UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB [X] Annual Report Under Section 13 or 15(d) of the Securities and Exchange Act of 1934 for the fiscal year ended: December 31, 2006[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities and 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. Employer Identification No.)incorporation or organization)
 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: Title of Each ClassCommon Stock ($0.00001 par value)
 Check whether the issuer: (1) has 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 issuer was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.  YES X         NO _____ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and that no disclosure will be contained, to the best of issuer'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  [  ]   NO
 [X] Issuer's revenues for its most recent fiscal year ended December 31, 2006 were $265,901.The aggregate market value of the issuer's common stock (the only class of voting stock) held by non-affiliates was approximately $5,525,808 based on the average closing bid and ask price of $1.08 for the common stock on March 15, 2007. As of March 16, 2007 there were 16,007,489 shares outstanding of the issuer's common stock.   IntelGenx Technologies Corp. FORM 10-KSB For the Year Ended December 31, 2006 INDEX PART ISpecial Note Regarding
    Forward-Looking Statements
    3Item 1.
    Description of
    Business
    4Item 2.
    Description of
    Property
    19Item 3.
    Legal Proceedings
    19Item 4.
    Submission of Matters
    to a Vote of Security Holders
    19PART IIItem 5.
    Market for Common
    Equity and Related Stockholder Matters
    20Item 6.
    Management Discussion
    and Analysis of Financial Condition
    21Item 7.
    Financial Statements
    for 2006 and 2005
    25Item 8.
    Changes in and
    Disagreements with Accountants on Accounting and Financial Disclosure
    25Item 8A
    Controls and
    Procedures
    25Item 8B
    Other Information
    26PART IIIItem 9.
    Directors, Executive
    Officers, Promoters, Control Persons and Corporate Governance; Compliance
    with Section 16(a) of the Exchange Act.
    26Item 10.
    Executive Compensation
    29Item 11.
    Security Ownership of
    Certain Beneficial Owners and Management and Related Stockholder
    Matters
    30Item 12.
    Certain Relationships
    and Related Transactions, and Director Independence
    31Item 13.
    Exhibits
    31Item 14.
    Principal Accountants
    Fees and Services
    32SIGNATURES
    
    32EXHIBITS
    
    34 2   SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-KSB for the year ended December 31,  2006 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 12, 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 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 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;
  
  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 approvals
  needed to market our products. 3   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). Company Structure The Company, formerly known as Big Flash Corp., was incorporated Delaware on July 27, 1999, We did not have any operations prior to the acquisition of IntelGenx. 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.  IntelGenx, incorporated on June 15, 2003, has continued its operations as our subsidiary.  See --The IntelGenx Acquisition). Our principal office is located at 6425 Abrams, Ville St-Laurent, Montreal, Quebec, H4S 1X9.  Our website is at www.IntelGenx.com.  Information on our website is not included or incorporated by reference into this Annual Report. Inter-corporate Relationships   General Business Overview We are a drug delivery company focusing on the development of oral controlled-release products both for the branded and generic pharmaceutical market as well as novel oral drug delivery systems. We have positioned ourselves as a provider of product development services to the pharmaceutical industry, focusing on the development of products that are based on our proprietary oral drug delivery technologies.  Drug delivery systems are an important tool in the hand of the physician to optimize drug therapy. For the pharmaceutical industry, they represent an opportunity to extend the market exclusivity and thereby the product lifecycle for drugs that are about to lose patent protection. According to a report by CMR International, products incorporating drug delivery systems represented 13% of the US$337 billion global pharmaceutical market with sales of US drug delivery products totaling $35 billion in 2006. The oral drug delivery segment of the market continues to be the largest with sales totaling $21 billion in 2006. CR (Controlled Release) dosage forms make up an important part of the oral drug delivery market. These advanced delivery technologies provide the patient 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, these advanced products are safer and more tolerable than conventional dosage forms and show better patient compliance. In order to utilize the full therapeutic potential of a drug, the pharmaceutical industry has been moving towards designing intelligent delivery systems in addition to the development of new drugs as a means of more cost-efficiently meeting the requirements of new therapeutic trends. 