IntelGenx Technologies (IGXT) 10-Q2023 Q3 Quarterly report

IntelGenx Technologies Corp.

3

IntelGenx Technologies Corp.

Consolidated Balance Sheet

(Expressed in Thousands of U.S. Dollars ($000's) Except Share and Per Share Data)

(Unaudited)

See accompanying notes

Approved on Behalf of the Board:

IntelGenx Technologies Corp.

Consolidated Statement of Shareholders' Equity

For the Period Ended September 30, 2023

(Expressed in Thousands of U.S. Dollars ($000's) Except Share and Per Share Data)

(Unaudited)

See accompanying notes

5

IntelGenx Technologies Corp.

Consolidated Statement of Comprehensive Loss

(Expressed in Thousands of U.S. Dollars ($000's) Except Share and Per Share Data)

(Unaudited)

See accompanying notes

3. Significant Accounting Policies

6. Bank Indebtedness

The Company's credit facility is subject to review annually and consists of corporate credits cards of up to CAD$50 thousand ($37 thousand) and $30 thousand, and foreign exchange contracts limited to CAD$425 thousand ($314 thousand).

7. Loan Payable

8.  Convertible Notes

On August 31, 2023 the Company announced the closing of the first tranche of a non-brokered private placement (the "Offering") of units ("Units") from atai for aggregate gross proceeds of approximately US$3 million, including US$750,000 to be received by the Company pursuant to the Subsequent atai Subscription (as defined below) once the Shareholder Approvals (as defined below) have been obtained.

Pursuant to the Offering, (i) United States subscribers can subscribe for Units (the "US Units") at a price of US$1,000 per US Unit, each US Unit being comprised of a US$1,000 principal amount convertible promissory note (the "US Notes") and 5,405 common stock purchase warrants (the "US Warrants").

The US Notes are convertible into shares of common stock of the Company (the "Shares") at the option of the holder at a price of US$0.185 (the "US Conversion Price"), at anytime from the date that is six (6) months following their issuance up to and including August 31, 2026, and bear interest at 12% per annum, payable quarterly, in arrears, with first payment due September 30, 2023 and every 3 months thereafter. The US Warrants entitle the holders thereof to purchase Shares at a price of US$0.26 per Share, for a period of 3 years following their issuance.

atai, a significant shareholder and partner of the Company, subscribed for 2,220 US Units for aggregate gross proceeds to the Company of US$2,220,000 (the "Initial atai Proceeds"). In addition, atai committed to subscribe for an additional 750 US Units for additional aggregate proceeds to the Company of US$750,000 (collectively with the Initial atai Proceeds, the "atai Proceeds") on the same terms (the "Subsequent atai Subscription"), subject to the Company obtaining the Shareholder Approvals.

On September 30, 2023, the Company and atai agreed, subject to obtaining TSX approval and the Shareholder Approvals, to enter into an amendment (the "Subscription Agreement Amendment") to the subscription agreement entered into by and between the Company and atai in connection with the Offering to provide atai with the right (the "Call Option") to purchase up to an additional 7,401 US Units (the "Call Option Units") at any time prior to August 31, 2026. The Call Option Units, to the extent atai exercises the Call Option in whole or in part, will be issued on the same terms as the US Units, including with respect to the US Conversion Price, maturity date, interest rate and the number of warrants issued in connection therewith. The Subscription Agreement Amendment will provide that the issuance of any Call Option Units will result in a corresponding reduction in atai's remaining purchase right pursuant to the amended and restated securities purchase agreement dated May 14, 2021, which such right to be reduced by the number of Shares issuable upon the conversion of the principal amount outstanding under such issued Call Option Units.

IntelGenx intends to use the proceeds of the Offering to fund the Company's wholly-owned Canadian subsidiary, continuing formulation and development efforts related to ongoing collaborations between IGXT and atai as well as working capital and expenses related to the Offering.

The proceeds of the Units are attributed to liability and equity components based on the fair value of each component as follows:

The convertible notes have been recorded as a liability. Total transactions costs in the amount of $152 thousand were recorded against the liability. The accretion expense for the nine-month period ended September 30, 2023 amounts to $9,000 (2022: $Nil). The warrants have been recorded as equity.

