UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter June 30, 2006or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to________
Commission File Number 000-31187
IntelGenx Technologies Corp. |
(Exact name of small business issuer as specified in its charter) |
Delaware | 87-0638336 |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) |
6425 Abrams, Ville Saint Laurent, Quebec H4S 1X9, Canada
(Address of principal executive offices)
(514) 331-7440
(Issuer's telephone number)
Big Flash Corp, 56 West 400 South, St 220, Salt Lake
City, UT 84101
(Former Name, former Address, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the issuer's common equity, as of the latest practicable date. (August 21, 2006) Class A 16,007,489
Check whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act.
Yes [ ] No [X]
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
TABLE OF CONTENTS |
||
PART I. FINANCIAL INFORMATION |
2
On August 10, 2006, pursuant to a vote by our shareholders, we changed our
corporate name from Big Flash Corp. to IntelGenx Technologies Corp. PART I Item 1. Financial Statements The accompanying
unaudited balance sheets of IntelGenx Technologies Corporation at June 30, 2006
and (audited) December 31, 2005, related unaudited statements of operations,
stockholders' equity (deficit) and cash flows for the six months ended June 30,
2006 and 2005 and three month ended June 30, 2006 and 2005 have been prepared by
management in conformity with accounting principles generally accepted in the
United States. In the opinion of management, all adjustments considered
necessary for a fair presentation of the results of operations and financial
position have been included and all such adjustments are of a normal recurring
nature. Operating results for the period ended June 30, 2006, are not
necessarily indicative of the results that can be expected for the fiscal year
ending December 31, 2006 or any other subsequent period.
3
IntelGenx Technologies Corp.
Consolidated Interim Financial Statements
June 30, 2006
4
IntelGenx Technologies Corp.
Consolidated Interim Financial Statements
June 30, 2006
Contents |
|
Balance Sheet | 1 |
Statement of Shareholders' Equity | 2 - 3 |
Statement of Operations and Comprehensive Loss | 4 |
Statement of Cash Flows | 5 |
Notes | 6 - 9 |
5
IntelGenx Technologies Corp. | |||||
(Formerly Big Flash Corporation) | |||||
Consolidated Balance Sheet | |||||
(Expressed in U.S. Funds) | |||||
June 30, | December 31, | ||||
2006 | 2005 | ||||
Unaudited | |||||
Assets | |||||
Current |
|
|
|
|
|
Cash |
$ |
607,521 |
$ |
10,938 |
|
Accounts receivable |
|
136,306 |
|
5,858 |
|
Income taxes recoverable |
|
9,794 |
|
9,400 |
|
Prepaid expenses |
|
136,569 |
|
3,186 |
|
Investment tax credits receivable |
|
95,748 |
|
69,576 |
|
|
985,938 |
|
98,958 |
||
Fixed Assets |
|
169,410 |
|
100,176 |
|
$ |
1,155,348 |
$ |
199,134 |
||
Liabilities |
|
|
|
|
|
Current |
|
|
|
|
|
Accounts payable and accrued liabilities |
|
72,671 |
|
67,322 |
|
Current maturity of long-term debt |
|
12,543 |
|
14,000 |
|
|
85,214 |
|
81,322 |
||
Loan Payable, Shareholder |
|
89,870 |
|
86,253 |
|
Long-Term Debt |
|
88,289 |
|
63,386 |
|
Shareholders' Equity (Deficiency) |
|
|
|
|
|
Capital Stock (note 5) |
|
1,031,735 |
|
77 |
|
Additional Paid-in-Capital |