4    We currently have two unique, proprietary drug delivery platform technologies that we use to develop products: a Tri-Layer Tablet (1) technology which allows for the development of oral controlled release products, and a Quick Release Wafer (2) technology for the rapid delivery of pharmaceutically active substances to the oral cavity. Our Tri-layer platform technology is very versatile and is aimed at reducing manufacturing costs significantly as compared to competing delivery technologies. The Quick Release  Wafer technology allows for the instant delivery of pharmaceuticals to the oral mucosa. Our business strategy is to develop pharmaceutical products based on our proprietary drug delivery technologies and license the commercial rights to competent partner companies once the viability of the product has been demonstrated. In addition to entering into partnering arrangements that provide for full funding of the project, we anticipate that we may undertake full development of certain products without seeking a partner until the product reaches the marketing and distribution stage.  We will assess the potential for successful development of a product and associated costs, and then determine at which stage it is most prudent to seek a partner, balancing such costs against the potential for additional returns earned by partnering later in the development process. Technology Platforms Our Tri-Layer platform technology (1) 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 two erodible cover layers.  The release of the active 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. The Tri-Layer tablet can thus produce quasi-linear (zero-order) kinetics for releasing a chemical compound over a desired period. 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. Our Quick Release Wafer (2) 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 which, management believes, make it the application system of choice for indications requiring rapid onset of action like migraine, motion sickness and nausea. Product Portfolio We have assembled a product portfolio that includes a blend of generic products that management believes will generate short-term revenues and high-potential opportunities that are based on our proprietary delivery technology. 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 a development agreement 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. 5  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 Novavax Inc., a pharmaceutical company based in Malvern, PA for the
development and manufacturing of a prenatal vitamin supplement product involving
our proprietary manufacturing technology and expect to commence
commercialization of the product in late 2007.
INT10/2006. We have entered into a development agreement with
Cannasat Therapeutics Inc. for the development of a sublingual tablet product
containing a cannabinoid-based active for the treatment of nausea in cancer
patients undergoing chemotherapy.
INT0007/2006. A wafer product based on our proprietary edible film technology
is in its early development stage. The product is intended for the treatment of
erectile dysfunction (ED).
The key product opportunities are summarized in the following table: Product
  Indication
  StatusINT0001/2004
  CHF, Hypertension
  Pivotal batches in preparationINT0003/2005
  Smoking cessation
  Pilot biostudy ongoingINT0004/2006
  Antidepressant
  Pilot biobatch completedINT0010/2006
  delta-9-THC
  Early formulation developmentINT0006/2005
  Pre-natal vitamin supplement
  Manufacturing scale-upINT0005/2005
  Osteoarthritis
  Pilot batch completed.INT0007/2006
  ED
  Pre-formulation activities  Our Strategy Our business strategy is to develop pharmaceutical products based on our proprietary oral controlled-release drug delivery technologies and license the commercial rights to competent partner companies once the viability of the product has been demonstrated in exchange for down payments, milestone fees and royalties. These potential partners would then fund the development of the products until completion and handle the regulatory approval process of the product with the FDA and/or other regulatory bodies. The partners would also be responsible for the marketing and distribution of the product(s). In order to increase revenue, we plan to take selected high-potential pharmaceutical product candidates through the entire development process ourselves and  attempt to sign distribution agreements with potential partners at a later stage. This strategy is aimed at adding value to the projects at the development stage, thus creating higher down payments and larger royalty payments on sales. Our main growth strategies include (1) lifecycle management opportunities of existing products, (2) generic drugs with high barriers to entry, (3) vitamin combination products, and (4) new drug delivery technologies. 6   Lifecycle Management Opportunities To achieve our goal of creating attractive business opportunities, we have undertaken a strategy under which we will position our delivery technology as an opportunity for lifecycle management of products for which the patent protection of the active ingredient is about to expire. While the substance patent cannot be extended, patent protection can be obtained for a new and improved formulation, which has to be filed with the FDA under a 505(b)(2) application. The first formulation for a respective active ingredient which is filed with the FDA under a 505(b)(2) application, will have up to three years of market exclusivity after product launch. Based on past partnerships between third party drug delivery companies and pharmaceutical companies, management believes that pharmaceutical companies will partner with drug delivery