INTELGENX TECHNOLOGIES CORP., 10-Q filed on 11/9/2011
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2011
Nov. 7, 2011
Document and Entity Information
 
 
Document Type
10-Q 
 
Amendment Flag
FALSE 
 
Document Period End Date
Sep. 30, 2011 
 
Trading Symbol
igxt 
 
Entity Registrant Name
IntelGenx Technologies Corp. 
 
Entity Central Index Key
0001098880 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Smaller Reporting Company 
 
Entity Common Stock, Shares Outstanding
 
46,999,910 
Entity Current Reporting Status
Yes 
 
Entity Voluntary Filers
No 
 
Entity Well Known Seasoned Issuer
No 
 
Document Fiscal Year Focus
2011 
 
Document Fiscal Period Focus
Q3 
 
Statement of Financial Position (USD $)
In Thousands
Sep. 30, 2011
Dec. 31, 2010
Current Assets
 
 
Cash and cash equivalents
$ 3,320 
$ 1,144 
Accounts receivable
93 
278 
Prepaid expenses
45 
47 
Investment tax credits receivable
301 
197 
Total Current Assets
3,759 
1,666 
Property and Equipment
134 
159 
Total Assets
3,893 
1,825 
Current Liabilities
 
 
Accounts payable and accrued liabilities
376 
349 
Shareholders' Equity
 
 
Capital Stock
Additional Paid-in-Capital
14,968 
11,087 
Accumulated Deficit
(11,480)
(9,761)
Accumulated Other Comprehensive Income
29 
150 
Total Stockholders Equity
3,517 
1,476 
Total Liabilities and Stockholder Equity
$ 3,893 
$ 1,825 
Statement of Operations (USD $)
In Thousands, except Share data
3 Months Ended
Sep. 30,
9 Months Ended
Sep. 30,
2011
2010
2011
2010
Revenue
$ 23 
$ 582 
$ 164 
$ 879 
Other income
324 
335 
Total Revenue
24 
906 
168 
1,214 
Expenses
 
 
 
 
Research and development
360 
606 
994 
1,186 
Research and development tax credits
(40)
(24)
(123)
(72)
Management salaries
148 
131 
416 
447 
General and administrative
86 
71 
249 
176 
Professional fees
162 
380 
436 
1,430 
Depreciation
12 
26 
32 
Foreign exchange gain
(162)
(3)
(113)
(4)
Interest and financing fees
96 
97 
Operating Expenses
563 
1,269 
1,887 
3,292 
Net Loss
(539)
(363)
(1,719)
(2,078)
Other Comprehensive Income / (Loss)
 
 
 
 
Foreign currency translation adjustment
(219)
68 
(121)
78 
Comprehensive Loss
$ (758)
$ (295)
$ (1,840)
$ (2,000)
Basic Weighted Average Number of Shares Outstanding
46,158,632 
35,483,445 
42,087,973 
33,890,795 
Basic and Diluted Loss Per Common Share
$ (0.02)
$ (0.01)
$ (0.04)
$ (0.06)
Statement of Cash Flows (USD $)
In Thousands
3 Months Ended
Sep. 30,
9 Months Ended
Sep. 30,
2011
2010
2011
2010
Funds Provided (Used) - Operating Activities
 
 
 
 
Net loss
$ (539)
$ (363)
$ (1,719)
$ (2,078)
Depreciation
12 
26 
32 
Investor relations services
11 
11 
Stock-based compensation
12 
26 
49 
Modification of warrant terms
96 
96 
Accounts receivable write-off
52 
Non-cash operating activities net income and adjustments
(517)
(239)
(1,604)
(1,890)
Changes in non-cash operating elements of working capital
(17)
(537)
57 
(43)
Net Cash Provided by Operating Activities
(534)
(776)
(1,547)
(1,933)
Financing Activities
 
 
 
 
Issue of capital stock
865 
2,465 
4,212 
2,465 
Transaction costs
(356)
(369)
(356)
Net Cash Provided by Financing Activities
865 
2,109 
3,843 
2,109 
Investing Activities
 
 
 
 
Additions to property and equipment
(4)
(23)
(7)
(29)
Net Cash Provided by Investing Activities
(4)
(23)
(7)
(29)
Increase (Decrease) in Cash and Cash Equivalent
327 
1,310 
2,289 
147 
Effect of Foreign Exchange on Cash and Cash Equivalents
(208)
61 
(113)
74 
Cash and Cash Equivalents
 
 
 
