IntelGenx Technologies Corp. - Quarter Report: 2021 June (Form 10-Q)

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Notes to Consolidated Interim Financial Statements

June 30, 2021

(Expressed in U.S. Funds)

(Unaudited)

 

4.      Leasehold Improvements and Equipment

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10.    Capital Stock

 

11. Additional Paid-In Capital (Cont'd)

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Operations

Introduction to Management's Discussion and Analysis

This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") comments on our business operations, performance, financial position and other matters for the six-month period ended June 30, 2021 and 2020.

Unless otherwise indicated, all financial and statistical information included herein relates to continuing operations of the Company. Unless otherwise indicated or the context otherwise requires, the words, "IntelGenx, "Company", "we", "us", and "our" refer to IntelGenx Technologies Corp. and its subsidiaries, including IntelGenx Corp.

This MD&A should be read in conjunction with the accompanying unaudited Consolidated Interim Financial Statements and Notes thereto. We also encourage you to refer to the Company's MD&A for the year ended December 31, 2020. In preparing this MD&A, we have taken into account information available to us up to August 4, 2021, the date of this MD&A, unless otherwise indicated.

Additional information relating to the Company, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the "2020 Form 10-K"), is available on SEDAR at www.sedar.com and on the U.S. Securities and Exchange Commission (the "SEC") website at www.sec.gov.

All dollar amounts are expressed in U.S. dollars, unless otherwise noted.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements included or incorporated by reference in this MD&A constitute forward-looking statements within the meaning of applicable securities laws. All statements contained in this MD&A that are not clearly historical in nature are forward-looking, and the words "anticipate", "believe", "continue", "expect", "estimate", "intend", "may", "plan", "will", "shall" and other similar expressions are generally intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All forward-looking statements are based on our beliefs and assumptions based on information available at the time the assumption was made. These forward-looking statements are not based on historical facts but on management's expectations regarding future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Forward-looking statements involve significant known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those implied by forward-looking statements. These factors should be considered carefully and you should not place undue reliance on the forward-looking statements. Although the forward-looking statements contained in this MD&A or incorporated by reference herein are based upon what management believes to be reasonable assumptions, there is no assurance that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this MD&A or as of the date specified in the documents incorporated by reference herein, as the case may be. We undertake no obligation to update any forward looking statements to reflect events or circumstances after the date on which such statements were made or to reflect the occurrence of unanticipated events, except as may be required by applicable securities laws. The factors set forth in Item 1A., "Risk Factors" of the 2020 Form 10-K, as well as any cautionary language in this MD&A, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Before you invest in the common stock, you should be aware that the occurrence of the events described as risk factors and elsewhere in this report could have a material adverse effect on our business, operating results and financial condition.

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Company Background

We are a drug delivery company established in 2003 and headquartered in Montreal, Quebec, Canada. Our focus is on the development of novel oral immediate-release and controlled-release products for the pharmaceutical market.  More recently, we have made the strategic decision to enter the Canadian cannabis market with a non-prescription cannabis infused oral film that was recently launched in Q1 2021.  In addition, we are offering partners a comprehensive portfolio of pharmaceutical services, including pharmaceutical R&D, clinical monitoring, regulatory support, tech transfer and manufacturing scale-up, and commercial manufacturing.

Our business strategy is to leverage our proprietary drug delivery technologies and develop pharmaceutical products with tangible benefits for patients, and once the viability of a product has been demonstrated, license the commercial rights to partners in the pharmaceutical industry.  In certain cases, we rely upon partners in the pharmaceutical industry to fund the development of the licensed products, complete the regulatory approval process with the FDA or other regulatory agencies relating to the licensed products, and assume responsibility for marketing and distributing such products.

In addition, we may choose to pursue the development of certain products until the project reaches the marketing and distribution stage. We will assess the potential for successful development of a product and associated costs, and then determine at which stage it is most prudent to seek a partner, balancing such costs against the potential for additional returns earned by partnering later in the development process.

