INTELGENX TECHNOLOGIES CORP., 10-Q filed on 11/10/2016
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2016
Nov. 9, 2016
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Sep. 30, 2016 
 
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
 
64,672,021 
Entity Current Reporting Status
Yes 
 
Entity Voluntary Filers
No 
 
Entity Well Known Seasoned Issuer
No 
 
Document Fiscal Year Focus
2016 
 
Document Fiscal Period Focus
Q3 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Current
 
 
Cash and cash equivalents
$ 2,720 
$ 2,865 
Short-term investments
3,002 
Accounts receivable
211 
1,140 
Prepaid expenses
539 
70 
Investment tax credits receivable
171 
97 
Total Current Assets
6,643 
4,172 
Leasehold Improvements and Equipment, net
6,106 
4,238 
Security Deposit
724 
506 
Total Assets
13,473 
8,916 
Current
 
 
Accounts payable and accrued liabilities
826 
1,595 
Current portion of long-term debt
589 
184 
Deferred revenue
4,651 
Total Current Liabilities
6,066 
1,779 
Deferred lease obligations
45 
27 
Long-term debt
2,512 
1,546 
Total Liabilities
8,623 
3,352 
Shareholders' Equity
 
 
Capital Stock, common shares, $0.00001 par value; 100,000,000 shares authorized; 64,672,020 shares issued and outstanding
Additional Paid-in-Capital
23,583 
22,846 
Accumulated Deficit
(18,113)
(16,557)
Accumulated Other Comprehensive Loss
(621)
(726)
Total Shareholders' Equity
$ 4,850 
$ 5,564 
Consolidated Balance Sheets (Parenthetical) (USD $)
Sep. 30, 2016
Dec. 31, 2015
Common Stock, Par Value Per Share
$ 0.00001 
$ 0.00001 
Common Stock, Shares Authorized
100,000,000 
100,000,000 
Common Stock, Shares, Issued
64,672,020 
64,672,020 
Common Stock, Shares, Outstanding
64,672,020 
64,672,020 
Consolidated Statement of Shareholders' Equity (USD $)
In Thousands, except Share data
Capital Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Loss [Member]
Total
Beginning Balance at Dec. 31, 2015
$ 1 
$ 22,846 
$ (16,557)
$ (726)
$ 5,564 
Beginning Balance (Shares) at Dec. 31, 2015
63,615,255 
 
 
 
 
Foreign currency translation adjustment
 
 
 
105 
105 
Warrants exercised
 
596 
 
 
596 
Warrants exercised (Shares)
1,056,765 
 
 
 
 
Stock-based compensation
 
141 
 
 
141 
Net loss for the period
 
 
(1,556)
 
(1,556)
Ending Balance at Sep. 30, 2016
$ 1 
$ 23,583 
$ (18,113)
$ (621)
$ 4,850 
Ending Balance (Shares) at Sep. 30, 2016
64,672,020 
 
 
 
 
Consolidated Statement of Comprehensive Income (Loss) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Revenues
 
 
 
 
Royalties
$ 0 
$ 248 
$ 1,051 
$ 674 
License and other revenue
1,819 
2,135 
2,258 
2,919 
Total Revenues
1,819 
2,383 
3,309 
3,593 
Expenses
 
 
 
 
Cost of royalty, license and other revenue
97 
189 
228 
292 
Research and development expense
388 
274 
1,295 
643 
Selling, general and administrative expense
1,072 
553 
2,837 
1,505 
Depreciation of tangible assets
174 
361 
19 
Amortization of intangible assets
10 
29 
Total Expenses
1,731 
1,032 
4,721 
2,488 
Operating income (loss)
88 
1,351 
(1,412)
1,105 
Interest income
20 
Financing and Interest expense
(60)
(6)
(146)
(101)
Net Income (Loss)
30 
1,352 
(1,556)
1,024 
Other Comprehensive Income (Loss)
 
 
 
