements contained in this report 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 United States Securities Act of 1933 ("Securities Act") and Section 21E of the United States Securities Exchange Act of 1934, as amended ("Exchange Act"). 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 and exchange listings. 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 report 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 report 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.

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:

• risks related to our history of losses;
• risks related to the potential need for additional capital;
• risks related to the incurrence of unforeseen costs;
• risks related to our dependence on business partners for clinical trials, regulatory approvals and the marketing and selling of our products;
• the competition in our industry;
• the size and experience of our competitors;
• the laws, regulations and guidelines applicable to cannabinoid-based products;
• risks related to our dependence on suppliers;
• risks related to the manufacturing of our VersaFilm™ products;
• risks related to regulatory approval and regulatory review of our products;
• our ability to expand or enhance our product offerings;
• the market's reception of our products that incorporate drug delivery technologies;
• risks related to environmental regulations;
• the impact of COVID-19;
• risks related to the Investment (as defined below);
• the risk the Investment is terminated;
• the restrictions on our business activities contained in the Securities Purchase Agreement (as defined below);
• that our existing shareholders will have reduced ownership and voting interest if  ATAI Life Sciences AG ("atai") chooses to exercise their options to increase the Investment;
• the influence atai may have on our business;
• the risk that the Strategic Development Agreement (as defined below) may not result in commercially viable products;
• risks related to default on our loan agreements;
• risks related to the developments of compounds that have psychedelic, entactogenic and/or oneirophrenic properties;
• risks related to public controversy with respect to compounds that may contain controlled substances;
• our ability to adequately protect our intellectual property;
• the risk we infringe on the intellectual property rights of third parties;
• the risk that certain of our products may be subject to litigation;
• the risk of litigation in the ordinary course of business;
• risks related to cyber security and the protection of our information systems;

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• risks related to the high risk nature of our Common Stock;
• our failure to achieve and maintain profitability;
• actual or anticipated variations in our quarterly results of operations;
• the application of "penny stock" rules to our Common Stock and its impact on trading and liquidity;
• the lack of public market for certain of our outstanding securities;
• the risk of dilution upon the conversion or exercise of outstanding securities;
• risks related to events of default with respect to our Debentures (as defined below) and Notes (as defined below);
• risks related to foreign currency fluctuations;
• the impact of securities analyst downgrades of our Common stock; and
• risks associated with the prior activities of the public company we merged with.

The factors set forth in Item 1A., "Risk Factors", as well as any cautionary language in this report, 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 of the Company (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.  In addition, there is an ongoing uncertainty about the spread of the COVID-19 virus and the impact it will have on our operations, the demand for its products, global supply chains and economic activity in general.

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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. The Company 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.

Overview

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 Canadian cannabis market with a non-prescription cannabis infused oral film that launched in early 2021 and in 2020 we made the decision to enter the psychedelic market. As a full service contract development and manufacturing organization ("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. 

Managing our project pipeline is a key Company success factor.  We have identified three focus areas; psychedelics, cannabis and animal health where we believe we can establish a leadership position with our drug delivery technology. 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 "FDCA"), 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 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 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.

Our website address is www.intelgenx.com.

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Technology Platforms

Our main product development efforts are based upon four delivery platform technologies: (1) VersaFilm™, an oral film technology, (2) AdVersa®, a mucoadhesive tablet technology, (3) the VetaFilm^TM technology platform for veterinary applications, and (4) DisinteQ^TM a disintegrating oral film technology.

VersaFilm™ is a drug delivery platform technology that enables the development of oral thin films, improving product performance through:

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 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 AdVersa® platform technology allows for the development of oral controlled-release products. It is designed to adhere to the oral mucosa and release the drug to the site of application at a controlled rate. The AdVersa® platform provides 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 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.

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 new 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.

Our 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 thirteen projects currently in our product portfolio, twelve use our VersaFilm™ technology and one uses our VetaFilm^TM technology.

Our most advanced projects:

INT0008/2008: We developed a Rizatriptan 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, which demonstrated to be bioequivalent to 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 originally developed under a co-development and commercialization agreement with RedHill Biopharma Ltd. ("RedHill") which was terminated December 5, 2017, following which Redhill transferred all rights and obligations to us.

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On July 5, 2016, we announced the signing of a definitive agreement with Grupo Juste S.A.Q.F. (now Exeltis Healthcare, S.L. ("Exeltis")) for the commercialization of RIZAPORT® for the treatment of acute migraines in Spain.    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.

Under the definitive agreement, Exeltis obtained exclusive rights to register, promote and distribute RIZAPORT® in Spain.  In exchange, we and Redhill received upfront payments and are entitled to milestone payments, together with a share of the net sales of RIZAPORT® in Spain.  The initial term of this agreement is ten years from the date of first commercial sale of the product and shall automatically renew for one additional two-year term. On August 27, 2020, we announced that we had granted Exeltis an exclusive license to manufacture and commercialize RIZAPORT® in the European Union ("EU").  Exeltis will pay us prespecified royalties on net RIZAPORT® sales in the EU.  In addition, we have a right of first refusal to manufacture this product for the EU market. Effective September 9, 2020, we signed a technology transfer agreement with LTS Lohmann Therapy Systems for future manufacture and supply of the product for Spain.

On October 31, 2018, we received National marketing authorization from the Spanish Agency of Medicines and Medical Devices for RIZAPORT® (10mg) in Spain. 

On September 7, 2021, we announced that Exeltis Healthcare S.L. ("Exeltis"), our commercialization partner in the European Union ("EU") for RIZAPORT®, a unique for the treatment of acute migraines, has launched the product in Spain.

On December 12, 2018, we announced the execution of a definitive licensing, development and supply agreement with Gensco® Pharma, a specialty pharmaceutical company focusing on research, development and marketing of prescription products, for the exclusive right to commercialize RIZAPORT® in the United States.  In return, we are entitled to receive royalty payments based on the net profits of RIZAPORT®.  We are also eligible to receive milestone payments upon FDA approval and product launch.  This agreement also grants Gensco® Pharma a right of first refusal for the exclusive rights to develop, market, sell, distribute and fully commercialize products as a partner for the People's Republic of China. 

On January 30, 2019, we announced that the FDA had performed a Pre-Approval Inspection ("PAI") of our manufacturing facility in Montreal, relating to our NDA for RIZAPORT®.  At the conclusion of the PAI on January 25, the FDA issued a Form 483 with five inspectional observations that needed attention before final approval. 

On March 27, 2020, we received an additional CRL from the FDA.  The Agency requested additional information, but no new bioequivalence study.  We have addressed the issues raised in the CLR and are currently preparing the CLR response

On December 14, 2016, we 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 such agreement, we granted Pharmatronic Co. the exclusive rights to register and commercialize RIZAPORT® in South Korea.  IntelGenx 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.

INT0046/2018: Our first cannabis project based on our VersaFilm™ technology contains 10mg CBD/CBDA.

On November 7, 2018 we announced the execution of a definitive license, development and supply agreement with Tilray, Inc. ("Tilray"), a global leader in cannabis production and distribution.  Under such agreement, the two companies will co-develop and commercialize oral film products infused with adult-used medical cannabis ("cannabis infused VersaFilm™").

Under the agreement with Tilray, we and Tilray will fund 20% and 80%, respectively, of the costs associated with the development of the cannabis infused Versafilm™ products.  We will have the exclusive right to manufacture and supply the co-developed products to Tilray, and will also receive a fixed single-digit royalty on net product sales.  Tilray will have the exclusive, worldwide marketing and distribution rights for the co-developed products.

In connection with the Tilray agreement, we and Tilray also executed a subscription agreement under which Tilray made a strategic investment in IntelGenx through a non-brokered private placement (the "Tilray Private Placement").  As a result, we issued Tilray 1,428,571 shares of Common Stock at a subscription price of $0.70 per share of Common Stock for gross proceeds of $1,000,000.  We used the proceeds of the Tilray Private Placement for cannabis infused VersaFilm™ product development under the agreement with Tilray.

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On May 2019, we received the first extract from Tilray in sufficient quantities to commence batch production of cannabis-infused VersaFilm® followed by an announcement in October that the formulation had progressed to the scale-up manufacturing stage.  The manufacturing scale-up work was completed successfully in January 2020.

In the spring of 2019, we applied for a micro-processing license under the Canadian Cannabis Act (the "Cannabis Act"), which would  allow us to process 600kg of cannabis per year, perform analytical testing and begin sales and research on cannabis.  On June 5, 2020, we received the cannabis micro-processing license from Health Canada for our Montreal, Quebec facility, in accordance with the Cannabis Act and the regulations thereunder.

On July 20, 2020, we announced that the exclusivity terms of the November 2018 license, development and supply agreement with Tilray had been amended to allow for the Company's co-development and commercialization of cannabidiol ("CBD") products with additional partners.  In consideration, we shall pay a royalty to Tilray on all CBD products sold under this amendment.  All other terms of such agreement, including those pertaining to Tilray's exclusive, worldwide marketing and distribution rights for non-CBD cannabis infused VersaFilm®, remained unchanged.

On October 29, 2020, we signed a letter of intent with Heritage Cannabis Holding Corp. ("Heritage Cannabis") for long term cannabis filmstrip supply agreement. Shortly after on January 7, 2021, we announced the execution of a definitive supply agreement with Heritage Cannabis for the manufacturing and supply of filmstrip products containing 10 mg of CBD/CBDA using our VersaFilm® technology for the Canadian and Australian markets.

On March 31, 2021, we announced that we completed our first shipment, consisting of 75,000 CBD/CBDA Filmstrips, to Heritage Cannabis Holdings Corp. to support the launch in Australia.

On August 31, 2021, we announced that we completed an additional shipment of CBD/CBDA Filmstrips in support of Heritage Cannabis Holdings Corp.'s Canadian market launch of its "CB4 Control" branded product.

On December 8, 2021, we announced that we initiated an arbitration proceeding against Tilray, related to an alleged breach of the parties' 2018 license, development and supply agreement, as amended with Tilray® for the co-development and commercialization of cannabis-infused VersaFilm® products.

INT0007/2006: We are developing an oral film product based on our VersaFilm™ technology containing the active ingredient tadalafil.  This product is intended for the treatment of erectile dysfunction ("ED").  The results of a phase I pilot study conducted in the second quarter of 2015 confirmed that the product is bioequivalent with the brand product, Cialis®.

On May 8, 2019, we executed a worldwide collaboration agreement for tadalafil with Aquestive Therapeutics, Inc. ("Aquestive").  Under the terms of this agreement, we and Aquestive will each grant to the other exclusive worldwide licenses to their respective intellectual property relating to tadalafil oral film formulation and manufacturing.  The companies will jointly undertake further co-development and commercialization of tadalafil oral film products, and will equally share (50/50) net profits from worldwide product sales.  Aquestive previously submitted an NDA for its tadalafil oral film for the treatment of ED to the FDA.  In November 2018, Aquestive received a CRL from the FDA requesting additional safety data from healthy volunteers.  Both companies are currently working on responding to the CRL.

On September 29, 2021, we announced that Aquestive Therapeutics, Inc., our co-development and commercialization partner for Tadalafil oral films for the treatment of erectile dysfunction and benign prostatic hyperplasia, has entered into a definitive license and supply agreement with an undisclosed leading men's health company for the US.

INT0039/2013: This product is based on one of our proprietary technologies and was being developed under another development and commercialization agreement with Par Pharmaceuticals ("Par").  On September 18, 2015, Endo International plc ("Endo") acquired Par. As a result of this acquisition, Par had a conflict and was unable to remain as the partner for this product.  Therefore, the product was returned to us with full rights and no requirement for any compensation for work paid by Par.

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On September 12, 2016, we entered into a licensing, development and supply agreement with Chemo Group ("Chemo") granting Chemo the exclusive license to commercialize two generic products for the United States market and one product on a worldwide basis.  Under the terms of this agreement, Chemo 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 United States.

On October 4, 2018, we submitted an Abbreviated New Drug Application ("ANDA") to the FDA for a generic buccal film product for our partner, Insud Pharma (formerly Chemo Group).  On January 30, 2019, the FDA confirmed the acceptance for review of this ANDA with a GDUFA date of October 18, 2019. 

On June 2019, the FDA conducted a pre-approval inspection for the buccal film that resulted in the FDA issuing us a Form 483, a report from an investigator noting conditions that in their judgment may constitute violations of the FDCA and related acts.  Further, in October 2019, we received a CRL in which the FDA declined to approve our product.  A CRL does not necessarily indicate that a drug or biologic is not safe or effective.  Rather, the FDA issues a CRL when it has reviewed the submitted data and has outstanding questions.  A CRL allows the FDA to provide an applicant with a systematic list of deficiencies detected within the submission package sent to the agency that stop short of requiring an entire resubmission. Our updated response to the 483 was submitted on April 28 2021 and our response to the CRL was sent to the FDA on May 14, 2021.On February 2022 the FDA conducted a second pre-approval inspection based on the initial response to the CRL filed earlier in May 2021 which resulted in the issuance of a Form 483 with two observations. Subsequently, on March 14, 2022 the FDA issued a second CRL requesting more information on the product and changes to the labelling.

INT0043/2015: We developed an oral film containing montelukast as the active ingredient based on our proprietary VersaFilm™ oral film technology, which is in the early clinical trial phase.

We are collaborating with Dr. Ludwig Aigner, 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 crucial signaling mechanisms that are 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 successful completion of a pilot clinical study for our montelukast VersaFilm™ that demonstrated a significantly improved pharmacokinetic profile compared to 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.

On 2017 we announced receiving a no objection letter from Health Canada regarding a Phase IIa proof-of-concept study.  The objectives of this 26-week, randomized, double-blind and placebo-controlled Phase IIa proof of concept study to be conducted at eight clinical study sites across Canada will be to evaluate the safety, feasibility, tolerability and efficacy of montelukast buccal film in patients with mild to moderate Alzheimer's Disease ("AD").  The trial design includes testing of up to 70 patients.

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.

On September 25, 2018, we announced the beginning of patient recruitment for the proposed AD study.  In October 2019, an independent Data Safety Monitoring Board ("DSMB") completed its first interim analysis of the ongoing montelukast AD Phase IIa ("BUENA") clinical trial in patients with mild to moderate AD.  The DSMB reviewed compiled safety data from 25 subjects enrolled in the BUENA trial, 13 of whom have completed 26 weeks of daily treatment.  The DSMB did not raise any concerns regarding safety and recommended that the trial continue.

Based on additional efficacy testing of montelukast in an AD mouse model, conducted in collaboration with Prof. Dr. Ludwig Aigner's group at the Paracelsus Medical University in Salzburg suggesting that montelukast, when given at higher doses, significantly improves cognition in patients suffering from memory impairment and dementia, a revision of the dosage regiment was requested to Health Canada through the filing of a clinical trial application.  Health Canada issued a non-objection letter in January 2020. 

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On October 12, 2021, we announced our intention to resume patient screening in the ongoing Montelukast VersaFilm® Phase 2a ("BUENA") clinical trial in patients with mild to moderate Alzheimer's Disease following Health Canada's issuance of a No Objection Letter in response to IntelGenx's amended Clinical Trial Application.

Subsequent to year end, on January 20, 2022, we announced that patient dosing has resumed in the ongoing Phase 2a ("BUENA") clinical trial in patients with mild to moderate Alzheimer's Disease ("AD") under a previously amended protocol using higher doses of Montelukast VersaFilm®.

Our Psychedelic Programs:

INT0052/2020.  On July 7, 2020 we entered into a feasibility agreement with Cybin Corp. for a fast-acting, orally-dissolving psilocybin film.  We are currently developing a formulation intended for a clinical phase 1 study.

INT0053/2020.  On August 20, 2020 we entered into a feasibility agreement with atai to develop pharmaceutical-grade polymeric film-based psychedelics. Some material was received and we are currently developing a formulation. However, in parallel, both companies are currently working on the required import and export licenses to continue the R&D work.

INT0054/2020.  On May 12, 2021, we entered into a second feasibility agreement with  atai for the development of novel formulations of Salvinorin A, a naturally occurring psychedelic compound being developed for the treatment of treatment-resistant depression and other indications.

Our Animal Health Programs:

INT0048/2020  VetaFilm: On January 9, 2020 we entered the animal health market by signing a feasibility agreement for its VetaFilm™ platform.  We have performed all of our obligations under such agreement and the successfully developed high loading VetaFilm which was sent for evaluation by our partner.  Based on the successful feasibility study, we are advancing the product development with the partner.

On February 8, 2021, we announced that we have filed a new provisional patent application at the United States Patent and Trademark Office ("USPTO") entitled "High Loading Oral Film Formulation". The patent application covers the incorporation of high concentrations of active ingredients in products based on IntelGenx's VetaFilm™ proprietary veterinary oral film technology. This higher loading capability enables a formulation with a ratio of active-to-polymer of 1-to-1, thereby pushing the limit of the film capabilities and distinguishing it from known oral film technology.

Other Programs:

INT0027/2011: We developed this oral film product based on our VersaFilm™ technology under a co-development and commercialization agreement with Par (now an operating company of Endo).  The product is a generic formulation of a commercial buprenorphine and naloxone-containing sublingual film for the treatment of opioid dependence.  With Par, we developed a bioequivalent film formulation, scaled-up to a commercial manufacturing process and manufactured and tested pivotal batches during a subsequent pivotal clinical study.  Par filed an ANDA with the FDA in July 2013.