Our primary growth strategies are based on three pillars: (1) out licensing commercial rights of our existing pipeline products, (2) partnering on contract development and manufacturing projects leveraging our various technology platforms, and (3) expanding our current pipeline through:

• identifying lifecycle management opportunities for existing market leading pharmaceutical products,

• develop oral film products that provide tangible patient benefits,

• development of new drug delivery technologies

• entering the veterinary market with VetaFilm™

• repurposing existing drugs for new indications, and

• developing generic drugs where high technology barriers to entry exist in reproducing branded films.

We have established a state-of-the-art manufacturing facility for the manufacture of our VersaFilm™ and VetaFilm™. 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.

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Lifecycle Management Opportunities

We are seeking to position our delivery technologies as an opportunity for lifecycle management of products for which patent protection of the active ingredient is nearing expiration. While the patent for the underlying substance cannot be extended, patent protection can be obtained for a new and improved formulation by filing an application with the FDA under Section 505(b)(2) of the U.S. Federal Food, Drug and Cosmetic Act. Such applications, known as a "505(b)(2) NDA", are permitted for new drug products that incorporate previously approved active ingredients, even if the proposed new drug incorporates an approved active ingredient in a novel formulation or for a new indication. A 505(b)(2) NDA may include information regarding safety and efficacy of a proposed drug that comes from studies not conducted by or for the applicant. The first formulation for a respective active ingredient filed with the FDA under a 505(b)(2) application may qualify for up to three years of market exclusivity upon approval. Based upon a review of past partnerships between third party drug delivery companies and pharmaceutical companies, management believes that drug delivery companies which possess innovative technologies to develop these special dosage formulations present an attractive opportunity to pharmaceutical companies. Accordingly, we believe "505(b)(2) products" represent a viable business opportunity for us.

Product Opportunities that provide Tangible Patient Benefits

Our focus will be on developing oral film products leveraging our VersaFilm™ technology that provide tangible patient benefits versus existing drug delivery forms. Patients with difficulties swallowing medication, pediatrics or geriatrics may benefit from oral films due to the ease of use. Similarly, we are working on oral films to improve bio-availability and/or response time versus existing drugs and thereby reducing side effects.

Development of New Drug Delivery Technologies

The rapidly disintegrating film technology contained in our VersaFilm™ is a good example of our efforts to develop alternate technology platforms.  As we work with various partners on different products, we seek opportunities to develop new proprietary technologies.

Repurposing Existing Drugs

We are working on the repurposing of already approved drugs for new indications using our VersaFilm™ film technology. This program represents a viable growth strategy for us as it will allow for reduced development costs, improved success rates and shorter approval times. We believe that through our repurposing program we will be able minimize the risk of developmental failure and create value for us and potential partners.

Generic Drugs with High Barriers to Entry

We plan to pursue the development of generic drugs that have certain barriers to entry, e.g., where product development and manufacturing is complex and can limit the number of potential entrants into the generic market. We plan to pursue such projects only if the number of potential competitors is deemed relatively insignificant.

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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.

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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.

 

Please see Description of the Business - Research and Development 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.

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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.

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.

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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.

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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.

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.

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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.

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.

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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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Most recent key developments

On May 11, 2021, the Company announced that a significant majority of its shareholders had approved the resolution approving the previously announced investment in IntelGenx by atai Life Sciences, pursuant to which atai acquired an approximate 25% interest in IntelGenx.  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. At the meeting, shareholders also approved a resolution to amend IntelGenx'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 12, 2021, the Company announced that it entered into a second feasibility agreement with atai Life Sciences 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.  Under the terms of the SFA, IntelGenx will conduct formulation development work to provide a prototype to atai for further clinical investigation.

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

On May 19, 2021, the Company announced that the holders 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 increased from 6% to 8%, (iii) the conversion ratio for conversions at the option of Noteholders has 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 June 08, 2021, the Company announced that it entered into a Materials Transfer Agreement with an undisclosed global veterinary health company.  Pursuant to the Agreement, the Partner will evaluate IntelGenx's proprietary VetaFilm™ platform in cats. Based on a successful evaluation, IntelGenx and the Partner will enter into negotiations for a commercial agreement in the veterinary field.