 
Foreign currency translation adjustment
32 
(195)
105 
(458)
Comprehensive Income (Loss)
$ 62 
$ 1,157 
$ (1,451)
$ 566 
Basic: Weighted Average Number of Shares Outstanding
63,874,252 
63,589,984 
63,702,536 
63,606,739 
Diluted Earnings (Loss) Per Common Share
$ 0.00 
$ 0.02 
$ (0.02)
$ 0.01 
Diluted: Weighted Average Number of Shares Outstanding
73,541,378 
64,030,092 
63,702,536 
71,725,902 
Diluted Earnings (Loss) Per Common Share
$ 0.00 
$ 0.02 
$ (0.02)
$ 0.01 
Consolidated Statement of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Funds Provided (Used) - Operating Activities
 
 
 
 
Net income (loss)
$ 30 
$ 1,352 
$ (1,556)
$ 1,024 
Amortization and depreciation
174 
16 
361 
48 
Stock-based compensation
49 
25 
141 
105 
Total Adjustments
253 
1,393 
(1,054)
1,177 
Changes in assets and liabilities:
 
 
 
 
Accounts receivable
539 
(763)
929 
(226)
Prepaid expenses
(430)
(469)
22 
Investment tax credits receivable
(21)
(19)
(74)
41 
Security deposit
11 
15 
(218)
(225)
Accounts payable and accrued liabilities
(331)
736 
(769)
874 
Deferred revenue
4,651 
(390)
4,651 
(1,169)
Deferred lease obligations
18 
Net change in assets and liabilities
4,419 
(420)
4,068 
(683)
Net cash from operating activities
4,672 
973 
3,014 
494 
Financing Activities
 
 
 
 
Issuance of term loans
1,569 
394 
Repayment of term loans
(239)
(6)
(309)
(6)
Proceeds from exercise of warrants and stock options
596 
28 
596 
62 
Net cash provided by financing activities
357 
22 
1,856 
450 
Investing Activities
 
 
 
 
Additions to property and equipment
(385)
(1,221)
(2,229)
(2,646)
Acquisition of short-term investments
(3,000)
(3,000)
Net cash used in investing activities
(3,385)
(1,221)
(5,229)
(2,646)
Increase (decrease) in Cash and Cash Equivalents
1,644 
(226)
(359)
(1,702)
Effect of Foreign Exchange on Cash and Cash Equivalents
(20)
(173)
214 
(433)
Cash and Cash Equivalents
 
 
 
 
Beginning of Period
1,096 
2,663 
2,865 
4,399 
End of Period
$ 2,720 
$ 2,264 
$ 2,720 
$ 2,264 
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, 2015. Operating results for the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. 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

The FASB issued Update 2015-16, Business Combinations, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this Update require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments in this Update require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The amendments in this Update apply to all entities that have reported provisional amounts for items in a business combination for which the accounting is incomplete by the end of the reporting period in which the combination occurs and during the measurement period have an adjustment to provisional amounts recognized. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments in this Update should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this Update with earlier application permitted for financial statements that have not yet been issued. The adoption of this Statement did not have a material effect on the Company’s financial position or results of operations.

The FASB issued amendments to ASU 2015-03, Interest – Imputation of Interest, which are intended to simplify the presentation of debt issuance costs. These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The adoption of this Statement did not have a material effect on the Company’s financial position or results of operations.

The FASB issued amendments to ASU 2015-01, Income Statement – Extraordinary and Unusual Items, eliminating from U.S. GAAP the concept of extraordinary items. Subtopic 225-20, Income Statement - Extraordinary and Unusual Items, required that an entity separately classify, present and disclose extraordinary events and transactions. This ASU will also align more closely U.S. GAAP income statement presentation guidance with IAS 1, Presentation of Financial Statements, which prohibits the presentation and disclosure of extraordinary items. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The adoption of this Statement did not have a material effect on the Company’s financial position or results of operations.

The FASB issued ASU No. 2014-12, Compensation – Stock Compensation, which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation – Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The adoption of this Statement did not have a material effect on the Company’s financial position or results of operations.

Recently Issued Accounting Pronouncements

ASU 2016-15 – Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued ASU 2016-15 which clarifies how certain cash receipts and payments are to be presented in the Statement of cash flows. The statement is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

Significant Accounting Policies
Significant Accounting Policies [Text Block]
3.

