UNITED STATES

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-KSB

[X] ANNUAL REPORT PURSUANT TO SECTION13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2007

[ ] 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.

(Name of Small Business Issuer in its Charter)

Delaware
        87-0638336(State or other jurisdiction of
        (I.R.S. Employerincorporation or organization)
        Identification No.)


6425 Abrams, Ville Saint Laurent, Quebec, H4S 1X9(Address of principal executive offices)

(514) 331-7440(Issuer's telephone number, including area code)

Securities registered pursuant to Section 12(g) of the Exchange Act: None.

Securities registered pursuant to Section
12(g) of the Act:Common Stock ($0.00001 par value)

Check whether the issuer is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act.

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12
months (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

Check if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).   Yes

The issuers revenues for the most recent fiscal year were
$862,731.

The aggregate market value of the voting and non-voting
common equity held by non-affiliates of the issuer was approximately $4,051,959
based on the average closing bid and ask price of $0.80 for the common stock on
March 24, 2008.

16,162,331 shares of the issuers common stock, par value
$.00001 per share, were issued and outstanding as of March 24, 2008.

Documents Incorporated by Reference: None.

Transitional Small Business Disclosure Format: No.

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IntelGenx Technologies Corp.FORM 10-KSB

For the Year Ended December 31, 2007

INDEX

|PART I     |                                                                                                                                                |   
|---------- | ---------------------------------------------------------------------------------------------------------------------------------------------- | --
|           | Special Note Regarding
    Forward-Looking Statements                                                                                          | 3 
|Item 1.    | Description of
    Business                                                                                                                    | 4 
|Item 2.    | Description of
    Property                                                                                                                    | 17
|Item 3.    | Legal Proceedings                                                                                                                              | 17
|Item 4.    | Submission of Matters
    to a Vote of Security Holders                                                                                        | 17
|           |                                                                                                                                                |   
|PART II    |                                                                                                                                                |   
|Item 5.    | Market for Common
    Equity and Related Stockholder Matters                                                                                   | 18
|Item 6.    | Management Discussion
    and Analysis of Financial Condition                                                                                  | 19
|Item 7.    | Financial Statements                                                                                                                           | 26
|Item 8.    | Changes in and
    Disagreements with Accountants on Accounting and
    Financial Disclosure                                                   | 26
|Item 8A    | Controls and
    Procedures                                                                                                                    | 27
|Item 8B    | Other Information                                                                                                                              | 27
|           |                                                                                                                                                |   
|PART III   |                                                                                                                                                |   
|Item 9.    | Directors, Executive
    Officers, Promoters, Control Persons and Corporate Governance; Compliance
    with Section 16(a) of the Exchange Act. | 27
|Item 10.   | Executive Compensation                                                                                                                         | 31
|Item 11.   | Security Ownership of
    Certain Beneficial Owners and Management and Related Stockholder
    Matters                                         | 34
|Item 12.   | Certain Relationships
    and Related Transactions, and Director Independence                                                                  | 35
|Item 13.   | Exhibits                                                                                                                                       | 36
|Item 14.   | Principal Accountant
    Fees and Services                                                                                                     | 37
|           |                                                                                                                                                |   
|SIGNATURES |                                                                                                                                                | 38
|           |                                                                                                                                                |   
|EXHIBITS   |                                                                                                                                                | 40

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-KSB for the year ended December
31, 2007 includes forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Securities Exchange Act of 1934, as amended (the " Exchange Act").
All statements, other than statements of historical fact, contained in this
Annual Report constitute forward-looking statements. In some cases you can
identify forward-looking statements by terms such as "may," "intend," "might,"
"will," "should," "could," "would," "expect," "believe," "estimate,"
"anticipate," "predict," "project," "potential," or the negative of these terms
and similar expressions intended to identify forward-looking statements.
Forward-looking statements are based on assumptions and
estimates and are subject to risks and uncertainties. We have identified in this
Annual Report some of the factors that may cause actual results to differ
materially from those expressed or assumed in any of our forward-looking
statements. There may be other factors not so identified. You should not place
undue reliance on our forward-looking statements. As you read this Annual
Report, you should understand that these statements are not guarantees of
performance or results. Further, any forward-looking statement speaks only as of
the date on which it is made and, except as required by law, we undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which it is made or to reflect the occurrence of
anticipated or unanticipated events or circumstances. New factors emerge from
time to time that may cause our business not to develop as we expect and it is
not possible for us to predict all of them. Factors that may cause actual
results to differ materially from those expressed or implied by our
forward-looking statements include, but are not limited to, those described
under the heading "Risk Factors" beginning on page 10, as well as the following:
Our limited operating history and
  business development;Our history of operating losses,
  which we expect to continue;Our ability to generate enough
  positive cash flow to pay our creditors;Our dependence on key personnel;Our need to attract and retain
  technical and managerial personnel;Our ability to execute our business
  strategy;Intense competition with
  established leaders in the drug delivery industry;
  Our ability to protect our
  intellectual property and proprietary technologies;
  Costs associated with potential
  intellectual infringement claims asserted by a third party;
  Our exposure to potential product
  liability claims resulting from the use of our products;

General economic and capital market
  conditions, including political and economic uncertainty in various areas of
  the world where we do business;

Our exposure to unanticipated and
  uncontrollable business interruptions;

Pricing and product actions taken
  by our competitors;

Financial conditions of our
  customers;

Customers perception of our
  financial condition relative to that of our competitors;

Changes in United States, Canadian
  or foreign tax laws or regulations;

Reliance upon
  suppliers and risks of production disruptions and supply and capacity
  constraints;

Our dependence on
  our pharmaceutical partners;

Costs of raw materials and energy;

Unforeseen liabilities arising from
  litigation;

Our ability to successfully
  complete the integration of any future acquisitions;

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Our exposure to undisclosed liabilities of the public shell corporation;Our ability to project the market for our products based upon estimates
  and assumptions; and
  Our ability to obtain regulatory approvals needed to market our products.PART I
ITEM 1. DESCRIPTION OF BUSINESS

In this annual report on Form 10-KSB, the "Company," "IntelGenx"
"we," "us," and "our," refer collectively to IntelGenx Technologies Corp. and
IntelGenx Corp., our wholly-owned Canadian subsidiary ("IntelGenx").
Corporate History

The Company, formerly known as Big Flash Corp., was
incorporated in Delaware on July 27, 1999. On April 28, 2006, the Company,
directly and indirectly through its Canadian holding corporation, completed the
acquisition of 100% of the issued and outstanding shares and warrants of
IntelGenx Corp., a Canadian company incorporated on June 15, 2003. The Company
did not have any operations prior to the acquisition of IntelGenx. In connection
with the acquisition, we changed our name from Big Flash Corp. to IntelGenx
Technologies Corp. IntelGenx Corp. has continued operations as our operating
subsidiary.
Our principal office is located at 6425 Abrams, Ville
St-Laurent, Montreal, Quebec, H4S 1X9. Our website is located at
www.IntelGenx.com. The contents of our website are not incorporated into this
filing.Inter-corporate RelationshipsOverview

We are a drug delivery company focusing on the
development of novel, orally administered drug delivery systems based on our
proprietary oral drug delivery technologies. We have positioned ourselves as a
provider of product development services for the pharmaceutical industry,
including the branded and generic pharmaceutical markets.
Drug delivery systems are an important tool in
the hands of physicians for purposes of optimizing drug therapy. For the
pharmaceutical industry, drug delivery systems represent an opportunity to
extend the market exclusivity and product lifecycle of drugs whose patent
protection is ending.
According to a report by CMR International,
products incorporating drug delivery systems represented 13% of the US $337
billion global pharmaceutical market. In the United States, sales of drug
delivery products totaled $35 billion in 2006. Of this amount, the orally
administered segment of the drug delivery market totaled $21 billion in sales.
Controlled release (CR) dosage technologies play an important role in the
development of orally administered drug delivery systems. Control release
technology provides patients with the required amount of medication over a
pre-determined, prolonged period of time, preferably over 24 hours. Because of
the reduced fluctuation of the active drug in the blood, controlled release
products are deemed safer and more tolerable than conventional dosage forms, and
have shown better patient compliance.
4Our primary business strategy is to develop pharmaceutical
products based upon our proprietary drug delivery technologies and license the
commercial rights to companies in the pharmaceutical industry once the viability
of a product has been demonstrated. In exchange for licensing rights to our
products, we seek funding consisting of advance down payments, milestone fees,
reimbursement for development costs, and royalties on sales. The companies we
partner with are responsible for managing the regulatory approval process of the
product with the U.S. Food & Drug Administration ("FDA") and/or other regulatory
bodies, as well as for the marketing and distribution of the products.
In addition to pursuing partnering arrangements that provide
for the full funding of a drug development project, we are planning to undertake
development of selected product opportunities until the marketing and
distribution stage. We would first assess the potential and associated costs for
successful development of a product, and then determine at which stage it would
be most prudent to seek a partner, balancing costs against the potential for
higher returns later in the development process.
Technology Platforms

Our product development efforts are based upon three delivery
platform technologies: (1) a Tri-Layer Tablet technology (2) a Quick Release
wafer technology, and (3) a Mucoadhesive Tablet technology. Our Tri-layer
platform technology allows for the development of oral controlled release
products. It is versatile and is aimed at significantly reducing manufacturing
costs as compared to competing delivery technologies. The Quick Release Wafer
technology allows for the instant delivery of pharmaceuticals to the oral
cavity. The Mucoadhesive Tablet allows for the controlled release of active
substances to the oral mucosa.
The Tri-Layer platform technology represents a new generation
of controlled release layered tablets to modulate the release of active
compounds. The technology is based on a tri-layer tablet with an active core
layer and erodible cover layers. The release of the active drug from the core
matrix initially occurs in a first-order fashion. As the erodible layers start
to disintegrate, the permeation of the active ingredient through the cover
layers increases. Thus, the Tri-Layer tablet can produce quasi-linear
(zero-order) kinetics for releasing a chemical compound over a desired period of
time. The erosion rate of the cover layers can be customized according to the
physico-chemical properties of the active drug. In addition, our multi-layer
technology offers the opportunity to develop combination products in a
regulatory-compliant format. Combination products are made up of two or more
active ingredients that are combined into a single dosage form.
The Quick Release Wafer is made up of a thin (25-35 micron)
polymeric film comprised of USP components that are safe and approved by the
Food and Drug Administration (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 Instant Delivery Film has distinct advantages over existing fast
dissolving oral tablets, thereby making it an attractive choice for indications
requiring rapid onset of action like migraine, motion sickness and nausea.
The Mucoadhesive Tablet is an innovative drug delivery system
capable of adhering to the oral mucosa and releasing the drug onto the site of
application at a desired rate. The Mucoadhesive Tablet exhibits many advantages:
i) it avoids the first pass effect (whereby the liver metabolizes the active and
greatly reduces the level of drug in the systemic circulation), ii) it leads to
a higher absorption rate as compared to the conventional oral route and iii) it
achieves a rapid onset of action for the drug. The Mucoadhesive Tablet
technology is a versatile one where the site of application, residence time and
rate of release of the drug can be modulated to achieve the desired results.
Product Portfolio

We have assembled a product portfolio that includes a blend
of generic products that management believes have the potential to generate
short-term revenues by presenting  branding opportunities that are based on our
proprietary delivery technology.
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INT0001/2004. This is the most advanced generic product
involving our trilayer technology. Equivalency with the reference product Toprol
XL and its European equivalent Beloc-ZOK has been demonstrated in-vitro.
The product has been tested in phase I studies.
INT0003/2005. We have entered into a partnership with Cary
Pharmaceuticals for the development of a once-daily tablet product containing an
antidepressant and a nicotine antagonist. The product is intended for smoking
cessation.
INT0004/2006. The formulation development for an antidepressant has been
completed and clinical (phase I) development has commenced.
INT0005/2005. We are developing a bilayer tablet containing a
fixed-dose combination of a non-steroidal anti-inflammatory drug and a synthetic
prostaglandin. Formulation development is completed and a pilot bio batch has
been manufactured.
INT0006/2005. We have entered into a development agreement
with Azur Pharma for the development and manufacture of a prenatal vitamin
supplement. The product was developed using our proprietary technology. We
expect to commercialize the product in mid 2008.
INT0010/2006. We have entered into an agreement with Cannasat
Therapeutics Inc. for the development of a sublingual tablet product containing
a cannabinoid-based drug for the treatment of neuropathic pain and nausea in
cancer patients undergoing chemotherapy.
INT0011/2007 Under a development agreement with Cannasat Therapeutics Inc.,
we are developing a controlled-release tablet containing Cannabidiol for the
treatment of schizophrenia.
INT0007/2006. A wafer product based on our proprietary edible film technology
is in early development stage. The product is intended for the treatment of
erectile dysfunction (ED).
INT0008/2007. A wafer product based on our proprietary edible film technology
is in early development stage. The product is intended for the treatment of
migraine.
The current development status of each of our products is summarized in the
following table:

|Product      | Application       | Status of Development         
|------------ | ----------------- | ------------------------------
|             |                   |                               
|INT0001/2004 | CHF, Hypertension | Pivotal batches in preparation
|INT0003/2005 | Smoking cessation | Pilot biostudy completed      
|INT0004/2006 | Antidepressant    | Pivotal batches completed     
|INT0010/2006 | neuropathic pain  | Pilot biostudy completed      
|INT0006/2005 | Prenatal vitamin  | Manufacturing scale-up        
|             | supplement        |                               
|INT0005/2005 | Osteoarthritis    | Pilot batch completed.        
|INT0007/2006 | ED                | Formulation development       
|             |                   | ongoing                       
|INT0008/2007 | Migraine          | Formulation development       
|             |                   | ongoing                       
|INT0011/2007 | Schizophrenia     | Formulation development       
|             |                   | ongoing                       

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Our Strategy

Our primary growth strategies include: (1) identifying
lifecycle management opportunities for existing "blockbuster" products, (2)
developing generic drugs with high barriers to entry, (3) developing products
for the (non-pharmaceutical) nutritional supplement market, and (4) new drug
delivery technologies.
Lifecycle Management Opportunities

To achieve our goal of creating attractive business
opportunities, we have undertaken a strategy under which we will position our
delivery technologies as an opportunity for lifecycle management of products for
which the patent protection of the active ingredient is nearing expiration.
While the patent for the underlying substance cannot be extended, patent
protection can be obtained for a new and improved formulation by filing an
application with the FDA under Section 505(b)(2) of the Food, Drug and Cosmetic
Act. The first formulation for a respective active ingredient which is filed
with the FDA under a 505(b)(2) application may qualify for three years of market
exclusivity upon approval. Based upon a review of past partnerships between
third party drug delivery companies and pharmaceutical companies, management
believes that drug delivery companies which possess innovative technologies to
develop these special dosage formulations present an attractive opportunity to
pharmaceutical companies. Accordingly, we believe these "505(b)(2) products"
represent the most attractive opportunity for us to date.
Generic Drugs with High Barriers to Entry

We will also plan to pursue the development generic drugs
that have certain barriers to entry, e.g., where product development and
manufacturing are complex and can limit the number of potential entrants into
the generic market. We plan to pursue such projects if there is a strong chance
the number of competitors will be small. An example of such a product is our pro
INT0005/2005, a fixed-dose combination medication requiring complex formulation
and manufacturing technology. Our goal is that this will be the first such
product to file for FDA approval.
Nutritional Supplement Products

We plan to develop additional products for the nutritional
supplement market based upon our proprietary drug delivery technologies. The
market for these supplements is large, with little differentiation between
products. Our proprietary technology is aimed at increasing the absorption rate
of active ingredients. We believe that supplements represent attractive short
term revenue opportunities since they are not as regulated as pharmaceutical
products and do not require FDA approval.
Development of New Drug Delivery Technologies

The rapidly disintegrating film technology contained in our
Quick Release Wafer and our mucosal adhesive tablet are examples 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 that may open up new market sectors for us in the future.
Competition

The pharmaceutical industry is highly competitive and is
subject to the rapid emergence of new technologies, governmental regulations,
healthcare legislation, availability of financing, patent litigation and other
factors. Many of our competitors, including Biovail Corporation, Labopharm Inc.,
and Flamel Technologies S.A., have longer operating histories and greater
financial, technical, marketing, legal and other resources than us. In addition,
many of our competitors have significantly greater experience than we have in
conducting clinical trials of pharmaceutical products, obtaining FDA and other
regulatory approvals of products, and marketing and selling products that have
been approved. We expect that we will be subject to competition from numerous
other companies that currently operate or are planning to enter the markets we
compete in.
The key factors affecting the success of our drug delivery
products are likely to include, among other factors:
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The safety and
  efficacy of our products;
  The relative speed
  with which we can develop products;
  generic competition
  for any product that we develop;
  our ability to
  defend our existing intellectual property and to broaden our IP and technology
  base;
  Our ability to differentiate our products;
  Our ability to manufacture our products in compliance with
  cGMP and any other regulatory requirementsIn order to establish ourselves as a viable industry partner,
we have to continue to invest in our research and development activities in
order to further strengthen our technology base and to develop the ability to be
able to manufacture our products through our manufacturing partner at
competitive costs.
Our Competitive Strengths

We believe that our key competitive strengths include:
Our intellectual
  property;The versatility of
  our drug delivery technology ; and
  The manufacturing
  cost savings associated with our technology.