On August 2013, we were notified that, in response to the filing of the ANDA, we were named as a co-defendant in a lawsuit under Paragraph IV of the Hatch-Waxman Act filed by Reckitt Benckiser Pharmaceuticals ("Reckitt") and Monosol RX ("Monosol") in the United States District Court for the District of Delaware (the "Delaware Court") alleging infringement of United States 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.  Under the terms of the co-development and commercialization agreement, Par was financially responsible for the costs of the defense.  In June 2016, the Delaware Court ruled that our product is not infringing on two out of the three patents.  Subsequently, both parties filed appeals.

On December 2014, Reckitt and Monosol filed another lawsuit for patent infringement in the Delaware Court relating to the Suboxone^® ANDA product.  We were named as a co-defendant in this action alleging patent infringement of United States Patent Nos. 8,900,497 ("the '497 patent") and 8,906,277 ("the '277 patent"), each of which related to a process for making a uniform oral film (the "process patents").  The trial on the process patents was held in November 2016.

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On May 14, 2018,  we, Par, Indivior, Inc., Indivior UK Limited, and Aquestive (previously Monosol RX) settled all patent litigation related to Suboxone® film.  The settlement agreement permits Par to begin selling a generic version of Suboxone® film on January 1, 2023 or earlier under certain circumstances.

INT0040/2014: This oral film product is based on our proprietary VersaFilm™ technology.  On December 27, 2016, we entered into a co-development and commercialization agreement with Endo for this product in the United States market.  Under such agreement, Endo obtained certain exclusive rights to market and sell our product in the United States.  We received an upfront payment and will receive future milestone payments. Endo will share with us the expected profits of commercialization. The project is currently on hold due to low sales of the brand product.

INT0036/2013: This oral film product is based on our proprietary oral film technology VersaFilm™. Loxapine is indicated for the treatment of anxiety and aggression in patients suffering from schizophrenia or bipolar 1 disorder.  Using our VersaFilm™ technology allows an improved product to offer patients significant therapeutic benefits compared to existing medications.  We expect to effectively treat acute agitation associated with schizophrenia or bipolar 1 disorder in non-institutionalized patients while reducing the risk of pulmonary problems.  Our product 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 were working to optimize the film to further improve the time to reach peak plasma concentrations, however, due to the prioritization of our project line, we directed resources to other projects, leading to a temporary hold of the optimization work during 2019. This project is currently on hold.

INT0010/2006: This product is based on our proprietary AdVersa^® technology and has been transferred to Tetra BioPharma. 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 this product.  The study results indicated improved bioavailability and reduced first-pass metabolization of the drug.  In the fourth quarter of 2010, we acquired full control of, and interest in, this project from Cynapsus going forward.  We also obtained worldwide rights to United States Patent 7,592,328 and all corresponding foreign patents and patent applications to exclusively develop and further secure intellectual property protection for this project.

On October 21, 2020, we entered into an amended and restated licensing agreement with Tetra Bio-Pharma under which Tetra is purchasing the worldwide Adversa® technology rights as it relates to its PPP-002 (Dronabinol) drug product candidate for three undisclosed milestone payments: 45% to be paid on November 15, 2020; 45% to be paid on March 1, 2021, and a final payment of 10% upon successful technology transfer. In addition, Tetra will pay us a royalty on future net sales of Dronabinol mucoadhesive tablets.

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The current status of each of our products as of the date of this Annual Report is summarized in the table below.

Product	Indication	Status of Development
INT0008/2008	Migraine	Launched in Spain and preparing CRL response
INT0046/2018	Adult Use	Launched in Australia and Canada
INT0007/2006	Erectile dysfunction	Working on response to Aquestive's CRL
INT0039/2013	Undisclosed	Undisclosed
INT0027/2011	Opioid addiction	Settlement agreement
INT0043/2015	Alzheimer	Study on-going
INT0040/2014	Undisclosed	Currently on hold
INT0010/2006	Treatment of neuropathic pain and nausea in cancer patients undergoing chemotherapy	Transferred to TetraBio
INT0036/2013	Schizophrenia or bipolar 1 disorder	Currently on hold
INT0048/2020	Animal Health	Formulation optimization ongoing
INT0052/2020	Undisclosed	Formulation development ongoing
INT0053/2020	Undisclosed	Formulation development ongoing Awaiting import and export permit for the shipment of the product to conduct the clinical study
INT0054/2020	Undisclosed	Formulation development in preparation

Growth Strategy

Our primary growth strategy is based on providing CDMO services to the pharmaceutical industry by focusing on three key strategic areas: (1) psychedelics, (2) cannabis, and (3) animal health.

We have established a state-of-the-art manufacturing facility for the future manufacture of our VersaFilm™ and VetaFilm™ products. 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.  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 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 and provide better protection of our Intellectual Property.

Product Opportunities that provide Tangible Patient Benefits

In addition to our three key strategic areas we will 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.

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.

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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 Aquestive Therapeutics Inc. (formerly 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 full service CDMO partner, we plan to continue to invest in our research and development activities, analytical testing and in our manufacturing technology expertise, in order to further strengthen our technology base and to develop the ability to manufacture products based on our drug delivery technologies at competitive costs.

Our Competitive Strengths

We believe that our key competitive strengths include:

• our comprehensive service portfolio;

• our ability to swiftly develop products through to regulatory approval;

• the versatility of our drug delivery technologies, and

• our highly qualified, dedicated professional team.

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.

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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 37 patents and have 39 published pending patent applications, as described below.  The patents expire 20 years after submission of the initial application.  In the United States, the term of a 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 delays in the prosecution of the patent application that are not applicant delays.

Our patent portfolio is dynamic in nature and constantly under review to assess the business priorities, as such any of the currently pending application and issued patent may be abandoned if the expense of pursuing prosecution or maintaining the patent or application active is no longer warranted by our business targets.

Patent No.	Title	Subject	Date issued/Expiration
US 7,132,113	Flavored film	Composition and manufacturing method of multi-layered films	Issued November 7, 2006 Expires April 16, 2022
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 8,691,272	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 8,735,374	Oral mucoadhesive dosage form	Direct compression formulation for buccal and sublingual dosage forms	Issued May 27, 2014 Expires April 15, 2032
South Africa 2016/00785	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 Expires July 30, 2034
US 9,301,948	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued April 5, 2016 Expires July 30, 2033
US 9,668,970	Film Dosage Form with Extended Release Mucoadhesive Particles	Film containing mucoadhesive particle	Issued June 6, 2017 Expires November 26, 2034
US 9,717,682	Solid Oral Film Dosage Forms and Methods for Making Same	Optimization of film strip technology	Issued August 1, 2017 Expires September 21, 2031
US 9,949,934	Device and method of treating conditions associated with neuroinflammation	Formulation of oral films containing montelukast	Issued April 24, 2018 Expires October 20, 2036

 

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US 10,272,038	Film dosage form with extended release mucoadhesive particles	Film containing mucoadhesive particle	Issued April 30, 2019 Expires November 26, 2034
US 10,610,528	Solid oral film dosage forms and methods for making same	Formulation of oral films containing tadalafil	Issued April 7, 2020 Expires June 28, 2031
US 10,722,476	Device and method of treating conditions associated with neuroinflammation	Formulation of oral films containing montelukast	Issued July 28, 2020 Expires October 20, 2036
US 10,828,254	Oral film formulation for modulating absorption profile	Formulation of oral films containing tadalafil	Issued November 10, 2020 Expired September 28, 2038
CA 2,998,223	Loxapine film oral dosage form	Formulation of oral films containing loxapine	Issued October 9, 2018 Expires January 24, 2037
CL 61.052	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued October 13, 2020 Expires July 30, 2034
EP 3,027,179	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued October 17, 2018 Expires July 30, 2034
JP 6,482,552	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued March 13, 2019 Expires July 30, 2034
MX 366,595	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued July 15, 2019 Expires July 30, 2034
ZL 105530921	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued February 26, 2021 Expires July 30, 2034
Austria 3027179	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued February 26, 2021 Expires July 30, 2034

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Belgium 3027179	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued February 26, 2021 Expires July 30, 2034
Switzerland 3027179	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued February 26, 2021 Expires July 30, 2034
Germany 3027179	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued February 26, 2021 Expires July 30, 2034
Spain 3027179	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued February 26, 2021 Expires July 30, 2034
Finland 3027179	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued February 26, 2021 Expires July 30, 2034
France 3027179	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued February 26, 2021 Expires July 30, 2034
UK 3027179	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued February 26, 2021 Expires July 30, 2034
Greece 3027179	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued February 26, 2021 Expires July 30, 2034
Italy 3027179	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued February 26, 2021 Expires July 30, 2034
Netherlands 3027179	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued February 26, 2021 Expires July 30, 2034

17

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Norway 3027179	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued February 26, 2021 Expires July 30, 2034
Sweden 3027179	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued February 26, 2021 Expires July 30, 2034
Denmark 3027179	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued February 26, 2021 Expires July 30, 2034
US 11,033,496	Film dosage form with extended release mucoadhesive particles	Film containing mucoadhesive particle	Issued June 15, 2021 Expires August 23, 2038
CA 2998218C	Device and method of treating conditions associated with neuroinflammation	Formulation of oral films containing montelukast	Issued June 15, 2021 Expires October 17, 2037
KR102272442B1	Instantly wettable oral film dosage form without surfactant or polyalcohol	Formulation of oral films containing active pharmaceutical ingredients	Issued June 28, 2021 Expires July 30, 2034

Patent Application No.	Title	Subject	Date Filed
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
Korean Appl. KR20180119627	Montelukast transmucosal film	Formulation of oral films containing montelukast	Filed March 1, 2017

18

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Korean Appl. KR20190071692	Devices and methods for treating diseases associated with neuroinflammation	Formulation of oral films containing montelukast	Filed October 17, 2017
Korean Appl. KR20190128637	Therapeutic Methods and Apparatus for Improved Bioavailability of Leukotriene Receptor Antagonists	Formulation of oral films containing montelukast	Filed March 29, 2018
EU Appl. EP 3,528,796	Device and method of treating conditions associated with neuroinflammation	Formulation of oral films containing montelukast	Filed October 17, 2017
Chinese Appl. CN109843273	The device and method for treating illness relevant to neuroinflammation	Formulation of oral films containing montelukast	Filed October 17, 2017
Chinese Appl. CN110381931	The treatment method and device of the bioavilability of improved leukotriene receptor antagonists	Formulation of oral films containing montelukast	Filed March 29, 2018
Mexican Appl. MX2019004096	Device and method of treating conditions associated with neuroinflammation	Formulation of oral films containing montelukast	Filed October 17, 2017
Mexican Appl. MX2019010573	Method of treatment and device for the improved bioavailability of leukotriene receptor antagonists	Formulation of oral films containing montelukast	Filed March 29, 2018
Indian Appl. IN201947014213	Device and method of treating conditions associated with neuroinflammation	Formulation of oral films containing montelukast	Filed October 17, 2017
Indian Appl. IN201947035380	Method of treatment and device for the improved bioavailability of leukotriene receptor antagonists	Formulation of oral films containing montelukast	Filed March 29, 2018
Mexican Appl. MX2018010755A	Montelukast transmucosal film	Formulation of oral films containing montelukast	Filed March 1, 2017
Canadian Appl. CA2,998,218	Device and method of treating conditions associated with neuroinflammation	Formulation of oral films containing montelukast	Filed October 17, 2017

19

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Canadian Appl. CA3,015,555	Loxapine film oral dosage form	Formulation of oral films containing loxapine	Filed January 25, 2017
Canadian Appl. CA3,017,264	Montelukast transmucosal film	Formulation of oral films containing montelukast	Filed March 1, 2017
Canadian Appl. CA3,017,526	Method of treatment and device for the improved bioavailability of leukotriene receptor antagonists	Formulation of oral films containing montelukast	Filed September 14, 2018
Canadian Appl. CA3,056,944	Method of treatment and device for the improved bioavailability of leukotriene receptor antagonists	Formulation of oral films containing montelukast	Filed March 29, 2018
Canadian Appl. CA 3,062,704	Film dosage form with extended release mucoadhesive particles	Film containing mucoadhesive particle	Filed May 8, 2018
EP Appl. 18798869.6	Film dosage form with extended release mucoadhesive particles	Film containing mucoadhesive particle	Filed May 8, 2018
Canadian Appl. CA 3,061,086	Lipophilic active oral film formulation and method of making the same	Film containing lipophilic actives	Filed November 6, 2019
Australian Appl. AU2017344764	Device and method of treating conditions associated with neuroinflammation	Formulation of oral films containing montelukast	Filed October 17, 2017
Canadian Appl. 3,122,192	Device and method of treating conditions associated with neuroinflammation	Formulation of oral films containing montelukast	Filed October 17, 2017
Australian Appl. AU2018241534	Method of treatment and device for the improved bioavailability of leukotriene receptor antagonists	Formulation of oral films containing montelukast	Filed March 29, 2018
US Appl. 15/940,288	Method of treatment and device for the improved bioavailability of leukotriene receptor antagonists	Formulation of oral films containing montelukast	Filed March 29, 2018
US Appl. 16/110,737	Film dosage form with extended release mucoadhesive particles	Film containing mucoadhesive particle	Filed August 23, 2018

20

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US Appl. 16/053,383	Loxapine film oral dosage form	Formulation of oral films containing loxapine	Filed August 2, 2018
US Appl. 16/131,995	Method of treatment and device for the improved bioavailability of leukotriene receptor antagonists	Formulation of oral films containing montelukast	Filed September 14, 2018
CA Appln. 3017526	Method of treatment and device for the improved bioavailability of leukotriene receptor antagonists	Formulation of oral films containing montelukast	Filed September 14, 2018
US Appl. 16/391,430	Film Dosage Forms Containing Amorphous Active Agents	Film containing amorphous agent	Filed April 23, 2019
US Appl. 15/067,309	Lipophilic active oral film formulation and method of making the same	Formulation of oral films containing lipophilic actives	Filed April 15, 2019
US Appl. 17/063,644	Oral film formulation for modulating absorption profile	Formulation of oral films containing tadalafil	Filed October 5, 2020
EP Appl. 19859079.6	Method of treatment and device for the improved bio availability of montelukast, a leukotriene receptor antagonist	Formulation of oral films containing montelukast	Filed September 12, 2019
PCT/CA2019/051564	Lipophilic active oral film formulation and method of making the same	Formulation of oral films containing lipophilic actives	Filed November 4, 2019
BR Appl. 112021008649-8	Lipophilic active oral film formulation and method of making the same	Formulation of oral films containing lipophilic actives	Filed November 4, 2019
CA Appl. 3118594	Lipophilic active oral film formulation and method of making the same	Formulation of oral films containing lipophilic actives	Filed November 4, 2019
EP Appl. 19883191.9	Lipophile aktive orale filmformulierung und verfahren zu ihrer herstellung	Formulation of oral films containing lipophilic actives	Filed November 4, 2019

21

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US Appl. 17/291,582	Lipophilic active oral film formulation and method of making the same	Formulation of oral films containing lipophilic actives	Filed May 5, 2021
US Appl. 17/346,874	Film dosage form with extended release mucoadhesive particles	Film containing mucoadhesive particles	Filed June 14, 2021
Australia Appl. 2019374173	Lipophilic active oral film formulation and method of making the same	Formulation of oral films containing lipophilic actives	Filed April 11, 2019

COVID-19

Our operations and financial condition have been affected by the COVID-19 pandemic. Though we were granted an exemption by local authorities which permitted us to continue operations during the COVID-19 pandemic, we nevertheless faced multiple operational and financial challenges. Despite these challenges, we have continually been able to minimize the impact on our overall performance. 

In response to the COVID-19 pandemic, we partially reorganized our operations, adopted a remote work policy for employees and management and implemented a compensation deferral program. We also benefited from the Canada Emergency Wage Subsidy as well as the Canada Emergency Commercial Rent Assistance program from our landlord. There is uncertainty as to the duration of these benefits and hence the potential impact.

Throughout the COVID-19 pandemic, we have been, and remain, in compliance with all federal, provincial, and municipal regulations that have been put in place since the beginning of the pandemic. We will continue to monitor any further developments in this regard, with the health and safety of our employees and management as the primary concern.

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 FDCA, 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 FDA's good laboratory practices regulations, ("GLPs");
• the submission to the FDA of an investigational new drug application, 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,("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 an 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 drug's identity, strength, quality and purity; and
• FDA review and approval of the NDA or ANDA.

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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.  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.

The preclinical and clinical testing and approval process takes many years and the actual time required to obtain approval, if any, may vary substantially based upon the type, complexity and novelty of the product or disease.

Preclinical tests include laboratory evaluation of product chemistry, formulation and toxicity, as well as animal studies to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including GLPs. The results of preclinical testing are submitted to the FDA as part of an Investigational New Drug ("IND") application along with other information, including information about product chemistry, manufacturing and controls and a proposed clinical trial protocol. Long-term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND application is submitted.

The IND application automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions relating to one or more proposed clinical trials and places the clinical trial on a clinical hold, including concerns that human research subjects will be exposed to unreasonable health risks. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. A separate submission to an existing IND application must also be made for each successive clinical trial conducted during product development. Further, an independent institutional review board,("IRB"), covering each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and informed consent information for subjects before the trial commences at that site and it must monitor the study until completed. The FDA, the IRB, or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk or for failure to comply with the IRB's requirements, or may impose other conditions. Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of a qualified investigator in accordance with GCP requirements, which includes the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Sponsors of clinical trials generally must register and report, at the NIH-maintained website ClinicalTrials.gov, key parameters of certain clinical trials. For purposes of an NDA submission and approval, human clinical trials are typically conducted in the following sequential phases, which may overlap or be combined:

In Phase 1, through the initial introduction of the drug into healthy human subjects or patients, the drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses, and, if possible, early evidence on effectiveness.

Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug for a particular indication, dosage tolerance and optimum dosage, and to identify common adverse effects and safety risks.

Phase 3 trials are undertaken to obtain the additional information about clinical efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of the drug. In most cases, the FDA requires two adequate and well controlled Phase 3 clinical trials to demonstrate the efficacy of the drug. A single Phase 3 trial with other confirmatory evidence may be sufficient in rare instances where the study is a large multicenter trial demonstrating internal consistency and a statistically persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible.

After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing of the product may begin in the United States. The NDA must include the results of all preclinical, clinical and other testing and a compilation of data relating to the product's pharmacology, chemistry, manufacture and controls. Under federal law, the submission of most NDAs is subject to a substantial application user fee, and applicant under an approved NDA is also subject to an annual program fee for each prescription drug product, which beginning in Fiscal Year 2018 replaced the product and establishment fees.

The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the agency's threshold determination that it is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information and is subject to payment of additional user fees. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. Under the Prescription Drug User Fee Act, the FDA has agreed to certain performance goals in the review of NDAs through a two-tiered classification system, Standard Review and Priority Review. Priority Review designation is given to drugs that offer major advances in treatment or provide a treatment where no adequate therapy exists. The FDA endeavors to review applications subject to Standard Review within ten to twelve months, whereas the FDA's goal is to review Priority Review applications within six to eight months.

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The FDA may refer applications for proprietary drug products or drug products which present difficult questions of safety or efficacy to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions.

Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP requirements. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. The FDA will not approve the product unless it determines that the manufacturing process and facilities are in compliance with cGMP requirements and are adequate to assure consistent production of the product within required specifications and the NDA contains data that provide substantial evidence that the drug is safe and effective in the indication studied.

After the FDA evaluates the NDA and the manufacturing facilities and possibly conducts a sponsor inspection, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the NDA and may require substantial additional testing, or information, in order for the FDA to reconsider the application. Even with submission of this additional information, the FDA may ultimately decide that an application does not satisfy the regulatory criteria for approval. If, or when, the deficiencies have been addressed to the FDA's satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The review by the FDA is two months for a Class I resubmission and six months for a Class 2 resubmission.  An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

As a condition of NDA approval, the FDA may require a REMS, or Risk Evaluation and Mitigation Strategy, to help ensure that the benefits of the drug outweigh the potential risks. If the FDA determines a REMS is necessary during review of the application, the drug sponsor must agree to the REMS plan at the time of approval. A REMS may be required to include various elements, such as a medication guide or patient package insert, a communication plan to educate healthcare providers of the drug's risks, limitations on who may prescribe or dispense the drug, or other elements to assure safe use, such as special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries. In addition, the REMS must include a timetable to periodically assess whether the REMS plan is effective. The requirement for a REMS can materially affect the potential market and profitability of a drug.

Moreover, product approval may require substantial post-approval testing and surveillance to monitor the drug's safety or efficacy, and the FDA has the authority to prevent or limit further marketing of a product based on the results of these post-marketing programs. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved label, and, even if the FDA approves a product, it may limit the approved indications for use for the product or impose other conditions, including labeling or distribution restrictions or other risk-management mechanisms.

Further changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented, which may require us to develop additional data or conduct additional preclinical studies and clinical trials. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses similar procedures in reviewing NDA supplements as it does in reviewing NDAs.

Post-Approval Requirements

Ongoing adverse event reporting and submission of periodic reports are required following FDA approval of an NDA. The FDA also may require post-marketing testing, known as Phase 4 testing, REMS, and surveillance to monitor the effects of an approved product, or the FDA may place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control, drug manufacture, packaging, and labeling procedures must continue to conform to cGMPs and NDA specifications after approval. Drug manufacturers and certain of their subcontractors are required to register their establishments with FDA. Accordingly, manufacturers must continue to expend time, money, and training and compliance efforts in the areas of production and quality control to maintain compliance with cGMPs or other applicable laws. Regulatory authorities may require remediation, withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems or new concerns are subsequently discovered. In addition, other regulatory action, including, among other things, warning letters, the seizure of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations, civil penalties, and criminal prosecution may be pursued.

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The Hatch-Waxman Amendments

ANDA Approval Process

The Hatch-Waxman Amendments established abbreviated FDA approval procedures for drugs that are shown to be equivalent to drugs previously approved by the FDA through its NDA process. Approval to market and distribute these drugs is obtained by submitting an ANDA to the FDA. An ANDA is a comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient, drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing process validation data and quality control procedures. Premarket applications for generic drugs are termed abbreviated because they generally do not include preclinical and clinical data to demonstrate safety and effectiveness. Instead, a generic applicant must demonstrate that its product is bioequivalent to the innovator drug. In certain situations, an applicant may obtain ANDA approval of a generic product with a strength or dosage form that differs from a referenced innovator drug pursuant to the filing and approval of an ANDA Suitability Petition. The FDA will approve the generic product as suitable for an ANDA application if it finds that the generic product does not raise new questions of safety and effectiveness as compared to the innovator product. A product is not eligible for ANDA approval if the FDA determines that it is not equivalent to the referenced innovator drug, if it is intended for a different use, or if it is not subject to an approved Suitability Petition. However, such a product might be approved under an NDA, with supportive data from clinical trials.

505(b)(2) NDAs

As an alternative path to FDA approval for modifications to formulations or uses of products previously approved by the FDA, an applicant may submit an NDA under Section 505(b)(2) of the FDCA. Section 505(b)(2) was enacted as part of the Hatch-Waxman Amendments and permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by, or for, the applicant. If the 505(b)(2) applicant can establish that reliance on FDA's previous findings of safety and effectiveness is scientifically appropriate, it may eliminate the need to conduct certain preclinical or clinical studies of the new product. The FDA may also require companies to perform additional studies or measurements, including clinical trials, to support the change from the approved branded reference drug. The FDA may then approve the new product candidate for all, or some, of the label indications for which the branded reference drug has been approved, as well as for any new indication sought by the 505(b)(2) applicant.

Orange Book Listing

In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA certain patents with claims that cover the applicant's product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in the Orange Book. Any applicant who files an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA that (i) no patent information on the drug product that is the subject of the application has been submitted to the FDA; (ii) such patent has expired; (iii) the date on which such patent expires; or (iv) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. This last certification is known as a paragraph IV certification. A notice of the paragraph IV certification must be provided to each owner of the patent that is the subject of the certification and to the holder of the approved NDA to which the ANDA or 505(b)(2) application refers. The applicant may also elect to submit a "section viii" statement certifying that its proposed label does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent.

If the reference drug NDA holder and patent owners assert a patent challenge directed to one of the Orange Book listed patents within 45 days of the receipt of the paragraph IV certification notice, the FDA is prohibited from approving the application until the earlier of 30 months from the receipt of the paragraph IV certification, expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the applicant. The ANDA or 505(b)(2) application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the branded reference drug has expired as described in further detail below.

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Non-Patent Exclusivity

In addition to patent exclusivity, the holder of the NDA for the listed drug may be entitled to a period of non-patent related exclusivity, during which the FDA cannot review, or in some cases, approve an ANDA or 505(b)(2) application that relies on the listed drug. For example, a company may obtain five years of non-patent exclusivity upon NDA approval of a new chemical entity ("NCE"), which is a drug that contains an active moiety that has not been approved by the FDA in any other NDA. An "active moiety" is defined as the molecule or ion responsible for the drug substance's physiological or pharmacologic action. During the five-year exclusivity period, the FDA cannot accept for filing any ANDA seeking approval of a generic version of that drug or any 505(b)(2) NDA for the same active moiety and that relies on the FDA's findings regarding that drug, except that FDA may accept an application for filing after four years if the follow-on applicant makes a paragraph IV certification.

A drug, including one approved under Section 505(b)(2), may obtain a three-year period of exclusivity for a particular condition of approval, or change to a marketed product, such as a new formulation of a previously approved product, if one or more new clinical studies (other than bioavailability or bioequivalence studies) was essential to the approval of the application and was conducted/sponsored by the applicant. Should this occur, the FDA would be precluded from approving any ANDA or 505(b)(2) application for the protected modification until after that three-year exclusivity period has run. However, unlike NCE exclusivity, the FDA can accept an application and begin the review process during the exclusivity period.

International Regulation

In addition to regulations in the United States, we are and will be subject to a variety of foreign regulations regarding development, approval, commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain the necessary approvals by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country and can involve additional product testing and additional review periods, and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing, among other things, the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others. If we fail to comply with applicable foreign regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution. In the EU, we may seek marketing authorization under either the centralized authorization procedure or national authorization procedures.

Centralized procedure. The European Medicines Agency, ("EMA"), implemented the centralized procedure for the approval of human medicines to facilitate marketing authorizations that are valid throughout the EU. This procedure results in a single marketing authorization issued by the European Commission following a favorable opinion by the EMA that is valid across the European Union, as well as Iceland, Liechtenstein and Norway. The centralized procedure is compulsory for human medicines that are: derived from biotechnology processes, such as genetic engineering, contain a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders or autoimmune diseases and other immune dysfunctions, and officially designated orphan medicines. For medicines that do not fall within these categories, an applicant has the option of submitting an application for a centralized marketing authorization to the EMA, as long as the medicine concerned is a significant therapeutic, scientific or technical innovation, or if its authorization would be in the interest of public health.

National authorization procedures. There are also two other possible routes to authorize medicinal products in several European Union countries, which are available for investigational medicinal products that fall outside the scope of the centralized procedure: the decentralized procedure and the mutual recognition procedure. Under the decentralized procedure, an applicant may apply for simultaneous authorization in more than one EU country for medicinal products that have not yet been authorized in any EU country and that do not fall within the mandatory scope of the centralized procedure. Under the mutual recognition procedure, a medicine is first authorized in one EU Member State, in accordance with the national procedures of that country. Following a national authorization, the applicant may seek further marketing authorizations from other EU countries under a procedure whereby the countries concerned agree to recognize the validity of the original, national marketing authorization.

In the EU, medicinal products designated as orphan products benefit from financial incentives such as reductions in marketing authorization application fees or fee waivers and 10 years of market exclusivity following medicinal product approval. For a medicinal product to qualify as orphan: (i) it must be intended for the treatment, prevention or diagnosis of a disease that is life-threatening or chronically debilitating; (ii) the prevalence of the condition in the EU must not be more than five in 10,000 or it must be unlikely that marketing of the medicine would generate sufficient returns to justify the investment needed for its development; and (iii) no satisfactory method of diagnosis, prevention or treatment of the condition concerned can be authorized, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition.

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Other Regulation

We are also subject to various laws and regulations regarding laboratory practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances in connection with our research. While we believe we are in compliance with applicable environmental and other regulations, in each of these areas, as above, the FDA and other government agencies have broad regulatory and enforcement powers, including, among other things, the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall products, and withdraw approvals, any one or more of which could have a material adverse effect on us.

Canadian Medical and Adult-Use

Medical and adult-use cannabis in Canada is regulated under the federal Cannabis Act and the Cannabis Regulations ("CR") promulgated under the Cannabis Act. Both the Cannabis Act and CR came into force in October 2018, superseding earlier legislation that only permitted commercial distribution and home cultivation of medical cannabis. The following are the highlights of the current federal legislation:

• a federal license is required for companies to cultivate, process and sell cannabis for medical or non-medical purposes;
• Health Canada, federal government entity, is the oversight and regulatory body for cannabis licenses in Canada. As of December 31, 2020, Health Canada has issued approximately 570 active licenses to licensees under the CR ("Licensed Producers");
• allows individuals to purchase, possess and cultivate limited amounts of cannabis for medical purposes and, for individuals over the age of 18 years, for adult-use recreational purposes;
• enables the provinces and territories to regulate other aspects associated with recreational adult-use. In particular, each province or territory may adopt its own laws governing the distribution, sale and consumption of cannabis and cannabis accessory products, and those laws may set lower maximum permitted quantities for individuals and higher age requirements;
• promotion, packaging and labelling of cannabis is strictly regulated. For example, promotion is largely restricted to the place of sale and age-gated environments (i.e., environments with verification measures in place to restrict access to persons of legal age). Promotions that appeal to underage individuals are prohibited;
• since the current federal regime came into force on October 17, 2018, certain classes of cannabis, including dried cannabis and oils, have been permitted for sale into the medical and adult-use markets;
• following amendments to the CR that came into force on October 17, 2019 (often referred to as Cannabis 2.0 regulations);
• other non-combustible form-factors, including edibles, topicals, and extracts (both ingested and inhaled), are permitted in the medical and adult-use markets;
• export is restricted to medical cannabis, cannabis for scientific purposes, and industrial hemp; and
• sale of medical cannabis occurs on a direct-to-patient basis from a federally licensed provider, while sale of adult-use cannabis occurs through retail-distribution models established by provincial and territorial governments.

All provincial and territorial governments have, to varying degrees, enacted regulatory regimes for the distribution and sale of recreational adult-use cannabis within their jurisdiction, including minimum age requirements. The retail-distribution models for adult-use cannabis varies nationwide:

• Quebec, New Brunswick, Nova Scotia and Prince Edward Island have adopted a government-run model for retail and distribution;
• Ontario, British Columbia, Alberta, and Newfoundland and Labrador have adopted a hybrid model with some aspects, including distribution and online retail being government-run while allowing for private licensed retail stores;
• Manitoba and Saskatchewan have adopted a private model, with privately-run retail stores and online sales, with distribution in Manitoba managed by the provincial government; and
• the three northern territories of Yukon, Northwest Territories and Nunavut have adopted a model that mirrors their government-run liquor distribution model.

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All provinces and territories have secured supply agreements from Licensed Producers for their respective markets. We are fulfilling adult-use supply agreements and purchase orders from various jurisdictions, consisting of: Quebec, Ontario, British Columbia, Prince Edward Island, Saskatchewan, Manitoba, Alberta, Nova Scotia, New Brunswick, Northwest Territories, and the Yukon.

United States Regulation of Hemp

Hemp products are subject to state and federal regulation in respect to the production, distribution and sale of products intended for human ingestion or topical application. Hemp is categorized as Cannabis sativa L., a subspecies of the cannabis genus. Numerous unique, chemical compounds are extractable from Hemp, including tetrahydrocannabinol ("THC") and CBD. These cannabinoids are responsible for a range of potential psychological and physiological effects. Hemp, as defined in the 2018 Farm Bill, is distinguishable from marijuana, which also comes from the Cannabis sativa L. subspecies, by its absence of more than trace amounts (0.3% or less) of the psychoactive compound THC. Although international standards vary, other countries, such as Canada, use the same THC potency standards to define Hemp.

The 2018 Farm Bill preserves the authority and jurisdiction of the FDA, under the FD&C Act, to regulate the manufacture, marketing, and sale of food, drugs, dietary supplements, and cosmetics, including products that contain Hemp extracts and derivatives, such as CBD. As a result, the FD&C Act will continue to apply to Hemp-derived food, drugs, dietary supplements, cosmetics, and devices introduced, or prepared for introduction, into interstate commerce. As a producer and marketer of Hemp-derived products, the Company must comply with the FDA regulations applicable to manufacturing and marketing of certain products, including food, dietary supplements, and cosmetics.

As a result of the 2018 Farm Bill, federal law dictates that CBD derived from Hemp is not a controlled substance; however, CBD derived from Hemp may still be considered a controlled substance under applicable state law. Individual states take varying approaches to regulating the production and sale of Hemp and Hemp-derived CBD. Some states explicitly authorize and regulate the production and sale of Hemp-derived CBD or otherwise provide legal protection for authorized individuals to engage in commercial Hemp activities, other states, however, maintain drug laws that do not distinguish between marijuana and Hemp and/or Hemp-derived CBD which results in Hemp being classified as a controlled substance under certain state laws.

European Union Medical Use

While each country in the EU has its own laws and regulations, many common practices are being adopted relative to the developing and growing medical cannabis market. For example, to ensure quality and safe products for patients, many EU countries only permit the import and sale of medical cannabis from GMP-certified manufacturers.

The EU requires adherence to GMP standards for the manufacture of active substances and medicinal products, including cannabis products. The EU system for certification of GMP allows a Competent Authority of any EU member state to conduct inspections of manufacturing sites and, if the strict GMP standards are met, to issue a certificate of GMP compliance that is also accepted in other EU member countries.

Competitive Conditions

As of December 31, 2020, Health Canada has issued approximately 570 active licenses to cannabis cultivators, processors and sellers. Health Canada licenses are limited to individual properties. As such, if a Licensed Producer seeks to commence production at a new site, it must apply to Health Canada for a new license. As demand for legal cannabis increases and the number of authorized retail distribution points increases, we believe new competitors are likely to enter the Canadian cannabis market.

We also expect more countries to pass regulation allowing for the use of medical and/or recreational cannabis. While expansion of the global cannabis market will provide more opportunities to grow our international business, we also expect to experience increased global competition.