|
19,420 |
|
- |
|
Other Comprehensive Gain |
|
5,126 |
|
4,825 |
|
Accumulated Deficit |
|
(164,306) |
|
(36,729) | |
|
891,975 |
|
(31,827) | ||
$ |
1,155,348 |
$ |
199,134 |
||
See accompanying notes | |||||
Approved on Behalf of the Board: | |||||
Director | |||||
Director |
6
IntelGenx Technologies Corp. | ||||||||||||
(Formerly Big Flash Corporation) | ||||||||||||
Consolidated Statement of Shareholders' Equity | ||||||||||||
For the Period Ended June 30, 2006 | ||||||||||||
(Expressed in U.S. Funds) | ||||||||||||
(Unaudited) | ||||||||||||
Additional | Other | Total | ||||||||||
Capital Stock | Paid-In | Comprehensive | Accumulated | Shareholders' | ||||||||
Number | Amount | Capital | Gain | Deficit | Equity | |||||||
Balance - December 31, 2005 |
10,000 |
$ |
77 |
$ |
- |
$ |
|
4,825 |
$ |
(36,729) |
$ |
(31,827) |
March 9, 2006 - recall and cancellation of issued |
|
|
|
|
|
|
|
|
|
|
|
|
shares |
(10,000) |
|
(77) |
|
- |
|
- |
|
|
- |
|
(77) |
March 9, 2006 - issue of common shares |
10,991,000 |
|
77 |
|
- |
|
- |
|
|
- |
|
77 |
April 28, 2006 - issue of common shares |
3,191,489 |
|
898,408 |
|
- |
|
- |
|
|
- |
|
898,408 |
April 28, 2006 - asset acquired |
1,825,000 |
|
133,250 |
|
- |
|
- |
|
|
- |
|
133,250 |
Foreign currency translation adjustment for the |
|
|
|
|
|
|
|
|
|
|
|
|
period |
- |
|
- |
|
- |
|
|
301 |
|
- |
|
301 |
Warrants issued |
- |
|
- |
|
19,420 |
|
- |
|
|
- |
|
19,420 |
Net loss for the period |
- |
|
- |
|
- |
|
- |
|
|
(127,577) |
|
(127,577) |
Balance - June 30, 2006 |
16,007,489 |
$ |
1,031,735 |
$ |
19,420 |
- $ |
|
5,126 |
$ |
(164,306) |
$ |
891,975 |
7
IntelGenx Technologies Corp. | |||||||||
(Formerly Big Flash Corporation) | |||||||||
Consolidated Statement of Shareholders' Equity | |||||||||
For the Period Ended June 30, 2005 | |||||||||
(Expressed in U.S. Funds) | |||||||||
(Unaudited) | |||||||||
Accumulated | |||||||||
Accumulated | Retained Earnings | ||||||||
Other | during the | Total | |||||||
Capital Stock | Comprehensive | Development | Shareholders' | ||||||
Number | Amount | Gain | Stage | Equity | |||||
Balance - December 31, 2004 |
10,000 |
|
77 |
|
6,493 |
|
88,791 |
|
95,361 |
Foreign currency translation adjustment for the |
|
|
|
|
|
|
|
|
|
period |
- |
|
- |
|
(1,865) |
|
- |
|
(1,865) |
Net loss for the period |
- |
|
- |
|
- |
|
(51,271) |
|
(51,271) |
Balance - June 30, 2005 |
10,000 |
$ |
77 |
$ |
4,628 |
$ |
37,520 |
$ |
42,225 |
See accompanying notes |
8
IntelGenx Technologies Corp. | ||||||||
(Formerly Big Flash Corporation) | ||||||||
Consolidated Statement of Operations and Comprehensive Loss | ||||||||
(Expressed in U.S. Funds) | ||||||||
(Unaudited) | ||||||||
For the Three-month period | For the Six-month period | |||||||
ended June 30th | ended June 30th | |||||||
2006 | 2005 | 2006 | 2005 | |||||
Revenue |
$ |
93,168 |
$ |
- |
|
188,686 |
|
- |
Expenses |
|
|
|
|
|
|
|
|
Research and development |
|
156,683 |
|
21,441 |
|
239,701 |
|
35,171 |
Administrative salaries |
|
15,585 |
|
5,680 |
|
30,154 |
|
15,960 |
Travel |
|
8,493 |
|
64 |
|
10,865 |
|
492 |
Advertising and promotion |
|
840 |
|
- |
|
1,882 |
|
- |
Telecommunications |
|
1,931 |
|
162 |
|
3,300 |
|
1,289 |
Professional fees |
|
697 |
|
- |
|
6,644 |
|
1,377 |
Office and general |
|
3,934 |