All amounts are expressed in thousands of U.S. dollars unless otherwise stated.

Currency rate fluctuations

Our operating currency is Canadian dollars, while our reporting currency is U.S. dollars. Accordingly, our results of operations and balance sheet position have been affected by currency rate fluctuations. In summary, our financial statements for the six-month period ended June 30, 2021 report an accumulated other comprehensive loss due to foreign currency translation adjustments of $1,201 primarily due to the fluctuations in the rates used to prepare our financial statements, $343 of which negatively impacted our comprehensive loss for the six-month period ended June 30, 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))

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Adjusted EBITDA is a non-US GAAP financial measure. A reconciliation of the Adjusted EBITDA is presented in the table below. The Company uses adjusted financial measures to assess its operating performance. Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than US-GAAP do not have standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they should not be considered in isolation. The Company uses Adjusted EBITDA to measure its performance from one period to the next without the variation caused by certain adjustments that could potentially distort the analysis of trends in our operating performance, and because the Company believes it provides meaningful information on the Company's financial condition and operating results.

IntelGenx obtains its Adjusted EBITDA measurement by adding / (deducting) to comprehensive loss, finance income and costs, depreciation and amortization, income taxes and foreign currency translation adjustment incurred during the period. IntelGenx also excludes the effects of certain non-monetary transactions recorded, such as share-based compensation, for its Adjusted EBITDA calculation. The Company believes it is useful to exclude these items as they are either non-cash expenses, items that cannot be influenced by management in the short term, or items that do not impact core operating performance. Excluding these items does not imply they are necessarily nonrecurring. Share-based compensation costs are a component of employee and consultant's remuneration and can vary significantly with changes in the market price of the Company's shares. Foreign currency translation adjustments are a component of other comprehensive income and can vary significantly with currency fluctuations from one period to another. In addition, other items that do not impact core operating performance of the Company may vary significantly from one period to another. As such, Adjusted EBITDA provides improved continuity with respect to the comparison of the Company's operating results over a period of time. Our method for calculating Adjusted EBITDA may differ from that used by other corporations.

Reconciliation of Non-US GAAP Financial Information

		Three-month period ended June 30,						Six-month period ended June 30,
		2021			2020			2021			2020
		$			$			$			$
Comprehensive loss		(2,500	)		(1,333	)		(4,797	)		(4,227	)
Add (deduct):
Depreciation		198			175			390			354
Finance costs		435			300			769			607
Finance income		(151	)		(401	)		(151	)		(402	)
Share-based compensation		25			53			56			124
Other comprehensive loss (income)		309			(317	)		345			120
Adjusted EBITDA Loss		(1,684	)		(1,523	)		(3,388	)		(3,424	)

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

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Adjusted EBITDA (Loss) increased by $161 for the three-month period ended June 30, 2021 to ($1,684) compared to ($1,523) for the three-month period ended June 30, 2020. The increase in Adjusted EBITDA (Loss) of $161 for the three-month period ended June 30, 2021 is mainly attributable to an increase in SG&A expenses of $149 before consideration of stock-based compensation and an increase in manufacturing expenses of $165 before consideration of stock-based compensation, offset by a increase in revenues of $120 and a decrease in R&D expenses of $33 before consideration of stock-based compensation. 

Adjusted EBITDA (Loss) improved by $36 for the six-month period ended June 30, 2021 to ($3,388) compared to ($3,424) for the six-month period ended June 30, 2020. The improvement in Adjusted EBITDA (Loss) of $36 for the six-month period ended June 30, 2021 is mainly attributable to a decrease in R&D expenses of $405 before consideration of stock-based compensation and an increase in revenues of $204, offset by an increase in SG&A expenses of $256 before consideration of stock-based compensation and an  increase in Manufacturing expenses of $317 before consideration of stock-based compensation.