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Psychedelic Regulatory Disclosure

Canada

In Canada, oversight of healthcare is divided between the federal and provincial governments. The federal government is responsible for regulating, among other things, the approval, import, sale, and marketing of controlled substances, whether natural or novel. The provincial/territorial level of government has authority over the delivery of health care services, including regulating health facilities, administering health insurance plans such as the Ontario Health Insurance Plan, distributing prescription drugs within the province, and regulating health professionals such as doctors, psychologists, psychotherapists and nurse practitioners. Regulation is generally overseen by various colleges formed for that purpose, such as the College of Physicians and Surgeons of Ontario.

Certain psychoactive compounds, such as psilocybin, are considered controlled substances under Schedule III of the Controlled Drugs and Substances Act (Canada) (the "CDSA"). The production, possession, sale and distribution of controlled substances is prohibited unless specifically permitted by the government. Notwithstanding the prohibitions on various activities with respect to controlled substances that are set out in the CDSA, there are several avenues through which one can be legally permitted to conduct otherwise-prohibited activities with controlled substances.

For instance, in order to conduct certain kinds of scientific research, including pre-clinical and clinical trials, using controlled substances (including various psychoactive compounds), an exemption granted by the Minister of Health under Section 56 of the CDSA (a "Section 56 Exemption") is required. This exemption allows the person to whom the Section 56 Exemption was issued to perform the activities specified in the Section 56 Exemption in relation to the controlled substance(s) specified in the Section 56 Exemption without being subject to the corresponding restrictions set out in the CDSA. Section 56 Exemptions may be granted by the Minister of Health to individual persons or to particular classes of persons, but only for medical purposes, scientific purposes, or where it is in the public interest.

Additionally, dealer's licences may be applied for and obtained pursuant to various regulations existing under the CDSA. Dealer's licences can authorize the holders thereof (also known as licensed dealers) to possess, produce, assemble, sell, provide, transport, send, deliver, import and/or export one or more controlled substances. Licensed dealers are permitted to engage in all activities that are expressly set out in their respective licences. With respect to psychedelic substances, the primary regulations pursuant to which a person may obtain the appropriate dealer's licence are Part J of the Food and Drug Regulations (Canada)-which applies to "restricted drugs" such as psilocin and psilocybin-and the Narcotic Control Regulations (Canada)-which applies to "narcotics" such as ketamine. In order to receive a dealer's licence, a party must meet all regulatory requirements mandated by the applicable regulations, including (without limitation) having sufficiently secure facilities and other physical infrastructure, and all requisite personnel (e.g., a senior person in charge; a qualified person in charge) that possess the necessary qualifications set out under the applicable regulations.

The Company currently holds a dealer's licence, as issued pursuant to the CDSA, which authorizes the Company to possess, sell, supply, send, transport and deliver various controlled substances, including, among others, 2,2'-bisnaloxone, fentanyl, N,N-dimethyltryptamine, oxycodone, pseudobuprenorphine, psilocin, psilocybin and thebaine. The Company may, from the time to time, apply for approval to perform additional activities under its dealer's licence and/or to perform such activities in relation to additional controlled substances.

United States

In the United States, the Food and Drug Administration ("FDA") and other federal, state, local and foreign regulatory agencies impose substantial requirements upon the clinical development, approval, labeling, manufacture, marketing and distribution of drug products. These agencies regulate, among other things, research and development activities and the testing, approval, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, advertising and promotion of any prescription drug product candidates or commercial products. The regulatory approval process is generally lengthy and expensive, with no guarantee of a positive result. Moreover, failure to comply with applicable FDA or other requirements may result in civil or criminal penalties, recall or seizure of products, injunctive relief including partial or total suspension of production, or withdrawal of a product from the market. The Company's commercial partners will be responsible for filing the necessary regulatory applications such as Investigational New Drug ("IND") with the FDA following the development by the Company of a prototype containing the psychedelic compound.

Psychoactive compounds such as psilocybin and psilocin, are strictly controlled under the federal Controlled Substances Act, 21 U.S.C. §801, et. seq. (the "CSA") as Schedule I substances. Schedule I substances by definition have no currently accepted medical use in the United States, a lack of accepted safety for use under medical supervision, and a high potential for abuse. Schedule I and II drugs are subject to the strictest controls under the CSA, including manufacturing and procurement quotas, security requirements and criteria for importation. Anyone wishing to conduct research on substances listed in Schedule I under the CSA must register with the U.S. Drug Enforcement Administration ("DEA"), and obtain DEA approval of the research proposal.

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Please see "Research and Development - Psychedelics" for additional information concerning the regulation applicable to the process required before prescription drug product candidates may be marketed in the United States.

The FDA also regulates the formulation, manufacturing, preparation, packaging, labeling, holding, and distribution of foods, drugs and dietary supplements under the Federal Food, Drug, and Cosmetic Act ("FFDCA") and the Dietary Supplement Health and Education Act of 1994 ("DSHEA"). "Dietary supplements" are defined as vitamins, minerals, herbs, other botanicals, amino acids and other dietary substances for human use to supplement the diet, as well as concentrates, metabolites, constituents, extracts or combinations of such dietary ingredients. Generally, under DSHEA, dietary ingredients that were on the market prior to October 15, 1994 may be used in dietary supplements without notifying the FDA. New dietary ingredients (i.e., not marketed in the U.S. prior to October 15, 1994) must be the subject of a new dietary ingredient notification submitted to the FDA unless the ingredient has been "present in the food supply as an article used for food" without being "chemically altered." A new dietary ingredient notification must provide the FDA with evidence of a "history of use or other evidence of safety" establishing that use of the dietary ingredient, when used under the conditions recommended or suggested in the labeling of the dietary supplement, "will reasonably be expected to be safe." A new dietary ingredient notification must be submitted to the FDA at least 75 days before the initial marketing of the new dietary ingredient. There can be no assurance that the FDA will accept the evidence of safety for any new dietary ingredients that the Company may want to market, and the FDA's refusal to accept such evidence could prevent the marketing of such dietary ingredients.

The DSHEA revised the provisions of the FFDCA concerning the composition and labeling of dietary supplement ingredients and products. Under the DSHEA, dietary supplement labeling must include the statement of identity (name of the dietary supplement), the net quantity of contents statement (amount of the dietary supplement), the nutrition labeling, the ingredient list, and the name and place of business of the manufacturer, packer, or distributor. The DSHEA also states that dietary supplements may display "statements of nutritional support," provided certain requirements are met. Such statements must be submitted to the FDA within 30 days of first use in marketing and must be accompanied by a label disclosure that "This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease." Such statements may describe how a particular dietary ingredient affects the structure, function or general well-being of the body, or the mechanism of action by which a dietary ingredient may affect body structure, function or well-being, but may not expressly or implicitly represent that a dietary supplement will diagnose, cure, mitigate, treat, or prevent a disease. Any statement of nutritional support the Company makes in labeling must possess scientific evidence substantiating that the statement is truthful and not misleading. If the FDA were to determine that a particular statement of nutritional support was an unacceptable drug claim or an unauthorized version of a health claim about disease risk reduction for a food product, or if the FDA were to determine that a particular claim was not adequately supported by existing scientific data or was false or misleading, the Company would be prevented from using that claim. In addition, the FDA deems promotional and internet materials as labeling; therefore, the Company's promotional and internet materials must comply with FDA requirements and could be the subject of regulatory action by the FDA, or by the Federal Trade Commission (the "FTC") if that agency or other governmental authorities, reviewing the materials as advertising, considers the materials false and misleading.

U.S. laws also require recordkeeping and reporting to the FDA of all serious adverse events involving dietary supplements products. The Company will need to comply with such recordkeeping and reporting requirements, and implement procedures governing adverse event identification, investigation and reporting. As a result of reported adverse events, health and safety risks or violations of applicable laws and regulations, the Company may from time to time elect, or be required, to recall, withdraw or remove a product from a market, either temporarily or permanently.

The Company's expected nutraceutical products may be considered "food" and must be labeled as such. Within the U.S., this category of products is subject to the federal Nutrition, Labeling and Education Act ("NLEA"), and regulations promulgated under the NLEA. The NLEA regulates health claims, ingredient labeling and nutrient content claims characterizing the level of a nutrient in the product. The ingredients in conventional foods must either be generally recognized as safe by experts for the purposes to which they are put in foods, or be approved as food additives under FDA regulations. If the Company's expected nutraceutical products were regulated as foods, it would be required to comply with the Federal Food Safety & Modernization Act and applicable regulations. The Company would be required to provide foreign supplier certifications evidencing the Company's compliance with FDA requirements.

The FDA has broad authority to enforce the provisions of the FFDCA applicable to foods, drugs, dietary supplements, and cosmetics, including powers to issue a public warning letter to a company, to publicize information about illegal or harmful products, to request a recall of products from the market, and to request the United States Department of Justice to initiate a seizure action, an injunction action, or a criminal prosecution in the U. S. courts. The Company could be subject to fines and penalties, including under administrative, civil and criminal laws for violating U.S. laws and regulations, and the Company's expected nutraceutical products could be banned or subject to recall from the marketplace. The Company could also be subject to possible business and consumer claims under applicable statutory, product liability and common laws.

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The FTC will exercise jurisdiction over the advertising of the Company's expected nutraceutical products in the United States. The FTC has in the past instituted enforcement actions against several dietary supplement and food companies and against manufacturers of dietary supplement products, including for false and misleading advertising, label claims or product promotional claims. In addition, the FTC has increased its scrutiny of the use of testimonials, which the Company may utilize, as well as the role of endorsements and product clinical studies. The Company cannot be sure that the FTC, or comparable foreign agencies, will not question the Company's advertising, product claims, promotional materials or other operations in the future. The FTC has broad authority to enforce its laws and regulations, including the ability to institute enforcement actions that could result in recall actions, consent decrees, injunctions, and civil and criminal penalties by the companies involved. Failure to comply with the FTC's laws and regulations could impair the Company's ability to market the Company's expected nutraceutical products.

The Company will also be subject to regulation under various state and local laws, ordinances and regulations that include provisions governing, among other things, the registration, formulation, manufacturing, packaging, labeling, advertising, sale and distribution of foods and dietary supplements. In addition, in the future, the Company may become subject to additional laws or regulations administered by the FDA or by other federal, state, local or foreign governmental authorities, to the repeal of laws or regulations that the Company considers favorable, or to more stringent interpretations of current laws or regulations. In the future, the Company believes that the dietary supplement industry will likely face increased scrutiny from federal, state and local governmental authorities. It is difficult to predict the effect future laws, regulations, repeals or interpretations will have on the Company's business. However, such changes could require the reformulation of products, recalls or discontinuance of products, additional administrative requirements, revised or additional labeling, increased scientific substantiation or other requirements. Any such changes could have a material adverse effect on the Company's business or financial performance.

Research and Development - Psychedelics

Canada

Prescription Drugs in Canada

If and as permitted by applicable law, the Company intends to manufacture prescription drugs with which it is authorized to deal pursuant to its dealer's licence. The process required before a prescription drug product candidate may be marketed in Canada generally involves:

Chemical and Biological Research - Laboratory tests are carried out on tissue cultures and with a variety of small animals to determine the effects of the drug. If the results are promising, the manufacturer will proceed to the next step of development.

Pre-Clinical Development - Animals are given the drug in varying amounts over differing periods of time. If it can be shown that the drug causes no serious or unexpected harm at the doses required to have an effect, the manufacturer will proceed to clinical trials.

Clinical Trials - Phase I - The first administration in humans is to test if people can tolerate the drug. If this testing is to take place in Canada, the manufacturer must prepare a clinical trial application for the Therapeutic Products Directorate of Health Canada (the "TPD"). This includes the results of the first two steps and a proposal for testing in humans. If the information is sufficient, the Health Products and Food Branch of Health Canada (the "HPFB") grants permission to start testing the drug, generally first on healthy volunteers.

Clinical Trials - Phase II - Phase II trials are carried out on people with the target condition, who are usually otherwise healthy, with no other medical condition. Trials carried out in Canada must be approved by the TPD. In phase II, the objective of the trials is to continue to gather information on the safety of the drug and begin to determine its effectiveness.

Clinical Trials - Phase III - If the results from phase II show promise, the manufacturer provides an updated clinical trial application to the TPD for phase III trials. The objectives of phase III include determining whether the drug can be shown to be effective, and have an acceptable side effect profile, in people who better represent the general population. Further information will also be obtained on how the drug should be used, the optimal dosage regimen and the possible side effects.

New Drug Submission - If the results from phase III continue to be favourable, the drug manufacturer can submit a new drug submission ("NDS") to the TPD. A drug manufacturer can submit an NDS regardless of whether the clinical trials were carried out in Canada. The TPD reviews all the information gathered during the development of the drug and assesses the risks and benefits of the drug. If it is judged that, for a specific patient population and specific conditions of use, the benefits of the drug outweigh the known risks, the HPFB will approve the drug by issuing a notice of compliance.

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United States

The process required before a prescription drug product candidate may be marketed in the United States generally involves:

• completion of extensive non-clinical laboratory tests, animal studies and formulation studies, all performed in accordance with the FDA's Good Laboratory and/or Manufacturing Practice regulations;
• submission to the FDA of an IND, which must become effective before human clinical trials may begin;
• approval by an institutional review board or independent ethics committee at each clinical trial site before each trial may be initiated;
• for some products, performance of adequate and well-controlled human clinical trials in accordance with the FDA's regulations, including Good Clinical Practices, to establish the safety and efficacy of the prescription drug product candidate for each proposed indication;
• submission to the FDA of a New Drug Application ("NDA"); and
• FDA review and approval of the NDA prior to any commercial marketing, sale or shipment of the drug.

The testing and approval process requires substantial time, effort and financial resources, and the Company cannot be certain that any approvals for its prescription drug product candidates will be granted on a timely basis, if at all.

Non-clinical tests include laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animals and other animal studies. The results of non-clinical tests, together with manufacturing information and analytical data, are submitted as part of an IND to the FDA. Some non-clinical testing may continue even after an IND is submitted. The IND also includes one or more protocols for the initial clinical trial or trials and an investigator's brochure. An IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions relating to the proposed clinical trials as outlined in the IND and places the clinical trial on a clinical hold. In such cases, the IND sponsor and the FDA must resolve any outstanding concerns or questions before any clinical trials can begin. Clinical trial holds also may be imposed at any time before or during studies due to safety concerns or non-compliance with regulatory requirements.

An independent institutional review board ("IRB"), at each of the clinical centers proposing to conduct the clinical trial, must review and approve the plan for any clinical trial before it commences at that center. An IRB considers, among other things, whether the risks to individuals participating in the trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the consent form signed by the trial participants and must monitor the study until completed. The FDA, the IRB, or the sponsor may suspend or discontinue a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk. There also are requirements governing the reporting of ongoing clinical trials and completed clinical trials to public registries.

The Company's commercial partners may plan to seek orphan drug designation for certain indications qualified for such designation. The U.S., E.U. and other jurisdictions may grant orphan drug designation to drugs intended to treat a "rare disease or condition." Under the Orphan Drug Act, the FDA may grant orphan designation to a drug intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the United States, or 200,000 or more individuals in the United States and for which there is no reasonable expectation that the cost of developing and making a drug available in the United States for this type of disease or condition will be recovered from sales of the product. Orphan drug designation must be requested before submitting an NDA. If a product that has an orphan drug designation subsequently receives the first regulatory approval for the indication for which it has such designation, the product is entitled to orphan exclusivity, meaning that the applicable regulatory authority may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for a period of seven years in the U.S. Orphan drug designation does not prevent competitors from developing or marketing different drugs for the same indication or the same drug for different indications. After orphan drug designation is granted, the identity of the therapeutic agent and its potential orphan use are publicly disclosed. Orphan drug designation does not convey an advantage in, or shorten the duration of, the development, review and approval process. However, this designation provides an exemption from marketing and authorization (NDA) fees.

The FDA offers a number of regulatory mechanisms that provide expedited or accelerated approval procedures for selected drugs and indications which are designed to address unmet medical needs in the treatment of serious or life threatening diseases or conditions. These include programs such as Breakthrough Therapy designations, Fast Track designations, Priority Review and Accelerated Approval, which the Company may need to rely upon in order to receive timely approval or to be competitive.

Drugs manufactured or distributed pursuant to FDA approvals are subject to continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, reporting of adverse experiences with the product, and complying with promotion and advertising requirements. The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-market testing, including phase IV clinical trials, and surveillance to further assess and monitor the product's safety and effectiveness after commercialization. In addition, drug manufacturers and their subcontractors involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with ongoing regulatory requirements, including current Good Manufacturing Practices, which impose certain procedural and documentation requirements. Failure to comply with statutory and regulatory requirements may subject a manufacturer to legal or regulatory action, such as warning letters, suspension of manufacturing, product seizures, injunctions, civil penalties or criminal prosecution. There is also a continuing, annual prescription drug product program user fee.

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The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information, requirements for post-market studies or clinical trials to assess new safety risks, or imposition of distribution or other restrictions under a risk evaluation and mitigation strategy.

Controlled Substances

In the United States, the possession and sale of psychedelic and hallucinogenic products are illegal under federal, state, and local laws and regulations. Many psychedelic substances, such as psilocybin, are strictly controlled under the CSA as Schedule I substances. The CSA and its implementing regulations establish a "closed system" of regulations for controlled substances. The CSA imposes registration, security, recordkeeping and reporting, storage, manufacturing, distribution, importation and other requirements under the oversight of the DEA. The DEA is responsible for regulating controlled substances, and requires those individuals or entities that manufacture, import, export, distribute, research, or dispense controlled substances to comply with the regulatory requirements in order to prevent the diversion of controlled substances to illicit channels of commerce.