|
2,684 |
|
8,026 |
|
3,634 |
Taxes and insurance |
|
894 |
|
678 |
|
1,349 |
|
1,384 |
Rent |
|
7,286 |
|
5,548 |
|
14,157 |
|
11,191 |
Interest and bank charges |
|
231 |
|
403 |
|
672 |
|
1,469 |
Interest and financing fees on long-term |
|
|
|
|
|
|
|
|
debt and loan payable, shareholder |
|
23,905 |
|
1,159 |
|
27,205 |
|
2,105 |
Amortization - laboratory and office equipment |
|
7,674 |
|
4,548 |
|
14,791 |
|
9,227 |
Amortization - leasehold improvements |
|
1,199 |
|
927 |
|
2,311 |
|
1,879 |
Amortization - computer equipment |
|
240 |
|
294 |
|
463 |
|
597 |
Foreign exchange |
|
837 |
|
50 |
|
842 |
|
64 |
Research and development tax credits |
|
(23,916) |
|
(3,624) |
|
(46,099) |
|
(24,561) |
|
206,513 |
|
40,014 |
|
316,263 |
|
61,278 |
|
Loss Before Income Taxes |
|
(113,345) |
|
(40,014) |
|
(127,577) |
|
(61,278) |
|
|
|
|
|
|
|
|
|
Income taxes - Current |
|
- |
|
- |
|
- |
|
(10,007) |
Net Loss |
|
(113,345) |
|
(40,014) |
|
(127,577) |
|
(51,271) |
Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
35 |
|
(1,206) |
|
301 |
|
(1,865) |
Comprehensive Loss |
$ |
(113,310) |
$ |
(41,220) |
|
(127,276) |
$ |
(53,136) |
Basic Weighted Average Number of |
|
|
|
|
|
|
|
|
Shares Outstanding |
14,463,954 |
10,991,000 |
12,737,071 |
10,991,000 |
||||
Basic and Diluted Loss Per Common Share (note 7) |
|
(0.01) |
|
- |
|
(0.01) |
|
- |
See accompanying notes |
9
IntelGenx Technologies Corp. | |||||||||
(Formerly Big Flash Corporation) | |||||||||
Statement of Cash Flows | |||||||||
(Expressed in U.S. Funds) | |||||||||
(Unaudited) | |||||||||
For the Three-month period | For the Six-month period | ||||||||
ended June 30th | ended June 30th | ||||||||
2006 | 2005 | 2006 | 2005 | ||||||
Funds Provided (Used) - | |||||||||
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(113,345) |
$ |
(40,014) |
|
$ |
(127,577) |
$ |
(51,271) |
Foreign currency translation adjustment |
|
35 |
|
(1,206) |
|
|
301 |
|
(1,865) |
Amortization |
|
9,113 |
|
5,769 |
|
|
17,565 |
|
11,703 |
Financing fee paid in warrants |
|
19,420 |
|
- |
|
|
19,420 |
|
- |
|
|
(84,777) |
|
(35,451) |
|
|
(90,291) |
|
(41,433) |
Changes in non-cash operating elements |
|
|
|
|
|
|
|
|
|
of working capital |
|
(115,001) |
|
5,002 |
|
|
(151,798) |
|
(29,875) |
|
(199,778) |
|
(30,449) |
|
|
(242,089) |
|
(71,308) | |
Financing Activities |
|
|
|
|
|
|
|
|
|
Bank Indebtedness |
|
(12,119) |
|
30,449 |
|
|
- |
|
32,469 |
Long-term debt |
|
- |
|
- |
|
|
29,294 |
|
- |
Repayment of long term debt |
|
(1,520) |
|
- |
|
|
(5,848) |
|
- |
Loan payable, shareholder |
|
3,986 |
|
- |
|
|
3,617 |
|
32,806 |
Issue of capital stock (note 5) |
|
1,341,750 |
|
- |
|
|
1,341,750 |
|
- |
Transaction costs (note 5) |
|
(443,342) |
|
- |
|
|
(443,342) |
|
- |
Promissory note |
|
(25,685) |
|
- |
|
|
- |
|
- |
|
863,070 |
|
30,449 |
|
|
925,471 |
|
65,275 |
|
Investing Activities |
|
|
|
|
|
|
|
|
|
Additions to fixed assets |
|
(55,771) |
|
- |
|
|
(86,799) |
|
(448) |
Increase (Decrease) in Cash |
|
607,521 |
|
- |
|
|
596,583 |
|
(6,481) |
|
|
|
|
|
|
|
|
|
|
Cash |
|
|
|
|
|
|
|
|
|
Beginning of Period |
|
- |
|
- |
|
|
10,938 |
|
6,481 |
End of Period |
$ |
607,521 |
$ |
- |
|
$ |
607,521 |
$ |
- |
See accompanying notes |
10
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
1.