Results of operations for the three-month and six-month periods ended June 30, 2021 compared with the three-month and six-month periods ended June 30, 2020.

		Three-month period ended June 30,						Six-month period ended June 30,
		2021			2020			2021			2020
Revenue	$	162		$	42		$	448			244
Research and Development Expenses		565			602			1,036			1,452
Manufacturing expenses		478			320			1,099			798
Selling, General and Administrative Expenses		828			696			1,757			1,542
Depreciation of tangible assets		198			175			390			354
Operating loss		(1,907	)		(1,751	)		(3,834	)		(3,902	)
Net loss		(2,191	)		(1,650	)		(4,452	)		(4,107	)
Comprehensive loss		(2,500	)		(1,333	)		(4,797	)		(4,227	)

 

Revenue

Total revenues for the three-month period ended June 30, 2021 amounted to $162, representing an increase of $120 or 286% compared to $42 for the three-month period ended June 30, 2020.  Total revenues for the six-month period ended June 30, 2021 amounted to $448, representing an increase of $204 or 84% compared to $244 for the six-month period ended June 30, 2020.  The increase for the three-month period ended June 30, 2021 compared to the last year's corresponding period is mainly attributable to an increase in R&D revenues of $120. The increase for the six-month period ended June 30, 2021 compared to the last year's corresponding period is mainly attributable to an increase in Product revenues of $162 and R&D revenues of $42.

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Research and development ("R&D") expenses

R&D expenses for the three-month period ended June 30, 2021 amounted to $565, representing a decrease of $37 or 6%, compared to $602 for the three-month period ended June 30, 2020. R&D expenses for the six-month period ended June 30, 2021 amounted to $1,036, representing a decrease of $416 or 29%, compared to $1,452 for the six-month period ended June 30, 2020.

The decrease in R&D expenses for the three-month period ended June 30, 2021 is mainly attributable to  decreases in analytical costs of $73 and study costs of $66, and an increase in R&D investments tax credits of $28, offset by increases in salaries of $79, lab supplies of $26 and patents expenses of $21.  The increase in salary expense may be explained by the fact the Company received the Canada Emergency Wage Subsidy in 2020. The decrease in R&D expenses for the six-month period ended June 30, 2021 is mainly attributable to decreases in study costs of $185, lab supplies of $161, analytical costs of $70, consulting fees of $22 as well as an increase in R&D investment tax credits of $18, offset by an increase in R&D batch development expenses of $37. 

In the three-month period ended June 30, 2021 we recorded estimated Research and Development Tax Credits of $64, compared with $37 that was recorded in the same period of the previous year. In the six-month period ended June 30, 2021 we recorded estimated Research and Development Tax Credits of $128, compared with $110 that was recorded in the same period of the previous year.

Manufacturing expenses

Manufacturing expenses for the three-month period ended June 30, 2021 amounted to $478, representing an increase of $158 or 49%, compared to $320 for the three-month period ended June 30, 2020. Manufacturing expenses for the six-month period ended June 30, 2021 amounted to $1,099 representing an increase of $301 or 38%, compared to $798 for the six-month period ended June 30, 2020.

The increase in Manufacturing expenses for the three-month period ended June 30, 2021 is mainly attributable to increases in salary expenses of $109,  supplies and consumables of $47, licenses of $9, and repairs and maintenance of $5, offset by a decrease in quality expenses of $17. The increase in Manufacturing expenses for the six-month period ended June 30, 2021 is mainly attributable to increases in supplies and consumables of $232 and salary expenses of $74.  The increase in salary expenses for the three-month and six-month periods can be explained by the fact the Company received the Canada Emergency Wage Subsidy in 2020.

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

SG&A expenses for the three-month period ended June 30, 2021 amounted to $828, representing an increase of $132 or 19%, compared to $696 for the three-month period ended June 30, 2020. SG&A expenses for the six-month period ended June 30, 2021 amounted to $1,757 representing an increase of $215 or 14%, compared to $1,542 for the six-month period ended June 30, 2020.