Facilities that research, manufacture, distribute, import or export any controlled substance must register annually with the DEA. The DEA registration is specific to the particular location, activity(ies) and controlled substance schedule(s). For example, separate registrations are needed for import and manufacturing, and each registration will specify which schedules of controlled substances are authorized.

The DEA inspects all manufacturing facilities to review security, recordkeeping, reporting and handling prior to issuing a controlled substance registration. The specific security requirements vary by the type of business activity and the schedule and quantity of controlled substances handled. The most stringent requirements apply to manufacturers of Schedule I and Schedule II substances. Required security measures commonly include background checks on employees and physical control of controlled substances through storage in approved vaults, safes and cages, and through use of alarm systems and surveillance cameras. Once registered, manufacturing facilities must maintain records documenting the manufacture, receipt and distribution of all controlled substances. Manufacturers must submit periodic reports to the DEA of the distribution of Schedule I and II controlled substances, Schedule III narcotic substances, and other designated substances. Registrants must also report any controlled substance thefts or significant losses, and must obtain authorization to destroy or dispose of controlled substances. Imports of Schedule I and II controlled substances for commercial purposes are generally restricted to substances not already available from a domestic supplier or where there is not adequate competition among domestic suppliers. In addition to an importer or exporter registration, importers and exporters must obtain a permit for every import or export of a Schedule I and II substance or Schedule III, IV and V narcotic, and submit import or export declarations for Schedule III, IV and V non-narcotics.

For drugs manufactured in the United States, the DEA establishes annually an aggregate quota for the amount of substances within Schedules I and II that may be manufactured or produced in the United States based on the DEA's estimate of the quantity needed to meet legitimate medical, scientific, research and industrial needs. The quotas apply equally to the manufacturing of the active pharmaceutical ingredient and production of dosage forms. The DEA may adjust aggregate production quotas a few times per year, and individual manufacturing or procurement quotas from time to time during the year, although the DEA has substantial discretion in whether or not to make such adjustments for individual companies.

Individual U.S. states also establish and maintain separate controlled substance laws and regulations, including licensing, recordkeeping, security, distribution, and dispensing requirements. State authorities, including boards of pharmacy, regulate use of controlled substances in each state. Failure to maintain compliance with applicable requirements, particularly as manifested in the loss or diversion of controlled substances, can result in enforcement action that could have a material adverse effect on the Company's business, operations and financial condition. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to revoke those registrations. In certain circumstances, violations could lead to criminal prosecution.

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Our business faces many risks. Any of the risks discussed below, or elsewhere in this report 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 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 $57,863 thousand since our inception in 2003 through December 31, 2021. To date, these losses have been financed principally through sales of equity securities. Our revenues for the past five years ended December 31, 2021, December 31, 2020, December 31, 2019, December 31, 2018 and December 31, 2017 were $1.5 million, $1.5 million, $0.7 million, $1.8 million and $5.2 million 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 need additional capital to fulfill our business strategies. 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 and manufacturing operation expansion 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.

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 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.

Additional funding may also not be available on favorable terms, or at all. 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.

We are dependent on business partners to conduct clinical trials of, obtain regulatory approvals for, and 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.

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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 partner's 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.

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 Aquestive Therapeutics Inc (formerly 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.

The laws, regulations and guidelines applicable to cannabinoid-based products in Canada and in other countries may change in ways that impact our ability to continue our business as currently conducted or proposed to be conducted.

Our operations are subject to various laws, regulations and guidelines relating to the manufacture, management, transportation, storage and disposal of cannabinoid-based products as well as laws and regulations relating to health and safety, the conduct of operations and the protection of the environment. The successful execution of our cannabis business objectives is contingent upon compliance with all applicable laws and regulatory requirements in Canada and other jurisdictions and obtaining all required regulatory approvals for the production, sale, import and export of our cannabinoid-based products. The administration, application and enforcement of the laws of Canada and other countries, may significantly delay or impact our ability to participate in the Canadian cannabis market or cannabis markets outside Canada, and our ability to develop, produce and sell cannabinoid-based products.

Further, the regulatory authorities in Canada and in other countries in which we may operate in the future or to which we may export our products may change their administration, interpretation or application of the applicable laws, rules and regulations or their compliance or enforcement procedures at any time. Any such changes could require us to revise our ongoing compliance procedures, requiring us to incur increased compliance costs and expend additional resources. There is no assurance that we will be able to comply or continue to comply with applicable laws, rules and regulations.

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.

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Any third-party manufacturers that we depend on to manufacture our products are required to adhere to FDA regulations regarding 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 have established our own manufacturing facility for the future manufacture of VersaFilm™ products, which required considerable financial investment. If we are unsuccessful to manufacture our VersaFilm™ products adequately and at an acceptable cost, this 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 yet manufacture products for commercial use to the exception of our CBD film which was launched in Q1 2021. 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. 

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. 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 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.

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.

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We depend on a limited number of suppliers for Active Pharmaceutical Ingredients ("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.

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.

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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.

The impact of the COVID-19 outbreak on our operations, and the operations of our partners, suppliers and logistics providers, could significantly disrupt our operations and may materially and adversely affect our business and financial conditions.

Our business could be adversely impacted by the effects of the coronavirus or other epidemics. In December 2019, a novel strain of the coronavirus emerged in China and the virus has now spread to other countries, including Canada and the U.S., and infections have been reported globally. We are actively assessing and responding where possible to the potential impact of the COVID-19 outbreak.  The extent to which the COVID-19 impacts our business, including our operations and the market for our securities, will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the outbreak and the actions taken to contain or treat the coronavirus outbreak. In particular, the continued spread of the coronavirus globally could materially and adversely impact our business including without limitation, employee health, workforce productivity, increased insurance premiums, limitations on travel, the availability of industry advisers and personnel, and other factors that will depend on future developments beyond our control, which may have a material and adverse effect on our business, financial condition and results of operations. Likewise, the continued spread of the virus locally and regionally and the resulting preventative measures that have been put in place by the provincial and local administrations may impact our ability to hire qualified staff.

Hence, there can be no assurance that our personnel will not be impacted by these pandemic diseases and ultimately see our workforce productivity reduced or incur increased medical costs / insurance premiums as a result of these health risks.

In addition, a significant outbreak of coronavirus could result in a widespread global health crisis that could adversely affect global economies and financial markets resulting in an economic downturn.

Risk related to the atai Investment

Our existing Shareholders will have a reduced ownership and voting interest after any potential future atai investment

Following any potential future atai investment under the Securities Purchase Agreement, the existing Shareholders other than atai will hold a percentage ownership in us that is smaller than the Shareholders' current percentage ownership.  This dilution will be proportional to the percentage rate by which we increase our issued and outstanding shares.  In addition, as of immediately following the initial closing of the Investment, atai had the right to nominate directors to the Board of Directors of the Company (the "Board"), which right is proportionate to the shares of Common Stock then held by atai.  As a result, existing Shareholders will have less influence on our management and policies than they currently have, which influence will also further diminish if atai's ownership stake increases following additional closings.

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Atai is in a position to exert substantial influence on us and the interests pursued by atai could differ from the interests of our other shareholders, and if it acquires a majority of our shares, it will be able to approve most corporate actions requiring shareholder approval by written consent.

Following the completion of the initial Investment, atai  holds approximately 25% of our issued and outstanding shares.  If atai were to acquire all of the Additional Shares and exercise all of the Initial Warrants and Additional Warrants, atai would hold approximately 60% of our issued and outstanding shares.  As a result, atai may be in a position to exert substantial influence at our annual shareholder meeting or any special meeting of the shareholders and, consequently, over matters decided by the annual shareholder meeting or any special meeting of the shareholders, including the appointment of members of the directors of the Board, particularly if attendance is low among other Shareholders.  If atai acquires more than 50% of our outstanding Common Stock, atai generally will be able to determine the outcome of corporate actions requiring shareholder approval.  In this regard, the interests of atai could deviate from, and even be to the detriment of, the interests of our other Shareholders.

The Strategic Development Agreement may not result in the development of commercially viable products or the generation of significant future revenues.

Under the Strategic Development Agreement, we will cooperate with atai to conduct research and development projects in areas relating to our respective technologies. The success of our cooperation is dependent on a number of factors, including with respect to research and development, manufacturing and quality assurance. Even if our development and clinical trial efforts succeed, the FDA or other regulatory agencies may not approve the developed products or may require additional product testing and clinical trials before approving the developed products, which would result in product launch delays and additional expense. Even if approved by the FDA or other regulatory agencies, the developed products may not be accepted in the marketplace.

The commercialization of any technologies that result from the research and development projects under the strategic development agreement will be subject to agreements to be negotiated, as well as to specified pricing and royalty terms for manufacturing conducted by us or third parties.  There is no guarantee that we will be able to enter into such an agreement on commercially reasonable terms or at all.

If we default under the Loan Agreement, all or a portion of our assets could be subject to forfeiture.

IntelGenx Technologies Corp. has guaranteed the repayment obligations of IntelGenx Corp. under the Loan Agreement and the loan is also secured by all of present and future fixed assets of IntelGenx Corp., excluding any intellectual property or technology controlled or owned by IntelGenx Corp.  If IntelGenx Technologies Corp.  defaults on the Loan Agreement and is unable to cure the default pursuant to the terms of the agreement or is unable to repay or refinance the loan when due, atai could take possession of any or all assets in which it holds a security interest, and dispose those assets to the extent necessary to pay off the debts, which may have a significant impact on our ability to operate our business.

Risks related to the development of compounds for the prevention or treatment of mental health diseases or disorders, including compounds that have psychedelic, entactogenic and/or oneirophrenic properties.

Under the Strategic Development Agreement, we aim to develop compounds for the prevention or treatment of mental health diseases or disorders, including compounds that have psychedelic, entactogenic and/or oneirophrenic properties.  The success of our ability to develop and commercialize such compounds will depend on numerous factors, including the following:

• successful completion of clinical trials and preclinical studies;
• sufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trials;
• receiving regulatory approvals or clearance for conducting our planned clinical trials or future clinical trials;
• successful patient enrollment in and completion of clinical trials;
• positive data from our clinical trials that support an acceptable risk-benefit profile of the compound for the intended populations;
• receipt and maintenance of regulatory and marketing approvals from applicable regulatory authorities;
• obtaining and maintaining patent and trade secret protection and/or regulatory exclusivity for any compounds we develop;
• successfully launching commercial sales of any compounds we develop, if approved;
• acceptance of our compounds' benefits and uses, if approved, by patients, the medical community and third-party payors;
• maintaining a continued acceptable safety profile of any compound we develop following approval;

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• effectively competing with companies developing and commercializing other compounds in the indications which our compounds target;
• obtaining and maintaining healthcare coverage and adequate reimbursement from third-party payors;
• enforcing and defending intellectual property rights and claims; and
• complying with laws and regulations, including laws applicable to controlled substances.

If we are not successful with respect to one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our compounds we develop, which would materially harm our business.

The compounds we may develop in the future may be subject to controlled substance laws and regulations in the territories where the product will be marketed, such as the United States, Canada, and Europe, and failure to comply with these laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the results of our business operations, both during clinical development and post approval, and our financial condition.  In addition, during the review process of any compound, and prior to approval, the FDA and/or other regulatory bodies may require additional data, including with respect to whether such compound has abuse potential.  This may delay approval and any potential rescheduling process.

Certain compounds may contain controlled substances, the use of which may generate public controversy.

Compounds containing controlled substances may generate public controversy.  Political and social pressures and adverse publicity could lead to delays in approval of, and increased expenses for, any compounds we may develop.  Adverse publicity from misuse may adversely affect the commercial success or market penetration achievable by any compound we develop.

If any compounds are approved for commercial sale, we will be highly dependent upon consumer perceptions regarding safety and quality.  We may face limited adoption if healthcare providers, and patients are unwilling to try novel compounds, which could have a material adverse impact on our business, prospects, financial condition and results of operations.

Future adverse events in research into depression and mental health diseases, or the pharmaceutical industry more generally, could also result in greater governmental regulation, stricter labeling requirements and potential regulatory delays in the testing or approvals.  Any increased scrutiny could delay or increase the costs of obtaining regulatory approvals.

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 37 patents and have an additional 39 published 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.

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.

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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 management's 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 are also subject to litigation and other legal proceedings and may be involved in disputes with other parties in the future which may result in litigation

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.

The causes of potential future litigation and legal proceedings cannot be known and may arise from, among other things, business activities, the Investment, environmental laws, permitting and licensing activities, volatility in stock prices, or alleged failure to comply with disclosure obligations. The results of litigation and proceedings cannot be predicted with certainty and may include injunctions pending the outcome of such litigation and proceedings. Failure to resolve any such disputes favorably may have a material adverse impact on our financial performance, cash flow and results of operations.

If we are unable to protect our information systems against service interruption, misappropriation of data or breaches of security, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.

If we or third parties with which we do business were to fall victim to successful cyber-attacks or experience other cybersecurity incidents, including the loss of individually identifiable customer or other sensitive data, we may incur substantial costs and suffer other negative consequences, which may include: remediation costs, such as liability for stolen assets or information, repairs of system damage or replacement of systems, and incentives to customers or business partners in an effort to maintain relationships after an attack; increased cybersecurity protection costs, which may include the costs to continue to make organizational changes, deploy additional personnel and protection technologies, train employees, and engage third party consultants; lost revenues resulting from the unauthorized use of proprietary information or the failure to retain or attract customers following an attack; litigation and legal risks, including regulatory actions by state and federal governmental authorities;  increased cybersecurity and other insurance premiums; reputational damage that adversely affects customer or investor confidence; and damage to our competitiveness, stock price, and long-term stockholder value.

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;

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• 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.

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 has been quoted on OTC Markets under the symbol "IGXT" since January 2007.  Beginning in June 2012, our Common Stock was quoted on the OTCQX and, since April 2020, has been quoted on the OTCQB.  Our Common Stock was also listed on the TSX-V from May 2008 until our graduation to the TSX in October 2021 where our Common Stock is now trading under the under the symbol "IGX".

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.

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 purchaser's 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.

There is no public market for certain Company warrants, which could limit their respective trading price or a holder's ability to sell them.

There is currently no trading market in the United States for the warrants issued by the Company in 2020 and 2021. As a result, a market is unlikely to develop for the Company's warrants in the United States and holders may not be able to sell the Company's warrants in the United States. Future trading prices of the Company's warrants will depend on many factors, including the market for similar securities, general economic conditions and our financial condition, performance and prospects. Accordingly, holders may be required to bear the financial risk of an investment in the Company's warrants for an indefinite period of time until they expire.

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Risks related to our outstanding convertible debentures and convertible notes.

Issuance of shares of our Common Stock upon conversion of convertible debentures will dilute the ownership interest of our existing stockholders and could adversely affect the market price of our Common Stock.

Conversions of the 8% Convertible Unsecured Subordinated Debentures due June 30, 2022 (the "Debentures") or the 8% Subordinate Convertible Unsecured Promissory Notes (the "Notes") would reduce a shareholder's percentage voting and ownership interest. The conversion, or potential conversion, of the Debentures or Notes could adversely affect the market price of our Common Stock and the terms on which we could obtain additional financing. In addition, our shareholders may experience further dilution upon our election to repay the Debentures or the interest payable thereon in, or convert the Notes to, shares of Common Stock.

There is no public market for the Company's Debentures in the United States, which could limit their respective trading price or a holder's ability to sell them.

There is currently no trading market for the Company's Debentures in the United States. As a result, a market is unlikely to develop for the Company's Debentures in the United States and holders may not be able to sell the Company's Debentures in the United States. Future trading prices of the Company's warrants will depend on many factors, including the market for similar securities, general economic conditions and our financial condition, performance and prospects. However, the Debentures are listed on the TSX and currently trade under the symbol IGX.DB. We do not intend to apply for listing or quotation of those Debentures on any other securities exchange or automated quotation system.

There is no public market for the Company's Notes, which could limit their respective trading price or a holder's ability to sell them.

There is currently no trading market for the Company's Notes. As a result, a market is unlikely to develop for the Company's Notes and holders may not be able to sell the Company's Notes. Future trading prices of the Company's Notes will depend on many factors, including the market for similar securities, general economic conditions and our financial condition, performance and prospects. Accordingly, holders may be required to bear the financial risk of an investment in the Company's Notes for an indefinite period of time until their maturity.

Our failure to avoid events of default as defined in the Debentures and Notes could require us to redeem such Debentures or Notes at a loss.

The Debentures provide that, upon the occurrence of an "Event of Default," the Debentures may become immediately due and payable.  Events of Default under the Debentures include, among other things the occurrence and continuation of any one or more of the following events with respect to the Debentures: (a) failure for 30 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 Company under bankruptcy or insolvency laws; or (d) default in the observance or performance of any material covenant or condition of the trust indenture dated July 12, 2017, between the Company and TSX Trust Company (the "Debenture Trustee"), as trustee, and continuance of such default for a period of 30 days after notice in writing has been given by the Debenture Trustee to the Company specifying such default and requiring the Company to rectify the same. In addition, upon an Event of Default, the Debentures become, upon receipt of a request in writing signed by the holders of not less than 25% in principal amount of the Debentures then outstanding, immediately due and payable.