companies which possess innovative technologies to develop these special dosage formulations. We source our 505(b)(2) eligible projects in two ways: either we develop a potential product to proof of concept stage and then solicit potential pharmaceutical partners, or potential partners approach us directly or through the use of an intermediary with a particular product candidate for the company to work on. The pharmaceutical partners provide the funding required for the product development and in return get the exclusive distribution rights for the products. We receive from our partners, development milestone payments and royalties upon commercialization. We believe that these 505(b)(2) products represent the most lucrative opportunity for us to date. Generic Drugs with High Barriers to Entry We will also pursue generic drugs that are not 505(b)(2) candidates but that have certain barriers to entry, e.g. where product development and manufacturing are more complex and therefore limit the number of potential entrants into the generic market. We will work on such projects if there is a strong chance to be first to market. An example of such a product is the company's INT0005/2005, a fixed-dose combination medication requiring complex formulation and manufacturing technology. In this case, we believe that we have a chance of being first to file and therefore command a lead presence in this market. Vitamin Combination Products We plan to develop more products using the proprietary technology we developed for our prenatal vitamin and mineral supplement. The advantage of developing products for the vitamin and mineral supplement market is that this market is large and current products are homogeneous differentiating themselves mostly on price. With our unique technology that increases the active ingredients' absorption rates, we believe that we can successfully differentiate ourselves from competing products in the market place. We believe that these types of products represent shorter term revenue opportunities for us since these products are not regulated as pharmaceutical products and do not require FDA approval, thereby significantly reducing the time to market of these products. New Drug Delivery Technologies Our prenatal vitamin supplement is an example of how we are using our technological know how to develop alternate technology platforms. As we continue to work with various partners on different products, we believe that we will have the opportunity 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 affected by new technologies, governmental regulations, healthcare legislation, availability of financing, litigation and other factors. Many of  our competitors 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 approved products. We expect that we will be subject to competition from numerous other entities that currently operate or intend to operate in the pharmaceutical and specialty pharmaceutical industry. 7    The key factors affecting the success of our drug delivery products are likely to include, among other things: the safety and efficacy of our products;
  the relative speed with which we can develop products;
  generic competition for any product that we will develop;
  our ability to defend our existing intellectual property and to broaden
  our IP and technology base;
  our ability to differentiate our products; and In order to establish ourselves as a viable industry partner and secure stable growth, we have to continue to invest in Research and Development (R&D) in order to further strengthen our technology base, and 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 ; andThe manufacturing cost savings
  associated with our technology. Manufacturing Partnership  We have established a strategic partnership with Keata Pharma Inc., a wholly owned subsidiary of PharmEng International Inc. based in Markham, Ontario. Under this partnership, Keata Pharma provides pharmaceutical manufacturing services to us and promotes our product development services to interested pharmaceutical companies. In addition, we are co-developing generic products with Keata for the European generic market. We do not anticipate any raw material shortages for the products that we are currently developing.  Dependence on Major Customers  We do not rely on any one or a few major customers for our end products. We do however depend on a few partners for the development of new products, to obtain approval from regulatory bodies such as the FDA to commercialize these products and for the successful distribution of these products.  Intellectual Property and Patent Protection  We plan to aggressively continue to protect our intellectual property and technology by applying for patent protection in the United States and in the most relevant foreign markets in anticipation of future commercialization opportunities.  We intend 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 and intend to protect our intellectual property through non-disclosure agreements, license agreements and appropriate restrictions and controls on the distribution of information.  The following table is a list of our issued and pending patents: 8    Patent No.TitleSubjectDate submitted / issuedUS 6,231,957
  Rapidly disintegrating flavor wafer for flavor enrichment
  The composition, manufacturing, and use of rapidly disintegrating flavored films for releasing flavors to certain substrates
  May 15, 2001US 6,660,292Rapidly disintegrating film for precooked foodsComposition and manufacturing of flavored films for releasing flavors to precooked food substratesDecember 9, 2003US 7,132,113