Significant Accounting Policies

ASU 2016-06 - Derivatives and Hedging (Topic 815) Contingent Put and Call Options in Debt Instruments

The amendments in this Update clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this Update is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence.

For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years and should be applied on a retrospective basis.

ASU 2016-09 - Compensation—Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting

FASB issued this Update as part of its Simplification Initiative. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.

For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued ASU 2016-01, which will significantly change practice for all entities. The targeted amendments to existing guidance are expected to include:

  1.

Equity investments that do not result in consolidation and are not accounted for under the equity method would be measured at fair value through net income, unless they qualify for the proposed practicability exception for investments that do not have readily determinable fair values.

     
  2.

Changes in instrument-specific credit risk for financial liabilities that are measured under the fair value option would be recognized in other comprehensive income.

     
  3.

Entities would make the assessment of the realizability of a deferred tax asset (DTA) related to an available- for-sale (AFS) debt security in combination with the entity’s other DTAs. The guidance would eliminate one method that is currently acceptable for assessing the realizability of DTAs related to AFS debt securities. That is, an entity would no longer be able to consider its intent and ability to hold debt securities with unrealized losses until recovery.

     
  4.

Disclosure of the fair value of financial instruments measured at amortized cost would no longer be required for entities that not public business entities.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

ASU 2016-02: Leases (Topic 842) Section A

The FASB issued ASU 2016-02 to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

These amendments are effective for a public business entity for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

Revenue from Contracts with Customers (Topic 606):

During the nine months ended September 30, 2016, the FASB issued three new amendments related to Topic 606:

  1.

ASU 2016-08: Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) which was issued to add clarification to the implementation guidance on principle versus agent considerations. This amendment does not provide any changes to the previously issued ASU No. 2014-09 and is effective for the same reporting period which was deferred by one year in ASU 2015-14: Revenue From Contracts With Customers (Topic 606), Deferral of the Effective Date.

     
  2.

ASU 2016-10: Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing which was issued to clarifying the following two aspects of topic 606; identifying performance obligations and the licensing implementation guidance. This amendment does not provide any changes to the previously issued ASU No. 2014-09 and is effective for the same reporting period which was deferred by one year in ASU 2015-14: Revenue From Contracts With Customers (Topic 606), Deferral of the Effective Date.

     
  3.

ASU 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting. With this amendment, the SEC Staff is rescinding the following SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive Activities—Oil and Gas, effective upon adoption of Topic 606. This amendment is effective immediately.


The FASB and IASB (the Boards) have issued converged standards on revenue recognition. ASU No. 2014-09 which affects any entity using U.S. GAAP that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

  • Step 1: Identify the contract(s) with a customer.

  • Step 2: Identify the performance obligations in the contract.

  • Step 3: Determine the transaction price.

  • Step 4: Allocate the transaction price to the performance obligations in the contract.

  • Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

This ASU is to be applied retrospectively, with certain practical expedients allowed. The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory

The amendments in this Update more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). An entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method.

The Board has amended some of the other guidance in Topic 330 to more clearly articulate the requirements for the measurement and disclosure of inventory. However, the Board does not intend for those clarifications to result in any changes in practice. Other than the change in the subsequent measurement guidance from the lower of cost or market to the lower of cost and net realizable value for inventory within the scope of this Update, there are no other substantive changes to the guidance on measurement of inventory.

The amendments in this Update do not apply to inventory that is measured using last-in, first-out (LIFO) or theretail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments in this Update should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The adoption of this Statement is not expected to have a material effect on the Company’s financial position or results of operations.

ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern

The FASB has issued ASU No. 2014-15 which is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

ASU 2015-17 – Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”)

In November 2015, the FASB issued ASU 2015-17, which require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position.

The amendments apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments.

For public business entities, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

Bank indebtedness
Bank indebtedness [Text Block]
4.

Bank indebtedness

The Company's credit facility is subject to review annually and consists of an operating demand line of credit of up to CAD$250 thousand and corporate credits cards of up to CAD$75 thousand and USD$55 thousand. Borrowings under the operating demand line of credit bear interest at the Bank’s prime lending rate plus 2%. The credit facility and term loan (see note 6) are secured by a first ranking movable hypothec on all present and future movable property of the Company and a 50% guarantee by Export Development Canada, a Canadian Crown corporation export credit agency. The terms of the banking agreement require the Company to comply with certain debt service coverage and debt to net worth financial covenants on an annual basis at the end of the Company’s fiscal year. As at September 30, 2016, the Company has not drawn on its credit facility.