The Notes provide that, upon the occurrence of an "Event of Default," the Notes may become immediately due and payable. Events of Default under the Notes include, the occurrence of any of the following events with respect to the Notes: (a) failure for 10 business days to pay any of the principal amount or interest on the Notes when due; (b) voluntary or involuntary bankruptcy or insolvency proceedings; or (c) the Company breaches any representation or covenant in the Note that could reasonably be expected to have a material adverse effect and such breach is not cured within 30 days after the notice thereof. Upon an Event of Default for non-payment, voluntary bankruptcy or insolvency or involuntary bankruptcy or insolvency, the Notes become immediately due and payable with the written consent of the holders of a majority in interest of investors. Upon an Event of Default for a Company breach of a representation or covenant, all outstanding Notes automatically become immediately due and payable.

Our ability to avoid such Events of Default under both the Debentures and Notes may be affected by changes in our business condition or results of our operations, or other events beyond our control. If we were to experience an Event of Default and the holders of Debentures elected to have us redeem their Debentures or the Notes became immediately due and payable, we may not have sufficient resources to do so, and we may have to seek additional debt or equity financing to cover the costs of redeeming the Debentures or paying the Notes. Any additional debt or equity financing that we may need may not be available on terms favorable to us, or at all.  Furthermore, 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 shareholders.

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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 an adverse effect on our financial condition and results of operations.

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.

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.

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.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

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 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$123 thousand (approximately $97 thousand) per year, which will increase at a rate of CA$0.25 ($0.20) per square foot, 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.

On March 6, 2017, we entered into an agreement to lease additional approximately 11,000 square feet in a property located at 6410 Abrams, St-Laurent, Quebec.  The lease has an 8 year and 5-month term commencing on October 1, 2017 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$79 thousand (approximately $62 thousand) per year, which will increase at a rate of CA$0.25 ($0.20) per square foot, every two years.  We use the leased space to manufacture the oral film VersaFilm™.

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ITEM 3. LEGAL PROCEEDINGS  

On March 1, 2019, a complaint for patent infringement was filed in United States District Court for the District of Delaware against Chemo Research, S.L., Insud Pharma S.L., IntelGenx Corp., and IntelGenx Technologies Corp. (collectively, the "Defendants") by BioDelivery Sciences International, Inc., and  Arius Two, Inc., (collectively, the "Plaintiffs"), asserting that the Defendants infringed upon BioDelivery Sciences International, Inc. Orange Book listed patents for BELBUCA, including United States Patent Nos. 8,147,866 and 9,655,843, both expiring in July of 2027, and United States Patent No. 9,901,539 expiring December of 2032. See BioDelivery Sciences International, Inc. et al v. Chemo Research, S.L. et al, No. 1:19-cv-00444-CFC-CJB (D. Del.). Plaintiffs seek to enjoin Defendants from commercially manufacturing, using, offering for sale, or selling Defendants' generic buprenorphine buccal film within the United States, or importing Defendants' generic buprenorphine buccal film into the United States, until the expiration of U.S. Patent Nos. 8,147,866, 9,655,843, and 9,901,539. Plaintiffs are not seeking damages. Discovery is ongoing.  A trial addressing infringement is scheduled to begin on or after April 25, 2022. We believe that we will ultimately be successful in our defense of these matters.

This complaint followed the receipt by BioDelivery Sciences International, Inc. of a notice letter by Chemo Research S.L. on January 31, 2019, stating that it had filed with the FDA an ANDA containing a Paragraph IV Patent Certification, for a generic version of BELBUA Buccal Film in strengths 75 mcg, 150 mcg, 300 mcg, 450 mcg, and 900 mcg. Since the Plaintiffs initiated a patent infringement suit to defend the patents identified in the notice letter within 45 days after receipt, the FDA is prevented from approving the ANDA until the earlier of (i) 30 months or (ii) a decision which determines whether the patents were infringed or invalid.

On March 15, 2019, Plaintiffs filed their same complaint for patent infringement in the United States District Court for the District of New Jersey. See BioDelivery Sciences International, Inc. et al v. Chemo Research, S.L. et al, No. 2:19-cv-08660-KM-MAH (D.N.J.). Plaintiffs voluntarily dismissed their New Jersey case on April 25, 2019.

On December 8, we initiated an arbitration proceeding against Tilray related to an alleged breach of the parties' 2018 license, development and supply agreement, as amended (the "Agreement"), with Tilray for the co-development and commercialization of cannabis-infused VersaFilm® products.

The action follows a press release issued by Tilray announcing its launch of medical cannabis oral strips in THC and CBD-rich varieties based on a competitive oral thin film technology to IntelGenx's VersaFilm® platform. We believes this represents a material breach of the Agreement.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our Common Stock has been quoted on OTC Markets under the symbol "IGXT" since January 2007.  Beginning in June 2012, our Common Stock was quoted on the OTCQX and, since April 2020, has been quoted on the OTCQB.  Our Common Stock was also listed on the TSX-V from May 2008 until our graduation to the TSX in October 2021 where our Stock is now trading under the under the symbol "IGX".

On March 24, 2022, there were approximately 48 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 ("CDS"). All of our Common Stock 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. 

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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 and will depend on a number of factors, including future earnings, capital requirements, financial conditions and future prospect and other factors that the Board may deem relevant.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

During the fourth quarter of 2021, there were no purchases or repurchases of our equity securities by us or any affiliated purchasers.

Unregistered Sales of Equity Securities and Use of Proceeds

During fiscal year ended 2021, we did not sell equity securities without registration under the Securities Act, except as disclosed on a Current Report on Form 8-K.

Equity Compensation Plan Information

	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(2)   (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	653,846(1)	$0.58	946,154(3)
Equity Compensation Plans Not Approved by Security Holders	3,912,318(3)	$0.56	4,856,076(4)
Total	4,566,164	$0.56	5,802,230

(1)	Includes shares of our Common Stock issuable pursuant to options granted under the 2006 Stock Option Plan and RSUs awarded under our Performance and Restricted Share Unit Plan ("PRSU Plan").
(2)	The weighted average exercise price excludes restricted share unit ("RSU") awards, which have no exercise price.
(3)	On May 9, 2016, the 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 TSX-V. The 2016 Stock Option Plan was further amended by the Board on March 21, 2022 and is now the SOP (as defined below) and certain amendments to the SOP are subject to shareholder approval at the Meeting. The number represents only securities available under the PRSU Plan.
(4)	Represents the maximum number of shares of our Common Stock available for grants under the 2016 Stock Option Plan as of December 31, 2021. No registration statement has been filed for the additional 1,678,218 shares of common stock that were available to be granted under the 2016 Stock Option Plan (now known as the SOP) pursuant to the amendment from July 2020.

The 2016 Stock Option Plan was adopted by the Board in order to make the terms of the Company's stock option plan more consistent with the requirements of the TSX-V and to remove certain provisions which would have enabled the Company 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 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. In August 2018, the Board approved the amendment of the 2016 Stock Option Plan to increase the total number of shares of Common Stock reserved under the plan to 9,347,747 and in July 2020, the number of shares reserved was increased to 11,025,965. 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.

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The PRSU Plan permits the Board to grant RSU awards to employees, consultants or directors of the Company and performance share unit ("PSU") awards to employees and consultants of the Company. In each case, the award of RSUs or PSUs are subject to restrictions in connection with the termination of employment, engagement or term in office. The Board may, in its sole discretion, grant the majority of the awards to insiders of the Company. The number of shares of Common Stock reserved for issuance under this plan is equal to a number that: (a) does not exceed 1,000,000 shares if, and for so long as the Company is listed on the TSX-V, or (b) 2.5% of the issued and outstanding Common Stock, if the Company is listed on the TSX. The Board has the authority to condition the grant of RSUs or PSUs upon the attainment of specified performance goals, or such other factors (which may vary between awards) as the Board determines in its sole discretion. The Board has the authority to determine at the time of grant, in its sole discretion, the duration of the vesting period and other vesting terms applicable to the grant of RSUs or PSUs. In the case of PSUs, such awards may be adjusted in accordance with the applicable PSU award agreement.

On a go-forward basis, the Company intends to primarily compensate executive officers with RSUs and compensate non-executive employees with stock options. No RSUs were granted during fiscal years 2019, 2020 and 2021.

ITEM 6. [RESERVED]

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

Introduction to Management's Discussion and Analysis

The purpose of this section, Management's 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", "Company", "we", "us", and "our" refer to IntelGenx Technologies Corp. and its subsidiaries, including IntelGenx Corp. This information should be read in conjunction with the accompanying audited Consolidated Financial Statements and Notes thereto.

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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 Canadian cannabis market with non-prescription cannabis infused oral film that launched in early 2021 and in 2020 we made the decision to enter the psychedelic market.  As a full service CDMO, we are offering partners a comprehensive portfolio of pharmaceutical services, including pharmaceutical 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 by focusing on three key strategic areas: (1) psychedelics, (2) cannabis, and (3) animal health.

We have established a state-of-the-art manufacturing facility for the future manufacture of our VersaFilm™ and VetaFilm™ products. 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.  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 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 and provide better protection of our Intellectual Property.

Product Opportunities that provide Tangible Patient Benefits

In addition to our three key strategic areas we will 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.

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.

Corporate

On March 15, 2021, the Company announced that its wholly owned subsidiary, IntelGenx Corp. agreed to the terms of a strategic partnership with atai, a clinical-stage biopharmaceutical company aiming to transform the treatment of mental health disorders, including an equity investment by atai, pursuant to which atai will initially acquire an approximate 25% interest in the Company. The Company also announced that atai granted to IntelGenx a secured loan in the amount of $2,000,000.  As part of the strategic partnership, IntelGenx has exclusively partner with atai to develop compounds for the prevention or treatment of mental health diseases or disorders, including compounds that have psychedelic, entactogenic and/or oneirophrenic properties.

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Strategic Development Agreement

Under a strategic development agreement, atai and IntelGenx Corp. will cooperate to conduct research and development projects in areas relating to the parties' respective technologies. A portion of the funds (20%) that the Company receives through atai's equity investment under the securities purchase agreement described below will be available to be credited against the costs to IntelGenx Corp. of the research and development projects. So long as atai maintains certain levels of its initial equity ownership in the Company, IntelGenx Corp. will work exclusively with atai in the field of compounds for the prevention or treatment of mental health diseases or disorders or compounds that have psychedelic, entactogenic and/or oneirophrenic properties, but excluding certain specific compounds and veterinary applications.

The commercialization of any technologies that result from the research and development projects under the strategic development agreement will be subject to agreements to be negotiated, as well as to specified pricing and royalty terms for manufacturing conducted by IntelGenx or third parties.

Securities Purchase Agreement

Under a securities purchase agreement, atai agreed to purchase 37,300,000 shares of common stock of the Company and 22,380,000 warrants ("Warrants") for aggregate gross proceeds of $12,346,300 following receipt of Shareholders' approval, which occurred at the Company's 2021 meeting of shareholders. Each Warrant entitles atai to purchase one share of common stock at a price of $0.35 for a period of three years from closing of the initial investment.  The securities purchase agreement also provides atai with the right to subscribe (in cash, or in certain circumstances, atai equity) for up to 130,000,000 additional units ("Additional Units") for a period of three years from the closing of the initial investment. Each Additional Unit will be comprised of (i) one share of common stock and (ii) one half of one warrant (each full warrant, an "Additional Warrant"). The price for the Additional Units will be (i) until the date which is 12 months following the closing, $0.331 (subject to certain exceptions), and (ii) following the date which is 12 months following the closing, the lower of (A) a 20% premium to the market price on the date of purchase, and (B) $0.50 if purchased in the second year following closing and $0.75 if purchased in the third year following closing. Each Additional Warrant will entitle atai, for a period of three years from the date of issuance, to purchase one share of common stock of the Company (the "Additional Share") at the lesser of either (i) a 20% premium to the price of the corresponding Additional Share, or (ii) the price per share under which shares of common stock of the Corporation are issued under convertible instruments that were outstanding on February 16, 2021 (the "Outstanding Convertibles"), the date on which the parties entered into a non-binding letter of intent to enter into a definitive securities purchase agreement, provided that atai may not exercise Additional Warrants to purchase more than the lesser of (x) 44,000,000 shares of common stock of the Company, and (y) the number of shares of common stock issued by the Corporation under Outstanding Convertibles.

Under the securities purchase agreement, the Company also granted atai a pro-rata equity participation right for any issuances of new securities, subject to certain exceptions.

Following the initial closing, atai holds approximately 25% (approximately 35% on a partially diluted basis) of the issued and outstanding shares of common stock and therefore became a new "Control Person" of the Corporation as such term is defined under applicable Canadian securities laws. Based on the number of issued and outstanding shares of common stock and outstanding convertible instruments on the date hereof, assuming the full exercise of its option to acquire the Additional Units and exercise of the Initial Warrants and Additional Warrants, atai would hold approximately 60% (approximately 60% on a partially diluted basis) of the issued and outstanding Shares.

Purchaser Rights Agreement

Under the purchaser rights agreement, atai has the right to appoint nominees in the same proportion to the number of Board members of the Company as the shares of common stock then held by atai, registration rights, and financial and other information rights. On August 4, 2021, the Company appointed Srinivas G. Rao, M.D., Ph.D. and Frank Stegert to its Board of Directors.

The Company will have the right to terminate the purchaser rights agreement if atai ceases to own a certain amount of the Company's equity.

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Term Loan

atai also granted to IntelGenx Corp. a secured loan in the amount of $2,000,000 which was subsequently increased to $2,500,000. The loan is guaranteed by the Company and secured by all of present and future fixed assets of IntelGenx Corp., excluding any intellectual property or technology controlled or owned by IntelGenx.

IntelGenx applied approximately $800,000 from the loan to fully repay the outstanding amount on the Company's credit facilities with the Bank of Montreal. IntelGenx Corp. intends to use the balance of the loan for general working capital purposes.

On May 11, 2021, the Company announced that a significant majority of its shareholders approved the resolution approving the previously announced investment in IntelGenx Corp. by atai, pursuant to which atai had initially acquired an approximate 25% interest in the Company.  The resolution was approved by 96.6% of the votes cast by shareholders present or represented by proxy at the virtual annual meeting of shareholders held earlier today. At the meeting, shareholders also approved a resolution to amend the Company's Certificate of Incorporation to increase the total number of shares of common stock that IntelGenx is authorized to issue from 200,000,000 shares to 450,000,000 shares.

On May 14, 2021, the Company reported that the previously announced $12,346,300 investment in IntelGenx by  atai had been completed. As a result of the investment, atai holds approximately 25% of the issued and outstanding common stock of IntelGenx.

On May 19, 2021, the Company announced that the noteholders of its 6.0% convertible unsecured promissory notes due June 1, 2021, originally issued by private placement on May 8, 2018, had, by written consent in accordance with the terms of the Notes, approved proposed amendments to the Notes. As a result, (i) the maturity date of the U.S.$1,600,000 principal amount of Notes has been extended from June 1, 2021 to October 31, 2024, (ii) the interest rate on the Notes has been increased from 6% to 8%, (iii) the conversion ratio for conversions at the option of Noteholders has been changed from 6,250 fully paid and non-assessable shares of common stock for each U.S.$5,000 aggregate principal amount of the Notes then outstanding to 11,363 fully paid and non-assessable shares of common stock for each U.S.$5,000 aggregate principal amount of the Notes then outstanding, effectively representing a reduction of the conversion price from U.S.$0.80 to U.S.$0.44, and (iv) the trigger price for a conversion at the option of IntelGenx has been reduced from U.S.$1.40 or greater for 20 consecutive trading days to U.S.$0.88 or greater for 20 consecutive trading days.

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 8% convertible notes due July 31, 2025 for aggregate gross proceeds of approximately U.S.$2.1 million (the "Offering"). The Notes bear interest at a rate of 8% per annum, payable quarterly, and are convertible into shares of common stock of the Company beginning 6 months after their issuance at a price of U.S.$0.40 per Share.  Cantone Research, Inc. ("Cantone") acted as placement agent in respect of the Offering. The Company intends to use the proceeds of the Offering to finance its Montelukast study.  In connection with the Offering, the Company paid Cantone a cash commission of approximately U.S.$199,525 in the aggregate and issued non-transferable warrants to the agent, entitling Cantone to purchase 613,000 Shares at a price of U.S.$0.40 per Share until August 4, 2023.

On September 15, 2021, the Company announced that its wholly-owned subsidiary, IntelGenx Corp. entered into an amended and restated secured loan agreement with atai pursuant to which atai has made two additional term loans (the "New Loans") available to IntelGenx in the amount of U.S.$3,000,000 each, which will mature on January 5, 2024. The first loan was received on January 7, 2022 and the second loan will be made available on January 6, 2023. The second loan will be subject to the satisfaction of customary conditions. The Loan Agreement also extends the maturity date for the current loans, in an aggregate amount of U.S.$2,500,000, to January 5, 2024. The obligations under the New Loans are guaranteed by the Company.

On September 15, 2021, the Company also announced that it received conditional approval from the Toronto Stock Exchange to graduate from the TSX Venture Exchange and list its shares of common stock, its 8% convertible debentures with a maturity date of June 30, 2022, and its share purchase warrants expiring on February 11, 2023 ("Feb 2023 Warrants").

On October 5, 2021, the Company announced that it received final approval to graduate to the Toronto Stock Exchange from the TSX Venture Exchange. The Company's shares of common stock, 8% convertible debentures with a maturity date of June 30, 2022, and share purchase warrants expiring on February 11, 2023 commenced trading on the TSX at market open on Thursday, October 7, 2021 under the existing stock symbols "IGX", "IGX.DB" and "IGX.WT", respectively. The shares of common stock, Debentures and the Feb 2023 Warrants were delisted from the TSXV concurrently with the commencement of trading on the TSX.