Basis of Presentation and Reorganization of the CorporationBasis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and item 310(b) of Regulation S-B and are prepared using the same accounting policies as outlined in note 3 of Intelgenx Corp. financial statements for the year ended December 31, 2005 and 2004 except for those discussed in note 4 below. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ended December 31, 2006. The unaudited financial statements should be read in conjunction with the financial statements and notes thereto included in the Intelgenx Corp. audited financial statements for the years ended December 31, 2005 and 2004.
Reorganization of the Corporation
On April 28, 2006, Intelgenx Corp. entered into a share exchange agreement with IntelGenx Technologies Corp. (formerly Big Flash Corporation), an inactive public shell company, for the acquisition by IntelGenx Technologies Corp. of all the issued and outstanding shares of Intelgenx Corp.
Under accounting principles generally accepted in the United States, the share exchange is considered to be a capital transaction in substance, rather than a business combination. That is, the share exchange is equivalent to the issuance of stock by Intelgenx Corp. for the net monetary assets of IntelGenx Technologies Corp. accompanied by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the share exchange is identical to that resulting from a reverse acquisition, except no goodwill is recorded. Under reverse takeover accounting, the post reverse acquisition comparative historical financial statements of the legal acquirer, IntelGenx Technologies Corp., are those of the legal acquiree, Intelgenx Corp., which are considered to be the accounting acquirerer.
11
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
All of the Intelgenx Corp. shares, through a series of exchanges, were exchanged for shares of IntelGenx Technologies Corp. common shares and/or exchangeable shares of 6544361 Canada Inc. a wholly-owned subsidiary of IntelGenx Technologies Corp. The Exchangeable shares are exchangeable for common shares of IntelGenx Technologies Corp. on a one for one basis. Until such time as the holders of the exchangeable shares wish to exchange their shares for IntelGenx Technologies Corp. shares, the IntelGenx Technologies Corp. shares are held in trust by a trustee on behalf of the exchangeable shareholders. The trustee shall be entitled to the voting rights in IntelGenx Technologies Corp. stated in the terms of the exchange and voting agreement and shall exercise these voting rights according to the instructions of the holders of the exchangeable shares on a basis of one vote for every exchangeable share held.
These financial statements reflect the accounts of the balance sheets, the results of operations and the cash flows of Intelgenx Corp. at their carrying amounts, since it is deemed to be the accounting acquirerer.
12
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
1. Basis of Presentation and Reorganization of the Corporation (Cont'd)
The results of operations, the cash flows and the assets and liabilities of IntelGenx Technologies Corp. have been included in these consolidated financial statements since April 28, 2006, the acquisition date. Amounts reported for the periods prior to April 28, 2006 are those of Intelgenx Corp..
The fair value assigned to the asset of IntelGenx Technologies Corp. acquired on April 28, 2006 is as follows:
Asset | ||
Prepaid investor relations services | $ | 133,250 |
Asset acquired | $ | 133,250 |
As part of the transaction, a shareholder of IntelGenx Technologies Corp. forgave the due to shareholder and related interest payable amounting to $23,160 and IntelGenx Technologies Corp. issued 325,000 common shares in consideration of investor relations services to be rendered.
2. Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has reported a net loss of $164,306 from inception (June 15, 2003) to June 30, 2006. The Company has reported deficient cash flows from operating activities of $250,651 from inception (June 15, 2003) to June 30, 2006. To date, these losses and cash flow deficiencies have been financed principally through long-term debt, debt from related parties and common shares issuance. Additional capital and/or borrowings will be necessary in order for the Company to continue in existence until attaining and sustaining profitable operations.
Management has continued to develop a strategic plan to develop a management
team, maintain reporting compliance and establish contracts with pharmaceutical companies. Management anticipates generating revenue through development contracts during the year. The Company has commenced the process of raising additional capital. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due.13
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
3. Nature of Business
The Company specializes in the development of pharmaceutical products in co-operation with various pharmaceutical companies. Prior to March 31, 2006, the Company was in the development stage and its efforts were focused on establishing contracts with pharmaceutical companies and the development of pharmaceutical products. The Company completed the development stage of its operations when the Company commenced consistently generating revenues from its operations in April 2006.
14
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
4.