Manufacturing Partnership

We have entered into a collaboration agreement with Keata
Pharma Inc., a wholly owned subsidiary of PharmEng International Inc., based in
Markham, Ontario. Under this agreement, Keata Pharma is our preferred supplier
for the manufacturing of clinical test batches and commercial products. We also
have a reciprocal relationship whereby we recommend Keata Pharma to our partners
for pharmaceutical manufacturing services and Keata Pharma promotes our product
development services to pharmaceutical companies.
Dependence on Major Customers

We do not rely on any one or a few major customers for our
end products. However, we depend upon a limited number of partners for the
development of new products, and to assist in obtaining approvals from
regulatory bodies such as the FDA that are required in order to commercialize
these products.
Intellectual Property and Patent Protection

We protect our intellectual property and technology by
applying for patent protection in the United States and in the most relevant
foreign markets, and through non-disclosure agreements, license agreements and
appropriate restrictions and controls on the distribution of information. We
plan to file core technology patents covering the use of our platform
technologies in any pharmaceutical products. We also rely on trade secrets,
common law trademark rights and trademark registrations.
8
The following table is a list of our three (3) issued and
seven (7) pending patents:

|             |                         |                                       | Date submitted /   
|------------ | ----------------------- | ------------------------------------- | -------------------
|Patent No.   | Title                   | Subject                               | issued             
|US 6,231,957 | Rapidly disintegrating  | The composition, manufacturing,       |                    
|             | flavor wafer for flavor | and use of rapidly
    disintegrating | Issued May 15, 2001
|             | enrichment              | flavored films for
    releasing      |                    
|             |                         | flavors to certain substrates         |                    

|US 6,660,292       | Rapidly disintegrating | Composition and
    manufacturing     |                      
|------------------ | ---------------------- | ------------------------------------- | ---------------------
|                   | film for precooked     | of flavored films for
    releasing   | Issued December 9,   
|                   | foods                  | flavors to precooked
    food         | 2003                 
|                   |                        | substrates                            |                      
|US 7,132,113       | Flavored film          | Composition and manufacturing         |                      
|                   |                        | method of multi-layered films         | Issued April 16, 2002
|US Appl.           | Multilayer Tablet      | Formulation and Method of             |                      
|2007/0190144       |                        | Preparation of
    Multilayered       | Published August 16, 
|                   |                        | Tablets                               | 2007                 
|US Appl.           | Multi-Vitamin And      | Formulation And Method of             |                      
|2007/0128272       | Mineral Supplement     | Preparation of Prenatal               | Published June 7,    
|                   |                        | Multivitamin Supplement               | 2007                 
|                   |                        |                                       |                      
|PCT/CA2006/0003    | Delayed Release Oral   | Formulation And Method Of             |                      
|36;US Appl.        | Dosage Form And        | Making Bilayer Tablets
    Containing | February 13, 2006    
|11/403,262         | Method Of Making       | Delayed-Release
    Diclofenac And    |                      
|                   | Same                   | Misoprostol                           |                      
|US Appl.           | Controlled Release     | Formulation And Method Of             | July 2006            
|11/782,838         | Pharmaceutical Tablets | Making Tablets Containing             |                      
|PCT/IB2007/03950   |                        | Bupropion And Mecamylamine            |                      
|                   |                        |                                       |                      
|US Appl. Make      | Stabilized sustained-  | Formulation And Method Of             |                      
|Special 11/828,287 | release Bupropion and  | Making Tablets
    Containing         | August 2007          
|                   | Bupropion /            | Bupropion And
    Mecamylamine        |                      
|                   | Mecamylamine tablets   |                                       |                      
|US Provisional     | Buccal And Sublingual  | Formulation And Method of             | July 2007            
|Appl.
    Attorney | Dosage Forms           | Preparation of mucoadhesive           |                      
|Docket INT34 P-    |                        | tablets containing THC                |                      
|311                |                        |                                       |                      
|US Provisional     | Cannabinoid            | Formulation And Method of             | July 2007            
|Appl. Attorney     | Complexes              | Preparation of gamma-cyclodextrin     |                      
|Docket INT34 P-    |                        | complexes containing
    CBD          |                      
|310                |                        |                                       |                      

Government Regulation

The pharmaceutical industry is highly regulated. We must
remain current with FDA and other regulatory requirements in order to get new
products approved. Failing to follow FDA and regulatory requirements could lead
to higher R&D expenses. We are responding to these regulatory challenges by
focusing on 505(b)(2) opportunities. By applying our drug delivery technology to
existing drugs, we have access to high-potential product opportunities at lower
R&D expenses and shorter time-to-market timelines compared to new chemical
entity NDA (New Drug Application) products.

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Research and Development

We are currently working on several 505(b)(2) opportunities
using our Tri-Layer and Quick Release Wafer platform technologies. We source our
505(b)(2) projects in two ways: (1) either we develop a product to "proof of
concept" and then solicit potential pharmaceutical partners, or (2) potential
partners approach us directly or through the use of an intermediary with a
product idea for development. The

Environmental Regulatory Compliance

We believe that we are in compliance with environmental regulations
applicable to our research and development facility located in Ville
Saint-Laurent, Quebec.

Employees

As of December 31, 2007, we had seven full-time employees and
two consultants on staff. Five full-time employees and one consultant are
directly involved in product development activities. Our technical staff
includes one individual with a Ph.D., one individual with an M.D., and three
individuals with Masters of Science degrees.

RISK FACTORS

This report contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
discussed in this report. Factors that cause or contribute to these differences
include, but are not limited to, those discussed below, elsewhere in this
report, and in any documents incorporated in this report by reference.

Risks Related to Our Business

We continue to sustain losses and our revenues are minimal.

Even though we completed the development stage of our
operations in April 2006 when we commenced consistently generating revenues from
our operations, we are still subject to all of the risks inherent in both the
creation of a new business and the development of new products. Our cash flows
may be insufficient to meet expenses relating to our operations and the
development of our business, and may be insufficient to allow us to develop new
products. We currently conduct research and development using our proprietary
platform technologies to develop oral controlled released and other delivery
products. We do not know if we will always be successful in the development of
such products.

We have an accumulated deficit of approximately $1,918,658
since our inception in 2003. To date, these losses have been financed
principally through sales of equity securities, long-term debt and debt from
related parties. Our revenues for the years ended December 31, 2007, December
31, 2006, December 31, 2005 and December 31, 2004 were $862,731, $265,901,
$19,990 and $257,374 respectively. Our revenues consisted primarily of
development fee revenues from four clients and have not been sufficient to
sustain our operations. In order to achieve profitability, our revenue streams
will have to increase and even though we expect increased revenues from
development fees in 2008, there is no assurance that revenues can increase to
such a level. Additional capital and/or borrowings will be necessary in order
for us to continue in existence until we are able to attain and sustain
profitable operations.

We are subject to currency fluctuations, which may affect our results.

The majority of our expenses are in Canadian dollars, while
our revenues are primarily in U.S. dollars. The fluctuation of the Canadian
dollar and the U.S. dollar could materially impact our operating results and
financial position.

We may need additional capital to fulfill our business
strategies. We may also incur unforeseen costs. Failure to obtain such capital
would adversely affect our business.

We will need to expend significant capital in order to
continue with our research and development by hiring additional research staff
and acquiring additional equipment. If our cash flows from operations are
insufficient to fund our expected capital needs, or our needs are greater than
anticipated, we will be required to raise additional funds in the future through
private or public sales of equity securities or the incurrence of additional
indebtedness. Additional funding may not be available on favorable terms, or at
all. If we borrow additional funds, we
likely will be obligated to make periodic interest or other debt service
payments and may be subject to additional restrictive covenants. If we fail to
obtain sufficient additional capital in the future, we could be forced to
curtail our growth strategy by reducing or delaying capital expenditures,
selling assets or downsizing or restructuring our operations. If we raise
additional funds through public or private sales of equity securities, the sales
may be at prices below the market price of our stock and our shareholders may
suffer significant dilution.

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The loss of the services of key personnel would adversely affect our
business.

Our future success depends to a significant degree on the
skills, experience and efforts of our executive officers and senior management
staff. The loss of the services of existing personnel, particularly Horst Zerbe,
our Chairman of the Board and Chief Executive Officer, would be detrimental to
our research and development programs and to our overall business.

We are dependent on collaborators to conduct clinical trials of, obtain
regulatory approvals for, and manufacture, market, and sell our controlled
release products.

We depend heavily on our pharmaceutical partners to pay for
part or all of the research and development expenses associated with developing
a new product and to obtain approval from regulatory bodies such as the FDA to
commercialize these products. We also depend on our partners to successfully
distribute these products after receiving regulatory approval. Our revenues from
research and development fees, milestone payments and royalty fees are provided
by our partners. Our inability to successfully find pharmaceutical partners who
are willing to pay us these fees in order to develop new products would
negatively impact our business and our cash flows.

We have limited experience in manufacturing, marketing and
selling pharmaceutical products. Accordingly, if we cannot maintain our existing
collaborations or establish new collaborations with respect to our other
products in development, we will have to establish our own capabilities or
discontinue the commercialization of the affected product. Developing our own
capabilities would be expensive and time consuming and could delay the
commercialization of the affected product. There can be no assurance that we
would be successful in developing these capabilities.

Our existing collaborations are subject to termination on
short notice under certain circumstances including, for example, if the
collaborator determines that the product in development is not likely to be
successfully developed or not likely to receive regulatory approval, if we
breach the agreement or upon a bankruptcy event. If any of our collaborations
are terminated, we may be required to devote additional resources to the
product, seek a new collaborator on short notice or abandon the product. The
terms of any additional collaboration or other arrangements that we establish
may not be favorable to us.

We are also at risk that these collaborations or other
arrangements may not be successful. Factors that may affect the success of our
collaborations include the following:

- Our collaborators
  may be pursuing alternative technologies or developing alternative products
  that are competitive to our product, either on their own or in collaboration
  with others.
- Our collaborators
  may reduce marketing or sales efforts, or discontinue marketing or sales of
  our products. This would reduce our revenues received on the products.
- Our collaborators
  may terminate their collaborations with us. This could make it difficult for
  us to attract new collaborators or adversely affect perception of us in the
  business and financial communities.
- Our collaborators
  may pursue higher priority programs or change the focus of their development
  programs, which could affect the collaborators commitment to us.
  Pharmaceutical and biotechnology companies historically have re-evaluated
  their priorities from time to time, including following mergers and
  consolidations, a common occurrence in recent years.

11

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We face competition in our industry, and many of our competitors have
substantially greater experience and resources than we do.
We compete with other companies within the drug delivery
industry, many of which have more capital, more extensive research and
development capabilities and greater human resources than we do. Some of these
drug delivery competitors include Biovail Corporation, Labopharm Inc., and
Flamel Technologies S.A. Our competitors may develop new or enhanced products or
processes that may be more effective, less expensive, safer or more readily
available than any products or processes that we develop, or they may develop
proprietary positions that prevent us from being able to successfully
commercialize new products or processes that we develop. As a result, our
products or processes may not compete successfully, and research and development
by others may render our products or processes obsolete or uneconomical.
Competition may increase as technological advances are made and commercial
applications broaden.

We are dependent upon sales outside the United States, which are subject to a
number of risks.

Our future results of operation could be harmed by risks
inherent in doing business in international markets, including:

- Unforeseen changes in regulatory
  requirements;

Weaker intellectual property rights
  protection in some countries;

New export license requirements,
  changes in tariffs or trade restrictions; and

Political and economic instability
  in our target markets.

We rely upon a third-party manufacturer, which puts us at risk for supplier
business interruptions.

We have entered into an agreement with a third party
manufacturer which will manufacture certain of our products once we complete
development and after we receive regulatory approval. If our third-party
manufacturer fails to perform, our ability to market products and to generate
revenue would be adversely affected. Our failure to deliver products in a timely
manner could lead to the dissatisfaction of our distribution partners and damage
our reputation, causing our distribution partners to cancel existing agreements
with us and to stop doing business with us.

The third-party manufacturer that we depend on to manufacture
our products is required to adhere to FDA regulations regarding current Good
Manufacturing Practices (cGMP), which include testing, control and documentation
requirements. Ongoing compliance with cGMP and other regulatory requirements is
monitored by periodic inspection by the FDA and comparable agencies in other
countries. Failure by our third-party manufacturer to comply with cGMP and other
regulatory requirements could result in actions against them by regulatory
agencies and jeopardize our ability to obtain products on a timely basis.

We are subject to extensive government regulation including
the requirement of approval before our products may be marketed. Even if we
obtain marketing approval, our products will be subject to ongoing regulatory
review.

We, our collaborators, our products, and our product
candidates are subject to extensive regulation by governmental authorities in
the United States and other countries. Failure to comply with applicable
requirements could result in warning letters, fines and other civil penalties,
delays in approving or refusal to approve a product candidate, product recall or
seizure, withdrawal of product approvals, interruption of manufacturing or
clinical trials, operating restrictions, injunctions, and criminal prosecution.

Our products cannot be marketed in the United States without
FDA approval. Obtaining FDA approval requires substantial time, effort, and
financial resources, and there can be no assurance that any approval will be
granted on a timely basis, if at all. We rely on our partners for the
preparation of applications and for obtaining regulatory approvals. If the FDA
does not approve our product candidates in a timely fashion, or does not approve
them at all, our business and financial condition may be adversely affected.
Further, the terms of approval of any marketing application, including the
labeling content, may be more restrictive than we desire and could affect the
marketability of our or our collaborators products. Subsequent discovery of
problems with an approved product may result in restrictions on the product or
its withdrawal from the market. In addition, both before and after regulatory
approval, we, our collaborators, our products, and our product candidates are
subject to numerous FDA requirements covering testing, manufacturing, quality
control, (cGMP), adverse event reporting, labeling, advertising, promotion,
distribution, and export. Our collaborators and we are subject to surveillance
and periodic inspections to ascertain compliance with these regulations.
Further, the relevant law and regulations may change in ways that could affect
us, our collaborators, our products, and our product candidates. Failure to
comply with regulatory requirements could have a material adverse impact on our
business.

12

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Regulations regarding the manufacture and sale of our future
products are subject to change. We cannot predict what impact, if any, such
changes may have on our business, financial condition or results of operations.
Failure to comply with applicable regulatory requirements could have a material
adverse effect on our business, financial condition and results of operations.
Additionally, the time required for obtaining regulatory
approval is uncertain. We may encounter delays or product rejections based upon
changes in FDA policies, including cGMP, during periods of product development.
We may encounter similar delays in countries outside of the United States. We
may not be able to obtain these regulatory acceptances on a timely basis, or at
all.
The failure to obtain timely regulatory acceptance of our
products, any product marketing limitations, or any product withdrawal would
have a material adverse effect on our business, financial condition and results
of operations. In addition, before it grants approvals, the FDA or any foreign
regulatory authority may impose numerous other requirements with which we must
comply. Regulatory acceptance, if granted, may include significant limitations
on the indicated uses for which the product may be marketed. FDA enforcement
policy strictly prohibits the marketing of accepted products for unapproved
uses. Product acceptance could be withdrawn or civil or criminal sanctions could
be imposed for our failure to comply with regulatory standards or the occurrence
of unforeseen problems following initial marketing.
The third party manufacturers that we depend on to
manufacture our products are required to adhere to FDA regulations regarding
cGMP and similar regulations in other countries, which include testing, control
and documentation requirements. Ongoing compliance with cGMP and other
regulatory requirements is monitored by periodic inspection by the FDA and
comparable agencies in other countries.
We may not be able to expand or enhance our existing product
lines with new products limiting our ability to grow.
If we are not successful in the development and
introduction of new products, our ability to grow will be impeded. We may not be
able to identify products to enhance or expand our product lines. Even if we can
identify potential products, our investment in research and development might be
significant before we could bring the products to market. Moreover, even if we
identify a potential product and expend significant dollars on development, we
may never be able to successfully bring the product to market or achieve market
acceptance for such product. As a result, we may never recover our expenses.

The market may not be receptive to products incorporating our
drug delivery technologies.

The commercial success of any of our products that are
approved for marketing by the FDA and other regulatory authorities will depend
upon their acceptance by the medical community and third party payors as
clinically useful, cost-effective and safe. No product based on our technologies
is marketed in the United States, so there can be no assurance as to market
acceptance.

Factors that we believe could materially affect market
acceptance of these products include:

- the timing of the
  receipt of marketing approvals and the countries in which such approvals are
  obtained;
- the safety and
  efficacy of the product as compared to competitive products;
- the relative
  convenience and ease of administration as compared to competitive products;
- the strength of
  marketing distribution support; and
- the
  cost-effectiveness of the product and the ability to receive third party
  reimbursement.

13

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We are subject to environmental regulations and any failure
to comply may result in substantial fines and sanctions.

Our operations are subject to Canadian and international
environmental laws and regulations governing, among other things, emissions to
air, discharges to waters and the generation, handling, storage, transportation,
treatment and disposal of raw materials, waste and other materials. Many of
these laws and regulations provide for substantial fines and criminal sanctions
for violations. We believe that we are and have been operating our business and
facility in a manner that complies in all material respects with environmental,
health and safety laws and regulations; however, we may incur material costs or
liabilities if we fail to operate in full compliance. We do not maintain
environmental damage insurance coverage with respect to the products which we
manufacture.

We may have to make significant expenditures in the future to
comply with evolving environmental, health and safety requirements, including
new requirements that may be adopted or imposed in the future. To meet changing
licensing and regulatory standards, we may have to make significant additional
site or operational modifications that could involve substantial expenditures or
reduction or suspension of some of our operations. We cannot be certain that we
have identified all environmental and health and safety matters affecting our
activities and in the future our environmental, health and safety problems, and
the costs to remediate them, may be materially greater than we expect.

Our limited cash resources restrict our ability to pay cash
dividends.

Since our inception, we have not paid any cash dividends on
our common stock and we do not anticipate paying any cash dividends on our
common stock in the foreseeable future. If we do not pay any dividends on our
common stock, our stockholders will be able to profit from an investment only if
the price of the stock appreciates before the stockholder sells it.

Risks Related to Our Intellectual Property

If we are not able to adequately protect our intellectual
property, we may not be able to compete effectively.

Our success depends, to a significant degree, upon the
protection of our proprietary technologies. While we currently own 3 U.S.
patents and have applied for 7 US patents, we will need to pursue additional
protections for our intellectual property as we develop new products and enhance
existing products. We may not be able to obtain appropriate protection for our
intellectual property in a timely manner, or at all. Our inability to obtain
appropriate protections for our intellectual property may allow competitors to
enter our markets and produce or sell the same or similar products.