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Liquidity Risk

Liquidity risk is the risk that we will not be able to meet our financial obligations as they fall due. We require continued access to capital markets to support our operations, as well as to achieve our strategic plans. Any impediments to our ability to access capital markets, including the lack of financing capability or an adverse perception in capital markets of our financial condition or prospects, could have a materially adverse effect on us. In addition, our access to financing is influenced by the economic and credit market environment.  We manage liquidity risk through the management of our capital structure.

Our objective in managing capital is to ensure a sufficient liquidity position to finance our research and development activities, scale up activities, regulatory activities, including product pipeline development general and administrative expenses, working capital and overall capital expenditures. Since inception, we financed our liquidity needs primarily through public offerings of our Common Stock, convertible debentures, convertible notes, bank loans, royalty, up-front and milestone payments, license fees, proceeds from exercise of warrants and options, research and development revenues and the sale of U.S. royalty on future sales of Forfivo XL^®.  When possible, we try to optimize our liquidity needs by non-dilutive sources, including research tax credits, grants, interest income, as well as with proceeds from collaboration and research agreements or product licensing agreements.

In addition, we manage liquidity risk by continuously monitoring actual and projected cash flows. The Board of Directors reviews, approves and monitors our annual operating and capital budgets, as well as any material transactions.

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, 2021 report an accumulated other comprehensive loss due mainly to foreign currency translation adjustments of $1,371 due to the fluctuations in the rates used to prepare our financial statements, $515 of which negatively impacted our comprehensive loss for the fiscal year ended December 31, 2021. 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. We use adjusted financial measures to assess our 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 our 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 meaningful information on our financial condition and operating results.

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. 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 consultant's 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 our core operating performance may vary significantly from one period to another. As such, Adjusted EBITDA provides improved continuity with respect to the comparison of our operating results over a period of time. Our method for calculating Adjusted EBITDA may differ from that used by other corporations.

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Reconciliation of Non-U.S.-GAAP Financial Information

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA (Loss))

Adjusted EBITDA Loss increased by $1,525 for the three-month period ended December 31, 2021 to ($2,279) compared to ($754) for the three-month period ended December 31, 2020. Adjusted EBITDA Loss increased by $1,747 for the twelve-month period ended December 31, 2021 to ($7,084) compared to ($5,337) for the twelve-month period ended December 31, 2020. The increase in Adjusted EBITDA Loss of $1,525 for the three-month period ended December 31, 2021 is mainly attributable to a decrease in revenues of $296, and increases in SG&A expenses of $535 before consideration of stock-based compensation, R&D expenses of $468 before consideration of stock-based compensation, and Manufacturing expenses of $226 before consideration of stock-based compensation.  The increase in Adjusted EBITDA Loss of $1,747  for the twelve-month period ended December 31, 2021 is mainly attributable to a decrease in revenues of $9, and increases in SG&A expenses of $854 before consideration of stock-based compensation,  Manufacturing expenses of $799 before consideration of stock-based compensation, and R&D expenses of $85 before consideration of stock-based compensation .

Results of operations for the three month and twelve month periods ended December 31, 2021 compared with the three month and twelve month periods ended December 31, 2020.

		Three-month period ended December 31,						Twelve-month period ended December 31,
In U.S.$ thousands		2021			2020			2021			2020
Revenue	$	494		$	790		$	1,535		$	1,544
Research and Development Expenses		807			337			2,717			2,637
Manufacturing Expenses		658			435			2,256			1,477
Selling, General and Administrative Expenses		1,334			793			3,753			2,960
Depreciation of tangible assets		202			198			791			734
Operating Loss		(2,507	)		(973	)		(7,982	)		(6,264	)
Net Loss		(2,858	)		(1,277	)		(9,312	)		(7,044	)
Comprehensive Loss		(2,857	)		(1,268	)		(9,827	)		(7,064	)

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Revenue

Total revenues for the three-month period ended December 31, 2021 amounted to $494, representing a decrease of $296 or 37% compared to $790 for the three-month period ended December 31, 2020.  Total revenues for the twelve-month period ended December 31, 2021 amounted to $1,535 representing a decrease of $9 or 1% compared to $1,544 for the twelve-month period ended December 31, 2020.  The decrease for the three-month period ended December 31, 2021 compared to the last year's corresponding period is mainly attributable to a decrease in Revenues from Licensing agreements of $425, offset by increases in and R&D revenues of $94 and Product revenues of $35.  The decrease for the twelve-month period ended December 31, 2021 compared to the last year's corresponding period is mainly attributable to a decrease in Revenues from Licensing agreements of $733, offset by increases in R&D revenues of $137, Product revenues of $267 and Sales milestones revenues of $320.

Research and development ("R&D") expenses

R&D expenses for the three-month period ended December 31, 2021 amounted to $807, representing an increase of $470 or 139%, compared to $337 for the three-month period ended December 31, 2020. R&D expenses for the twelve-month period ended December 31, 2021 amounted to $2,717, representing an increase of $80 or 3%, compared to $2,637 recorded in the same period of 2020.

The increase in R&D expenses for the three-month period ended December 31, 2021 is mainly attributable to increases in salary expenses of $163 due to new hires, the allocation of the 20% credit of $115 as per the strategic development agreement with atai, study costs of $78, a decrease in R&D estimated tax credits of $63, consulting fees of $53, and R&D batch development expenses of $37, offset by a decrease in patent expenses of $39. 

The increase in R&D expenses for the twelve-month period ended December 31, 2021 is mainly attributable to increases in salary expenses of $275 (mainly attributable to the Canada Emergency Wage Subsidy received only in 2020 and due to new hires in 2021), the allocation of the 20% credit of $115 as per the strategic development agreement with atai, a decrease in R&D estimated tax credits of $57, R&D batch development expenses of $54, consulting fees of $19, and patent expenses of $13, offset by decreases in lab supplies of $225, analytical costs of $127 and study costs of $113.

In the twelve-month period ended December 31, 2021 we recorded estimated Research and Development Tax Credits of $183, compared with $240 that was recorded in the same period of the previous year.

Manufacturing expenses

Manufacturing expenses for the three-month period ended December 31, 2021 amounted to $658, representing an increase of $223 or 51%, compared to $435 for the three-month period ended December 31, 2020. Manufacturing expenses for the twelve-month period ended December 31, 2021 amounted to $2,256 representing an increase of $779 or 53%, compared to $1,477 for the twelve-month period ended December 31, 2020.

The increase in Manufacturing expenses for the three-month period ended December 31, 2021 is mainly attributable to increases in salary expenses of $166 due to new hires, supplies and consumables of $36, and quality expenses of $13.

The increase in Manufacturing expenses for the twelve-month period ended December 31, 2021 is mainly attributable to increases in salary expenses of $448 (mainly attributable to the Canada Emergency Wage Subsidy received only in 2020 and due to new hires in 2021) and supplies and consumables of $341. 

Selling, general and administrative ("SG&A") expenses

SG&A expenses for the three-month period ended December 31, 2021 amounted to $1,334, representing an increase of $541 or 68%, compared to $793 for the three-month period ended December 31, 2020. SG&A expenses for the twelve-month period ended December 31, 2021 amounted to $3,753, representing an increase of $793 or 27%, compared to $2,960 recorded in the same period of 2020.

The increase in SG&A expenses for the three-month period ended December 31, 2021 is mainly attributable to increases in salaries and compensation expenses of $211 due to new hires, filing fees of $149 in relation to the TSX graduation, leasehold expenses of $63, insurance expense of $26, and by the variation of the foreign exchange expense due to the depreciation of the CA dollar vs the US currency in the amount of $75.

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The increase in SG&A expenses for the twelve-month period ended December 31, 2021 is mainly attributable to increases in salaries and compensation expenses of $942 (mainly attributable to the issuance of new DSUs to the board members granted in 2021m due to new hires in 2021, and due to the Canada Emergency Wage Subsidy received only in 2020), leasehold expenses of $253 (mainly attributable to the fact that the Company benefited from the Canadian government rent relief program related to the COVID-19 pandemic only in 2020), filing fees of $155 in relation to the TSX graduation and insurance expense of $71, offset by the variation of the foreign exchange expense due to the depreciation of the CA dollar vs the US currency of $479 (mostly due to increase in cash and investments held in USD) and decreases in professional fees of $155.

Depreciation of tangible assets

In the three-month period ended December 31, 2021 we recorded an expense of $202 for the depreciation of tangible assets, compared with an expense of $198 thousand for the same period of the previous year.  In the twelve-month period ended December 31, 2021 we recorded an expense of $791 for the depreciation of tangible assets, compared with an expense of $734 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, 2021 amounted to $26 compared to $21 for the three-month period ended December 31, 2020. Share-based compensation warrants and share-based payments expense for the twelve-month period ended December 31, 2021 amounted to $107 compared to $193 for the twelve-month period ended December 31, 2020.

We expensed approximately $107 in the twelve-month period ended December 31, 2021 for options granted to our employees in 2020 and 2021 under the 2016 Stock Option Plans and $Nil for options granted to consultants, compared with $156 and $37 respectively that was expensed in the same period of the previous year.

There remains approximately $146 in stock-based compensation to be expensed in fiscal 2022, of which $24 relates to the issuance of options to a consultant during 2021. 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

		December 31, 2021			December 31, 2020			Increase/ (Decrease)			Percentage Increase/ (Decrease)
Current assets	$	11,437		$	4,305		$	7,132			166%
Leasehold improvements and equipment, net		5,213			5,851			(638	)		(11%)
Security deposits		252			252			0			0%
Operating lease right-of-use asset		1,003			710			293			41%
Current liabilities (excluding convertible debentures and notes)		2,773			2,882			(109	)		(4%)
Long-term debt		2,500			171			2,329			1,362%
Convertible debentures		4,247			5,461			(1,214	)		(22%)
Convertible notes		3,709			2,991			718			24%
Operating lease liability		642			482			160			33%
Finance lease liability		84			84			0			0%
Capital Stock		1			1			0			0%
Additional paid-in-capital		63,104			48,453			14,651			30%

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Current assets

Current assets totaled $11,437 at December 31, 2021 compared with $4,305 at December 31, 2020. The increase of $7,132 is mainly attributable to increases in cash of $2,740, short-term investments of $4,966, accounts receivable of $420, offset by decreases in investment tax credits receivable of $199, prepaid expenses of $57, contract asset of $354, security deposits of $202, and inventory of $182.

Cash

Cash totaled $3,945 as at December 31, 2021 representing an increase of $2,740 compared with the balance of $1,205 as at December 31, 2020. The increase in cash on hand relates to net cash provided by financing activities of $15,492, offset by net cash used in operating activities of $7,173 and cash used in investing activities of $5,074 and a negative effect of foreign exchange of $505.

Short term investments

Short term investments totaled $6,004 as at December 31, 2021, representing an increase of $4,966 compared with the balance of $1,038 as at December 31, 2020.  The increase in short term investments is attributable to acquisition of investments to fund operations.

Accounts receivable

Accounts receivable totaled $680 as at December 31, 2021 representing an increase of $420 compared with the balance of $260 as at December 31, 2020. The increase is related to the invoicing of revenues incurred in the three month period ended December 31, 2021 as well as some unpaid invoices from Q3 2021.

Prepaid expenses

As at December 31, 2021, prepaid expenses totaled $105 compared with $162 as of December 31, 2020. The decrease may be explained by the expensing of advance payments made in December 2020.

Investment tax credits receivable

R&D investment tax credits receivable totaled approximately $436 as at December 31, 2021 compared with $635 as at December 31, 2020. The decrease is attributable to the collection of the 2019 amount.

Inventory

As at December 31, 2021, inventories totaled $62 compared to a balance of $244 as at December 31, 2020. An amount of $144 was recognized in Research and development expenses.

Leasehold improvements and equipment

As at December 31, 2021, the net book value of leasehold improvements and equipment amounted to $5,213, compared to $5,851 as at December 31, 2020. In the year ended December 31, 2021 additions to assets totaled $108 and mainly comprised of $61 for laboratory and office equipment, $30 for manufacturing equipment and $18 for computer equipment and variation of foreign exchange fluctuation, offset by depreciation expense of $791.

Security deposit

A security deposit in the amount of CA$300 ($237) 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, 2021.  Security deposits in the amount of CA$14 ($11) for utilities and CA$5 ($4) for Cannabis license were also recorded as at December 31, 2021.  Security deposit in the amount of CA$260 ($252) for the term loan was also recorded as at December 31, 2021 but classified as short-term. 

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Accounts payable and accrued liabilities

Accounts payable and accrued liabilities totaled $2,299 as at December 31, 2021 (December 31, 2020 - $1,989).  The increase is mainly attributable to an increase in accrued liabilities as at December 31, 2021.

Long-term debt

atai has granted to the Company a secured loan in the initial amount of $2,000,000, bearing interest at 8%.  An additional advance for $500,000 was also granted in May 2021. Together with the initial amount of $2,000,000, atai has granted a total amount of $2,500,000 to the Company. In September 2021, the Company entered into an amended and restated secured loan agreement with atai pursuant to which atai has made two additional term loans available to the Company for $3,000,000 each.  The first loan was received in January 2022 and the second loan will be available in January 2023, subject to the satisfaction of customary conditions. The Loan Agreement also extends the maturity date for the current loans, in an aggregate amount of $2,500,000, to January 2024. 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 bears interest at 8%. The interest for the year ended December 31, 2021 amounts to $156,000 and is recorded in financing and interest expense.

Convertible debentures

Convertible debentures totaled $4,247 as at December 31, 2021 as compared to $5,641 as at December 31, 2020.  We issued a total aggregate principal amount of CA$7,600,000 ($5,995,000) of debentures at a price of CA$1,000 ($789) per debenture in July 2017 and August 2017.  On June 25, 2020, the debenture holders approved the extension of the maturity date of the convertible debentures from June 30, 2020 to June 30, 2022 and the conversion price was reduced from CA$1.35 ($1.06) to CA$0.50 ($0.39).  The convertible debentures have been recorded as a liability as at December 31, 2021

The accretion expense for the year ended December 31, 2021 amounts to CA$288,000 ($230,000) (CA$398,000, (297,000) in 2020).  The interest on the convertible debentures as at December 31, 2021 amounts to CA$549,000 ($438,000).  The interest on the convertible debentures as at December 31, 2020 amounts to CA$606,000 ($452,000)  out of which CA$309 thousand ($218 thousand) was paid in cash on June 25, 2020 and CA$297 thousand ($234 thousand) was paid by issuance of 887,880 shares of Common Stock on December 31, 2020, and is recorded in Financing and interest expense.  A gain on debt extinguishment based on its present value calculation was recognized in finance and interest income in the amount of $401 for the year ended December 31, 2020, which will be accreted until June 30, 2022.

During the year ended December 31, 2021, CAD$1,926,000 ($1,519,000) of convertible debentures were converted into 3,852,000 shares of common stock at the option of the holders, resulting in an increase in additional paid-in capital of $1,498,000.

During the year ended December 31, 2020, CA$141,000 ($111,000) of convertible debentures were converted into 282,000 shares of Common Stock at the option of the holders, resulting in an increase in additional paid-in capital of $103,000.

Convertible notes

Convertible notes totaled $3,709 as at December 31, 2021 as compared to $2,991 as at December 31, 2020 out of which $1,486 was classified as short-term. The convertible notes have been recorded as a liability.

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 6% to 8%, and the conversion price was reduced from $0.80 to $0.44. These amendments were accounted for as an extinguishment and the notes were re-measured at fair value on June 1, 2021.  This re-measurement resulted in a gain on extinguishment in the amount of $151,000 recognized in finance and interest income.

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 $2.1 million principal amount of 8% convertible notes due July 31, 2025. The Notes will bear interest at a rate of 8% per annum, payable quarterly, and will be convertible into shares of common stock of the Company beginning 6 months after their issuance at a price of $0.40 per Share. The Company intends to use the proceeds of the Offering for the Montelukast clinical program. In connection with the Offering, the Company paid to an agent a cash commission of approximately $199,525 in the aggregate and issued non-transferable warrants to the agent, entitling the holder to purchase 613,000 shares of common stock at a price of $0.40 per Share until August 4, 2023. Management has determined the value of the agents' warrants to be $164,000. The convertible notes have been recorded as a liability.  Total transactions costs in the amount of $268 thousand were recorded against the liability. The Company recognized the value of the embedded beneficial conversion feature of $411 as additional paid-in capital and an equivalent discount which will be expensed over the term of the convertible notes.

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The accretion expense for the year ended December 31, 2021 amounts to $247 compared to $242 for the comparative period in 2020.  The interest on the convertible notes for the year ended December 31, 2021 amounts to $302 ($125 in 2020) and is recorded in Financing and interest expense. 

During the year ended December 31, 2021, $712,000 of convertible notes were converted into 1,985,847 shares of common stock at the option of the holders, resulting in an increase in additional paid-in capital of $632,000.

Shareholders' equity

As at December 31, 2021 we had accumulated a deficit of $57,863 compared with an accumulated deficit of $48,551 as at December 31, 2020. Total assets amounted to $17,905 and shareholders' equity totaled $3,871 as at December 31, 2021, compared with total assets and shareholders' deficiency of $11,118 and $953 respectively, as at December 31, 2020.