The components of the convertible notes are as follows:

The interest on the convertible notes for the nine-month period ended September 30, 2023 amounts to $22 thousand (2022: $Nil) and is recorded in financing and interest expense.

The proceeds of the Units are attributed to liability and equity components based on the fair value of each component. Management has determined the value attributed to the warrants to be issued upon shareholder approval is $693, resulting in an increase in additional paid-in-capital of $693.

On March 21, 2023, the Company announced the closing of an offering by way of private placement to certain investors in the United States of $763 thousand principal amount of 10% convertible notes due March 1, 2027. The Notes will bear interest at a rate of 10% per annum, payable quarterly, and will be convertible into shares of common stock of the Company beginning 6 months after their issuance at a price of $0.20 per Share. The Company intends to use the proceeds of the Offering to finance the Company's Rizaport and Buprenorphine programs as well as for working capital. In connection with the Offering, the Company paid to an agent a cash commission of approximately $53,000 in the aggregate and issued non-transferable warrants to the agent, entitling the holder to purchase 304,000 common shares at a price of $0.20 per Share until March 21, 2025.

Management has determined the value of the agents' warrants to be $19,000.

The convertible notes have been recorded as a liability. Total transactions costs in the amount of $126 thousand were recorded against the liability. The accretion expense for the nine-month period ended September 30, 2023 amounts to $13,000 (2022: $Nil). The warrants have been recorded as equity.

The components of the convertible notes are as follows:

The interest on the convertible notes for the nine-month period ended September 30, 2023 amounts to $40,000 (2022: $Nil) and is recorded in financing and interest expense.

On August 5, 2021, the Company announced the closing of an offering by way of private placement to certain investors in the United States of $2.1 million principal amount of 8% convertible notes due July 31, 2025. The Notes will bear interest at a rate of 8% per annum, payable quarterly, and will be convertible into shares of common stock of the Company beginning 6 months after their issuance at a price of $0.40 per Share. The Company intends to use the proceeds of the Offering for the Montelukast clinical program. In connection with the Offering, the Company paid to an agent a cash commission of approximately $199,525 in the aggregate and issued non-transferable warrants to the agent, entitling the holder to purchase 613,000 common shares at a price of $0.40 per Share until August 4, 2023. On May 8, 2023, the expiry date of these warrants was extended by an additional 12 months to August 4, 2024. The impact of the modification on the financial statements was insignificant.

Management has determined the value of the agents' warrants to be $164,000.

The convertible notes have been recorded as a liability. Total transactions costs in the amount of $403 thousand were recorded against the liability. The accretion expense for the nine-month period September 30, 2023 amounts to $72,000 (2022: $63,000). The warrants have been recorded as equity.

The components of the convertible notes are as follows:

The interest on the convertible notes for the nine-month period ended September 30, 2023 amounts to $126,000 (2022: $126,000) and is recorded in financing and interest expense.

On May 8, 2018, the Company closed its previously announced offering by way of private placement (the "Offering"). In connection with the Offering, the Company issued 320 units (the "Units") at a subscription price of $10,000 per Unit for gross proceeds of $3,200,000. A related party of the Company participated in the Offering and subscribed for an aggregate of two Units.

Each Unit is comprised of (i) 7,940 common shares of the Corporation ("Common Shares"), (ii) a $5,000 convertible 6% note (a "Note"), and (iii) 7,690 warrants to purchase common shares of the Corporation ("Warrants"). Each Note bears interest at a rate of 6% (payable quarterly, in arrears, with the first payment being due on September 1, 2018), matured on June 1, 2021 and is convertible into Common Shares at a conversion price of $0.80 per Common Share. Each Warrant entitled its holder to purchase one Common Share at a price of $0.80 per Common Share until June 1, 2021.

In connection with the Offering, the Company paid to the Agents a cash commission of approximately $157,800 in the aggregate and issued non-transferable agents' warrants to the Agents, entitling the Agents to purchase 243,275 common shares at a price of $0.80 per share until June 1, 2021. Management has determined the value of the agents' warrants to be $50,000.