If we are forced to resort to legal proceedings to enforce
our intellectual property rights, the proceedings could be burdensome and
expensive. In addition, our proprietary rights could be at risk if we are
unsuccessful in, or cannot afford to pursue, those proceedings.

We also rely on trade secrets and contract law to protect
some of our proprietary technology. We have entered into confidentiality and
invention agreements with our employees and consultants. Nevertheless, these
agreements may not be honored and they may not effectively protect our right to
our un-patented trade secrets and know-how. Moreover, others may independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to our trade secrets and know-how.

In 1995, the U.S. Patent and Trademark Office adopted changes
to the U.S. patent law that made the term of issued patents 20 years from the
date of filing rather than 17 years from the date of issuance, subject to
specified transition periods. Beginning in June 1995, the patent term became 20
years from the earliest effective filing date of the underlying patent
application. These changes may reduce the effective term of protection for
patents that are pending for more than three years. While we cannot predict the
effect that these changes will have on our business, they could have a material
adverse effect on our ability to protect our proprietary information.
Furthermore, the possibility of extensive delays in the patent issuance process
could effectively reduce the term during which a marketed product is protected
by patents.

We may need to obtain licenses to patents or other
proprietary rights from third parties. We may not be able to obtain the licenses
required under any patents or proprietary rights or they may not be available on
acceptable terms. If we do not obtain required licenses, we may encounter delays
in product development or find that the development, manufacture
or sale of products requiring licenses could be foreclosed. We may, from time to
time, support and collaborate in research conducted by universities and
governmental research organizations. We may not be able to acquire exclusive
rights to the inventions or technical information derived from these
collaborations, and disputes may arise over rights in derivative or related
research programs conducted by us or our collaborators.

14

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If we infringe on the rights of third parties, we may not be able to sell our
products, and we may have to defend against litigation and pay damages.
If a competitor were to assert that our products infringe
on its patent or other intellectual property rights, we could incur substantial
litigation costs and be forced to pay substantial damages. Third-party
infringement claims, regardless of their outcome, would not only consume
significant financial resources, but would also divert our managements time and
attention. Such claims could also cause our customers or potential customers to
purchase competitors products or defer or limit their purchase or use of our
affected products until resolution of the claim. If any of our products are
found to violate third-party intellectual property rights, we may have to
re-engineer one or more of our products, or we may have to obtain licenses from
third parties to continue offering our products without substantial
re-engineering. Our efforts to re-engineer or obtain licenses could require
significant expenditures and may not be successful.
Our controlled release products that are generic versions of
branded controlled release products that are covered by one or more patents may
be subject to litigation, which could delay FDA approval and commercial launch
of our products

We expect to file or have our collaborators file Abbreviated
New Drug Applications or New Drug Applications (ANDAs or NDAs) for our
controlled release products under development that are covered by one or more
patents of the branded product. It is likely that the owners of the patents
covering the brand name product or the sponsors of the NDA with respect to the
branded product will sue or undertake regulatory initiatives to preserve
marketing exclusivity. Any significant delay in obtaining FDA approval to market
our products as a result of litigation, as well as the expense of such
litigation, whether or not we or our collaborators are successful, could have a
materially adverse effect on our business, financial condition and results of
operations.
Risks Related to Our Securities:
The price of our common stock could be subject to significant fluctuations.

Any of the following factors could affect the market price of our common
stock:

- Our failure to achieve and maintain
  profitability;

Changes in earnings estimates and
  recommendations by financial analysts;

Actual or anticipated variations in
  our quarterly results of operations;

Changes in market valuations of
  similar companies;

Announcements by us
  or our competitors of significant contracts, new products, acquisitions,
  commercial relationships, joint ventures or capital commitments;

The loss of major customers or
  product or component suppliers;

The loss of significant partnering
  relationships; and

General market, political and
  economic conditions.

We have a significant number of convertible securities
outstanding that could be exercised in the future. Subsequent resale of these
and other shares could cause the Companys stock price to decline. This could
also make it more difficult to raise funds at acceptable levels via future
securities offerings.

15

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We have a concentration of stock ownership and control, and a
small number of stockholders have the ability to exert significant control in
matters requiring stockholder vote and may have interests that conflict with
ours.

Our common stock ownership is highly concentrated. See
"Security Ownership of Certain Beneficial Owners and Management." As a result, a
relatively small number of stockholders, acting together, have the ability to
control all matters requiring stockholder approval, including the election of
directors and approval of mergers and other significant corporate transactions.
This concentration of ownership may have the effect of delaying, preventing or
deterring a change in control of our company. It could also deprive our
stockholders of an opportunity to receive a premium for their shares as part of
a sale of our company and it may affect the market price of our common stock. In
deciding how to vote on such matters, those stockholders interests may conflict
with yours.

Lack of Independent Directors

We cannot guarantee that our Board of Directors will always
have a majority of independent directors. In the absence of a majority of
independent directors, our executive officer, who is also a principal
stockholder and director, could establish policies and enter into transactions
without independent review and approval thereof. This could present the
potential for a conflict of interest between the Company and its stockholders
generally and the controlling officers, stockholders or directors.

Our common stock is quoted on the OTC Bulletin Board.

As a result, the holders of our common stock may find it more
difficult to obtain accurate quotations concerning the market value of the
stock. Stockholders also may experience greater difficulties in attempting to
sell the stock than if it was listed on a stock exchange or quoted on Nasdaq.
Because our common stock is not traded on a stock exchange or on Nasdaq, and the
market price of the common stock is less than $5.00 per share, the common stock
is classified as a "penny stock." Rule 15g-9 of the Securities Exchange Act of
1934 imposes additional sales practice requirements on broker-dealers that
recommend the purchase or sale of penny stocks to persons other than those who
qualify as an "established customer" or an "accredited investor." This includes
the requirement that a broker-dealer must make a determination that investments
in penny stocks are suitable for the customer and must make special disclosures
to the customer concerning the risks of penny stocks. Application of the penny
stock rules to our common stock could adversely affect the market liquidity of
the shares, which in turn may affect the ability of holders of our common stock
to resell the stock.

Consequently, these rules may restrict the ability of
broker-dealers to trade and/or maintain a market in our common stock and may
affect the ability of stockholders to sell their shares. These requirements may
be considered cumbersome by broker-dealers and could impact the willingness of a
particular broker-dealer to make a market in our shares, or they could affect
the value at which our shares trade. Classification of the shares as penny
stocks increases the risk of an investment in our shares.

We became public by means of a reverse merger, and as a
result we are subject to the risks associated with the prior activities of the
public company. In addition, we may not be able to attract the attention of
major brokerage firms or institutional buyers.

Additional risks may exist because we became public through a
"reverse merger" with a shell corporation. Although the shell did not have
recent or past operations or assets and we performed a due diligence review of
the public company, there can be no assurance that we will not be exposed to
undisclosed liabilities resulting from the prior operations of our company.

Security analysts of major brokerage firms and securities
institutions may not cover us since there are no broker-dealers who sold our
stock in a public offering who would have an incentive to follow or recommend
the purchase of our common stock. No assurance can be given that established
brokerage firms will want to conduct any financings for us in the future.

16

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ITEM 2. DESCRIPTION OF PROPERTY

We currently occupy 3,100 square feet of leased space at a
rate of CAN$8.29/square foot in an industrial zone in Ville St.-Laurent, Quebec,
Canada under a 5-year renewable lease agreement signed in 2004. We expanded our
laboratory and office space at this facility to its maximum during the second
quarter of 2006. In order to continue to support ongoing product development
activities and allow the addition of further development programs we might be
required to seek a different location in 2008. Management has therefore entered
into discussions with the current landlord to look for alternative facilities
that would meet our need for additional space at affordable costs.
ITEM 3. LEGAL PROCEEDINGS

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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the quarter ended December 31, 2007 no matters were submitted to a
vote of security holders.
17

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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock has been quoted on the OTC Bulletin Board
under the symbol "IGXT" since January, 2007. For the quarters indicated, the
following table sets forth the high and low bid prices per share of common
stock. These prices represent inter-dealer quotations without retail markup,
markdown, or commission and may not necessarily represent actual transactions.

|Quarter Ended                           |  | High ($) |  | Low ($)
|--------------------------------------- |  | -------- |  | -------
|                                        |  |          |  |        
|March 31, 2008 (through March 24, 2008) |  | 0.81     |  | 0.51   
|                                        |  |          |  |        
|December 31, 2007                       |  | 1.05     |  | 0.45   
|                                        |  |          |  |        
|September 30, 2007                      |  | 1.90     |  | 0.87   
|                                        |  |          |  |        
|June
    30, 2007                       |  | 1.31     |  | 0.60   
|                                        |  |          |  |        
|March 31,2007                           |  | 1.20     |  | 0.68   

Holders

As of March 2008, we had approximately 164 active holders of
our common stock. The number of active record holders was determined from the
records of our transfer agent and also includes beneficial owners of common
stock whose shares are held in the names of various security brokers, dealers,
and registered clearing agencies. The transfer agent of our common stock is
StockTrans Inc., 44 W. Lancaster Avenue, Ardmore, Pennsylvania 19003.

Dividends

We have never declared any cash dividends and do not
anticipate paying such dividends in the near future. We anticipate all earnings
for the foreseeable future will be retained for future investments in business.
Any future determination to pay cash dividends is subject to the approval of
66.6% of the then outstanding Exchangeable Shares, at the discretion of the
Board of Directors, and will be dependent upon our results of operations,
financial conditions, contractual restrictions, and other factors deemed
relevant by our Board of Directors. (See Financial Statements - Note 1 -
Reorganization of the Corporation).

2006 Stock Option Plan

A majority of our shareholders approved the 2006 Option Plan
at the Annual General Meeting held on August 10, 2006. Under the 2006 Stock
Option Plan, up to 1,600,749 shares of common stock may be issued upon the
exercise of options granted to directors, management, employees and consultants.
As of March 24, 2008, 1,376,500 options have been issued and remain outstanding
under the 2006 Option Plan.

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Equity Compensation Plan Information

|                                  |                          |                       |                         
|--------------------------------- | ------------------------ | --------------------- | ------------------------
|                                  | Number
    of Securities | Weighted-             | Number
    of securities
|                                  | to be
    issued upon    | Average               | remaining available     
|                                  | exercise
    of          | Exercise
    Price of | for
    future issuance 
|                                  | outstanding options,     | outstanding           | under
    equity        
|                                  | warrants, and rights     | options,              | compensation plans      
|                                  |                          | warrants, and         | (excluding securities   
|                                  |                          | rights                | reflected in the first  
|                                  |                          |                       | Two columns             
|Equity Compensation Plans         |                          |                       |                         
|Approved by Security Holders      | 1,600,749                | $0.55                 | 224,249                 
|                                  |                          |                       |                         
|Equity Compensation
    Plans Not |                          |                       |                         
|Approved by Security
    Holders  | None                     | None                  | None                    
|                                  |                          |                       |                         
|                                  |                          |                       |                         
|Total                             | 1,600,749                | $0.55                 | 224,249                 

On September 26, 2006 we granted options to purchase 225,000
shares of common stock to three non-employee directors. These options have an
exercise price of $0.41, vest upon issuance and expire on September 26, 2016.

On October 1, 2006 we granted options to purchase up to
69,000 shares of common stock to a consultant. These options have an exercise
price of $0.41, vest upon issuance, and expire on October 1, 2016.

On November 9, 2006 we granted options to purchase up to
450,000 shares of common stock to the CFO and a management employee. These
options have an exercise price of $0.41, vest upon issuance, and expire on
November 9, 2016.

On November 13, 2006 we granted options to purchase up to
250,000 shares of common stock to a consultant. These options have an exercise
price of $0.41, vest over two years at the rate of 25% every six months, and
expire on November 13, 2016.

On November 16, 2006 we granted options to purchase up to
100,000 shares of common stock to employees and 25,000 options to a consultant.
These options have an exercise price of $0.41, vest over 2 years at the rate of
25% every six months, and expire on November 16, 2016.

On August 9, 2007 we granted options to purchase up to
107,500 shares of common stock to four non-employee directors. These options
have an exercise price of $1.15, vest upon issuance, and expire on August 9,
2017.

On August 9, 2007 we granted options to purchase up to 75,000
shares of common stock to our Vice President of Business Development. These
options have an exercise price of $1.15, vest over 2 years at the rate of 25%
every six months, and expire on August 9, 2017

On August 9, 2007 we granted options to purchase up to 75,000
shares of common stock to our chief financial officer. These options have an
exercise price of $1.15, vest over 2 years at the rate of 25% every six months,
and expire on August 9, 2017

As of March 7, 2008 there are 224,249 options remaining to be
granted under the 2006 Option Plan. None of the options have been exercised as
of March 7, 2008.

Recent Sales of Unregistered Securities

Between August 28, 2007 and November 26, 2007, Intelgenx
Corp. issued 149,657 of our common stock upon conversion of an aggregate
principal amount of $104,759 of 8% Secured Convertible Debentures issued in May
2007

ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

This section and other parts of this Form 10-KSB contain
forward-looking statements that involve risks and uncertainties. Forward-looking
statements can also be identified by words such as "anticipates," "expects,"
"believes," "plans," "predicts," and similar terms. Forward-looking statements
are not guarantees of future performance and the Company's actual results may
differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such differences include, but are not
limited to, those discussed in the subsection entitled "Risk Factors" above. The
following discussion should be read in conjunction with the consolidated
financial statements and notes thereto included in Item 7 of this Form 10-KSB.
All information presented herein is based on the Company's fiscal calendar.
Unless otherwise stated, references in this report to particular years or
quarters refer to the Company's fiscal years ended in December and the
associated quarters of those fiscal years. The Company assumes no obligation to
revise or update any forward-looking statements for any reason, except as
required by law.

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Results of Operations  Year ended December 31, 2007 compared to Year ended
December 31, 2006.

|                                        |   |             |   |           |   | Increase/  |  | Percentage
|--------------------------------------- | - | ----------- | - | --------- | - | ---------- |  | ----------
|                                        |   | 2007        |   | 2006      |   | (Decrease) |  | Change    
|Revenue                                 | $ | 862,731     | $ | 265,901   | $ | 596,830    |  | 224%      
|Research and
    Development Expenses   |   | 777,773     |   | 510,407   |   | 267,366    |  | 52%       
|Management salaries                     |   | 328,513     |   | 245,637   |   | 82,876     |  | 34%       
|General and
    Administrative Expenses |   | 166,249     |   | 84,040    |   | 82,209     |  | 98%       
|Professional fees                       |   | 424,817     |   | 158,925   |   | 265,892    |  | 167%      
|Interest and financing
    fees         |   | 349,093     |   | 54,724    |   | 294,369    |  | 538%      
|Net
    income (loss)                   |   | (1,100,793) |   | (781,136) |   | (319,657)  |  | 41%       

Revenues

Total revenues for the year ended December 31, 2007 were
$862,731, compared with $265,901 for the same period last year, an increase of
$596,830, or 224%. The increase in total revenue for the twelve month period is
primarily attributable to revenues received pursuant to our research and
development agreements with our pharmaceutical partners. The remaining amount
is attributable to increased interest income of  $23,103 earned on the cash proceeds from the sale
of our securities in May 2007.

Our research and development revenues in 2007 consisted of
$492,530 received for development milestones achieved in connection with product
development projects begun prior to 2007, and $342,846 received in connection
with drug development projects initiated in 2007.

Research and Development Expenses

Research and development expenses for the twelve-month period
ended December 31, 2007 were $777,773, as compared to $510,407 for 2006. The
increase in research and development expenses is attributable to the increased
drug development activities.

Approximately 92% of our research and development expenses in
2007 were incurred pursuant to research and development agreements entered into
with our pharmaceutical industry partners. The remaining 8% of our research and
development expenses were incurred in connection with internal projects that we
are pursuing independently.

General and Administrative Expenses

Our general and administrative expenses increased to $166,249
in 2007, as compared to $84,080 in 2006. The increase is primarily attributable
to increases in expenses in connection with our regulatory and capital raising
efforts.

Management Salaries

Management salaries increased to $328,513 in 2007, as
compared to $245,637 in 2006. Included in management salaries are $97,951 in non
cash compensation in the form of options granted to directors and management
employees in 2007. This amount compares to $137,097 in non cash compensation in
2006.

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The increase in management salaries is also attributable to
the addition of a full time Chief Financial Officer and Vice-President of
Business Development.

Professional Fees

Professional fees increased to $424,817 in 2007, as compared
to $158,925 in 2006. Of this amount, $68,349 represents non-cash compensation
paid for investor relations services. The remaining increase of $197,543 is
primarily attributable to increased amounts paid to our legal counsel and
auditors in connection with our reporting obligations as well as our fund
raising.

Stock Based Compensation Expense, Warrants and Stock Based
Payments

We incurred an aggregate of $202,607 of amortization expense
for stock based compensation in 2007, as compared to $202,116 for 2006. In 2007,
we granted 257,500 stock options pursuant to our 2006 Stock Option Plan,
resulting in $97,951 in amortization expense. The remaining amortization expense
for 2007 was incurred for options granted in 2006 in connection with the
following: a) options grants to company employees resulting in an amortization
expense of $18,190, b) for financing fees related to the April 2006 Intelgenx
Corp. acquisition for $76,591, and c) for investor relations of $9,875. In 2006,
we granted 1,119,000 stock options pursuant to our 2006 Stock Option Plan,
resulting in $202,116 in amortization expense.

In 2007, we also amortized a total of $68,349 in stock based
compensation issued in 2006 with respect to investor relation services as
compared to $76,900 in 2006.

We expect to incur an aggregate of $97,381 in stock based
compensation expense in fiscal 2008 and 2009 solely in connection with the
issuance of options during 2006 and 2007. We anticipate to issue additional
options and warrants in the future, which will continue to result in stock-based
compensation and warrant amortization expenses.

Interest and Financing Fees

We incurred interest and financing fee expense of $349,093
during the year ended December 31, 2007, as compared to $54,724 in 2006.
Included in the financing fees are a non-cash accretion expense of $185,823, and
cash interest payments of $66,180 on the convertible debentures issued in May
2007. Also included in the financing costs is a non cash financing fee of
$76,591 incurred with respect to the amortization of 250,000 options issued in
connection with the acquisition of IntelGenx in April 2006. The total of
non-cash items included in interest and financing fees is $262,414.