Capital stock

As at December 31, 2021 capital stock amounted to $1.5457 (December 31, 2020: $1.1143). 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 $63,104 as at December 31, 2021, as compared to $48,453 at December 31, 2020.  Additional paid in capital increased by $14,651 from which $8,398 was the value of the common stock issued to atai, $3,526 was the value of the warrants issued to atai, $325 was the value of the beneficial conversion feature, net of a deferred income tax liability of $86, $632 was the value of the conversion of the convertible notes, $1,498 was the value of the conversion of the convertible debentures, $164 was the value of the Agents' warrants issued in connection with the August 2021 private placement, $107 was from stock based compensation attributable to the amortization of stock options granted to employees, and $1 was for interest paid by issuance of shares of common stock.

Taxation

As at December 31, 2021, the date of our latest annual tax return, we had Canadian and provincial net operating losses of approximately $39,823 (December 31, 2020: $31,673) and $43,482 (December 31, 2020: $33,905) 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 2041. A portion of the net operating losses may expire before they can be utilized.

As at December 31, 2020, we had non-refundable tax credits of $2,912 thousand (2020: $2,802 thousand) of which $8 thousand is expiring in 2026, $10 thousand is expiring in 2027, $177 thousand is expiring in 2028, $155 thousand is expiring in 2029, $132 thousand is expiring in 2030, $141 thousand is expiring in 2031, $176 thousand is expiring in 2032, $117 thousand is expiring in 2033, $89 thousand expiring in 2034, $104 thousand is expiring in 2035, $144 thousand expiring in 2036,  $275 thousand is expiring in 2037, $594 thousand expiring in 2038, $359 thousand expiring in 2039, $298 thousand expiring in 2040, and $183 expiring in 2041 and undeducted research and development expenses of $16,566 thousand (2020: $15,302 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

Statement of cash flows

Net cash used in operating activities was $7,173 for the year ended December 31, 2021, compared to net cash used by operating activities of $5,768 for the year ended December 31, 2020. For the year ended December 31, 2021, net cash used by operating activities consisted of a net loss of ($9,312) (2020: $7,044) before depreciation, stock-based compensation, accretion expense, DSU expense, interest paid by issuance of Common Stock, gain on debt extinguishment, lease non-cash expense and deferred income tax in the amount of $1,450 (2020: $1,152) and an increase in non-cash operating elements of working capital of $689 compared with an increase of $124 for the year ended December 31, 2020.

The net cash provided by financing activities was $15,492 for the year ended December 31, 2021, compared to net cash provided by financing activities of $6,240 for the year ended December 31, 2020.  For the year ended December 31, 2021, an amount of $12,346 (2020: $5,564) derives from proceeds from issuance of shares, an amount of $2,500 (2020: $Nil) derives from the issuance of a loan, and an amount of $1,897 (2020: $1,601) derives from the net proceeds from convertible notes, offset by repayment of term loans for an amount of $737 (2020: $474), the transaction costs related to share issuance of $422 (2020: $320), transaction costs related to debt extinguishment of $29 (2020: $69), the transaction costs related to the convertible notes of $34 (2020: $62), and finance lease payments of $29 (2020: $Nil). 

Net cash used in investing activities amounted to $5,074 for the year ended December 31, 2021 compared to net cash used in investing activities of $526 for the year ended December 31, 2020. The net cash used in investing activities for the year ended December 31, 2021 relates to the acquisition of short-term investments of $6,000 (2020: $4,532) and the purchase of fixed assets for $108 (2020: $120), offset by redemption of short-term investments of $1,034 (2020: $4,126).

The balance of cash as at December 31, 2021 amounted to $3,945, compared to $1,205 at December 31, 2020.

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 lease, with each option being for an additional five years. Under the terms of the lease we are required to pay base rent of approximately CA$123 thousand (approximately $97 thousand) per year, which will increase at a rate of CA$0.25 ($0.20) per square foot, every two years.

On March 6, 2020 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 has an 8 year and 5-month term commencing on October 1, 2020 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 we will be required to pay base rent of approximately CA$79 thousand (approximately $62 thousand) per year, which will increase at a rate of CA$0.25 ($0.20) per square foot every two years. 

On August 31, 2021 we entered into an agreement to lease additional approximately 15,000 square feet in a property located at 6400 Abrams, St-Laurent, Québec.  The lease has a 4 year and 6-month term commencing September 1, 2021 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 required to pay base rent of approximately CA$145 thousand (approximately $114 thousand) per year, which will increase at a rate of CA$0.50 ($0.39) per square foot, every two years.

The aggregate minimum rentals, exclusive of other occupancy charges, for property leases expiring in 2026, are approximately $1,168 thousand, as follows:

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2022	274
2023	277
2024	285
2025	285
2026	47

Substantially all our finance lease right-of-use assets and finance lease liability represents leases for laboratory equipment to conduct our business.

The aggregate minimum lease payments for laboratory equipment are approximately $132 thousand, as follows:

2022	43
2023	43
2024	40
2025	6

We have initiated a project to expand the existing manufacturing facility.  We have signed agreements in the amount of Euro1,911 thousand with three suppliers with respect to equipment for solvent film manufacturing.  As at December 31, 2021 an amount of Euro1,425 thousand has been paid with respect to these agreements.

IT Infrastructure

We have an IT Infrastructure Disaster Recovery Plan in place.  In the event of a disaster (cyber attack), a full recovery of our IT system is estimated to be recovered within a week. A timeline is being determined to test the disaster recovery plan.

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 $243,000 (including interest and penalties of $28,000), which was paid to avoid further interest and penalties. The Company disagrees with the government's position and the sales tax assessments are under appeal. In the event the Company is unsuccessful in its appeal, sales taxes expenses would increase by $215,000 and net earnings would decrease by $215,000.

Subsequent events

Subsequent to the end of the year, CAD$40,000 ($32,000) of convertible debentures were converted into 80,000 common shares at the option of the holders.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and supplementary data of the Company required in this item are set forth beginning on page F-1 of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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a. Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of our management, our Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of December 31, 2021 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company's management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

b. Changes in Internal Controls over Financial Reporting

Our Chief Executive Officer and Chief Financial Officer have concluded that there were no changes in the Company's internal controls over financial reporting during the quarter ended December 31, 2021 that have materially affected or are reasonably likely to materially affect the Company's internal controls over financial reporting.

c. Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control system was designed to provide reasonable assurance to our management and the Board regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Our management, including the Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2021. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). Based on our processes and assessment, as described above, management has concluded that, as of December 31, 2021 our internal control over financial reporting was effective.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to rules of the SEC, as the Company qualifies as a "smaller reporting company". 

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGRADING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Certain information required by this Item 10 relating to our directors, executive officers, audit committee and corporate governance is incorporated by reference herein from the 2022 Proxy Statement. 

ITEM 11. EXECUTIVE COMPENSATION

Certain information required by this Item 11 relating to remuneration of directors and executive officers and other transactions involving management is incorporated by reference herein from the 2022 Proxy Statement.

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Certain information required by this Item 12 relating to security ownership of certain beneficial owners and management, and the equity compensation plan information, is incorporated by reference herein from the 2022 Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Certain information required by this Item 13 relating to certain relationships and related transactions, and director independence is incorporated by reference herein from the 2022 Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Certain information required by this Item 14 regarding principal accounting fees and services is set forth under "Audit Fees" in the 2022 Proxy Statement.

PART IV

ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements and Schedules

1. Financial Statements

The following financial statements are filed as part of this report under Item 8 of Part II "Financial Statements and Supplementary Data:

A. Report of Independent Registered Public Accounting Firm Richter LLP, PCAOB ID# 989, Montreal, Quebec

B. Consolidated Balance Sheets as of December 31, 2021 and 2020.

C. Consolidated Statements of Shareholders' Equity for the years ended of December 31, 2021 and 2020.

D. Consolidated Statements of Comprehensive Loss for the years ended of December 31, 2021 and 2020.

E. Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020.

F. Notes to Consolidated Financial Statements.

2. Financial Statement Schedules

Financial statement schedules not included herein have been omitted because they are either not required, not applicable, or the information is otherwise included herein.

(b) Exhibits.

EXHIBIT INDEX

Exhibit No.	Description
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)
3.2	Amendment to the Certificate of Incorporation (incorporated by reference to amendment No. 2 to Form SB-2 (File No. 333-135591) 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	Amendment to the Certificate of Incorporation (incorporated by reference to the Form S-1/A filed on May 12, 2017)
3.5	Third Amended and Restated By-Laws (incorporated by reference to the Form 8-K filed on March 21, 2022)

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4.1	Trust Indenture with TSX Trust Company, dated July 12, 2017 (incorporated by reference to the Form 8-K filed on July 12, 2017)
4.2	Warrant Indenture dated February 11, 2020 (incorporated by reference to the Form 8-K filed on February 12, 2020)
4.3	Description of the Company's Securities Registered Under Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to the Form 10-K filed on March 26, 2020)
4.4	Second Supplemental Trust Indenture, June 25, 2020.(incorporated by reference to the Form 8-K on December 23, 2020)
9.1	Voting Trust agreement (incorporated by reference to the Form 8-K/A filed on May 5, 2006)
10.1+	Horst Zerbe employment agreement dated October 1, 2014 (incorporated by reference to the Form 10-Q filed on November 12, 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)
10.6+	Amended and Restated 2006 Stock Option Plan (incorporated by reference to the Form S-8 filed on November 15, 2010)
10.8	Second Amended 2016 Stock Option Plan, July 16, 2020 (incorporated by reference to the Form 8-K on July 17, 2020)
10.9+	Employment Agreement Andre Godin, July 2015 (incorporated by reference to the Form 8-K filed on July 20, 2015)
10.10+	Employment Agreement Nadine Paiement, January 2016 (incorporated by reference to the Form 10-K filed on March 30,  2016)
10.11+	Employment Agreement Dana Matzen, March 2016 (incorporated by reference to the Form 10-K filed on March 30, 2016)
10.12+	2016 Stock Option Plan May, 11 2016 (incorporated by reference to the Form S-8 Registration Statement filed on August  3, 2016)
10.13	Amended Principal's Registration Rights Agreement, November 8, 2016 (incorporated by reference to Form 10-Q filed on November 10, 2016)
10.14	Agency Agreement dated June 28, 2017 (incorporated by reference to the Form 8-K filed on July 5, 2017)
10.15+	Deferred Share Unit Plan for non-employee directors (incorporated by reference to the Form 10-K filed on March 29, 2018)
10.16	Placement Agent Agreement dated May 8, 2018 (incorporated by reference to the Form 8-K filed on May 10, 2018)
10.17	Form of Warrant dated May 8, 2018 (incorporated by reference to the Form 8-K filed on May 10, 2018)
10.18	Form of Securities Purchase Agreement dated May 8, 2018 (incorporated by reference to the Form 8-K filed on May 10, 2018)
10.19	Form of Registration Rights Agreement dated May 8, 2018 (incorporated by reference to the Form 8-K filed on May 10, 2018)
10.20	Form of Note dated May 8, 2018 (incorporated by reference to the Form 8-K filed on May 10, 2018)
10.21	Placement Agent Agreement between the Company and H.C. Wainwright & Co., LLC dated October 18, 2018 (incorporated by reference to the Form 8-K filed on October 22, 2018)
10.22	Placement Agent Agreement between the Company and Echelon Wealth Partners Inc. dated October 18, 2018 (incorporated by reference to the Form 8-K filed on October 22, 2018)
10.23	Form of Warrant (incorporated by reference to the Form 8-K on October 22, 2018)
10.24	Form of Securities Purchase Agreement (incorporated by reference to the Form 8-K filed on October 22, 2018)
10.25	Form of Agent Warrant (incorporated by reference to the Form S-1/A on filed on January 30, 2020)
10.26	Agency Agreement dated January 27, 2020 (incorporated by reference to the Form 8-K filed on January 29, 2020)
10.27	Loan Agreement dated March 9, 2021 (incorporated by reference to the Form 10-K filed on March 25, 2021)

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10.28[#]	Strategic Development Agreement dated March 14, 2021(incorporated by reference to the Form 10-K filed on March 25, 2021) ,
10.29±	Securities Purchase Agreement dated March 14, 2021(incorporated by reference to the Form 10-K filed on March 25, 2021)
10.30	Purchaser Rights Agreement dated March 14, 2021(incorporated by reference to the Form 10-K filed on March 25, 2021)
10.31	Amended and Restated Securities Purchase Agreement dated May 14, 2021 (incorporated by reference to the Form 8-K filed on May 17, 2021)
10.32	First Amendment to Loan Agreement dated May 14, 2021 (incorporated by reference to the Form 8-K filed on May 17, 2021)
10.33	Amendment No. 1 to 6% Subordinated Convertible Unsecured Promissory Note dated May 24, 2021 (incorporated by reference to the Form 8-K filed on May 25, 2021)
10.34	Form of Initial Warrant dated May 14, 2021 (incorporated by reference to the Form 10-Q filed on August 4, 2021)
10.35	Form of Additional Unit Warrant dated May 14, 2021 (incorporated by reference to the Form 10-Q filed on August 4, 2021)
10.36	Form of Note (incorporated by reference to the Form 8-K filed on August 11, 2021)
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
31.1*	Certification of Horst G. Zerbe, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Andre Godin, President and Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Horst G. Zerbe, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350
32.2*	Certification of Andre Godin, President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350
101.INS*	Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith. + Indicates management contract or employee compensation plan. [# Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10). The omitted information is not material and would likely cause competitive harm to the Company if publicly disclosed. The Company agrees to furnish an unredacted copy to the SEC upon its request.] ±Certain schedules and exhibits have been omitted in compliance with Regulation S-K Item 601(a)(5). The Company agrees to furnish a copy of any omitted schedule or exhibit to the SEC upon its request.

ITEM 16.    FORM 10-K SUMMARY.   None.

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned on March 24, 2022, thereunto duly authorized.

	INTELGENX TECHNOLOGIES CORP.
	By:	/s/ Horst G. Zerbe
		Horst G. Zerbe
		Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ Andre Godin
		Andre Godin
		President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.

Signature	Position	Date
By: /s/ Horst G. Zerbe	Chief Executive Officer and Chairman of the Board	March 24, 2022
Horst G. Zerbe
By: /s/Andre Godin	President and Chief Financial Officer	March 24, 2022
Andre Godin
By: /s/ Bernard Boudreau	Director, Vice Chairman of the Board	March 24, 2022
J. Bernard Boudreau
By: /s/Bernd Melchers	Director	March 24, 2022
Bernd J. Melchers
By: /s/John Marinucci	Director	March 24, 2022
John Marinucci
By: /s/Clemens Mayr	Director	March 24, 2022
Clemens Mayr
By: /s/Mark Nawacki	Director	March 24, 2022
Mark Nawacki
By: /s/Frank Stegert	Director	March 24, 2022
Frank Stegert
By: /s/Srinivas Rao	Director	March 24, 2022
Srinivas Rao

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IntelGenx Technologies Corp.
 

Consolidated Financial Statements

December 31, 2021 and 2020

(Expressed in U.S. Funds)

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IntelGenx Technologies Corp.
 

Consolidated Financial Statements

December 31, 2021 and 2020

(Expressed in U.S. Funds)

 

 

Contents

Report of Independent Registered Public Accounting Firm	F - 1 - 2
Consolidated Balance Sheets	F - 3
Consolidated Statements of Shareholders' Equity	F - 4 - 5
Consolidated Statements of Comprehensive Loss	F - 6
Consolidated Statements of Cash Flows	F - 7
Notes to Consolidated Financial Statements	F - 8 - 33

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of
IntelGenx Technologies Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of IntelGenx Technologies Corp. (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of comprehensive loss, shareholders' deficit and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States ("US GAAP").

Basis for opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Impairment of leasehold improvements and equipment

As reflected in the Company's consolidated financial statements, at December 31, 2021, the Company's leasehold improvements and equipment amounted to $5,213 million. Long-lived assets must be reviewed for possible impairment if circumstances indicate the carrying amount of the asset may not be recoverable. Given that the plant is not currently operating at capacity, the Company evaluated its leasehold improvements and equipment for recoverability and concluded that they were not impaired. Auditing the Company's impairment assessment involved subjective auditor judgment due to the significant estimation involved in determining the fair value, including the forecasted cash flows used to evaluate the recoverability and the significant assumptions used in estimating the fair values of long-lived assets. We therefore identified the impairment of leasehold improvements and equipment as a critical audit matter.

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The primary procedures we performed to address this critical audit matter included:

• Obtaining an understanding of the impairment process and the controls relating to management's impairment test,
• Reviewing the valuation methodology to assess whether the methodology was widely recognized and appropriate for use in the valuation of leasehold improvements and equipment,
• Testing management's process for determining the forecasted future cash flows used to evaluate the recoverability. We evaluated the reasonableness of management's forecasts of future manufacturing and operating margin by comparing the Company's plans and forecasts to current industry and economic trends,
• Evaluating whether the data and assumptions used were reasonable by considering the past performance, industry and third-party market data, and whether such assumptions were consistent with evidence obtained in other areas of the audit,
• Performing sensitivity analysis on the significant data and assumptions used.

We have served as the Company's auditors since 2005.

Montréal, Quebec
March 24, 2022

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See accompanying notes

F-6

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F-8

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IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in U.S. Funds)

5. Inventory

6. Leasehold Improvements and Equipment

F-18

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IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements December 31, 2021 and 2020 (Expressed in U.S. Funds)

10.  Convertible Notes

13. Additional Paid-In Capital

F-33

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