The increase in SG&A expenses for the three-month period ended June 30, 2021 is mainly attributable to increases in salaries and compensation expenses of $376 (mainly attributable to the issuance of new DSUs to the board members and the revaluation of previously issued DSUs which was caused by the increase in the Company's share price during the quarter), leasehold expenses of $85, and investor relations expenses of $10, offset by the variation of the foreign exchange expense due to the depreciation of the CA dollar vs the US currency in the amount of $245 and a decrease in professional fees of $96. The increase in SG&A expenses for the six-month period ended June 30, 2021 is mainly attributable to increases in salaries and compensation expenses of $683 (mainly attributable to the issuance of new DSUs to the board members and the revaluation of previously issued DSUs which was caused by the increase in the Company's share price during the quarter) and leasehold expenses of $101, offset by the variation of the foreign exchange expense due to the depreciation of the CA dollar vs the US currency in the amount of $397 and a decrease in professional fees of $174.  The increase in rent expense may be explained by the fact that the Company benefited from the Canadian rent relief program related to the COVID-19 pandemic in 2020.

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Depreciation of tangible assets

In the three-month period ended June 30, 2021 we recorded an expense of $198 for the depreciation of tangible assets, compared with an expense of $175 for the same period of the previous year.  In the six-month period ended June 30, 2021 we recorded an expense of $390 for the depreciation of tangible assets, compared with an expense of $354 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 June 30, 2021 amounted to $25 compared to $53 for the three-month period ended June 30, 2020. Share-based compensation warrants and share-based payments expense for the six-month period ended June 30, 2021 amounted to $56 compared to $124 for the six-month period ended June 30, 2020.

We expensed approximately $25 in the three-month period ended June 30, 2021 for options granted to our employees in 2020 and 2021 under the 2016 Stock Option Plan and $Nil for options granted to a consultant, compared with $41 and $12, respectively that was expensed in the same period of the previous year.

We expensed approximately $56 in the six-month period ended June 30, 2021 for options granted to our employees in 2020 and 2021 under the 2016 Stock Option Plan and $Nil for options granted to a consultant in 2018, compared with $100 and $24, respectively that was expensed in the same period of the previous year.

There remains approximately $141 in stock-based compensation to be expensed in fiscal 2021 and 2022, all of which relates to the issuance of options to our employees during 2020 to 2021. We anticipate the issuance of additional options and warrants in the future, which will continue to result in stock-based compensation expense.

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Key items from the balance sheet

 

Current assets

Current assets totaled $13,838 as at June 30, 2021 compared with $4,305 at December 31, 2020. The increase of $9,533 is mainly attributable to increases in cash of $4,916, short-term investments of $4,970, accounts receivable of $258, and investment tax credits receivable of $146, offset by decreases in prepaid expenses of $83, contract asset of $354, security deposits of $197, and inventory of $123.

Cash

Cash totaled $6,121 as at June 30, 2021 representing an increase of $4,916 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 $13,648, offset by net cash used in operating activities of $3,370 and investing activities of $4,988 and a negative effect of foreign exchange of $374.

Accounts receivable

Accounts receivable totaled $518 as at June 30, 2021 representing an increase of $258 compared with the balance of $260 as at December 31, 2020. The main reason for the increase is related to the revenues accounted for as at June 30, 2021 offset by the collection in 2021 of revenues accounted for as at December 31, 2020.

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Prepaid expenses

As at June 30, 2021 prepaid expenses totaled $79 compared with $162 as of December 31, 2020. The decrease in prepaid expenses is attributable to the expensing of advance payments made in December 2020 related to services to be provided in the remainder of the year.

Investment tax credits receivable

R&D investment tax credits receivable totaled approximately $781 as at June 30, 2021 compared with $635 as at December 31, 2020. The increase is attributable to the accrual estimated and recorded for the first six months of 2021 and the fact that the 2019 amount was collected in the second half of 2021.