The proceeds of the Units are attributed to liability and equity components based on the fair value of each component as follows:

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 components of the convertible notes subsequent to the amendments are as follows:

The convertible notes have been recorded as a liability. Total transactions costs in the amount of $29 thousand were recorded against the liability. The accretion expense for the nine-month period ended September 30, 2023 amounts to $26,000 (2022: $23,000).

The interest on the convertible notes for the nine-month period ended September 30, 2023 amounts to $60,000 and is recorded in financing and interest expense (2022: $60,000).

On October 15, 2020, the Company announced the closing of an offering by way of private placement to certain investors in the United States of $1.2 million principal amount of 8% convertible notes due October 15, 2024. The Notes will bear interest at a rate of 8% per annum, payable quarterly, and will be convertible into shares of common stock of the Company beginning 6 months after their issuance at a price of $0.18 per Share. The Company intends to use the proceeds of the Offering for working capital purposes. In connection with the Offering, the Company paid to an agent a cash commission of approximately $85,000 in the aggregate and issued non-transferable warrants to the agent, entitling the holder to purchase 482,000 common shares at a price of $0.18 per Share until October 15, 2022.

On October 23, 2020, the Company announced the closing of a second tranche of the Notes to certain investors in the United States of $557 thousand principal amount of 8% convertible notes due October 15, 2024. The Notes will bear interest at a rate of 8% per annum, payable quarterly, and will be convertible into shares of common stock of the Company beginning 6 months after their issuance at a price of $0.18 per Share. In connection with the Offering, the Company paid to an agent a cash commission of approximately $39,000 in the aggregate and issued non-transferable warrants to the agent, entitling the holder to purchase 222,800 common shares at a price of $0.18 per Share until October 15, 2022.

Management has determined the value of the agents' warrants to be $44,000.

The convertible notes have been recorded as a liability. Total transactions costs in the amount of $268 thousand were recorded against the liability. The accretion expense for the nine-month period ended September 30, 2023 amounts to $49,000 (2022: $44,000). The warrants have been recorded as equity.

The components of the convertible notes are as follows:

The interest on the convertible notes for the nine-month period ended September 30, 2023 amounts to $99,000 (2022: $99,000) and is recorded in financing and interest expense.

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction to Management's Discussion and Analysis

This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") comments on our business operations, performance, financial position and other matters for the nine-month periods ended September 30, 2023 and 2022.

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

This MD&A should be read in conjunction with the accompanying unaudited Consolidated Financial Statements and Notes thereto. We also encourage you to refer to the Company's MD&A for the year ended December 31, 2022. In preparing this MD&A, we have taken into account information available to us up to November 9, 2023, 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, 2022 (the "2022 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 2022 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.

Company Background

We are a drug delivery company established in 2003 and headquartered in Montreal, Quebec, Canada. Our focus is on the contract development and manufacturing of novel oral thin film products for the pharmaceutical market. More recently, we have made the strategic decision to enter the Canadian cannabis market with a non-prescription cannabis infused oral film that launched in early 2021 and in 2020 we made the decision to enter the psychedelic market. As a full-service contract development and manufacturing organization ("CDMO"), we are offering partners a comprehensive portfolio of pharmaceutical services, including pharmaceutical research and development ("R&D"), clinical monitoring, regulatory support, tech transfer, manufacturing scale-up and commercial manufacturing.

Our business strategy is to leverage our proprietary drug delivery technologies and develop pharmaceutical products with tangible benefits for patients, for our partners and, once a developed product launches, retain the exclusive manufacturing rights.

Managing our project pipeline is a key Company success factor. We have identified three focus areas; psychedelics, cannabis and animal health where we believe we can establish a leadership position with our drug delivery technology. We have undertaken a strategy under which we will work with pharmaceutical companies in order to apply our oral film technology to pharmaceutical products for which patent protection is nearing expiration, a strategy which is often referred to as "lifecycle management." Under Section 505(b)(2) of the Federal Food, Drug, and Cosmetics Act (the "FDCA") ("Section 505(b)(2)"), the U.S. Food and Drug Administration (the "FDA") may grant market exclusivity for a term of up to three years following approval of a listed drug that contains previously approved active ingredients but is approved in a new dosage, dosage form, route of administration or a combination.