  Flavored film
  Composition and manufacturing method of multi-layered films
  April 16, 2002US Appl. 11/647,033Multilayer TabletFormulation and Method of Preparation of Multilayered TabletsDecember 30, 2005US Appl. 11/635,361
  Multi-Vitamin And Mineral Supplement
  Formulation And Method of Preparation of Prenatal Multivitamin Supplement
  December 7, 2005PCT/CA2006/000336; US Appl. 11/403,262Delayed Release Oral Dosage Form And Method Of Making SameFormulation And Method Of Making Bilayer Tablets Containing Delayed-Release Diclofenac And MisoprostolFebruary 13, 2006US Provisional Appl. 60/833,154
  Stabilized sustained-release Bupropion and Bupropion / Mecamylamine tablets
  Formulation And Method Of Making Tablets Containing Bupropion And Mecamylamine
  July 25, 2006  Government Regulation The pharmaceutical industry is highly regulated. We have to remain current with FDA and other regulatory requirements in order to get new products approved. The consequence of this will be higher R&D expenses in order to meet regulatory requirements. We are responding to these regulatory challenges by focusing on 505(b)(2) opportunities that, by applying our drug delivery technology to existing drugs, give us access to high-potential product opportunities by limiting R&D expenses and time-to-market as compared to NDA (New Drug Application) products. 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: either we develop a potential product to proof of concept  stage  and then  solicit  potential  pharmaceutical  partners,  or potential  partners  approach  us  directly  or  through  the  use  of an intermediary with a particular product candidate for us to work on. The pharmaceutical partners  provide the funding required for the product development  and in return  get the exclusive  distribution rights for the products.  We receive development milestone payments  from our partners  and  royalties  upon  commercialization. Currently, development  fees and  milestone  payments  account  for 100% of our  revenues,  and 53% of our R&D expenses were used to support partner programs. 9   Environmental Regulatory Compliance We believe that we are fully compliant with environmental regulations of our research and development facility located in Ville Saint-Laurent, Quebec. Employees As of December 31, 2006, we had 6 full-time employees and one consultant on staff.  Five full-time employees and the consultant are directly involved in product development activities. The technical staff includes one Ph.D., one M.D., and three M.Sc.'s. The IntelGenx Acquisition 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. IntelGenx continued
its operations as a subsidiary of the Company. The Company acquired the shares
of IntelGenx held by its principal shareholders pursuant to a share exchange
agreement dated April 10, 2006 which the Company entered into with IntelGenx and
the principals of IntelGenx. The Company also acquired 100,000 common share
purchase warrants of IntelGenx pursuant to a securities purchase agreement which
we entered into with Patrick J. Caruso, in exchange for 100,000 common share
purchase warrants of the Company. The Company also acquired 3,191,489 common
shares of IntelGenx from 34 investors in exchange for 3,191,489 shares of our
common stock.
The Company's special purpose Canadian subsidiary, 6544361
Canada Inc.("Exchango"), completed the acquisition of 10,991,000 common shares
of IntelGenx held by Horst Zerbe, Ingrid Zerbe and Joel Cohen (the "IntelGenx
Principals") pursuant to the Share Exchange Agreement and other agreements among
the Company, Exchangeco, the IntelGenx Principals and Equity Transfer Services
Inc. ("Equity"). Under the Share Exchange Agreement, Exchangeco acquired all of
the issued and outstanding common shares of IntelGenx held by the IntelGenx
Principals in exchange for 10,991,000 Class A Special Shares of Exchangeco
("Exchangeable Shares"). At closing of the Share Exchange Agreement, the
Company, Exchangeco, the IntelGenx Principals and Equity entered into an
Exchange and Voting Trust Agreement (the "Exchange and Voting Trust Agreement")
pursuant to which 10,991,000 shares of our common stock (the "Trust Shares")
were issued to Equity, in its capacity as trustee for the IntelGenx Principals,
as security for the Company's covenants under the provisions of the Exchangeable
Shares. At closing, we, Exchangeco and Equity also entered into a support
agreement ("Support Agreement") which, among other things, sets forth the terms
and conditions upon which the IntelGenx Principals may exchange the Exchangeable
Shares for a corresponding number of shares of our common stock. The Company may
satisfy its obligations by instructing the Trustee to deliver one of our common
share for each such Exchangeable ShareThe Company, Exchangeco, Equity and the
IntelGenx Principals also entered into an escrow agreement (the "Escrow
Agreement") pursuant to which the IntelGenx Principals have deposited into
escrow with Equity, as escrow agent, all of the Exchangeable Shares and they
have undertaken to deposit with Equity any Trust Shares for which the
Exchangeable Shares may be exchanged from time to time, over a term of 3 years
following closing. The Escrow Agreement provides that the Exchangeable Shares
and any Trust Shares held in escrow may not be sold, assigned or transferred,
except as expressly permitted under the Escrow Agreement, and shall be released
from escrow at the end of the 3-year term.