Significant Accounting PoliciesShare-Based Payments
The Company accounts for share-based payments in accordance with the provisions of FAS 123R "Share-based payments (Revised)" and accordingly recognizes in its financial statements share-based payments at their fair value.
5. Capital Stock
June 30, | December 31, | |
2006 | 2005 | |
Authorized without limit as to number and without par value - common shares | ||
Issued - | ||
16,007,489 (2005 - 10,000) common shares | $ 1,031,735 | $ 77 |
On April 28, 2006 Intelgenx Corp. issued 3,191,489 common shares for cash consideration of $1,341,750. The transactions cost related to the share issuance amounted to $443,342.
On the same date Intelgenx Corp. completed a share exchange transaction with IntelGenx Technologies Corp. in which it acquired an asset of $133,250.
Warrants
During the six month period ended June 30, 2006, Intelgenx Technologies Corp. issued 100,000 stock purchase warrants exercisable into common shares at $0.41 per share which expire on April 28, 2008. The stock purchase warrants were issued in payment of a financing fee. The stock purchase warrants were accounted for at their fair value, as determined by the Black-Scholes valuation model, of $19,420, using the following assumptions:
Expected volatility | 85% |
Expected life | 2 years |
Risk-free interest rate | 3.91% |
Dividend yield | Nil |
As at June 30, 2006, no stock purchase warrants were exercised.
15
IntelGenx Technologies Corp.
Notes to Consolidated Interim Financial Statements
6. Related Party Transactions
During the six month period ending June 30, 2006, the Company incurred expenses of approximately $9,109 (2005 - $8,201) for laboratory equipment leased from a shareholder and $2,693 (2005 - $2,026) for interest on the loan payable shareholder.
The Company has entered into employment contracts with certain executives. For the six months ended June 30, 2006, the research and development expense and the administrative salaries expense include $57,000 and $30,000 respectively paid to executives.
The transaction costs (see note 5) include approximately $95,000 paid to a company controlled by an executive.
Included in accounts payable and accrued liabilities is approximately $25,500 (2005 - $27,000) payable to shareholders.
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.
7. Loss Per Share
Basic loss per share is calculated based on the weighted average number of shares outstanding during the period. The warrants have been excluded from the calculation of diluted loss per share since they are anti-dilutive.
8. Subsequent Events
On July 3, 2006, IntelGenx Technologies Corp. filed a registration statement to allow certain stockholders to resell up to an aggregate of 3,616,489 shares of common shares for estimated proceeds of up to $2,170,000.
16
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the financial statements for the three and six month periods ended June 30, 2006 and notes thereto appearing elsewhere in this Form 10-QSB. On August 10, 2006, pursuant to a vote by our shareholders, we changed our corporate name from Big Flash Corp. to IntelGenx Technologies Corp. Unless otherwise indicated or the context otherwise requires, the "Company" we," "us," and "our" and "Intelgenx" refer to IntelGenx Technologies Corp. and its subsidiaries including IntelGenx Corp.
Overview
Company Background
IntelGenx is a drug delivery company established in 2003 and headquartered in Montreal, Quebec, Canada, which focuses on the development of novel oral immediate-release and controlled-release products for the generic pharmaceutical market. IntelGenx's business strategy is to develop pharmaceutical products based on its proprietary drug delivery technologies and then license commercial rights for such products to pharmaceutical partners once the viability of a product has been demonstrated. We expect a partner company will, in some cases, fund development of the licensed products, complete the Food and Drug Administration ("FDA") regulatory approval process relating to the licensed products, and assume responsibility for marketing and distributing such products.
In addition, the Company anticipates that it may undertake full development of certain products without seeking a partner until the product reaches the marketing and distribution stage. The Company 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.
The Company has also undertaken a strategy under which it will work with pharmaceutical companies in order to develop new dosage forms in addition to already existing ones for pharmaceutical products for which patent protection is about to expire. Under §(505)(b)(2) of the Food, Drug & Cosmetics Act, FDA will grant a market exclusivity of up to three years for such a new dosage form. The Company anticipates significant returns from successfully obtaining market exclusivity in this manner.
The Company is currently continuing to develop the existing products in its pipeline and may also perform research and development on other potential products as the opportunities present themselves.
The Company does not currently plan to acquire a manufacturing facility. The Company currently purchases and or leases, on an as-needed basis, the equipment necessary for performing research and development activities related to its products.