 
Beginning of Period
3,201 
375 
1,144 
1,525 
End of Period
$ 3,320 
$ 1,746 
$ 3,320 
$ 1,746 
Statement of Stockholders Equity (USD $)
In Thousands, except Share data
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Other Comprehensive Income [Member]
Accumulated Deficit [Member]
Total
Beginning Balance at Dec. 31, 2010
$ 0 
$ 11,087 
$ 150 
$ (9,761)
$ 1,476 
Beginning Balance (Shares) at Dec. 31, 2010
39,581,271 
 
 
 
 
Foreign currency translation adjustment
 
 
(121)
 
(121)
Issue of common stock, net of transaction costs of $390,017
 
2,024 
 
 
2,024 
Issue of common stock, net of transaction costs of $390,017 (Shares)
4,821,342 
 
 
 
 
Warrants issued, net of transaction costs of $131,936
 
685 
 
 
685 
Agents' Warrants
 
153 
 
 
153 
Warrants exercised
 
762 
 
 
762 
Warrants exercised (Shares)
1,951,141 
 
 
 
 
Agents options exercised
 
117 
 
 
117 
Agents options exercised (Shares)
246,156 
 
 
 
 
Options exercised
 
103 
 
 
103 
Options exercised (Shares)
250,000 
 
 
 
 
Modification of warrant terms
 
 
 
 
Stock-based compensation
 
37 
 
 
37 
Net Income (Loss)
 
 
 
(1,719)
(1,719)
Ending Balance at Sep. 30, 2011
$ 0 
$ 14,968 
$ 29 
$ (11,480)
$ 3,517 
Ending Balance (Shares) at Sep. 30, 2011
46,849,910 
 
 
 
 
Basis of Presentation
Basis of Presentation [Text Block]
1. Basis of Presentation
   
  The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal and recurring nature.
   
  These financial statements should be read in conjunction with the audited consolidated financial statements at December 31, 2010. Operating results for the three and nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred.
   
  The consolidated financial statements include the accounts of the Company and its subsidiary companies. On consolidation, all inter-entity transactions and balances have been eliminated.
   
  The financial statements are expressed in U.S. funds.
   
  Management has performed an evaluation of the Company’s activities through the date and time these financial statements were issued and concluded that there are no additional significant events requiring recognition or disclosure.
Adoption of New Accounting Standards
Adoption of New Accounting Standards [Text Block]
2. Adoption of New Accounting Standards
   
  Revenue Recognition and Disclosures
   
  In October 2009, the FASB issued Update No. 2009-13, “Revenue Recognition (Topic 605)—Multiple-Deliverable Revenue Arrangements, a consensus of the FASB Emerging Issues Task Force” (ASU 2009-13). ASU 2009-13 provides amendments to the criteria in ASC 605-25 for separating consideration in multiple-deliverable arrangements. As a result of those amendments, multiple-deliverable arrangements will be separated in more circumstances than under existing U.S. GAAP. ASU 2009-13: 1) establishes a selling price hierarchy for determining the selling price of a deliverable, 2) eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, 3) requires that a vendor determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis, 4) significantly expands the disclosures related to a vendor’s multiple-deliverable revenue arrangements. ASU 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The adoption of ASU 2009-13 did not have a material effect on the Company’s financial position or results of operations.
   
 

In April 2010, the FASB issued Update No. 2010-17, “Revenue Recognition—Milestone Method (Topic 605): Milestone Method of Revenue Recognition”. This ASU provides guidance on defining a milestone under Topic 605 and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Consideration that is contingent on achievement of a milestone in its entirety may be recognized as revenue in the period in which the milestone is achieved only if the milestone is judged to meet certain criteria to be considered substantive. Milestones should be considered substantive in their entirety and may not be bifurcated. An arrangement may contain both substantive and non substantive milestones that should be evaluated individually. ASU 2010-17 is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The adoption of ASU 2010-07 did not have a material effect on the Company’s financial position or results of operations.

   
 

In January 2011, the FASB issued Update No. 2011-01, “Receivables (Topic 310): Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20”. ASU 2010-20 amends Topic 310 to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. ASU 2011-01 temporarily delays the effective date of the disclosures about troubled debt restructurings in ASU 2010-20 for public entities.

   
 

The FASB believes this guidance will be effective for interim and annual periods ending after June 15, 2011. The adoption of this Statement did not have a material effect on the Company’s financial position or results of operations.

   
 

In April 2011, the FASB issued Update No. 2011-02, “Receivables (Topic 310): A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring”. The amendments in ASU 2011-02 apply to all creditors that restructure receivables that fall within the scope of Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors. The amendments in this ASU provide additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring. ASU 2011-2 is effective for public companies for interim and annual periods beginning on or after June 15, 2011 and is to be applied retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption. Early application is permitted. The adoption of this Statement did not have a material effect on the Company’s financial position or results of operations.