The remainder of $20,499 in interest expense relates to long
term debt which was redeemed in May 2007, as well as interest paid on the
outstanding shareholder loan. Based on the outstanding principal amount of the
convertible debentures issued in May 2007, and assuming no additional
conversions of these debentures into common stock, we expect to incur interest
expenses of $113,000 in 2008.

Net Loss

Net loss for the year ended December 31, 2007 was $1,100,793,
as compared to a net loss of $781,136 for the year ended December 31, 2006. The
increase in the net loss for the year ended December 31, 2007 is primarily due
to increases in research and development expenses, professional fees and
financing expenses. These expenses were offset by higher research and
development revenues and interest income. In 2007, the Company incurred
non-recurring and non-cash expenses for an approximate total of $444,000 for the
amortization of financing fees, investor relation services, accretion expense,
depreciation, share-based compensation and deferred income taxes.

Income taxes

In 2007, we incurred Canadian and provincial net operating
losses of approximately $794,000 and $908,000 respectively, that may be applied
against earnings of future years. This compares to Canadian and provincial net
operating losses of approximately $350,000 and $387,000 in 2006. Should there be
an acquisition or a change in control of Intelgenx Corp, our Canadian
subsidiary, the utilization of these net operating losses is subject to
significant limitations imposed by Canadian income tax law. A portion of the net
operating losses may expire before they can be utilized (see Financial
Statements Note 13  Income Taxes).

21

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As at December 31, 2007, we had non-refundable tax credits of
$24,000 expiring in 2017. In addition, we had deductible research and
development expenses in the amount of $670,000 with no expiration date, as
compared to $340,000 as of December 31, 2006.
Key items from the Balance Sheet

|                              |   |           |   |         |   | Increase/  |  | Percentage
|----------------------------- | - | --------- | - | ------- | - | ---------- |  | ----------
|                              |   | 2007      |   | 2006    |   | (Decrease) |  | Change    
|Current Assets                | $ | 1,035,920 | $ | 488,975 | $ | 546,945    |  | 112%      
|Property and Equipment        |   | 235,244   |   | 161,861 |   | 73,383     |  | 45%       
|Current Liabilities           |   | 261,485   |   | 154,020 |   | 107,465    |  | 70%       
|Loan Payable,
    Shareholder |   | 101,193   |   | 86,076  |   | 15,117     |  | 18%       
|Long-term debt                |   | -         |   | 82,661  |   | (82,661)   |  | 100%      
|Convertible notes             |   | 417,634   |   | -       |   | 417,634    |  | N/A       

Current Assets

At December 31, 2007 we had current assets of $1,035,920, as
compared to current assets $488,975 at December 31, 2006. The net increase in
current assets of $546,945 is attributable to increases in cash, accounts
receivable, and income taxes, as well as investment tax credits receivable in
the amount of $596,416, and a decrease in prepaid expenses in the amount of
$49,471. The increase in accounts receivable is attributable to increased
revenues recognized in the fourth quarter of 2007. The increase in investment
tax credits receivable is attributable to the increased expenses incurred in
research and development in direct relation to the increased development work
performed.

Contractual Obligations and Commitments

Excluding trade accounts payable and accrued liabilities, the Company is
committed to the following contractual obligations and commitments.

2008
      2009Operating Lease Obligations
      $15,900
      $10,800Interest on Convertible Notes
      113,000
      85,000Total
      $128,900
      $95,800


Liquidity and Capital Resources

At December 31, 2007, we had an accumulated deficit of
$1,918,658, and cash and cash equivalents of $330,967. We also had accounts
receivable of $427,476, of which $70,238 is a sales tax refund which we expect
to receive during the first quarter of 2008.

At December 31, 2007, we had accounts payable and accrued
liabilities in an aggregate amount of $261,485. Of this amount, approximately
$71,651 represents amounts owing to shareholders, and approximately $37,000 was
due for legal fees rendered.

We presently do not have any available credit, bank financing
or other external sources of liquidity. Due to our brief operating history and
startup, our operations have not been a consistent source of liquidity. We have
financed our operating and capital expenditures principally through the sale of
debt and equity securities to accredited and institutional investors. In May
2007, we issued convertible debentures in an aggregate principal amount of $1.5
million, of which $1,395,241 remained outstanding as of December 31, 2007.
Management believes that the Companys existing cash resources will be
sufficient to meet our operating requirements for the first six months of 2008.
We are seeking additional funding through additional equity and debt financings.
However, there can be no assurance that that any additional financing will
become available to us, and if available, on terms acceptable to us. Any
financing, if available, may involve restrictive covenants that impact our
ability to conduct our business. If we are unable to raise additional capital
when required or on acceptable terms, we may have to significantly delay, scale
back or discontinue the development and/or commercialization of one or more of
our product candidates.

22

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Our consolidated financial statements as of December 31, 2007
have been prepared under the assumption that we will continue as a going concern
for the twelve months ending December 31, 2008. The report of our independent
registered public accounting firm accompanying our financial statements includes
an explanatory paragraph referring to our recurring losses from operations and
expressing substantial doubt in our ability to continue as a going concern
without additional capital becoming available. Our ability to continue as a
going concern is dependent upon our ability to obtain additional equity or debt
financing and to generate revenue. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
At December 31, 2007, we had total assets of $1,271,164, and shareholders
equity of $211,864.Current Liabilities

At December 31, 2007 we had current liabilities of $261,485,
as compared to current liabilities of $154,020 at December 31, 2006. The net
increase of $107,465 consists of an increase of $60,000 in current loans payable
to our President and Chief Executive Officer, an increase of $46,989 in accounts
payable, approximately $24,502 in currency exchange rate fluctuations on
accounts payable, and a decrease in the long-term debt of $24,026. The long-term
debt was redeemed in connection with the completion of our convertible note
financing in May 2007.Property and Equipment

At December 31, 2007 we had property and equipment valued at
$235,244, as compared to $161,861 at December 31, 2006. The increase is
attributable to acquisitions of $68,723, $5,712, and $8,526 for laboratory,
office, and computer equipment respectively, with $42,003 allocated to
depreciation, as well as a currency exchange rate fluctuation of $32,425.Long term debt

At December 31, 2007 there was no long term debt as compared
to $82,661 at December 31, 2006. The long term debt was redeemed in connection
with our convertible note financing in May 2007.May 2007 Convertible Note Financing

On May 22, 2007, we completed the sale of 8% Secured
Convertible Debentures (the "Debentures") in an aggregate principal amount of
approximately $1.5 million (the "Purchase Price") to certain institutional and
accredited investors (the "Investors"), pursuant to a Securities Purchase
Agreement (the "Purchase Agreement"). The Company received net proceeds of
approximately $1.36 million.
Pursuant to the Purchase Agreement, the Company also issued
to the Investors five year warrants to purchase 2,142,857 shares of the
Companys common stock at an exercise price of $1.02 per share (the "Warrants").
The Debentures mature twenty-eight (28) months from the date of issuance (the
"Maturity Date") and are convertible at any time into shares of the Companys
common stock at a fixed conversion price of $.70. The conversion price of the
Debentures and exercise price of the Warrants is subject to adjustment for
certain events, including dividends, distributions or split of the Companys
Common Stock, subsequent equity sales or rights offerings by the Company, or in
the event of the Companys consolidation, merger or reorganization. The
Debentures bear interest at the rate of 8% per annum, which interest is payable
quarterly in cash or, at the Companys option following the effective date of
the registration statement, in shares of common stock equal to the interest
amount divided by the lower of $0.70 or 85% of the Companys 10 day volume
weighted average stock price.
23

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The Companys obligations under the Purchase Agreement and
the Debentures are secured by a lien on substantially all of the assets of the
Company, pursuant to a Security Agreement.
In connection with the Purchase Agreement, the Company also
entered into registration rights agreements (the "Registration Rights
Agreements") providing for the filing of a registration statement (the
"Registration Statement") with the Securities and Exchange Commission
registering the Common Stock issuable upon conversion of the Debentures and
exercise of the Warrants. The Company was obligated to file the Registration
Statement no later than 45 days from the date of closing and to use its best
efforts to cause the Registration Statement to be declared effective no later
than 90 days after the date of closing (or 120 days in the event of a "full
review" by the Securities and Exchange Commission). The Company met its
obligations under the Registration Rights Agreements by filing the Registration
Statement within the deadline and ensuring it was declared effective by August
23, 2007.
In connection with the private placement, the Company paid
Carter Securities LLC, a NASD registered broker-dealer, placement agent and due
diligence fees of approximately $127,500 and four year warrants allowing him to
purchase 214,286 shares of the Companys common stock at an exercise price of
$0.70 per share. In addition, legal and due diligence expenses of the Investors
were paid to Feldman Weinstein & Smith LLP and Valla LLC for a total of $28,750
while an escrow account fee of $3,500 was paid to the Signature Bank.
Key items from the Statement of Cash Flows

|                           |   |           |   |           |   | Increase/  |  | Percentage
|-------------------------- | - | --------- | - | --------- | - | ---------- |  | ----------
|                           |   | 2007      |   | 2006      |   | (Decrease) |  | Change    
|                           |   |           |   |           |   |            |  |           
|Operating Activities       | $ | (968,659) | $ | (489,651) | $ | (479,008)  |  | 98%       
|Financing Activities       |   | 1,162,806 |   | 823,543   |   | 339,263    |  | 41%       
|Investing Activities       |   | (82,961)  |   | (97,511)  |   | (14,550)   |  | (15%)     
|Increase in cash and cash  |   |           |   |           |   |            |  |           
|equivalent                 |   | 111,186   |   | 236,381   |   | (125,195)  |  | (53%)     
|Cash and cash equivalent - |   |           |   |           |   |            |  |           
|end of period              |   | 330,967   |   | 227,578   |   | 103,389    |  | 45%       

Net cash used in operating activities was $968,659 for the
year ended December 31, 2007, as compared to $489,651 in 2006. In 2007, net cash
used in operating activities consisted of an operating loss of $1,100,793, and a
decrease in non-cash operating elements of working capital of $312,065. Non-cash
items included in operating activities totaled $444,199 and included the
following items: depreciation, non-cash payments for investor relation services,
share based compensation expense, interest and expense accretion on the
convertible notes issued in May 2007 and deferred income tax provision. Our
operating activities will continue to consume our available funds until we can
generate increased sales revenues.

Net cash provided by financing activities was $1,162,806 for
the year ended December 31, 2007, as compared to $823,543 in 2006. Of this
amount, $1,500,000 represents proceeds from the sale of convertible debentures
in May 2007, less $229,323 of related transaction costs, and $107,871 paid for
the redemption of the long-term debt. Net Cash provided by financing activities
is expected to increase as the Company is seeking additional financing.

Net cash used in investing activities was $82,961 for the
year ended December 31, 2007, as compared to $97,511 in 2006. The net cash of
$82,961 was used to purchase capital assets in 2007. On December 27, 2007, the
company purchased $60,000 in laboratory equipment from Horst Zerbe, our
President and Chief Executive Officer. We expect to purchase additional
equipment on an as needed basis in order to support our development efforts.

24

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Cash and cash equivalents are $330,967 at December 31, 2007,
as compared to $227,578 as of December 31, 2006. The net increase in cash and
cash equivalents was the result of proceeds from the sale of convertible notes
in May 2007, offset by increased spending on research and development
activities.
Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as of December 31,
2007.
Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. The financial statements include estimates
based on currently available information and management's judgment as to the
outcome of future conditions and circumstances.
Changes in the status of certain facts or circumstances could
result in material changes to the estimates used in the preparation of the
financial statements and actual results could differ from the estimates and
assumptions.
Revenue Recognition
The Company recognizes revenue from development contracts as
the contracted services are performed or when milestones are achieved, in
accordance with the terms of the specific agreements. Amounts received in
advance of recognition, if any, are included in deferred income.
Financial Instruments
The Company estimates the fair value of its financial
instruments based on current interest rates, market value and pricing of
financial instruments with comparable terms. Unless otherwise indicated, the
carrying value of these financial instruments approximates their fair market
value. It is not practical to determine the fair value of the amounts due from
related parties due to their related party nature and the absence of a market
for such instruments.
Accounts Receivable
The Company accounts for trade receivables at original
invoice amount less an estimate made for doubtful receivables based on a review
of all outstanding amounts on a monthly basis. Management determines the
allowance for doubtful accounts by regularly evaluating individual customer
receivables and considering a customer's financial condition, credit history and
current economic conditions. The Company writes off trade receivables when they
are deemed uncollectible. The Company records recoveries of trade receivables
previously written-off when they receive them. Management considers the reserve
for doubtful accounts of $Nil to be adequate to cover any exposure to loss in
its December 31, 2007 and December 31, 2006 accounts receivable.
Investment Tax Credits
Investment tax credits relating to qualifying expenditures
are recognized in the accounts at the time at which the related expenditures are
incurred and there is reasonable assurance of their realization. Management has
made estimates and assumptions in determining the expenditures eligible for
investment tax credits claimed.
25

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|Amortization                      |        
|--------------------------------- | -------
|                                  |        
|On the declining balance method - |        
|Computer equipment                | 30%    
|                                  |        
|Laboratory and office equipment   | 20%    
|                                  |        
|On the straight-line method -     |        
|Leasehold improvements            | 5 years

Impairment of Long-Lived Assets

Long-lived assets held and used by the Company are reviewed
for possible impairment whenever events or changes in circumstances indicate the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of the
assets to the estimated undiscounted cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the asset
exceeds the fair value thereof.

Foreign Currency Translation

The Company's reporting currency is the United States dollar.
The Canadian dollar is the functional currency of the Company's Canadian
operations which is translated to the United States dollar using the current
rate method. Under this method, accounts are translated as follows:

- Assets and liabilities - at
  exchange rates in effect at the balance sheet date;
- Revenue and expenses - at average
  exchange rates prevailing during the year.
- Gains and losses arising from
  foreign currency translation are included in other comprehensive income.

Share-Based Compensation

In determining the value of share-based payments/warrants,
the company must make estimates of the fair value of the common shares at the
grant date (when no quoted prices are available) and, when using the Black-Scholes
model to determine the grant date fair value of options and warrants, of the
period in which the holder will exercise the option and the volatility of the
company's share price over that same period. Different estimates would result in
different amounts of compensation being recorded in the financial statements.

ITEM 7. FINANCIAL STATEMENTS FOR 2007 AND 2006

The financial statements for the fiscal years ending December 31, 2007 and
2006, required by Item 7 are set forth on pages F-1 through F-25.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

26

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ITEM 8A. CONTROLS AND PROCEDURES
a. Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the
participation of the Company's management, the Company's principal executive
officer and principal financial officer have concluded that the Company's
disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended ("Exchange Act") were
effective as of December 31, 2007 to ensure that information required to be
disclosed by the Company in reports that it files or submits under the Exchange
Act is (i) recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission rules and forms and (ii)
accumulated and communicated to the Company's management, including its
principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.
b. Changes in Internal Controls over Financial Reporting

The Companys chief executive officer and the Companys chief
financial officer have concluded that there were no changes in the Companys
internal controls over financial reporting during the quarter ended December 31,
2007 that have materially affected or are reasonably likely to materially affect
the Companys internal controls over financial reporting.
c. Managements Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and
maintaining adequate internal control over financial reporting, as such term is
defined in Exchange Act Rule 13a-15(f). The Companys internal control system
was designed to provide reasonable assurance to the Companys management and
board of directors regarding the preparation and fair presentation of published
financial statements.
All internal control systems, no matter how well designed,
have inherent limitations. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.
The Companys management, including the Companys Chief
Executive Officer and Chief Financial Officer, assessed the effectiveness of the
Companys internal control over financial reporting as of December 31, 2007. In
making this assessment, the Companys management used the criteria set forth by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal ControlIntegrated Framework. Based on this assessment, management
believes that, as of December 31, 2007, the Companys internal control over
financial reporting was effective based on those criteria.
This annual report does not include an attestation report of
the Company's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
company's registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management's report in this annual report.
ITEM 8B. OTHER INFORMATION

None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL
PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT

The following table identifies our directors and executive
officers as of December 31, 2007:

|Name                            | Age | Position                         | -Since       
|------------------------------- | --- | -------------------------------- | -------------
|Horst G. Zerbe                  | 61  | Chairman of the Board, President | April 2006   
|                                |     | and
    Chief Executive Officer  |              
|Gino Di Iorio                   | 40  | Chief Financial
    Officer      | July 2007    
|Joel
    Cohen (1)              | 36  | Director                         | April 2006   
|J. Bernard Boudreau
    (1) (2) | 63  | Director                         | June 2006    
|David Coffin-Beach (2)          | 60  | Director                         | June
    2006
|Reiza Rayman (1) (2)            | 44  | Director                         | June 2006    

(1) Audit Committee member 
(2) Compensation Committee member

27

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All directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and qualified.
There are no agreements with respect to the election of directors. Officers are
appointed annually by the board and each executive officer serves at the
discretion of the board.

Biographies

Horst G. Zerbe, Ph.D.

Dr. Zerbe is our President, Chief Executive Officer and
Chairman of the Board and is a full time employee of the Company. Dr. Zerbe has
more than 20 years experience in the pharmaceutical industry. He has been the
President and Chief Executive Officer of IntelGenx Corp. since 2005; prior
thereto, from 1998 to 2005, he served as the president of Smartrix Technologies
Inc. in Montreal; prior thereto, from 1994 to 1998, he was Vice President of R&D
at LTS Lohmann Therapy Systems in West Caldwell, NJ. He has published numerous
scientific papers in recognized journals and holds over 30 patents.