Deferred revenue
Deferred revenue [Text Block]
5.

Deferred revenue

On August 5, 2016, the Company sold its U.S. royalty on future sales of Forfivo XL ® to SWK Holdings Corporation for $6 million. Under the terms of the agreement, SWK paid IntelGenx $6 million at closing. In return for, (i) 100% of any and all royalties or similar royalty amounts received on or after April 1, 2016, (ii) 100% of the $2 million milestone payment upon Edgemont reaching annual net sales of $15 million, and (iii) 35% of all potential future milestone payments.

The deferred revenue represents the payment received for the royalty on future sales in the amount of $6 milliion less the Q2 royalties recognized in the second quarter in the amount of $352, less the amount recognized in other revenue during the three-month period ended September 30, 2016. The deferred revenue will be recognized as other revenue on a straight-line basis until December 31, 2017.

10% of the proceeds were paid to our former development partner, Cary Pharmaceuticals Inc. This amount is included in prepaid expenses less the portion expensed during the three-month period ended September 30, 2016. This expense will be recognized as cost of royalty, license and other revenue on a straight-line basis until December 31, 2017.

Long-term debt
Long-term debt [Text Block]
6.

Long-term debt

The components of the Company’s debt are as follows:

      September 30, 2016     December 31, 2015  
      $     $  
  (in U.S. $ thousands)            
  Term loan facility   2,453     1,188  
  Secured loan   648     542  
  Total debt   3,101     1,730  
  Less: current portion   589     184  
  Total long-term debt   2,512     1,546  

The Company’s term loan facility consists of a total of CAD$3.5 million bearing interest at the Bank’s prime lending rate plus 2.50% . The term loan is subject to the same security and financial covenants as the bank indebtedness (see note 4).

The secured loan has a principal balance authorized of CAD$1 million, bearing interest at prime plus 7.3%, reimbursable in monthly principal payments of CAD$14 thousand from January 2017 to December 2021. During the three-month period ended September 30, 2016, the Company made a CAD$150 thousand payment which decreased the principal balance outstanding to CAD$850 thousand as at September 30, 2016. The loan is secured by a second ranking on all present and future property of the Company. The terms of the banking agreement require the Company to comply with certain debt service coverage and debt to net worth financial covenants on an annual basis at the end of the Company’s fiscal year.

  Principal repayments due in each of the next five years are as follows:  
  (in U.S. $ thousands)      
  2016 $ 123  
  2017   621  
  2018   621  
  2019   621  
  2020   621  
  Thereafter   494  
Capital Stock
Capital Stock [Text Block]
7.

Capital Stock


      September 30,     December 31,  
      2016     2015  
  Authorized -            
  100,000,000 common shares of $0.00001 par value            
  20,000,000 preferred shares of $0.00001 par value            
  Issued -            
  64,672,020 (December 31, 2015 - 63,615,255) common shares $ 647   $ 636  
Related Party Transactions
Related Party Transactions [Text Block]
9.

Related Party Transactions

Included in management salaries are $2 thousand (2015 - $1 thousand) for options granted to the Chief Executive Officer, $45 thousand (2015 - $25 thousand) for options granted to the Chief Financial Officer, $9 thousand (2015-$6 thousand) for options granted to the Vice President, Operations, $4 thousand (2015 - nil) for options granted to the Vice-President, Research and Development, $21 thousand (2015 - nil) for options granted to the former Vice President, Corporate Development, and $1 thousand for options granted to Vice-President, Business and Corporate Development (2015 – nil) under the 2006 Stock Option Plan and $45 thousand (2015 - $61 thousand) for options granted to non-employee directors.

Also included in management salaries are director fees of $137 thousand (2015 - $198 thousand).

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]
10.

Basic and Diluted Earnings (Loss) Per Common Share

Basic and diluted earnings (loss) per common share is calculated based on the weighted average number of shares outstanding during the period. Common equivalent shares from stock options and warrants are also included in the diluted per share calculations unless the effect of the inclusion would be antidilutive.