The Section 505(b)(2) pathway is also the regulatory approach to be followed if an applicant intends to file an application for a product containing a drug that is already approved by the FDA for a certain indication and for which the applicant is seeking approval for a new indication or for a new use, the approval of which is required to be supported by new clinical trials, other than bioavailability studies. We have implemented a strategy under which we actively look for such so-called "repurposing opportunities" and determine whether our proprietary VersaFilm™ technology adds value to the product. We currently have two such drug repurposing projects in our development pipeline.

We continue to develop the existing products in our pipeline and may also perform R&D on other potential products as opportunities arise.

We have established a state-of-the-art manufacturing facility with the intent to manufacture all of our VersaFilm™ products in-house as we believe that this:

We initiated a project to expand the existing manufacturing facility, the timing of which will be dictated in part by the completion of agreements with our commercial partners. This expansion might become necessary in order to meet expected production volumes from our commercial partners. The new facility should create a fourfold increase of our production capacity in addition to offering a one-stop shopping opportunity to our partners and provide better protection of our Intellectual Property.

Technology Platforms

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

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

Our VersaFilm™ technology consists of a thin (25-35 micron) polymeric film comprised of United States Pharmacopeia components that are approved by the FDA for use in food, pharmaceutical, and cosmetic products. Derived from the edible film technology used for breath strips and initially developed for the instant delivery of savory flavors to food substrates, the VersaFilm™ technology is designed to provide a rapid response and improved bioavailability compared to existing conventional tablets. Our VersaFilm™ technology is intended for indications requiring rapid onset of action, such as migraine, opioid dependence, chronic pain, motion sickness, erectile dysfunction, and nausea or for drug that have a low oral bioavailability and require transmucosal absorption.

Our VetaFilm™ platform technology is designed for the application in companion animals. Dose acceptance and compliance are often a challenge for the care giver which can be overcome with our newly designed VetaFilm™ platform. VetaFilm™ is specifically formulated with flavors that are appealing to pets and to achieve rapid adhesion to the oral mucosa of the animal to achieve compliance.

Our new DISINTEQ™ oral disintegrating film formulations will provide different dissolution characteristics compared to VersaFilm®. Instead of quickly dissolving in the oral cavity, DISINTEQ™ formulations disintegrate at a controlled rate. This will allow a slower release of the drug into the oral cavity thereby avoiding saturation of the oral mucosal membranes and increasing mucosal absorption.

Product Opportunities that provide Tangible Patient Benefits

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

Development of New Drug Delivery Technologies

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

Most recent key developments

On July 21, 2023, the Company announced the resignation of Mr. J. Bernard (Bernie) Boudreau from the Board of Directors (the "Board") of the Company. Mr. Boudreau was a Director of the Company since 2006 and the Vice Chairman since 2014. He was also the Chair of the Corporate Governance and Nomination Committee.

On July 25, 2023, the Company announced the execution of a Research Grant Agreement with Karolinska University Hospital and that the manufacturing of both active and placebo films is underway in preparation for a planned multicentre, randomized, double-blind, placebo-controlled clinical study (the "Study") to investigate the use of IntelGenx's Montelukast VersaFilm® for the treatment of Parkinson's Disease ("PD").

The Study will be conducted at the Karolinska University Hospital under IntelGenx's previously announced research collaboration with Per Svenningsson, MD, PhD, who will serve as the Study's Principal Investigator. Dr. Svenningsson - a Professor of Clinical Neuroscience who investigates the pathogenic mechanisms of PD - previously conducted a clinical study utilizing the tablet form of Montelukast for the treatment of PD, where 2 tablets of 10 mg Montelukast were administered twice daily, for a total daily dose of 40 mg. Prof. Svenningsson will sponsor the study through a 20 million Swedish Crowns grant (approx. $2 million USD) awarded by the Swedish Research Council, Sweden's largest governmental research funding body.