Gino Di Iorio, CA

Mr. Di Iorio is the Chief Financial Officer of IntelGenx.
From 2006 to 2007, Mr. Di Iorio held the position of CFO at Viropro Inc., a
publicly held development company in the bio-technology industry. From 2005 to
2006 he held the position of Controller at Group Montoni  Division
Construction, a general entrepreneur in the construction industry. Prior to
that, from 2004 to 2005, he held the position of Finance Director at Draft Inc.,
a subsidiary of IPG, a publicly-held American company traded on the New York
Stock Exchange with interests in advertising and public relations. From 1997 to
2003, he held the position of Finance Director at Sitel Canada Inc., a
subsidiary of Sitel Corporation, a publicly-held American company traded on the
New York Stock Exchange with interests in advertising and public relations.

Joel Cohen, CFA

Mr. Cohen has been a director of IntelGenx Technologies Corp.
since April, 2006. Mr. Cohen also served as the consulting Chief Financial
Officer of IntelGenx from April, 2006 until May 23, 2007. Mr. Cohen has
extensive experience in biotechnology and high tech financings and in financial
analysis. From 2002 until 2007, Mr. Cohen was consulting CFO for Osta
Biotechnologies a publicly traded company on the TSX Venture Exchange (the "TSXV").

J. Bernard Boudreau, Sr. Vice President, PharmEng Inc.

Mr. Boudreau has been a director of IntelGenx since June,
2006. Since 2004, he has been the Senior Vice-president of Pharmeng
International Inc., a full-service consulting and contract manufacturing company
that serves the pharmaceutical, biotechnology and medical device industries in
North America and internationally. Pharmeng is a publically traded company on
the Toronto Stock Exchange. Mr. Boudreau served as Government Leader in the
Senate of Canada and Member of the Federal Cabinet between 1999 and 2001.

Reiza Rayman, M.D.

Dr. Rayman has been a director of IntelGenx since June, 2006.
Currently, he is pursuing a PhD in the area of Tele-surgery. From 2000 until
2005, Dr. Rayman served as Principal Investigator, Robotic Tele-surgery and
Hybrid Cardiac Surgery, CSTAR, and Assistant Professor, Department of Surgery,
at the University of Western Ontario. Dr. Rayman is currently completing his PhD
in Medical Biophysics.

28

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David Coffin-Beach, Ph.D.

Dr. Coffin-Beach has been a director of IntelGenx since June,
2006. On April 18, 2007, Dr. Coffin-Beach was appointed President and COO of
Synovics Pharmaceuticals Inc. a Fort Lauderdale based pharmaceutical company
specializing in both private label OTC products and niche prescription products.
Prior to this appointment, Dr. Coffin-Beach served as President of ATP
Solutions, a privately held consulting firm which specializes in delivering
strategic, technical, marketing and management services to pharmaceutical
manufacturers and investors. Dr. Coffin-Beach was the founder, former President
and Board Member of TorPharm (1994 - 2004), the U.S. division of Apotex Inc.
Key Personnel and Consultants
James Wittenberg, R.Ph, MS

Mr. Wittenberg serves as IntelGenxs Vice President Business
Development. He has accumulated over 20 years of experience in the
pharmaceutical industry in market research and most recently as Director of
Business Development at Schwarz Pharma.
Ingrid Zerbe

Mrs. Zerbe is our Director of Finance and Administration,
Corporate Secretary and is a full time employee of the Company. Mrs. Zerbe is
the founder of IntelGenx. Mrs. Zerbe served as the president of IntelGenx since
its incorporation until December, 2005. Prior to founding IntelGenx, she worked
in the travel industry. From June 2003 until August 2006, Mrs. Zerbe was a
director of IntelGenx. Horst Zerbe and Ingrid Zerbe are husband and wife.
Nadine Paiement, MSc

Ms. Paiement serves as IntelGenxs Director of Research and
Development. She holds a Master of Science degree in Polymer Chemistry from Sherbrooke
University, and is co-inventor of IntelGenxs Tri-Layer technology. Prior to
joining IntelGenx in 2005 she worked for five years as a formulation scientist
at Smartrix Technologies, Inc.
Board of Directors and Committees

Our board of directors held four meetings in 2007.
Audit Committee

Our audit committee assists our board of directors in
fulfilling its responsibilities for oversight and supervision of financial and
accounting matters. The chairman of the audit committee is J. Bernard Boudreau.
Joel Cohen serves as our audit committee financial expert. Our audit committees
responsibilities include, among others (i) recommending to the board of
directors the engagement of the external auditor and the terms of the external
auditors engagement; (ii) overseeing the work of the external auditor,
including dispute resolution between management and the external auditor, if
required; (iii) pre-approving all non-audit service to be provided to us by our
external auditor; (iv) reviewing our financial statements, managements
discussion and analysis and annual and interim earnings press releases before
this information is publicly disclosed; (v) assessing the adequacy of procedures
for our public disclosure of financial information; (vi) establishing procedures
to deal with complaints received by us relating to our accounting and auditing
matters; and (vii) reviewing our hiring policies regarding employees of our
external auditor or former auditor. We have adopted, along with our audit
committee, a written charter of the audit committee setting out the mandate and
responsibilities of the audit committee which provides that the audit committee
convene no less than four times per year.
Compensation Committee

Our compensation committee reviews and makes recommendations
to our board of directors concerning the compensation of our executive officers
and key employees which include the review of our executive compensation and
other human resource policies, the review and administration of any bonuses and
stock options and major changes to our benefit plans and the review of and
recommendations regarding the performance of the Chief Executive Officer of the
Company. Our compensation committee is comprised of non-management members of
our board of directors and is required to convene at least annually. The
chairman of our compensation committee is David Coffin-Beach.
29

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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires directors,
officers and persons who own more than 10% of a registered class of our equity
securities to file reports of ownership and change in ownership with the
Securities and Exchange Commission. Directors, officers and greater than 10%
shareholders are required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file.
Based solely upon our review of the copies of such forms that
we received during the fiscal year ended December 31, 2007, we believe that each
person who at any time during the fiscal year was a director, officer, or
beneficial owner of more than ten percent of our common stock complied with all
Section 16(a) filing requirements during such fiscal year, except as follows:
The Form 3s filed by the following directors were not filed timely: Joel Cohen,
Bernard Boudreau, David Coffin-Beach and Reiza Rayman. The Form 4 filed by our
chief financial officer Gino Di Iorio, was not filed timely.
Code of Ethics

We have not adopted a formal code of ethics at this time, as
our focus has been on our product development and enhancement. We follow
generally accepted business ethics and labor practices. We plan to adopt a code
of ethics in the near future.
30

---

ITEM 10. COMPENSATION OF DIRECTORS AND OFFICERS

The following table provides a summary of the compensation
paid to date during the last three completed fiscal years to the President and
Chief Executive Officer and the Chief Financial Officer. No other officers of
the Company qualify as "named executive officers", which category includes the
Chief Executive Officer and the next two highest paid executive officers whose
salary and bonus exceeds $100,000 in the most recent year ("Named Executive
Officers").

|Name and       |      |            | Option | All Other    |          
|-------------- | ---- | ---------- | ------ | ------------ | ---------
|principal      |      |            | Awards | Compensation |          
|position       | Year | Salary ($) | ($)    | ($)          | Total ($)
|(a)            | (b)  | (c)        | (f)    | (i)          | (j)      
|Horst Zerbe,   | 2007 | 176,536    | Nil    | Nil          | 176,536  
|President and  | 2006 | 139,053    | 69,680 | Nil          | 208,733  
|CEO            | 2005 | 8,174      | Nil    | 10,978       | 19,152   
|Gino Di Iorio, |      |            |        |              |          
|CFO (1)        | 2007 | 46,235     | Nil    | Nil          | 46,235   

Footnotes:

(1) Mr. Di Iorio joined the Company in August, 2007.

Employment Agreements

Horst Zerbe.

Gino Di Iorio. Effective August 6, 2007, we entered
into an employment agreement with Mr. Gino Di Iorio, to serve as Chief Financial
Officer. Under the agreement, Mr. Di Iorio is entitled to receive: (1) a minimum
base salary of CAN$110,000 (US$110,965 at year-end 2007) per year, and (2)
options grants under the 2006 Stock Option Plan.

The following table presents information regarding the
outstanding equity awards held by each of the named officers as of December 31,
2007, including the vesting dates for the portions of these awards that had not
vested as of that date.

31

---



|OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|--------------------------------------------
|                                            
|                                            
|                                            
|                                            
|                                            
|                                            
|                                            
|Name                                        
|(a)                                         
|                                            
|Horst Zerbe                                 
|                                            
|Gino Di Iorio                               

1

Summary of Directors Compensation

At present, members of our board of directors do not receive
cash compensation for their services, including attending meetings of the board
of directors or other committee meetings. Our directors do not have service
contracts. However, our directors are entitled to receive stock options in
amounts determined by the board of directors on an annual basis. All directors
are reimbursed for reasonable expenses incurred by them in their capacity as
directors, including travel and other out-of-pocket expenses incurred in
connection with meetings of the board of directors or any committee of the board
of directors.

32

---



|DIRECTOR COMPENSATION
|---------------------
|                     
|                     
|                     
|                     
|                     
|Name                 
|(a)                  
|                     
|Joel                 
|Cohen                
|                     
|Bernard              
|Boudreau             
|                     
|David                
|Coffin-              
|Beach                
|                     
|Reiza                
|Rayman               

Footnotes:

1

2

3Represents an aggregate of 100,000 options
outstanding, including 25,000 options issued on August 9, 2007.

4Represents an aggregate of 100,000 options
outstanding, including 25,000 options issued on August 9, 2007.

33

---

Directors and Officers Liability Insurance

We carry directors and officers liability insurance at an approximate
annual cost of $19,500.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The following table sets forth information with respect to
ownership of the Companys securities by its officers and directors and by any
person (including any "group") who is the beneficial owner of more than 5% of
the Companys common stock. As of March 24, 2008 there were 16,162,331 shares of
common stock issued and outstanding. The following table includes options
exercisable within sixty days.

|Name and Address                                  | Amount and Nature of | Percent of
|------------------------------------------------- | -------------------- | ----------
|Of Owner                                          | Beneficial Owner     | Class     
|                                                  |                      |           
|Horst G. Zerbe(1)                                 | 4,934,643.5          | 30.5%     
|Ingrid Zerbe(2)                                   | 4,934,643.5          | 30.5%     
|Joel Cohen(3)                                     | 1,846,713            | 11.4%     
|Bernard Boudreau (4)                              | 107,500              | *         
|David Coffin-Beach (5)                            | 153,191              | *         
|Reiza Rayman (6)                                  | 153,191              | *         
|Gino Di Iorio (7)                                 | 18,750               | *         
|All directors and officers as a group (7 persons) | 12,148,632           | 75.2%     

* Less than 1%.

(1) In connection with the acquisition of IntelGenx in 2006,
Horst Zerbe became our President, Chief Executive Officer and Director and
acquired 4,709,643.5 exchangeable shares of our Canadian holding corporation
6544631Canada Inc., a Canadian special purpose corporation which wholly owns
IntelGenx Corp. (the "Exchangeable Shares"). The 4,709,643.5 Exchangeable Shares
are exchangeable, on a one for one basis, into shares of common stock of
IntelGenx Technologies Corp. at Horst Zerbes discretion. Prior to exchanging
the Exchangeable Shares for shares of common stock, Horst Zerbe has the right to
vote 4,709,643.5 shares of common stock which are currently held in trust on
behalf of Horst Zerbe. The 4,709,643.5 shares of common stock have not been
registered for resale at this time. In addition to the Exchangeable Shares,
Horst Zerbes beneficial ownership includes 225,000 shares of common stock
underlying options granted November 9, 2006, which are currently exercisable.
The options have an exercise price of $0.41. Horst Zerbe and Ingrid Zerbe are
husband and wife.

(2) In connection with the acquisition of IntelGenx in 2006,,
Ingrid Zerbe became our Secretary and our director of Finance and Administration
and acquired 4,709,643.5 Exchangeable Shares. The 4,709,643.5 Exchangeable
Shares are exchangeable, on a one for one basis, into shares of common stock of
IntelGenx Technologies Corp. at Ingrid Zerbes discretion. Prior to exchanging
the Exchangeable Shares, Ingrid Zerbe has the right to vote 4,709,643.5 shares
of common stock which are currently held in trust on behalf of Ingrid Zerbe. The
4,709,643.5 shares of common stock have not been registered for resale at this
time. In addition to the Exchangeable Shares, Ingrid Zerbes beneficial
ownership includes 225,000 shares of common stock underlying options granted
November 9, 2006, which are currently exercisable. The options have an exercise
price of $0.41. Horst Zerbe and Ingrid Zerbe are husband and wife.

(3) In connection with the acquisition of IntelGenx in 2006,,
Joel Cohen became a Director and acquired 1,571,713 Exchangeable Shares. The
1,571,713 Exchangeable Shares are exchangeable, on a one for one basis, into
shares of common stock of IntelGenx Technologies Corp. at Joel Cohens
discretion. Prior to exchanging the Exchangeable Shares for shares of common
stock, Joel Cohen has the right to vote 1,571,713 shares of common stock which
are currently held in trust on behalf of Joel Cohen. The 1,571,713 shares of
common stock have not been registered for resale at this time. In addition to
the Exchangeable Shares, Mr. Cohens beneficial ownership includes 250,000
exercisable options to purchase common stock at an exercise price of $0.41
granted on November 13, 2006 and 25,000 exercisable options to purchase common
stock at an exercise price of $1.51, granted on August 9, 2007.

34

---

(4) Mr. Boudreaus beneficial ownership consists of 75,000
exercisable options to purchase common stock at an exercise price of $0.41,
granted in October 2006, and 32,500 exercisable options to purchase common stock
at an exercise price of $1.51, granted on August 9, 2007.

(5) Dr. Coffin-Beachs beneficial ownership includes 75,000
exercisable options to purchase common stock at an exercise price of $0.41,
granted in October, 2006, 25,000 exercisable options to purchase common stock at
an exercise price of $1.51, granted on August 9, 2007and 53,191 shares of common
stock.

(6) Dr. Raymans beneficial ownership includes 75,000
exercisable options to purchase common stock at an exercise price of $0.41,
granted in October of 2006, 25,000 exercisable options to purchase common stock
at an exercise price of $1.51, granted on August 9, 2007and 53,191 shares of
common stock.

(7)

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

On May 23, 2007, Taylor Hutchison, who served as our Chief
Financial Officer from May 23, 2007 until July 16, 2007, purchased debentures in
a principal amount of $25,000 and warrants to purchase 35,714 shares of the
Company's common stock at an exercise price of $1.02 subject to a Purchase
Agreement between IntelGenx and certain institutional and accredited investors.

Between February and May of 2007, David Coffin-Beach, one of
our directors, received fees of approximately $18,700 for consulting work
performed for IntelGenx in connection with our May 2007 Private Placement.

During the year ended December 31, 2007, $5,636 of interest
was paid to Ingrid Zerbe, our secretary and director of finance and
administration for interest on a long-term shareholder loan. The loan is
unsecured, bears interest at 6% per annum and is not repayable prior to January
1, 2009. The amount outstanding at December 31, 2007, was $101,193. Ingrid Zerbe
was also paid $18,606 under an equipment lease for the year ended 2007 with a
comparable amount of $17,850 in 2006.

On August 9, 2007, our non-employee directors Joel Cohen,
David Coffin-Beach, and Reiza Rayman were each granted 25,000 options to
purchase common stock. Bernard Boudreau, a non-employee director, was granted
32,500 options to purchase common stock. The related charge in 2007 for the
total of 107,500 in options grants was $76,733.

On the same date, Gino Di Iorio, our CFO, was granted 75,000
options to purchase common shares. The related charge for 2007 was $10,609.

On December 27, 2007, the Company purchased from Horst Zerbe,
our President and CEO, $60,000 in laboratory equipment.