The Company will hire new personnel, primarily in the area of research and development, on an as-needed basis as the Company enters into partnership agreements and increases its research and development activities.
17
Recent Developments On April 28, 2006, the Company entered into a Share Exchange
Agreement, whereby the Company, (through its wholly-owned subsidiary 6544361
Canada, Inc., a Canadian company) acquired 100% of the issued and outstanding
common stock and warrants of IntelGenx Corp., a Canadian corporation . Pursuant
to the Share Exchange Agreement, and several separate related agreements, the
Company issued, as consideration for the IntelGenx Corp. common stock,
14,507,489 shares of the Company's common stock to various shareholders of
IntelGenx Corp., along with 100,000 common stock purchase warrants to an
IntelGenx Corp. shareholder. The warrants granted are exercisable at $0.41 per
share of common stock, and expire on April 28, 2008. Upon completion of the
acquisition, the total shares of common stock issued by the Company pertaining
to the acquisition of IntelGenx Corp. constituted 68.7% of the 16,007,489 shares
of common stock of the Company then outstanding. Following the completion of the
acquisition, IntelGenx Corp. continued its operations as a controlled subsidiary
of the Company. Since we did not have any substantial assets or operations
during the two fiscal years prior to the Intelgenx Corp. Acquisition, Intelgenx
Corp. is deemed to be the accounting acquirer of Intelgenx Technologies Corp.
and the discussion of operations below relate to the operations of Intelgenx
Corp. Results of Operations six month period ended June 30, 2006
compared to the six month period ended June 30, 2005.
Increase/ | Percentage | ||||||
2006 | 2005 | (Decrease) | Change | ||||
Revenue | $ | 188,686 | $ | 0 | $ | 188,686 | % |
Research and development | 239,701 | 35,171 | 204,530 | 582% | |||
General and Administrative | 76,377 | 35,327 | 41,050 | 116% | |||
Interest and financing fees | 27,877 | 3,574 | 24,303 | 680% | |||
Net income (loss) | (127,577) | (51,271) | 76,306 | 149% |
Revenue
Our revenues from R&D services provided are $188,686 for the first two quarters of 2006,compared to $0 for the same period in 2005. Management believes that we may begin to realize increased sales revenues by early 2007.
General and Administrative
General administrative expenses increased by $41,050 (116%) from $35,327 for the six month period ended June 30, 2005 to $76,377 for the six month period ended June 30, 2006. The increase is attributed to an increase in corporate operations.
Research and development
Costs related to research and development increased from $35,171 in the six month period ended June 30,2005 to $239,701 for the same period in 2006, which reflects the commencement of some projects with certain partners started in 2005 and 2006. Management believes that with funding provided by the private placement of common stock (See "Business Recent Developments"), research and development expenses will increase significantly during the remainder of 2006 and into 2007.
18
Interest Expense We incurred interest and financing fee expenses of $27,877 in
the six month period ended June 30, 2006 compared to $3,574 for the same period
in 2005. Included in the interest expense for the first six month of 2006 are
$19,420 representing the value of 100,000 warrants issued as a non-cash
financing fee payment for a bridge loan. Since the loan was received and repaid
in the first six month of this year and the warrants are a one time expense,
Management expects the interest expense to be significantly lower for the rest
of 2006. Net Loss We recorded a net loss of $127,577 in the six month period
ended June 30, 2006 compared to a net loss of $51,271 for the same period in
2005. Management believes that we will continue to operate at a net loss until
such time as we can complete our business development efforts and begin to
realize increased sales revenues by early 2007. Income tax Losses We have approximately $100,000 of Canadian and provincial
income tax losses as of December 31, 2005, which may be carried forward and
offset against taxable income in future years. The use of these losses to reduce
future income taxes will depend on the generation of sufficient taxable income
prior to the expiration of the carryforwards after the year 2015. In the event
of certain changes in control, there will be an annual limitation on the amount
of the income tax losses carryforwards which can be used. No tax benefit
regarding these losses has been reported in the financial statements for the
year ended December 31, 2005 nor for the six month ended June 30, 2006 because
management believes there is a 50% or greater chance that the carryforward will
not be used. Accordingly, the potential tax benefit of the loss carryforward is
offset by a valuation allowance of the same amount. Prepaid Expenses At June 30, 2006 our Balance Sheet shows prepaid expenses of
$136,569 compared to $3,186 for the same period in 2005. The increase is due to
the issuance of 325,000 shares in consideration of investor relations services
to be rendered Liquidity and Capital Resources At June 30, 2006, we had cash on hand of $607,521. We also
had accounts receivable of $136,306, income taxes recoverable of $9,794 and
investment tax credits receivable of $95,748. At June 30, 2006, we had accounts payable and accrued
liabilities of $72,671, of these liabilities, approximately $25,500 was payable
to shareholders. Our current portion of the long term debt was $12,543. At June 30, 2006, we had an operating line of credit in place
with a maximum of $45,000 of which $0 was borrowed. We believe that the proceeds of the private placement
completed on April 28, 2006, in the amount of approximately 900,000 net of
transactions cost, will be sufficient to satisfy cash requirements for the next
12 - 18 months. At June 30, 2006, we had total assets of $1,155,348 and
shareholders' equity of $891,975.