Summary of Significant Accounting Policies (Policies)

ASU 2016-06 - Derivatives and Hedging (Topic 815) Contingent Put and Call Options in Debt Instruments

The amendments in this Update clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this Update is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence.

For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years and should be applied on a retrospective basis.

ASU 2016-09 - Compensation—Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting

FASB issued this Update as part of its Simplification Initiative. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.

For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued ASU 2016-01, which will significantly change practice for all entities. The targeted amendments to existing guidance are expected to include:

  1.

Equity investments that do not result in consolidation and are not accounted for under the equity method would be measured at fair value through net income, unless they qualify for the proposed practicability exception for investments that do not have readily determinable fair values.

     
  2.

Changes in instrument-specific credit risk for financial liabilities that are measured under the fair value option would be recognized in other comprehensive income.

     
  3.

Entities would make the assessment of the realizability of a deferred tax asset (DTA) related to an available- for-sale (AFS) debt security in combination with the entity’s other DTAs. The guidance would eliminate one method that is currently acceptable for assessing the realizability of DTAs related to AFS debt securities. That is, an entity would no longer be able to consider its intent and ability to hold debt securities with unrealized losses until recovery.

     
  4.

Disclosure of the fair value of financial instruments measured at amortized cost would no longer be required for entities that not public business entities.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

ASU 2016-02: Leases (Topic 842) Section A

The FASB issued ASU 2016-02 to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

These amendments are effective for a public business entity for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

Revenue from Contracts with Customers (Topic 606):

During the nine months ended September 30, 2016, the FASB issued three new amendments related to Topic 606:

  1.

ASU 2016-08: Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) which was issued to add clarification to the implementation guidance on principle versus agent considerations. This amendment does not provide any changes to the previously issued ASU No. 2014-09 and is effective for the same reporting period which was deferred by one year in ASU 2015-14: Revenue From Contracts With Customers (Topic 606), Deferral of the Effective Date.

     
  2.

ASU 2016-10: Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing which was issued to clarifying the following two aspects of topic 606; identifying performance obligations and the licensing implementation guidance. This amendment does not provide any changes to the previously issued ASU No. 2014-09 and is effective for the same reporting period which was deferred by one year in ASU 2015-14: Revenue From Contracts With Customers (Topic 606), Deferral of the Effective Date.

     
  3.

ASU 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting. With this amendment, the SEC Staff is rescinding the following SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive Activities—Oil and Gas, effective upon adoption of Topic 606. This amendment is effective immediately.


The FASB and IASB (the Boards) have issued converged standards on revenue recognition. ASU No. 2014-09 which affects any entity using U.S. GAAP that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

  • Step 1: Identify the contract(s) with a customer.

  • Step 2: Identify the performance obligations in the contract.

  • Step 3: Determine the transaction price.

  • Step 4: Allocate the transaction price to the performance obligations in the contract.

  • Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

This ASU is to be applied retrospectively, with certain practical expedients allowed. The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory

The amendments in this Update more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). An entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method.

The Board has amended some of the other guidance in Topic 330 to more clearly articulate the requirements for the measurement and disclosure of inventory. However, the Board does not intend for those clarifications to result in any changes in practice. Other than the change in the subsequent measurement guidance from the lower of cost or market to the lower of cost and net realizable value for inventory within the scope of this Update, there are no other substantive changes to the guidance on measurement of inventory.

The amendments in this Update do not apply to inventory that is measured using last-in, first-out (LIFO) or theretail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments in this Update should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The adoption of this Statement is not expected to have a material effect on the Company’s financial position or results of operations.

ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern

The FASB has issued ASU No. 2014-15 which is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

ASU 2015-17 – Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”)

In November 2015, the FASB issued ASU 2015-17, which require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position.

The amendments apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments.

For public business entities, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently evaluating the impact of this Statement on its consolidated financial statements.