Leasehold improvements and equipment

As at June 30, 2021, the net book value of leasehold improvements and equipment amounted to $5,651, compared to $5,851 at December 31, 2020. In the six-month period ended June 30, 2021 additions to assets totaled $22 and mainly comprised of $13 for manufacturing equipment, $6 for computer equipment and $3 for lab and office equipment, and variation of foreign exchange fluctuation, offset by depreciation expense of $390.

Security deposit

A security deposit in the amount of CAD$300 ($242) 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 June 30, 2021.  Security deposits in the amount of CAD$15 ($12) for utilities and CAD$5 ($4) for Cannabis license were also recorded as at June 30, 2021.  Security deposit in the amount of CAD$260 ($210) for the term loan was also recorded as at June 30, 2021 but classified as short-term. 

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities totaled $2,182 as at June 30, 2021 compared with $1,989 as at December 31, 2020. 

Loan payable

Loan payable totaled $2,500 as at June 30, 2021 compared with $Nil as at December 31, 2021.  atai has granted the Company a secured loan in the amount of $2,500, bearing interest at 8%. An amendment has been entered into at the initial closing of the atai investment under which the maturity date will be following the first closing of a subscription for additional units if the proceeds from such subscription amount to at least $3,000,000.  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.

Convertible debentures

Convertible debentures totaled $5,437 as at June 30, 2021 as compared to $5,461 as at December 31, 2020.  The Corporation issued a total aggregate principal amount of CAD$7,600,000 ($6,132,000) of debentures at a price of CAD$1,000 ($807) per debenture in July 2017 and August 2017. On June 25, 2021, the debenture holders approved the extension of the maturity date of the convertible debentures from June 30, 2021 to June 30, 2022 and the conversion price was reduced from CAD$1.35 ($1.09) to CAD$0.50 ($0.40).  The convertible debentures have been recorded as a liability.

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The accretion expense for the six-month period ended June 30, 2021 amounts to CAD$147,000 ($118,000) ((CAD$249,000, (182,000) in 2020)).  The interest on the convertible debentures as at June 30, 2021 amounts to CAD$289,000 ($232,000) compared to CAD$303,000 ($222,000) for the comparative period in 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 in June 2020 which will be accreted until June 30, 2022.

Convertible notes

Convertible notes totaled $2,631 as at June 30, 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.

The accretion expense for the six-month period ended June 30, 2021 amounts to $146 compared to $109 for the comparative period in 2020.  The interest on the convertible notes for the six-month period ended June 30, 2021 amounts to $121 ($48 in 2020) and is recorded in Financing and interest expense. 

Shareholders' equity

As at June 30, 2021 we had accumulated a deficit of $53,003 compared with an accumulated deficit of $48,551 as at December 31, 2020. Total assets amounted to $20,416 and shareholders' equity totaled $6,840 as at June 30, 2021, compared with total assets and shareholders' deficit of $11,118 and $953 respectively, as at December 31, 2020.

Capital stock

As at June 30, 2021 capital stock amounted to $1.505 (December 31, 2020: $1.114). 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 $61,043 as at June 30, 2021, as compared to $48,453 as at December 31, 2020. Additional paid in capital increased by $12,590 from which $8,398 was the value of the common stock issued to atai Life Sciences, $3,526 was the value of the warrants issued to atai, $321 was the value of the conversion of the convertible notes, $289 was the value of the conversion of the convertible debentures, and $56 from stock based compensation attributable to the amortization of stock options granted to employees.

Taxation

As at December 31, 2020, the date of our latest annual tax return, we had Canadian and provincial net operating losses of approximately $31,673 (December 31, 2019: $23,101) and $33,905 (December 31, 2019: $25,264) respectively, which may be applied against earnings of future years. Utilization of the net operating losses is subject to significant limitations imposed by the change in control provisions. Canadian and provincial losses will be expiring between 2026 and 2040. A portion of the net operating losses may expire before they can be utilized.