19
Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. Forward-Looking and Cautionary Statements This report contains certain forward-looking statements that
involve risks and uncertainties relating to, among other things, our future
financial performance or future events. Forward-looking statements give
management's current expectations, plans, objectives, assumptions or forecasts
of future events. All statements other than statements of current or historical
fact contained in this Form 10QSB, including statements regarding our future
financial position, business strategy, budgets, projected costs and plans and
objectives of management for future operations, are forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such
as "anticipate," "estimate," "plans," "potential," "projects," "ongoing,"
"expects," "management believes," "we believe," "we intend," and similar
expressions. These statements involve known and unknown risks, estimates,
assumptions and uncertainties that could cause actual results to differ
materially from the results set forth in this Form 10-QSB. You should not place
undue reliance on these forward-looking statements. You should be aware that our
actual results could differ materially from those contained in the
forward-looking statements due to a number of factors such as:
continued
development of our technology;
lack of product revenues
successful completion of clinical trials and obtaining regulatory approval to market
ability to protect our intellectual property
dependence on collaborative partners
ability to generate positive cash flow
ability to raise additional capital if and when necessary
dependence on key personnel;
competitive factors;
the operation of our business; and
general economic conditions.
These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward looking statements These forward-looking statements speak only as of the date on which they are made, and except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
20
Item 3.
Controls and Procedures.
As of the end of the period covered by this report, we
carried out an evaluation, under the supervision and with the participation of
management, including our chief executive officer and principal financial
officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934. Based upon that evaluation, our chief executive
officer and principal financial officer concluded that our disclosure controls
and procedures are effective to cause the material information required to be
disclosed by us in the reports that we file or submit under the Exchange Act to
be recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms. There have been no significant changes
in our internal controls or in other factors which could significantly affect
internal controls subsequent to the date we carried out our evaluation. There are no material pending legal
proceedings to which we are a party or to which any of our property is subject
and to the best of our knowledge, no such actions against us are contemplated or
threatened.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
3,191,489 shares of our common stock issued to 34 shareholders of IntelGenx in exchange for 3,191,489 IntelGenx common stock;
325,000 shares of our common stock issued as a non-refundable retainer, and in full payment of investor relations services to be rendered by Mr. Patrick J. Caruso pursuant to an agreement entered into between us and Mr. Caruso, and
100,000 shares of common stock issuable upon the exercise of purchase warrants issued to Mr. Caruso in exchange for 100,000 common stock purchase warrants of IntelGenx.
We also acquired, through Exchangeco, 10,991,000 shares of IntelGenx, held by its principal shareholders pursuant to a share exchange agreement dated April 10, 2006, in exchange for 10,991,000 Class A special shares of Exchangeco. The Exchangeco special shares are convertible into shares of our common stock on a one for one basis.
Item 3. Defaults Upon Senior Securities
This Item is not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
This Item is not applicable.
21
This Item is not applicable. (a) Exhibits:
Exhibit 31.1 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.
Certification of C.E.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
INTELGENX TECHNOLOGIES CORPORATION | ||
Date: August 21, 2006 | By: | /S/ Horst Zerbe |
Horst Zerbe | ||
President, C.E.O. and | ||
Director | ||
Date: August 21, 2006 | By: | /S/ Joel Cohen |
Joel Cohen | ||
Chief Financial | ||
Officer and | ||
Director |
22