Upon completion of the Study, IntelGenx will have the option to acquire the developed intellectual property rights and study data for a predetermined low five-digit amount and use the findings to further develop its Montelukast VersaFilm^® program for PD treatment.

On August 01, 2023, the Company announced the completion of patient enrollment in the ongoing Montelukast VersaFilm^® Phase 2a ("BUENA") clinical trial in patients with mild to moderate Alzheimer's Disease.

The Company successfully enrolled 52 patients in the study, 18 fewer than initially planned, in a study design modification that received a No Objection Letter ("NOL") from Health Canada. The NOL provided authorization to proceed with the study changes. IntelGenx, in consultation with its statistical consultant, Cogstate Ltd., determined that adjusting the p-value (which determines whether a drug effect exists) to p<0.1 will provide a basis for determining the extent to which effect sizes (the size of the drug effect) of 0.6 or greater (0.5 to <0.8 are considered 'medium' effect sizes, while 0.8 or greater are considered 'large' effect sizes¹) are statistically significant.

GlobalData recently reported that the AD market is expected to reach $13.7 billion in 2030 across the eight major markets (U.S., France, Germany, Italy, Spain, U.K., Japan, and China), representing a compound annual growth rate of 20.0% from $2.2 billion in 2020. The expansion is primarily attributed to the significant unmet needs posed by AD, combined with the introduction of new therapies, including the recently approved Leqembi and donanemab, which is expected to be approved by year-end.

On August 10, 2023, the Company announced its first agreement for CDMO packaging service, expected to generate approximately $9 million in revenue over three years. The Company has entered into a binding term sheet agreement for the packaging of a pharmaceutical oral film product that its undisclosed CDMO customer is planning to commercialize in the United States. IntelGenx will package (film in pouch) the product at its cGMP manufacturing facility in Montreal.

Subject to satisfaction of remaining conditions, the parties will endeavor to enter into a definitive agreement as soon as is practicable.

On August 31, 2023 the Company announced the closing of the first tranche of a non-brokered private placement (the "Offering") of units ("Units") from atai Life Sciences AG ("atai") for aggregate gross proceeds of approximately US$3 million, including US$750,000 to be received by the Company pursuant to the Subsequent atai Subscription (as defined below) once the Shareholder Approvals (as defined below) have been obtained.

Pursuant to the Offering, (i) United States subscribers can subscribe for Units (the "US Units") at a price of US$1,000 per US Unit, each US Unit being comprised of a US$1,000 principal amount convertible promissory note (the "US Notes") and 5,405 common stock purchase warrants (the "US Warrants).

The US Notes are convertible into shares of common stock of the Company (the "Shares") at the option of the holder at a price of US$0.185 (the "US Conversion Price") at anytime from the date that is six (6) months following their issuance up to and including August 31, 2026, and bear interest at 12% per annum, payable quarterly, in arrears, with first payment due September 30, 2023 and every 3 months thereafter. The US Warrants entitle the holders thereof to purchase Shares at a price of US$0.26 per Share, for a period of 3 years following their issuance.

atai, a significant shareholder and partner of the Company, subscribed for 2,220 US Units for aggregate gross proceeds to the Company of US$2,220,000 (the "Initial atai Proceeds"). In addition, atai committed to subscribe for an additional 750 US Units for additional aggregate proceeds to the Company of US$750,000 (collectively with the Initial atai Proceeds, the "atai Proceeds") on the same terms (the "Subsequent atai Subscription"), subject to the Company obtaining the Shareholder Approvals (as defined below).

IntelGenx intends to use the proceeds of the Offering to fund the Company's wholly-owned Canadian subsidiary, continuing formulation and development efforts related to ongoing collaborations between IGXT and atai as well as working capital and expenses related to the Offering.

All securities issued in connection with the Offering, including Shares issuable pursuant to the conversion of the Notes or exercise of the Warrants, are subject to a 6-month hold period, during which time trading in the securities is restricted in accordance with applicable securities laws.