Long-term debt (Tables)
      September 30, 2016     December 31, 2015  
      $     $  
  (in U.S. $ thousands)            
  Term loan facility   2,453     1,188  
  Secured loan   648     542  
  Total debt   3,101     1,730  
  Less: current portion   589     184  
  Total long-term debt   2,512     1,546  
  Principal repayments due in each of the next five years are as follows:  
  (in U.S. $ thousands)      
  2016 $ 123  
  2017   621  
  2018   621  
  2019   621  
  2020   621  
  Thereafter   494  
Capital Stock (Tables)
Schedule of Stock by Class [Table Text Block]
      September 30,     December 31,  
      2016     2015  
  Authorized -            
  100,000,000 common shares of $0.00001 par value            
  20,000,000 preferred shares of $0.00001 par value            
  Issued -            
  64,672,020 (December 31, 2015 - 63,615,255) common shares $ 647   $ 636  
Bank indebtedness (Narrative) (Details)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2016
USD ($)
Sep. 30, 2016
CAD ($)
Bank Indebtedness 1
 
$ 250 
Bank Indebtedness 2
 
75 
Bank Indebtedness 3
$ 55 
 
Bank Indebtedness 4
2.00% 
2.00% 
Bank Indebtedness 5
50.00% 
50.00% 
Deferred revenue (Narrative) (Details) (USD $)
9 Months Ended
Sep. 30, 2016
Deferred Revenue 1
$ 6,000,000 
Deferred Revenue 2
6,000,000 
Deferred Revenue 3
100.00% 
Deferred Revenue 4
100.00% 
Deferred Revenue 5
2,000,000 
Deferred Revenue 6
15,000,000 
Deferred Revenue 7
35.00% 
Deferred Revenue 8
Deferred Revenue 9
$ 352 
Deferred Revenue 10
10.00% 
Long-term debt (Narrative) (Details) (CAD $)
9 Months Ended
Sep. 30, 2016
Long-term Debt 1
$ 3,500,000 
Long-term Debt 2
2.50% 
Long-term Debt 3
1,000,000 
Long-term Debt 4
7.30% 
Long-term Debt 5
14,000 
Long-term Debt 6
150,000 
Long-term Debt 7
$ 850,000 
Related Party Transactions (Narrative) (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Related Party Transactions 1
$ 2 
Related Party Transactions 2
Related Party Transactions 3
45 
Related Party Transactions 4
25 
Related Party Transactions 5
Related Party Transactions 6
Related Party Transactions 7
Related Party Transactions 8
Related Party Transactions 9
21 
Related Party Transactions 10
Related Party Transactions 11
Related Party Transactions 12
Related Party Transactions 13
45 
Related Party Transactions 14
61 
Related Party Transactions 15
137 
Related Party Transactions 16
$ 198 
Term loan (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Long-term Debt Term Loan 1
$ 2,453 
Long-term Debt Term Loan 2
1,188 
Long-term Debt Term Loan 3
648 
Long-term Debt Term Loan 4
542 
Long-term Debt Term Loan 5
3,101 
Long-term Debt Term Loan 6
1,730 
Long-term Debt Term Loan 7
589 
Long-term Debt Term Loan 8
184 
Long-term Debt Term Loan 9
2,512 
Long-term Debt Term Loan 10
$ 1,546 
Term loan principal repayments (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Long-term Debt Term Loan Principal Repayments 1
$ 123 
Long-term Debt Term Loan Principal Repayments 2
621 
Long-term Debt Term Loan Principal Repayments 3
621 
Long-term Debt Term Loan Principal Repayments 4
621 
Long-term Debt Term Loan Principal Repayments 5
621 
Long-term Debt Term Loan Principal Repayments 6
$ 494 
Schedule of Stock by Class (Details) (USD $)
9 Months Ended
Sep. 30, 2016
Capital Stock Schedule Of Stock By Class 1
100,000,000 
Capital Stock Schedule Of Stock By Class 2
$ 0.00001 
Capital Stock Schedule Of Stock By Class 3
20,000,000 
Capital Stock Schedule Of Stock By Class 4
0.00001 
Capital Stock Schedule Of Stock By Class 5
64,672,020 
Capital Stock Schedule Of Stock By Class 6
63,615,255 
Capital Stock Schedule Of Stock By Class 7
647 
Capital Stock Schedule Of Stock By Class 8
$ 636