35

---



ITEM 13. EXHIBITS

|2.1 | Share exchange
    agreement dated April 10, 2006, incorporated by reference to 99.1 from the
    8K/A filed on April 28, 2006                      
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                     
|3.1 | Articles of
    incorporation (incorporated by reference to exhibit 3.1 of the registrants
    SB-2 (File No. 333-90149 filed on November 16, 1999)
|    |                                                                                                                                                     
|3.2 | By-Laws (incorporated
    by reference to exhibit 3.1 of the registrants SB-2 No. 333-91049 filed onNovember 16, 1999)                             

|      |                                                                                                                                                                                      
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.3   | Amendment to the Articles of Incorporation
    (incorporated by reference to exhibit 3.3 filed with amendment No. 2 to Form
    SB-2 (File No. 333-135591) filed on August 28, 2006).
|      |                                                                                                                                                                                      
|4.1   | Warrants dated March 16, 2006 issued to
    Patrick J. Caruso (incorporated by reference to exhibit 4.1of the
    registrants SB-2 (File No. 333-135591), filed on July 3, 2006)    
|      |                                                                                                                                                                                      
|9.1   | Voting Trust agreement (incorporated by
    reference to exhibit 99.1 from the Form 8K/A filed on April 28, 2006)                                                                    
|      |                                                                                                                                                                                      
|10.1  | Horst Zerbe employment agreement
    (incorporated by reference to exhibit 10.1 of the registrants SB-2 (File
    No. 333-135591) filed on July 3, 2006)                            
|      |                                                                                                                                                                                      
|10.2  | Joel Cohen consulting agreement (incorporated
    by reference to exhibit 10.2 of the registrants SB-2 (File No. No.
    333-135591) filed on July 3, 2006)                         
|      |                                                                                                                                                                                      
|10.3  | Ingrid Zerbe employment agreement
    (incorporated by reference to exhibit 10.3 of the registrants SB-2 (File
    No. 333-135591) filed on July 3, 2006)                           
|      |                                                                                                                                                                                      
|10.4  | Registration rights agreement, incorporated
    by reference to exhibit 10.4 of the registrants SB-2 (File No. 333-135591)
    filed on July 3, 2006)                               
|      |                                                                                                                                                                                      
|10.5  | Principal's registration rights agreement
    (incorporated by reference to exhibit 10.5 of the registrants SB-2 (File
    No. 333-135591) filed on July 3, 2006)                   
|      |                                                                                                                                                                                      
|10.6  | Investor relations consulting agreement
    (incorporated by reference to exhibit 10.6 of the registrants SB-2 No.
    333-135591, filed on July 3, 2006).                          
|      |                                                                                                                                                                                      
|10.7  | 2006 Stock Option Plan (incorporated by
    reference to exhibit 10.1 of the Form S-8 filed on November 21, 2006)                                                                    
|      |                                                                                                                                                                                      
|10.8  | Form of Securities Purchase Agreement
    (incorporated by reference to the Form 8-K filed on May 23, 2007)                                                                          
|      |                                                                                                                                                                                      
|10.9  | Form of 8% Secured Convertible Debenture
    (incorporated by reference to the Form 8-K filed on May 23, 2007)                                                                       
|      |                                                                                                                                                                                      
|10.10 | Form of Registration Rights Agreement
    (incorporated by reference to the Form 8-K filed on May 23, 2007)                                                                          
|      |                                                                                                                                                                                      
|10.11 | Form of Warrant (incorporated by reference to
    the Form 8-K filed on May 23, 2007)                                                                                                
|      |                                                                                                                                                                                      
|10.12 | Form of Security Agreement (incorporated by
    reference to the Form 8-K filed on May 23, 2007)                                                                                     
|      |                                                                                                                                                                                      
|10.13 | Subsidiary Guarantee (incorporated by
    reference to the Form 8-K filed on May 23, 2007)                                                                                           
|      |                                                                                                                                                                                      
|10.14 | Deed of Hypothec (incorporated by reference
    to the Form 8-K filed on May 23, 2007)                                                                                               
|      |                                                                                                                                                                                      
|16.1  | Letter on change in certifying accountant
    (incorporated by reference to exhibit 16.1 of the SB-2 (File No. 333-135591)
    filed on July 3, 2006)                                
|      |                                                                                                                                                                                      
|21.1  | Subsidiaries of the small business issuer
    (incorporated by reference to exhibit 21.1 of the registrant SB-2 (File No.
    333-135591) filed on July 3, 2006)                     

36

---

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth, for each of the years
indicated, the audit fees billed by our independent public accountants, RSM
Richter LLP, and includes fees billed to our Canadian subsidiary for all
necessary financial reviews in connection with our regulatory filings.

|                       |   | 2007    |   | 2006  
|---------------------- | - | ------- | - | ------
|                       |   |         |   |       
|Audit Fees (1)         | $ | 116,470 | $ | 72,308
|Audit-Related Fees (2) |   |         |   |       
|Tax Fees               |   |         |   |       
|All Other Fees         |   |         |   |       
|                       |   |         |   |       
|Total                  | $ | 116,470 | $ | 72,308

(1) Audit fees relate to professional services rendered in
connection with the audit of the Company's annual financial statements and
internal control over financial reporting, quarterly review of financial
statements included in the Company's Forms 10-Q, and audit services provided in
connection with other statutory and regulatory filings.

(2) Audit-related fees comprise fees for professional
services that are reasonably related to the performance of audit or review of
the Company's financial statements.

Pre-Approval Policies and Procedures

In June 2006 the Board of Directors delegated certain
responsibilities to the Audit Committee. The Audit Committee adopted an Audit
Committee Charter that outlines its responsibilities including the pre-approval
of non-audit related services rendered by the Company's independent public
accountants. The fees charged by RSM Richter in 2007 are audit fees and incurred
on an as-needed basis. Prior to June 2006, the directors served as our Audit
Committee. 100% of the audit fees in 2007 and 2006 were approved by the
directors. No issue regarding these services has arisen in the last two fiscal
years.

37

---



SIGNATURES

In accordance with Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

DATED: March 31, 2008

| | IntelGenx Technologies
    Corp. 
| | ---------------------------------
| |                                  
| | By: /s/ Horst G.
    Zerbe       
| | Horst G. Zerbe,
    President and
| | Chief Executive
    Officer      
| |                                  
| | By: /s/ Gino D.
    Iorio        
| | Chief Financial
    Officer      

38

---

In accordance with the Exchange Act, this report has been
signed by the following persons on behalf of the registrant, in the capacities,
and on the dates, indicated.
DATED: March 31, 2008

IntelGenx Technologies Corp.Directors:
      Date:/s/ Horst G.
      Zerbe
      March 31, 2008Horst G. Zerbe, CEO
      and Chairman/s/ Joel Cohen
      March 31, 2008Joel Cohen , -
      Director/s/ Bernard
      Boudreau
      March 31, 2008Bernard Boudreau,
      Director/s/ David
      Coffin-Beach
      March 31, 2008David Coffin-Beach,
      Director/s/ Reiza Rayman
      March 31, 2008Reiza Rayman,
      Director


39

---

EXHIBITS

|2.1 | Share exchange
    agreement dated April 10, 2006, incorporated by reference to 99.1 from the
    8K/A filed on April 28, 2006                      
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                     
|3.1 | Articles of
    incorporation (incorporated by reference to exhibit 3.1 of the registrants
    SB-2 (File No. 333-90149 filed on November 16, 1999)
|    |                                                                                                                                                     
|3.2 | By-Laws (incorporated
    by reference to exhibit 3.1 of the registrants SB-2 No. 333-91049 filed onNovember 16, 1999)                             

|      |                                                                                                                                                                                      
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.3   | Amendment to the Articles of Incorporation
    (incorporated by reference to exhibit 3.3 filed with amendment No. 2 to Form
    SB-2 (File No. 333-135591) filed on August 28, 2006).
|      |                                                                                                                                                                                      
|4.1   | Warrants dated March 16, 2006 issued to
    Patrick J. Caruso (incorporated by reference to exhibit 4.1of the
    registrants SB-2 (File No. 333-135591), filed on July 3, 2006)    
|      |                                                                                                                                                                                      
|9.1   | Voting Trust agreement (incorporated by
    reference to exhibit 99.1 from the Form 8K/A filed on April 28, 2006)                                                                    
|      |                                                                                                                                                                                      
|10.1  | Horst Zerbe employment agreement
    (incorporated by reference to exhibit 10.1 of the registrants SB-2 (File
    No. 333-135591) filed on July 3, 2006)                            
|      |                                                                                                                                                                                      
|10.2  | Joel Cohen consulting agreement (incorporated
    by reference to exhibit 10.2 of the registrants SB-2 (File No. No.
    333-135591) filed on July 3, 2006)                         
|      |                                                                                                                                                                                      
|10.3  | Ingrid Zerbe employment agreement
    (incorporated by reference to exhibit 10.3 of the registrants SB-2 (File
    No. 333-135591) filed on July 3, 2006)                           
|      |                                                                                                                                                                                      
|10.4  | Registration rights agreement, incorporated
    by reference to exhibit 10.4 of the registrants SB-2 (File No. 333-135591)
    filed on July 3, 2006)                               
|      |                                                                                                                                                                                      
|10.5  | Principal's registration rights agreement
    (incorporated by reference to exhibit 10.5 of the registrants SB-2 (File
    No. 333-135591) filed on July 3, 2006)                   
|      |                                                                                                                                                                                      
|10.6  | Investor relations consulting agreement
    (incorporated by reference to exhibit 10.6 of the registrants SB-2 No.
    333-135591, filed on July 3, 2006).                          
|      |                                                                                                                                                                                      
|10.7  | 2006 Stock Option Plan (incorporated by
    reference to exhibit 10.1 of the Form S-8 filed on November 21, 2006)                                                                    
|      |                                                                                                                                                                                      
|10.8  | Form of Securities Purchase Agreement
    (incorporated by reference to the Form 8-K filed on May 23, 2007)                                                                          
|      |                                                                                                                                                                                      
|10.9  | Form of 8% Secured Convertible Debenture
    (incorporated by reference to the Form 8-K filed on May 23, 2007)                                                                       
|      |                                                                                                                                                                                      
|10.10 | Form of Registration Rights Agreement
    (incorporated by reference to the Form 8-K filed on May 23, 2007)                                                                          
|      |                                                                                                                                                                                      
|10.11 | Form of Warrant (incorporated by reference to
    the Form 8-K filed on May 23, 2007)                                                                                                
|      |                                                                                                                                                                                      
|10.12 | Form of Security Agreement (incorporated by
    reference to the Form 8-K filed on May 23, 2007)                                                                                     
|      |                                                                                                                                                                                      
|10.13 | Subsidiary Guarantee (incorporated by
    reference to the Form 8-K filed on May 23, 2007)                                                                                           
|      |                                                                                                                                                                                      
|10.14 | Deed of Hypothec (incorporated by reference
    to the Form 8-K filed on May 23, 2007)                                                                                               
|      |                                                                                                                                                                                      
|16.1  | Letter on change in certifying accountant
    (incorporated by reference to exhibit 16.1 of the SB-2 (File No. 333-135591)
    filed on July 3, 2006)                                
|      |                                                                                                                                                                                      
|21.1  | Subsidiaries of the small business issuer
    (incorporated by reference to exhibit 21.1 of the registrant SB-2 (File No.
    333-135591) filed on July 3, 2006)                     
|      |                                                                                                                                                                                      
|23.1  | Consents of Auditor                                                                                                                                                                  
|      |                                                                                                                                                                                      

---



IntelGenx Technologies Corp.

Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

RSM Richter LLP 
Chartered Accountants



RSM Richter LLP is an independent member firm of RSM International, 
an affiliation of independent accounting and consulting firms.

---



IntelGenx Technologies Corp.

Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

|Contents                                                    |           
|----------------------------------------------------------- | ----------
|                                                            |           
|                                                            |           
|Report of Independent Registered Public
    Accounting Firm | F-1       
|Balance Sheet                                               | F-2       
|Statement of Shareholders' Equity                           | F-3 - F-4 
|Statement of Operations and Comprehensive
    Loss          | F-5       
|Statement of Cash Flows                                     | F-6       
|Notes to Financial Statements                               | F-7 - F-25

---



| |  | RSM Richter S.E.N.C.R.L.                    
| |  | --------------------------------------------
| |  | Comptables agréés                           
| |  | Chartered Accountants                       
| |  | 2, Place Alexis Nihon                       
| |  | Montréal, (Québec) H3Z 3C2                  
| |  | Téléphone / Telephone : (514)
    934-3400  
| |  | Télécopieur / Facsimile : (514)
    934-3408
| |  | www.rsmrichter.com                          

Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of

IntelGenx Technologies Corp.

We have audited the accompanying consolidated balance sheets
of IntelGenx Technologies Corp. as at December 31, 2007 and 2006 and the related
consolidated statements of operations and comprehensive loss, shareholders' equity
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform an audit to obtain reasonable assurance whether
the financial statements are free of material misstatement. We were not engaged
to perform an audit of the Company's internal control over financial reporting.
Our audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting.
Accordingly we express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, these consolidated financial statements
present fairly in all material respects, the financial position of the Company
as at December 31, 2007 and 2006 and the results of its operations,
comprehensive loss, and its cash flows for the years then ended in accordance
with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As described in note
2 to the financial statements, the Company has experienced operating losses and
requires significant capital to finance operations and repay existing
indebtedness. This raises substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in note 2. The financial statements do not include any adjustments that may
result from the outcome of this uncertainty.

We were not engaged to examine managements assertion about
the effectiveness of the Companys internal control over financial reporting as
at December 31, 2007 included in the accompanying 10  KSB filing and,
accordingly, we do not express an opinion thereon.

Signed: RSM Richter LLP

Chartered Accountants

Montreal, Quebec 
March 28, 2008

F-1

---



IntelGenx Technologies Corp.

Consolidated Balance Sheet As 
At December 31, 2007 and 2006 
(Expressed in U.S. Funds)

|                                                                     |   | 2007        |   | 2006     
|-------------------------------------------------------------------- | - | ----------- | - | ---------
|Assets                                                               |   |             |   |          
|Current                                                              |   |             |   |          
|Cash and cash equivalent                                             | $ | 330,967     | $ | 227,578  
|Accounts receivable                                                  |   | 427,476     |   | 135,223  
|Income taxes recoverable                                             |   | 11,028      |   | 9,380    
|Prepaid expenses                                                     |   | 23,443      |   | 72,914   
|Investment tax credits receivable                                    |   | 243,006     |   | 43,880   
|                                                                     |   | 1,035,920   |   | 488,975  
|Property and Equipment(note 6)                                       |   | 235,244     |   | 161,861  
|                                                                     |   |             |   |          
|                                                                     | $ | 1,271,164   | $ | 650,836  
|Liabilities                                                          |   |             |   |          
|Current                                                              |   |             |   |          
|Accounts payable and accrued liabilities (note 7)                    |   | 261,485     |   | 129,994  
|Current maturity of long-term debt                                   |   | -           |   | 24,026   
|                                                                     |   | 261,485     |   | 154,020  
|Long-Term Debt                                                       |   | -           |   | 82,661   
|Loan Payable, Shareholder(note 8)                                    |   | 101,193     |   | 86,076   
|Convertible Notes,less unamortized discount and
    deferred charges |   |             |   |          
|of $1,082,366(note9)                                                 |   | 417,634     |   | -        
|Deferred Income Tax Liability                                        |   | 278,988     |   | -        
|Commitment (note 10)                                                 |   |             |   |          
|Shareholders' Equity                                                 |   |             |   |          
|Capital Stock(note 11)                                               |   | 162         |   | 160      
|Additional Paid-In Capital(note 12)                                  |   | 2,071,818   |   | 1,165,403
|Accumulated Other Comprehensive Income (Loss)                        |   | 58,542      |   | (19,619) 
|Accumulated Deficit                                                  |   | (1,918,658) |   | (817,865)
|                                                                     |   | 211,864     |   | 328,079  
|                                                                     | $ | 1,271,164   | $ | 650,836  

See accompanying notes

Approved on Behalf of the Board

_________________________, Director

_________________________, Director

F-2

---



IntelGenx Technologies Corp.

Consolidated Statement of Shareholders' Equity 
For the Year Ended December 31, 2006 
(Expressed in U.S. Funds)

|                                                      |               |         |               |             |               | Accumulated |          |       |           |  
|----------------------------------------------------- | ------------- | ------- | ------------- | ----------- | ------------- | ----------- | -------- | ----- | --------- | -
|                                                      |               |         |               | Additional  | Other         |             |          | Total
|                                                      | Capital Stock | Paid-In | Comprehensive | Accumulated | Shareholders'
|                                                      | Number        | Amount  |               | Capital     | Income (Loss) |             | Deficit  |       | Equity   
|Balance - December 31, 2005                           | 10,000        | $       | 77            | $           | -             | $           | 4,825    | $     | (36,729)  | $
|March 9, 2006 - recall and cancellation of
    issued | (10,000)      |         | (77)          |             | -             |             | -        |       | -         |  
|shares                                                |               |         |               |             |               |             |          |       |           |  
|March 9, 2006 - issue of common shares                | 10,991,000    |         | 110           |             | (33)          |             | -        |       | -         |  
|April 28, 2006 - issue of common shares               | 3,191,489     |         | 32            |             | 792,389       |             | -        |       | -         |  
|April 28, 2006 - asset acquired                       | 1,825,000     |         | 18            |             | 133,232       |             | -        |       | -         |  
|Foreign currency translation adjustment               | -             |         | -             |             | -             |             | (24,444) |       | -         |  
|Warrants issued                                       | -             |         | -             |             | 37,699        |             | -        |       | -         |  
|Stock options issued                                  | -             |         | -             |             | 212,778       |             | -        |       | -         |  
|Compensation expense related to services not
    yet  |               |         |               |             |               |             |          |       |           |  
|rendered                                              | -             |         | -             |             | (10,662)      |             | -        |       | -         |  
|Net loss                                              | -             |         | -             |             | -             |             | -        |       | (781,136) |  
|Balance - December 31, 2006                           | 16,007,489    | $       | 160           | $           | 1,165,403     | $           | (19,619) | $     | (817,865) | $

See accompanying notes

F-3

---



IntelGenx Technologies Corp.

Consolidated Statement of Shareholders' Equity 
For the Year Ended December 31, 2007 
(Expressed in U.S. Funds)

|                                                            |               |   |         |               |            |              | Accumulated   |         |             |        |            
|----------------------------------------------------------- | ------------- | - | ------- | ------------- | ---------- | ------------ | ------------- | ------- | ----------- | ------ | -----------
|                                                            |               |   |         |               | Additional |              | Other         |         |             |        | Total      
|                                                            | Capital Stock |   | Paid-In | Comprehensive |            | Accumulated  | Shareholders'
|                                                            | Number        |   | Amount  |               | Capital    | Income(Loss) |               | Deficit |             | Equity
|                                                            |               |   |         |               |            |              |               |         |             |        |            
|Balance - December 31, 2006                                 | 16,007,489    | $ | 160     | $             | 1,165,403  | $            | (19,619)      | $       | (817,865)   | $      | 328,079    
|Foreign currency translation adjustment                     | -             |   | -       |               | -          |              | 78,161        |         | -           |        | 78,161     
|Debenture conversion                                        | 149,657       |   | 2       |               | 104,757    |              | -             |         | -           |        | 104,759    
|Warrants issued, net of transaction costs of
    $121,063   | -             |   | -       |               | 452,023    |              | -             |         | -           |        | 452,023    
|Stock-based compensation                                    | -             |   | -       |               | 202,607    |              | -             |         | -           |        | 202,607    
|Beneficial conversion feature, net of a
    deferred income | -             |   | -       |               | 147,028    |              | -             |         | -           |        | 147,028    
|tax liability of $343,065                                   |               |   |         |               |            |              |               |         |             |        |            
|Net loss                                                    | -             |   | -       |               | -          |              | -             |         | (1,100,793) |        | (1,100,793)
|                                                            |               |   |         |               |            |              |               |         |             |        |            
|Balance - December 31, 2007                                 | 16,157,146    | $ | 162     | $             | 2,071,818  | $            | 58,542        | $       | (1,918,658) | $      | 211,864    

F-4

---



IntelGenx Technologies Corp.