The Toronto Stock Exchange (the "TSX") has conditionally approved the Offering and the listing of the Shares, subject to the General Cap and the Insider Cap (each as defined below). The Offering and the listing of the Shares issuable in connection with the Offering, including Shares issuable pursuant to the conversion of the Notes or exercise of the Warrants, subject to the General Cap and Insider Cap, are subject to final approval of the TSX upon satisfaction of customary closing conditions.

Amendment to the Amended and Restated Loan Agreement

On August 31, 2023, the Company entered into an amending agreement (the "Amending Agreement") in respect of the amended and restated loan agreement dated as of September 14, 2021 (the "Loan Agreement") between the Company, as borrower, and atai, as lender pursuant to which, among other things, the maturity date of the Loan Agreement was extended from January 5, 2024 to January 5, 2025, and the Company granted additional security to atai over any non-licensed intellectual property of the Company (the "Loan Amendment").

On September 30, 2023, the Company and atai also agreed, subject to obtaining TSX and Shareholders approvals, to enter into a second amendment to the Loan Agreement (the "Second Amendment") to provide, among other things, for the ability for atai to convert the principal and accrued interest outstanding under the Loan Agreement into Shares at the US Conversion Price (the "Conversion Feature"). Assuming the Second Amendment is entered into between the Company and atai prior to the Shareholder Approvals being obtained (as defined below), the Second Amendment will include the same "blocker" provisions as those included in the Notes and the Warrants (see below "Shareholder Approvals").

Call Option

On September 30, 2023, the Company and atai agreed, subject to obtaining TSX approval and the Shareholder Approvals (as defined below), to enter into an amendment (the "Subscription Agreement Amendment") to the subscription agreement entered into by and between the Company and atai in connection with the Offering to provide atai with the right (the "Call Option") to purchase up to an additional 7,401 US Units (the "Call Option Units") at any time prior to August 31, 2026. The Call Option Units, to the extent atai exercises the Call Option in whole or in part, will be issued on the same terms as the US Units, including with respect to the US Conversion Price, maturity date, interest rate and the number of warrants issued in connection therewith. The Subscription Agreement Amendment will provide that the issuance of any Call Option Units will result in a corresponding reduction in atai's remaining purchase right pursuant to the amended and restated securities purchase agreement dated May 14, 2021, which such right to be reduced by the number of Shares issuable upon the conversion of the principal amount outstanding under such issued Call Option Units.

Shareholder Approvals

The Notes and the Warrants include "blocker" provisions to ensure that, unless securityholder approval is obtained in accordance with the rules of the TSX, (i) the aggregate number of Shares issuable in connection with the Offering (upon conversion of the Notes, exercise of the Warrants and/or the payment of interest on the Notes in Shares, as the case may be) is limited to 43,664,524 Shares, which equals 24.99% of the issued and outstanding Shares (on a non-diluted basis) as of the date hereof (the "General Cap"), and (ii) the aggregate number of Shares that may be issued to "insiders" of the Company (as such term is defined in the policies of the TSX) pursuant to the Offering (upon conversion of the Notes, exercise of the Warrants and/or the payment of interest on the Notes in Shares, as the case may be), is limited to 17,465,809 Shares, which equals 9.99% of the issued and outstanding Shares as of the date hereof (the "Insider Cap").

In accordance with the terms of the Notes and the Warrants, the Company intends to seek (i) securityholder approval of the issuance of Shares in connection with the Offering (upon conversion of the Notes, exercise of the Warrants and/or payment of interest on the Notes in Shares, as the case may be) above the General Cap, in accordance with Section 607(g)(i) of the TSX Company Manual (the "General Shareholder Approval"), and (ii) disinterested securityholder approval of the issuance of Shares to "insiders" of the Company (as such term is defined in the policies of the TSX), as of the date hereof, pursuant to the Offering (upon conversion of the Notes, exercise of the Warrants and/or the payment of interest on the Notes in Shares, as the case may be) above the Insider Cap, in accordance with Section 607(g)(ii) of the TSX Company Manual (the "Insider Shareholder Approval").