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As at December 31, 2020, we had non-refundable tax credits of $2,802 thousand (2019: $2,486 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, and $298 thousand expiring in 2040 and undeducted research and development expenses of $15,302 thousand (2019: $14,282 thousand) with no expiration date.

Key items from the statement of cash flows

		June 30, 2021			June 30, 2020			Increase/ (Decrease)			Percentage Increase/ (Decrease)
Operating Activities	$	(3,370	)	$	(3,708	)	$	338			(9%)
Financing Activities		13,648			5,057			8,591			170%
Investing Activities		(4,988	)		(2,582	)		(2,406	)		93%
Cash - end of period		6,121			134			5,987			4,468%

 

Statement of cash flows

Net cash used in operating activities was $3,370 for the six-month period ended June 30, 2021, compared to $3,708 for the six-month period ended June 30, 2020. For the six-month period ended June 30, 2021, net cash used by operating activities consisted of a net loss of $4,452 (2020: $4,107) before depreciation, accretion expense, stock-based compensation, DSU expense, gain on debt extinguishment and lease non-cash expense in the amount of $938 (2020: $229) and an increase in non-cash operating elements of working capital of $144 (2020: $170).

The net cash provided by financing activities was $13,648 for the six-month period ended June 30, 2021, compared to $5,057 in the same period of the previous year. An amount of $12,346 derives from the proceeds from the issuance of shares (2020: $5,564) and an amount of $2,500 derives from the issuance of a loan (2020: $Nil) offset by repayment of term loans for an amount of $737 (2020: $118), the transaction costs related to the issuance of shares of $422 (2020: $320) and the transaction costs related to the debt extinguishment of $29 (2020: $69).

Net cash used investing activities amounted to $4,988 for the six-month period ended June 30, 2021 compared to $2,582 in the same period of 2020. The net cash used in investing activities for the six-month period ended June 30, 2021 relates to the acquisition of short-term investments of $6,000 (2020: $4,532) and the purchase of leasehold improvements and equipment of $22 (2020: $81), offset by the redemption of short-term investments of $1,034 (2020: $2,031).

The balance of cash as at June 30, 2021 amounted to $6,121, compared to $134 as at June 30, 2020.

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Subsequent Event

On July 27, 2021, the Company announced that it had received subscriptions from investors in the United States for $2.1 million principal amount of 8% convertible notes due July 31, 2025 (the "Notes"). 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 (the "Shares") beginning 6 months after their issuance at a price of $0.40 per Share. The offering of the Notes (the "Offering") is subject to the approval of the TSX Venture Exchange, receiving an exemption from the prospectus requirement from the Autorité des marchés financiers, and other customary closing conditions. The Offering is expected to close on or about July 30, 2021.

Off-balance sheet arrangements

We have no off-balance sheet arrangements.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based upon that evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures are effective to cause the material information required to be disclosed by us in the reports that we file or submit under the Exchange Act to be recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. There have been no significant changes in our internal controls or in other factors which could significantly affect internal controls subsequent to the date we carried out our evaluation.

PART II

              This Item is not applicable.

              This Item is not applicable.

              This Item is not applicable.

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Exhibit 31.1	Certification of C.E.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2	Certification of Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1	Certification  of  C.E.O. pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2	Certification of Principal Accounting Officer pursuant to 18 U.S.C.  Section  1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 10.1	Securities Purchase Agreement - Form of Additional Unit Warrant
Exhibit 10.2	Securities Purchase Agreement - Form of Additional Warrant Certificate
Exhibit 10.3	Securities Purchase Agreement - Form of Initial Warrant
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	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	INTELGENX TECHNOLOGIES CORP.
Date:  August 4, 2021	By:	/s/    Horst G.  Zerbe
		Dr. Horst G. Zerbe Chief Executive Officer and Director
Date:  August 4, 2021	By:	/s/    Andre Godin
		Andre Godin Principal Accounting Officer

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