Consolidated Statement of Operations and Comprehensive Loss 
For the Year Ended December 31, 2007 and 2006 
(Expressed in U.S. Funds)

|                                                    |   | 2007        |   | 2006      
|--------------------------------------------------- | - | ----------- | - | ----------
|                                                    |   |             |   |           
|Revenue                                             | $ | 835,376     | $ | 261,649   
|                                                    |   |             |   |           
|Interest                                            |   | 27,355      |   | 4,252     
|                                                    |   | 862,731     |   | 265,901   
|                                                    |   |             |   |           
|Expenses                                            |   |             |   |           
|Research and development                            |   | 777,773     |   | 510,407   
|Research and development tax credits                |   | (174,399)   |   | (39,025)  
|Management salaries                                 |   | 328,513     |   | 245,637   
|General and administrative                          |   | 166,249     |   | 84,040    
|Professional fees                                   |   | 424,817     |   | 158,925   
|Depreciation                                        |   | 42,003      |   | 33,912    
|Foreign exchange                                    |   | 113,552     |   | (1,583)   
|Interest and financing fees                         |   | 349,093     |   | 54,724    
|                                                    |   | 2,027,601   |   | 1,047,037 
|                                                    |   |             |   |           
|Loss Before Income Taxes                            |   | (1,164,870) |   | (781,136) 
|                                                    |   |             |   |           
|Income taxes (note 13)                              |   | (64,077)    |   | -         
|                                                    |   |             |   |           
|Net Loss                                            | $ | (1,100,793) | $ | (781,136) 
|                                                    |   |             |   |           
|Other Comprehensive Income (Loss)                   |   |             |   |           
|                                                    |   |             |   |           
|Foreign currency translation adjustment             |   | 78,161      |   | (24,444)  
|Comprehensive Loss                                  | $ | (1,022,632) | $ | (805,580) 
|                                                    |   |             |   |           
|Basic Weighted Average Number of Shares Outstanding |   | 16,042,791  |   | 14,335,000
|                                                    |   |             |   |           
|Basic and Diluted Loss Per Common Share             | $ | (0.07)      | $ | (0.05)    

See accompanying notes

F-5

---



IntelGenx Technologies Corp.

Consolidated Statement of Cash Flows 
For the Year Ended December 31, 2007 and 2006 
(Expressed in U.S. Funds)

|                                                           |         | 2007        |   | 2006     
|---------------------------------------------------------- | ------- | ----------- | - | ---------
|                                                           |         |             |   |          
|Funds Provided (Used) -                                    |         |             |   |          
|Operating Activities                                       |         |             |   |          
|                                                           |         |             |   |          
|Net loss                                                   | $       | (1,100,793) | $ | (781,136)
|Deferred income taxes                                      |         | (64,077)    |   | -        
|Depreciation                                               |         | 42,003      |   | 33,912   
|Stock issued for investor relations services               |         | 68,349      |   | 66,625   
|Financing fees paid in warrants                            |         | -           |   | 37,699   
|Employees and directors share-based compensation           |         | 202,607     |   | 202,116  
|Interest accretion and amortization of debenture
    costs | 195,317 |             | -
|                                                           |         | (656,594)   |   | (440,784)
|Changes in non-cash operating elements of working          |         |             |   |          
|capital                                                    |         | (312,065)   |   | (48,867) 
|                                                           |         | (968,659)   |   | (489,651)
|Financing Activities                                       |         |             |   |          
|                                                           |         |             |   |          
|Promissory note                                            |         | -           |   | 134,689  
|Repayment of promissory note                               |         | -           |   | (134,689)
|Increase in long-term debt                                 |         | -           |   | 53,754   
|Repayment of long-term debt                                |         | (107,871)   |   | (22,632) 
|Issue of capital stock                                     |         | -           |   | 1,341,750
|Transaction costs                                          |         | (229,323)   |   | (549,329)
|Convertible notes                                          |         | 1,500,000   |   | -        
|                                                           |         | 1,162,806   |   | 823,543  
|Investing Activity                                         |         |             |   |          
|                                                           |         |             |   |          
|Additions to property and equipment                        |         | (82,961)    |   | (97,511) 
|Increase in Cash and Cash Equivalent                       |         | 111,186     |   | 236,381  
|Effect of Foreign Exchange on Cash Balance                 |         | (7,797)     |   | (19,741) 
|Cash and Cash Equivalent                                   |         |             |   |          
|Beginning of Year                                          |         | 227,578     |   | 10,938   
|End of Year                                                | $       | 330,967     | $ | 227,578  

See accompanying notes

F-6

---



IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

1.

Basis of
Presentation and Reorganization of the Corporation Basis of Presentation

The Company prepares its financial
statements in accordance with accounting principles generally accepted in the
United States. 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 material interentity transactions and balances have been
eliminated.

The financial statements are expressed in U.S. funds.

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 is considered to be the
accounting acquirer.

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
instruction of the holders of the exchangeable shares on a basis of one vote for
every exchangeable share held.

F-7

---



IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

1.

Basis of Presentation and
Reorganization of the Corporation (Cont'd)

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 acquirer.

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, being prepaid
investor relations services, is $133,250. As part of the transaction, a
shareholder of IntelGenx Technologies Corp. forgave the amount due to
shareholder and related interest payable amounting to $23,160.

2.

Going Concern

The accompanying financial statements
have been prepared assuming the Company will continue as a going concern. The
Company has reported an accumulated deficit of $1,918,658 (2006 - $817,865). To
date, these losses have been financed principally through common share issuance,
long-term debt and debt from related parties. 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. To date revenues consisted
primarily of research and development fee revenues from four clients and have
not been sufficient to sustain operations. In order to achieve profitability,
revenue streams will have to increase significantly and there is no assurance
that revenues can increase to such a level. The Company has raised additional
cash through the issuance of convertible debt during the year and is currently
undergoing 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.

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 research and 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.

F-8

---



IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

4.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. The financial
statements include estimates based on currently available information and
management's judgment as to the outcome of future conditions and circumstances.
Significant estimates in these financial statements include the allowance for
doubtful accounts, useful lives and impairment of long-lived assets, stock-based
compensation costs, determination of the fair value of the warrants issued with
the convertible notes, the investments tax credits receivable and the resulting
impact on the allocation of the proceeds between the convertible notes, the
beneficial conversion feature and the warrants.

Changes in the status of certain
facts or circumstances could result in material changes to the estimates used in
the preparation of the financial statements and actual results could differ from
the estimates and assumptions.

Revenue Recognition

The Company recognizes revenue from
research and development contracts as the contracted services are performed or
when milestones are achieved, in accordance with the terms of the specific
agreements and when collection of the payment is reasonably assured. In
addition, the performance criteria for the achievement of milestones are met if
substantive effort was required to achieve the milestone and the amount of the
milestone payment appears reasonably commensurate with the effort expended.
Amounts received in advance of the recognition criteria being met, if any, are
included in deferred income.

Sales Tax

On June 28, 2006, the FASB ratified
the EITFs consensus reached on EITF 06-3, which relates to the income statement
presentation of taxes collected from customers and remitted to government
authorities. The Task Force affirmed as a consensus on this issue that the
presentation of taxes on either a gross basis or a net basis within the scope of
EITF 06-3 is an accounting policy decision that should be disclosed pursuant to
APB 22. A company should disclose the amount of those taxes that is recognized
on a gross basis in interim and annual financial statements for each period for
which an income statement is presented if those amounts are significant. The
Company adopted EITF 06-3 on January 1, 2007. While the amounts are not
material, the Companys policy is to present such taxes on a net basis in the
consolidated statements of operations.

Financial Instruments

The Company estimates the fair value
of its financial instruments based on current interest rates, market value and
pricing of financial instruments with comparable terms. Unless otherwise
indicated, the carrying value of these financial instruments approximates their
fair market value.

F-9

---

IntelGenx Technologies Corp.Notes to Consolidated Financial Statements December 31, 2007 and 2006 
(Expressed in U.S. Funds)

4.

Summary of
Significant Accounting Policies (Contd)

Cash and Cash Equivalent

Cash and cash equivalent is comprised
of cash on hand and a term deposit with an original maturity date of less than
three months.

Accounts Receivable

The Company accounts for trade
receivables at original invoice amount less an estimate made for doubtful
receivables based on a review of all outstanding amounts on a monthly basis.
Management determines the allowance for doubtful accounts by regularly
evaluating individual customer receivables and considering a customer's
financial condition, credit history and current economic conditions. The Company
writes off trade receivables when they are deemed uncollectible. The Company
records recoveries of trade receivables previously written-off when they receive
them. Management considers the reserve for doubtful accounts of $Nil (2006:
$Nil) to be adequate to cover any exposure to loss in its December 31, 2007 and
2006 accounts receivable.

Investment Tax Credits

Investment tax credits relating to
qualifying expenditures are recognized in the accounts at the time at which the
related expenditures are incurred and there is reasonable assurance of their
realization. Management has made estimates and assumptions in determining the
expenditures eligible for investment tax credits claimed.

Property and Equipment

Property and equipment are recorded
at cost. Provisions for depreciation are based on their estimated useful lives
using the methods as follows:

| | On the declining balance method - |        
| | --------------------------------- | -------
| | Laboratory and office equipment   | 20%    
| | Computer equipment                | 30%    
| | On the straight-line method -     |        
| | Leasehold improvements            | 5 years

Upon retirement or disposal, the cost
of the asset disposed of and the related accumulated depreciation are removed
from the accounts and any gain or loss is reflected in income. Expenditures for
repair and maintenance are expensed as incurred.

F-10

---

IntelGenx Technologies Corp.
Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)
4.

Summary of
Significant Accounting Policies (Contd)

Impairment of Long-Lived Assets

Long-lived assets held and used by
the Company are reviewed for possible impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of the assets to the estimated undiscounted cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the asset exceeds the fair value thereof.

Foreign Currency Translation

The Company's reporting currency is
the United States dollar. The Canadian dollar is the functional currency of the
Company's Canadian operations which is translated to the United States dollar
using the current rate method. Under this method, accounts are translated as
follows:

Assets and liabilities - at exchange
rates in effect at the balance sheet date;

Revenue and expenses - at average
exchange rates prevailing during the year.

Gains and losses arising from foreign
currency translation are included in other comprehensive income.

Income Taxes

The Company accounts for income taxes
in accordance with SFAS No. 109, "Accounting for Income Taxes". Deferred taxes
are provided on the liability method whereby deferred tax assets are recognized
for deductible temporary differences, and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of
enactment.

In July 2006, the FASB released FIN
48, "Uncertainty in Income Taxes," which defines accounting for uncertain tax
positions and includes amendments to SFAS No. 109. The Company adopted FIN 48 on
January 1, 2007 (the first fiscal year after December 15, 2006). See Note 13 for
additional information."



---

IntelGenx Technologies Corp.
Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)
4.

Summary of Significant Accounting Policies (Contd)

Share-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. In addition, it will recognize in the financial
statements an expense based on the grant date fair value of stock options
granted to employees. The expense will be recognized on a straight-line basis
over the vesting period and the offsetting credit will be recorded in additional
paid-in capital. Upon exercise of options, the consideration paid together with
the amount previously recorded as additional paid-in capital will be recognized
as capital stock. The Company estimates its forfeiture rate in order to
determine its compensation expense arising from stock-based awards. The Company
uses the Black-Scholes-Merton option pricing model to determine the fair value
of the options.

Loss Per Share

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

Newly Issued Accounting
Pronouncements

In February 2007, the Financial
Accounting Standards Board issued FASB Statement No. 159, the Fair Value Option
for Financial Assets and Financial Liabilities ("SFAS 159"), which includes an
amendment to FASB Statement No. 115. The statement permits entities to choose,
at specified election dates, to measure eligible financial assets and financial
liabilities at fair value (referred to as the "fair value option") and report
associated unrealized gains and losses in earnings. SFAS 159 is effective for
fiscal years beginning after November 15, 2007. No significant impact is
expected on the consolidated financial statements at the time of adoption.

In December 2007, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 141 (Revised 2007),
"Business Combinations" ("SFAS 141R"). SFAS 141R will significantly change the
accounting for business combinations. Under SFAS 141R, an acquiring entity will
be required to recognize all the assets acquired and liabilities assumed in a
transaction at the acquisition-date fair value with limited exceptions. SFAS
141R will change the accounting treatment for certain specific acquisition
related items including: (1) expensing acquisition related costs as incurred;
(2) valuing noncontrolling interests at fair value at the acquisition date; and
(3) expensing restructuring costs associated with an acquired business. SFAS
141R also includes a substantial number of new disclosure requirements. SFAS
141R is to be applied prospectively to business combinations for which the
acquisition date is on or after January 1, 2009. We expect SFAS 141R will have
an impact on our accounting for future business combinations once adopted but
the effect is dependent upon the acquisitions that are made in the future.

F-12

---

IntelGenx Technologies Corp.Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)
4.
Summary of Significant Accounting
Policies (Contd)In December 2007, the FASB issued
SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements" ("SFAS
160"). SFAS 160 establishes new accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary
(minority interest) is an ownership interest in the consolidated entity that
should be reported as equity in the Consolidated Financial Statements and
separate from the parent companys equity. Among other requirements, this
statement requires consolidated net income to be reported at amounts that
include the amounts attributable to both the parent and the noncontrolling
interest. It also requires disclosure, on the face of the Consolidated Statement
of Operations, of the amounts of consolidated net income attributable to the
parent and to the noncontrolling interest. We expect SFAS 160 will have an
impact on our accounting for future business combinations once adopted but the
effect is dependent upon the acquisitions that are made in the future.5.
Adjustment to Issued Financial
Statements

Balance sheet as at December 31, 2006

The balance sheet as at December 31,
2006 has been adjusted, in this filing, to reflect the correction of an error in
the previously issued financial statements. Capital stock was not disclosed at
its par value with the excess of the proceeds in additional paid-in capital. As
a result, capital stock is reduced by $977,846 and additional paid-in capital is
increased by the same amount. This error is not material to prior years audited
statements since it is a reclassification within the stockholders equity section
and has no impact on earnings or cash flows from operating or financing
activities. The application of Staff Accounting Bulletin 108 ("SAB 108") has
allowed a restatement of December 31, 2006 financial statements during the
filing of December 31, 2007 10-KSB.

Balance sheet as at June 30 and September 30, 2007

Following the release of the third
quarter financial statements, the Company corrected the calculation of the
volatility of the warrants issued in connection with the convertible notes (note
9). As a result, the volatility changed from 75% to 64%. The impact of the
change resulted in a decrease of $60,566 to the value of the warrants initially
recorded to additional paid-in capital and a decrease of $14,171 to the related
transaction costs. The beneficial conversion feature recorded to additional
paid-in capital was also decreased by $60,566 and the related deferred income
tax liability was increased by $35,211. The convertible notes value decreased by
$100,603. The only impact this change had on net loss was to increase the
interest accretion recorded for 2007 by $13,153.

F-13

---



IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

6.

Property and Equipment

| |                                 |   |         |              |              |              | 2007    |        | 2006   
| | ------------------------------- | - | ------- | ------------ | ------------ | ------------ | ------- | ------ | -------
| |                                 |   |         | Accumulated  | Net Carrying | Net Carrying
| |                                 |   | Cost    | Depreciation |              | Amount       |         | Amount
| |                                 |   |         |              |              |              |         |        |        
| | Laboratory and office equipment | $ | 281,485 | $            | 96,412       | $            | 185,073 | $      | 112,968
| | Computer equipment              |   | 26,447  |              | 10,362       |              | 16,085  |        | 9,184  
| | Leasehold improvements          |   | 62,987  |              | 28,901       |              | 34,086  |        | 39,709 
| |                                 | $ | 370,919 | $            | 135,675      | $            | 235,244 | $      | 161,861

7.

Accounts
Payable and Accrued Liabilities

Included in accounts payable and
accrued liabilities is approximately $71,651 (2006 - $22,500) payable to
shareholders, who are also officers of the Company.

8.

Loan Payable,
Shareholder

The loan payable, shareholder, who is
also an officer of the Company, is unsecured, bears interest at 6% per annum and
is not repayable prior to January 1, 2009. Interest incurred during the year
amounted to approximately $5,636 (2006 - $5,300) which is measured at the
exchange amount.

9.

Convertible
Notes

On May 22, 2007 the Company entered
into convertible note agreements with certain institutional and accredited
investors for amounts totalling $1,500,000. The convertible notes bear interest
at the rate of 8% per annum and are repayable on September 22, 2009. Interest is
payable quarterly and payments commenced on July 1, 2007. The notes are
convertible into common stock of the Company, at the option of the holders, at a
rate of $0.70 per share. The Company also issued to the holders 2,142,857 stock
purchase warrants exercisable at $1.02 per share before May 22, 2012.

The Company paid approximately
$229,323 in cash consideration for and issued warrants with a fair value of
$82,993 in consideration for transaction costs as explained in note 12. These
transaction costs were allocated between the convertible debt and the warrants
based on their relative fair value.

F-14

---



IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

9.

Convertible
Notes (Contd)

The Company may, at its option, elect
to pay the interest by the issuance of shares of common stock. The number of
shares is to be determined by dividing the amount of the interest payment by the
number which is 85% of the average market price of the Company's common shares
for the 20 trading days immediately prior to the interest payment date assuming
the average market price is equal or greater than $0.70 as adjusted for reverse
and forward share split, recapitalizations and the like that occur after the
date of the Securities Purchase Agreements.

In accordance with EITF Issue 98-5
"Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios", the Company recognized the value of
the embedded beneficial conversion feature of $490,093 as additional paid-in
capital and an equivalent discount which will be expensed over the term of the
convertible notes. In addition, in accordance with EITF Issue 00-27 "Application
of Issue No.98-5 to Certain Convertible Instruments", the Company has allocated
the proceeds of issuance between the convertible notes and the detachable
warrants based on their relative fair value. Accordingly, the Company recognized
the fair value of the detachable warrants of $490,093 as additional paid-in
capital and an equivalent discount against the convertible notes. The difference
between the face amount of the convertible notes and their carrying value is
amortized over the life of the convertible notes. As long as any portion of the
convertible notes remains outstanding, the Company shall not pay any cash
dividends or distributions on any equity securities of the Company without prior
written consent from the holders of the convertible note.