 

Significant Accounting Policies
Significant Accounting Policies [Text Block]
3. Significant Accounting Policies
   
  Recently Issued Accounting Pronouncements
   
  In May 2011, the FASB issued Update No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the Board does not intend for the amendments in this Update to result in a change in the application of the requirements in Topic 820. Some of the amendments clarify the Board’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. For public entities, ASU 2011-4 is effective during interim and annual periods beginning after December 15, 2011 and early application is not permitted. The adoption of this amendment is not expected to have a material effect on the Company’s financial position or results of operations.
   
  In June 2011, the FASB issued Update No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income. Under the amendments, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This Update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this Update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The adoption of this amendment is not expected to have a material effect on the Company’s financial position or results of operations.

 

Capital Stock
Capital Stock [Text Block]
4.

Capital Stock


      March 31,     December 31,  
      2011     2010  
  Authorized -            
    100,000,000 common shares of $0.00001 par value            
     20,000,000 preferred shares of $0.00001 par value            
               
  Issued -            
    46,849,910 (December 31, 2010 - 39,581,271) common shares $  468   $  396  

On June 21, 2011, as part of two concurrent private placement offerings, the Company issued approximately 4.8 million shares of common stock, and three-year warrants to purchase up to approximately 2.4 million shares of common stock, for aggregate gross proceeds of approximately US$3.2 million. Each warrant entitles the holder to purchase one half of one common share at an exercise price of $0.74 per common share and expires 36 months after the date of issuance. Proceeds were allocated between the common shares and the warrants based on their relative fair value. The common shares were recorded at a value of $2,024 thousand. (See note 5 for the portion allocated to the warrants).

The private placements consisted of a definitive securities purchase agreement with certain accredited and institutional investors for the issuance and sale in a private placement transaction (the "US Private Offering") of 2,582,536 shares and warrants to purchase up to 1,291,268 shares of common stock, for aggregate gross proceeds of approximately $1.7 million, and a definitive subscription agreement solely with Canadian investors for the issuance and sale in a concurrent non-brokered private placement transaction (the "Canadian Private Offering") of 2,238,806 shares and warrants to purchase up to 1,119,403 shares of common stock, for aggregate gross proceeds of approximately $1.5 million.

The Company paid an agent cash commissions in the amount of approximately $121 thousand, representing 7% of the aggregate gross proceeds received by the Company in the US Private Offering, plus expenses in the amount of approximately $28 thousand, and issued warrants to the agent to purchase 180,778 shares of common stock, representing 7% of the amount of shares sold in the US Private Offering. The Company also paid cash finder's fees in the amount of approximately $105 thousand, representing 7% of the aggregate gross proceeds received by the Company in the Canadian Private Offering; and issued warrants to purchase 156,716 shares of common stock, representing 7% of the amount of shares sold in the Canadian Private Offering. Each warrant entitles the holder to purchase one half of one common share at an exercise price of $0.74 per common share and expires 36 months after the date of issuance.

In addition, the Company paid approximately $114 thousand in cash consideration for other transaction costs, which have been reflected as a reduction of the common shares and the warrants based on their relative fair values.

All of the above transaction costs have been reflected as a reduction to the common shares and the warrants based on their relative fair values.

 

Related Party Transactions
Related Party Transactions [Text Block]
6.

Related Party Transactions

   
 

Included in management salaries are $4 thousand (2010 - $17 thousand) for options granted to the Chief Financial Officer and $4 thousand (2010 - $4 thousand) for options granted to the Chief Executive Officer under the 2006 Stock Option Plan and $7 thousand (2010 - $24 thousand) for options granted to non-employee directors.

   
 

Also included in management salaries are director fees of $63 thousand (2010 - $64 thousand) for attendance to board meetings and audit committee meetings.

   
 

The above related party transactions have been measured at the exchange amount which is the amount of the consideration established and agreed to by the related parties.

Basic and Diluted Loss Per Common Share
Basic and Diluted Loss Per Common Share [Text Block]
7.

Basic and Diluted Loss Per Common Share

   
 

Basic and diluted loss per common share is calculated based on the weighted average number of shares outstanding during the period. The warrants, share-based compensation and convertible notes have been excluded from the calculation of diluted loss per share since they are anti-dilutive.

Subsequent Events
Subsequent Events [Text Block]
8.

Subsequent events

   
 

On November 3, 2011, 100,000 warrants were exercised for 100,000 common shares having a par value of $0 thousand for cash consideration of approximately $47 thousand, resulting in an increase in additional paid-in capital of approximately $47 thousand.
 

 

On November 3, 2011, 50,000 stock options were exercised for 50,000 common shares having a par value of $0 thousand for cash consideration of approximately $21 thousand, resulting in an increase in additional paid-in capital of approximately $21 thousand.