In addition, approval of the securityholders of the Company will be required in connection with the Conversion Feature, the Call Option and to authorize the Subsequent atai Subscription on the same terms as the Offering (together with the General Shareholder Approval and the Insider Shareholder Approval, the "Shareholder Approvals").

The Company will seek to obtain the Shareholder Approvals at an upcoming special meeting of Shareholders on November 28, 2023.

On September 19, 2023, the Company provided a regulatory update on Buprenorphine Buccal Film, for which an abbreviated new drug application ("ANDA") has been filed with the U.S. Food and Drug Administration ("FDA" or the "Agency") by its co-developer, Chemo Research SL, through its agent and affiliate, Xiromed LLC ("Xiromed").

As previously announced, Xiromed received a Complete Response Letter ("CRL") from the FDA in April 2023. In response to the CRL, Xiromed submitted to the FDA an Amendment to the ANDA, requesting priority review. In an Amendment Acknowledgement received from the FDA by Xiromed, the FDA granted priority review with a Generic Drug User Fee Act ("GDUFA") goal date for review of the Amendment of March 8, 2024, unless the Agency determines that an inspection is required. Alternatively, if the FDA determines that an inspection is required, the GDUFA goal date is July 8, 2024.

On September 21, 2023, the Company announced that it has received the first purchase order ("PO") for RIZAFILM^®1 from its commercial partner in the United States, Gensco Pharma ("Gensco^®").

The PO triggers an upfront order deposit payment. A pre-specified milestone payment to IntelGenx from Gensco^® is also payable upon transfer of NDA. Both payments are reflected in the Company's Q3-2023 financial results. IntelGenx expects to ship the ordered RIZAFILM^® product to Gensco^® in Q1-2024 for immediate launch.

On November 6, 2023, the Company announced that it and Tilray Brands Inc. ("Tilray") have entered into a further amendment (the "Second Amendment") to their November 2018 license, development and supply agreement for the co-development and commercialization of cannabinoid-infused VersaFilm^® products, settling IntelGenx's arbitration claim against Tilray.

Pursuant to the Second Amendment, IntelGenx has received an initial purchase order from Tilray for three SKUs (CBD20, THC10, THC10:CBD 10), with each SKU totalling 130,000 filmstrips. The Second Amendment also allows for IntelGenx's co-development and commercialization of CBD (pursuant to a previous amendment), THC, and combination THC:CBD products with additional partners. The Second Agreement removes any royalties paid to or from Tilray.

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 nine-month period ended September 30, 2023 report an accumulated other comprehensive loss mainly due to foreign currency translation adjustments of $2,167 primarily due to the fluctuations in the rates used to prepare our financial statements, $67 of which positively impacted our comprehensive loss for the nine-month period ended September 30, 2023. The following Management Discussion and Analysis takes this into consideration whenever material.

Reconciliation of Comprehensive Loss to Adjusted Earnings (Loss) before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA (Loss))

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

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

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

Adjusted EBITDA (Loss) improved by $97 for the three-month period ended September 30, 2023 to ($2,067) compared to ($2,164) for the three-month period ended September 30, 2022. The improvement of Adjusted EBITDA (Loss) of $97 for the three-month period ended September 30, 2023 is mainly attributable to an increase in revenues of $176 and a decrease in Manufacturing expenses of $141 before consideration of stock-based compensation, offset by increases in R&D expenses of $165 before consideration of stock-based compensation and SG&A expenses of $55 before consideration of stock-based compensation expense.

Adjusted EBITDA (Loss) increased by $446 for the nine-month period ended September 30, 2023 to ($6,650) compared to ($6,204) for the nine-month period ended September 30, 2022. The increase in Adjusted EBITDA (Loss) of $446 for the nine-month period ended September 30, 2023 is mainly attributable to a decrease in revenues of $164 and increases in SG&A expenses of $234 before consideration of stock-based compensation and R&D expenses of $221 before consideration of stock-based compensation, offset by a decrease in Manufacturing expenses of $173 before consideration of stock-based compensation expense.

Results of operations for the three-month and nine-month periods ended September 30, 2023 compared with the three-month and nine-month periods ended September 30, 2022.