The Black-Scholes Model was used to
calculate the fair value of the warrants. The underlying assumptions included in
the Black-Scholes Model were as follows:

| | Expected volatility     | 64%     | 
| | ----------------------- | ------- | 
| | Contractual life        | 5 years | 
| | Risk-free interest rate | 4.39%   | 
| | Dividend yield          | Nil     | 

Substantially all of the assets of
the Company have been pledged as security of the convertible notes. As at
December 31, 2007, $66,180 of interest has been paid, and $195,317 of interest
has been accreted. During the year, $104,759 of convertible notes were exchanged
for 149,657 shares of common stock.

F-15

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IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

10.

Commitment

The Company has entered into an
agreement to lease premises up to August 2009. The future minimum lease payments
over the next two years are approximately as follows:

| | 2008 | $ 15,900 | 
| | ---- | -------- | 
| | 2009 | 10,800   | 

11.

Capital Stock

| |                                                     |   | 2007 |   | 2006
| | --------------------------------------------------- | - | ---- | - | ----
| |                                                     |   |      |   |     
| | Authorized -                                        |   |      |   |     
| | 100,000,000 common shares of $0.00001 par
    value |   |      |   |     
| | 20,000,000 preferred shares                         |   |      |   |     
| | Issued -                                            |   |      |   |     
| | 16,157,146 (2006  16,007,489) common shares        | $ | 162  | $ | 160 

On March 9, 2006, the Company
recalled and cancelled its 10,000 issued and outstanding common shares and
issued in exchange 10,991,000 common shares.

On April 28, 2006, the Company issued
3,191,489 common shares for cash consideration of $1,341,750. The transaction
costs related to the share issuance amounted to $549,329.

On the same date, the Company
completed a share exchange transaction with IntelGenx Technologies Corp. in
which it acquired prepaid investor relations services amounting to $133,250.

On April 10, 2007, the Board of
Directors of the Corporation approved an amendment, subject to shareholder
approval, to the Corporation's Certificate of Incorporation, to increase the
number of authorized common shares from 20,000,000 to 100,000,000 and to
authorize the creation of 20,000,000 shares of "blank check" preferred shares.
On April 10, 2007, the majority stockholder of the Corporation approved the same
resolution as the Board of Directors.

During the year, the Company issued
149,657 common shares in exchange for $104,759 of convertible notes.

F-16

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IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

12.

Additional Paid-In Capital

Warrants

During the year ended December 31,
2006, the Company issued 190,691 stock purchase warrants exercisable into common
shares at $0.41 per share which expire on April 28, 2008 and November 13, 2008.
The stock purchase warrants were issued in payment of financing fees. The stock
purchase warrants were accounted for at their fair value, as determined by the
Black-Scholes-Merton valuation model, of $37,699, using the following
assumptions:

| | Expected volatility     | 85% and 88%    
| | ----------------------- | ---------------
| | Expected life           | 2 years        
| | Risk-free interest rate | 3.91% and 4.78%
| | Dividend yield          | Nil            

On May 22, 2007, IntelGenx
Technologies Corp. issued 214,286 stock purchase warrants exercisable into
common shares at $0.70 per share which expire on May 22, 2011. The Stock
purchase warrants were issued as part of the transaction costs in connection
with the convertible notes described in note 9. The stock purchase warrants were
accounted for at their fair value, as determined by the Black-Scholes valuation
model, of $82,993, using the following assumptions:

| | Expected volatility     | 64%    
| | ----------------------- | -------
| | Expected life           | 4 years
| | Risk-free interest rate | 4.39%  
| | Dividend yield          | Nil    

As at December 31, 2007, no stock purchase warrants
have been exercised.

F-17

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IntelGenx Technologies Corp.

12.

Additional Paid-In Capital
(Contd)

Information with respect to
warrant activity for 2006 and 2007 is as follows:

| |                                                     |                    | Weighted average
| | --------------------------------------------------- | ------------------ | ----------------
| |                                                     | Number of warrants | exercise price  
| |                                                     |                    | $               
| |                                                     |                    |                 
| | Outstanding  January 1, 2006                       | -                  | -               
| |                                                     |                    |                 
| | Granted                                             | 190,691            | 0.41            
| |                                                     |                    |                 
| | Outstanding  December 31, 2006                     | 190,691            | 0.41            
| |                                                     |                    |                 
| | Warrants attached to convertible notes (note
    9) | 2,142,857          | 1.02            
| | Warrants issued as part of transaction costs        |                    |                 
| | (note 12)                                           | 214,286            | 1.02            
| |                                                     |                    |                 
| | Outstanding  December 31, 2007                     | 2,547,834          | 0.97            

Stock Options

In November 2006, the Company adopted
the 2006 Stock Incentive Plan ("Plan") for the purpose of issuing both Incentive
Options and Nonqualified Options to officers, employees, directors and eligible
consultants of the Company. A total of 1,600,749 shares of common stock are
reserved for issuance under this plan. Options may be granted under the Plan on
terms and at prices as determined by the Board of Directors except that the
options cannot be granted at less than 100%, of the fair market value of the
common stock on the date of the grant. Each option will be exercisable after the
period or periods specified in the option agreement, but no option may be
exercised after the expiration of 10 years from the date of grant. All options
granted to individuals other than non-employee directors will have a total
vesting period of 24 months from the date of grant, with one quarter of the
total options granted vesting and becoming exercisable every six months. Options
granted to non-employees will vest and become 100% fully exercisable immediately
upon grant.

On September 26, 2006, the Company
granted 225,000 stock options to certain of its directors to purchase common
shares. The stock options are immediately exercisable at $0.41 per share and
expire in five years.

On October 1, 2006, the Company
granted to a consultant for investor relations services 69,000 stock options to
purchase common shares. The stock options are immediately exercisable at $0.41
per share and expire in ten years.

F-18

---



IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

12.

Additional Paid-In
Capital (Contd)

On November 9, 2006, the Company
granted 450,000 stock options to certain of its employees to purchase common
shares. The stock options are immediately exercisable at $0.41 per share and
expire in ten years.

On November 13, 2006, the Company
granted to a consultant for services provided in connection with the transaction
on April 28, 2006, 250,000 stock options to purchase common shares. The stock
options are immediately exercisable at $0.41 per share and expire in ten years.

On November 16, 2006, the Company
granted 100,000 stock options to certain of its employees to purchase common
shares. On the same date, the Company also granted 25,000 stock options to
purchase common shares to an R&D consultant. The stock options are immediately
exercisable at $0.41 per share and expire in ten years.

On August 9, 2007, the Company
granted 257,500 stock options to employees and directors to purchase common
shares. The stock options are exercisable at $1.15 per share and have a term of
10 years with vesting provisions ranging from immediate to vesting in equal
increments over two years.

The fair values of all options
granted during 2007 and 2006 were estimated as of the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions:

| |                         | 2007              | 2006             
| | ----------------------- | ----------------- | -----------------
| |                         |                   |                  
| | Expected option life    | 5.00 - 5.75 years | 2.50 - 5.75 years
| | Volatility              | 71 %              | 88%              
| | Risk-free interest rate | 4.58%             | 4.78%            
| | Dividend yield          | Nil               | Nil              

The weighted average grant-date fair values for stock
options granted during 2007 and 2006 were $0.74 and $0.33 per option,
respectively.

F-19

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IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

12.

Additional Paid-In Capital
(Contd)

Information with respect to stock option activity for
2006 and 2007 is as follows:

| |                                 |                   | Weighted average
| | ------------------------------- | ----------------- | ----------------
| |                                 | Number of options | exercise price  
| |                                 |                   | $               
| |                                 |                   |                 
| | Outstanding  January 1, 2006   | -                 | -               
| |                                 |                   |                 
| | Granted                         | 1,119,000         | 0.41            
| | Forfeited                       | -                 | -               
| | Expired                         | -                 | -               
| | Exercised                       | -                 | -               
| |                                 |                   |                 
| | Outstanding  December 31, 2006 | 1,119,000         | 0.41            
| |                                 |                   |                 
| | Granted                         | 257,500           | 1.15            
| | Forfeited                       | -                 | -               
| | Expired                         | -                 | -               
| | Exercised                       | -                 | -               
| |                                 |                   |                 
| | Outstanding  December 31, 2007 | 1,376,500         | 0.55            

Details of stock options outstanding as at December
31, 2007 are as follows:

| |          | Outstanding options |                  | Exercisable options
| | -------- | ------------------- | ---------------- | -------------------
| |          |                     |                  |                    
| |          |                     | Weighted         | Weighted           
| |          |                     | average          | average            
| | Exercise | Number of           | remaining        | exercise           
| | prices   | options             | contractual life | price              
| | $        |                     | (years)          | $                  
| |          |                     |                  |                    
| | 0.41     | 1,119,000           | 7.84             | 0.41               
| | 1.15     | 257,500             | 9.58             | 1.15               
| |          |                     |                  |                    
| |          | 1,376,500           | 8.16             | 0.55               

Stock-based compensation expense
recognized in 2007 in regards to the stock options was $202,607 (2006 -
$212,778). As of December 31, 2007, total unrecognized compensation expense
related to unvested stock options was $97,381. This amount is expected to be
recognized as expense over a period of two years. A change in control of the
Company due to acquisition would cause the vesting of these stock options to
accelerate and would result in this amount being charged to stock-based
compensation expense.

F-20

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IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

13.

Income Taxes

Income taxes reported differ from
the amount computed by applying the statutory rates to losses. The reasons are
as follows:

2007
      
      2006Statutory income taxes
      $
      (352,000)
      $
      (242,000)Net operating losses for which no tax
      benefits have been recorded
      
      140,000
      
      76,000Excess of amortization over capital cost
      allowance
      
      14,000
      
      11,000Non-deductible expenses
      
      147,000
      
      98,000Undeducted research and development
      expenses
      
      143,000
      
      105,000Tax deductible portion of transaction costs
      
      (36,000)
      
      (34,000)Investment tax credit
      
      (56,000)
      
      (14,000)Lower effective tax rate resulting from
      deferred income taxesdrawdowns
      
      (64,000)
      
      -$
      (64,000)
      $
      -The major components of the
      deferred tax assets classified by the source of temporary differences are
      as follows:2007
      
      2006Property and equipment
      $
      (15,000)
      $
      (2,000)Net operating losses carryforward (expiring
      2015-2016)
      264,000
      
      109,000Undeducted research and development
      expenses
      206,000
      
      105,000Non-refundable tax credits carryforward
      
      23,000
      
      93,000Transaction costs to be deducted in future years
      108,000
      
      136,000586,000
      
      441,000Valuation allowance
      (586,000)
      
      (441,000)$
      -
      $
      -


There were Canadian and provincial
net operating losses of approximately $794,000 (2006 - $350,000) and $908,000
(2006 - $387,000) respectively, that may be applied against earnings of future
years. Utilization of the net operating losses is subject to significant
limitations imposed by the change in control provisions. A portion of the net
operating losses may expire before they can be utilized.

As at December 31, 2007, the Company
had non-refundable tax credits of $24,000 (2006 -$93,000) expiring in 2017 and
undeducted research and development expenses of $670,000 (2006 - $340,000) with
no expiration date.

F-21

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IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

13.

Income Taxes
(Contd)

Due to the reorganization of the
corporation, there were $549,000 of transaction costs of which $113,000 was
deductible in the current year (2006- $109,000). The remaining transaction costs
are deductible for income tax purposes in equal amounts over the next three
years.

The deferred tax benefit of these
items was not recognized in the accounts.

Deferred Income Taxes

The balance of deferred income taxes
as at December 31, 2007 represents the tax effect of the convertible debt
arising from the difference between the convertible debts basis for accounting
purposes and that for income tax purposes and it has been charged to additional
paid-in capital. As the convertible debt is repaid, the deferred tax liability
will be charged to expenses.

Unrecognized Tax Benefits

On January 1, 2007, the Company
adopted the provisions for FIN 48, which is an interpretation of SFAS No. 109.
FIN 48 prescribes a recognition threshold that a tax position is required to
meet before being recognized in the financial statements and provides guidance
on de-recognition, measurement, classification, interest and penalties,
accounting in interim periods, disclosure and transition issues. FIN 48 contains
a two-step approach to recognizing and measuring uncertain tax positions
accounted for in accordance with SFAS No. 109. The first step is to evaluate the
tax position for recognition by determining if the weight of available evidence
indicates that it is more likely than not that the position will be sustained
upon ultimate settlement with a taxing authority, including resolution of
related appeals or litigation processes, if any. The second step is to measure
the tax benefit as the largest amount that is more than 50% likely of being
realized upon ultimate settlement. Prior to January 1, 2007 and the
implementation of FIN 48, the Company recorded tax contingencies when the
exposure item became probable and reasonably estimable, in accordance with SFAS
No. 5, Accounting for Contingencies.

The adoption of FIN 48 has not had a
material effect on our financial position or results of operations for 2007.

The Company does not expect its
unrecognized tax benefits to change significantly over the next twelve months.

Classification of Interest and
Penalties

Additionally, FIN 48 requires the
Company to accrue interest and related penalties, if applicable, on all tax
positions for which reserves have been established consistent with
jurisdictional tax laws.

The Companys policy to include
interest and penalties related to unrecognized tax benefits within the provision
for income taxes did not change as a result of adopting FIN 48.

The interest and penalties as of
December 31, 2007 and for the years ended December 31, 2007, 2006 and 2005 were
zero.

F-22

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IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

13.

Income Taxes (Contd)

Tax Years and Examination

The Company files tax returns in each
jurisdiction in which it is registered to do business. For each jurisdiction a
statute of limitations period exists. After a statute of limitations period
expires, the respective tax authorities may no longer assess additional income
tax for the expired period. Similarly, the Company is no longer eligible to file
claims for refund for any tax that it may have overpaid. The following table
summarizes the Companys major tax jurisdictions and the tax years that remain
subject to examination by these jurisdictions as of December 31, 2007:

| | Tax Jurisdictions |  | Tax Years      
| | ----------------- |  | ---------------
| | Federal - Canada  |  | 2003 and onward
| | Quebec - Canada   |  | 2003 and onward

14.

Statement of Cash Flows
Information

| |                                                           |   | 2007      |   | 2006     
| | --------------------------------------------------------- | - | --------- | - | ---------
| |                                                           |   |           |   |          
| | Accounts receivable                                       | $ | (292,253) | $ | (132,948)
| | Prepaid expenses                                          |   | 49,471    |   | (6,721)  
| | Investment tax credits receivable                         |   | (200,774) |   | 26,258   
| | Accounts payable and accrued liabilities                  |   | 131,491   |   | 64,544   
| | Changes in non-cash operating elements of working capital | $ | (312,065) | $ | (48,867) 
| | Additional Cash Flow Information:                         |   |           |   |          
| | Interest paid                                             | $ | 81,194    | $ | 35,000   

F-23

---



I

Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

15.

Related Party Transactions

During the year the Company incurred
expenses of approximately $18,606 (2006 - $17,850) for laboratory equipment
leased from a shareholder and $5,636 (2006 - $5,300) for interest on the loan
payable shareholder.

Included in professional fees are
approximately $18,104 (2006 - $Nil) paid to a non-employee director of the
Company.

In 2007, the Company amortized
interest and financing fees of approximately $79,477 (2006 - $Nil) for share
based compensation to a former officer and director of the Company in connection
with the private placement closed on April 28, 2006.

Included in management salaries are
$76,733 for options granted to non-employee directors and $10,609 for options
granted to the CFO.

In December 2007, the Company
purchased $60,000 in laboratory equipment from a shareholder who is also an
officer. The Company has had the use of the equipment since 2005.

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.

16.

Comparative Figures

Certain reclassifications of 2006 amounts have been
made to facilitate comparison with the current year.

17.

Subsequent Event

On March 27, 2008, as part of a
private placement, the Company issued 4,001,000 units for gross proceeds of
$2,800,000. Each unit consists of one common share of the Company and one common
share purchase warrant. Each warrant entitles the holder to purchase one common
share at an exercise price of $1.02 per common share. and expires 24 months
after the date of issuance.

The Company paid an agent a cash
commission in the amount of $196,000, which is equal to 7% of the gross proceeds
of the offering and issued an agent option entitling the agent to acquire
320,080 units at $0.70 per unit, which expires 24 months after the date of
issuance. Each warrant entitles the holder to purchase one common share at an
exercise price of $1.02 per common share and expires 24 months after the date of
issuance of the unit.

The cash consideration paid to the
agent and the fair value of the agent option will be reflected as a reduction to
the additional paid-in capital.

F-24

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IntelGenx Technologies Corp.

Notes to Consolidated Financial Statements 
December 31, 2007 and 2006 
(Expressed in U.S. Funds)

17.

Subsequent Event (Contd)

Pursuant to the terms of the private
placement, the Company is obliged to use its best effort to (i) have the common
shares listed on the TSX Venture Exchange, and (ii) prepare and file with, and
have declared effective, by the U.S. Securities and Exchange Commission, a
resale registration statement in respect of the common shares and the warrants
issued to subscribers as well as those issuable upon exercise of the agents
warrants, all prior to 4 months after March 27, 2008. In the event that these
provisions are not satisfied within 4 months, the exercise price of the warrants
shall be reduced to $0.93. In addition, if the Company is not listed on the TSX
Venture Exchange within 2 months of the private placement, the Company shall: (i)
pay to each subscriber under this private placement a cash penalty in the amount
of 5% of the aggregate subscription price paid by the subscriber and an
additional 1% of the aggregate subscribtion price for every subsequent calendar
month thereafter that the listing is not effected, to a maximum of 3 months; and
(ii) reduce the exercise price of the agents option by 5% with an additional 1%
for every subsequent calendar month thereafter that the listing is not effected.
Pursuant to EITF 00-19-2 "Accounting In Registration Payment Arrangements", the
Company concluded that at inception, payments under these commitments are not
probable.

F-25

---