The Trustee, as the holder of record of the Trust Shares, is
entitled to all of the voting rights, including the right to vote in person or
by proxy the Trust Shares on any matters, questions, proposals or propositions
whatsoever that may properly come before our stockholders or at a meeting of our
stockholders or in connection with respect to all written consents sought by us
from our stockholders (the "Voting Rights"). The Voting Rights shall be and
remain vested in and exercised by the Trustee. As further particularized in the
Exchange and Voting Trust Agreement, the Trustee shall exercise the Voting
Rights only on the basis of instructions received from the IntelGenx Principals
entitled to instruct the Trustee as to the voting thereof at the time at which
the stockholders meeting is held or a stockholders' consent is sought. To the
extent that no instructions are received from an IntelGenx Principal with
respect to the Voting Rights to which such person is entitled, the Trustee shall
not exercise or permit the exercise of such Voting Rights.
10  Under the terms of the Exchangeable Shares, the IntelGenx
Principals will have the right to exchange the Exchangeable Shares for a
corresponding number of shares of our common stock at any time. Prior to the
exercise of such exchange rights, Equity will be the owner of record of the
Trust Shares and will retain power to vote the Trust Shares or grant consent in
regard to any and all matters presented for approval by the holders of our
common stock. Under the terms of the Exchange and Voting Trust Agreement,
Equity, in its capacity as trustee, will act in regard to such matters only in
accordance with instructions given by the IntelGenx Principals. In its capacity
as trustee, Equity does not have any powers of disposition over the Trust Shares
except as expressly required under the Exchange and Voting Trust Agreement and
the Support Agreement.
Immediately prior to closing of the Share Exchange Agreement,
IntelGenx issued 3,191,489 common shares to 34 investors ("Investors") pursuant
to private placement subscription agreements at an issue price of (Cdn.) $0.47
per share. At closing, all of the 3,191,489 common shares of IntelGenx held by
the Investors were transferred to usin exchange for 3,191,489 shares of our
common stock pursuant.
At closing, we entered into a securities purchase agreement
("Caruso Securities Purchase Agreement") with Patrick J. Caruso pursuant to
which we purchased from Mr. Caruso warrants to purchase 100,000 common shares of
IntelGenx at (Cdn.) $0.47 per share on or before March 15, 2008 in exchange for
which we issued to Mr. Caruso warrants entitling the holder to purchase 100,000
shares of our common stock at $0.41 per share on or before April 28, 2008.
Additionally, at closing, we entered into a business consultancy agreement
("Caruso Consulting Agreement") with Mr. Caruso pursuant to which we issued to
Mr. Caruso 325,000 shares of our common stock as a non-refundable retainer, and
in full payment of investor relations services to be rendered by Mr. Caruso
under the agreement.
After giving effect to the issuance of the 10,991,000 shares
of our common stock under the Share Exchange Agreement, the issuance of
3,191,489 shares of our stock to the Investors, the issuance of 100,000 warrants
of our pursuant to the Caruso Securities Purchase Agreement and the issuance of
325,000 shares of our common stock pursuant to the Caruso Consulting Agreement,
the number of Trust Shares that will be issued to Equity will constitute 68.7%
of the shares of our common stock that will be issued and outstanding. After
giving effect to the issuance of the shares in connection with the IntelGenx
Acquisition, Horst Zerbe, Ingrid Zerbe and Joel Cohen will, pursuant to rights
attached to the Exchangeable Shares issued to them under the Share Exchange
Agreement, be entitled to acquire and beneficially own, respectively, 4,709,643,
4,709,643 and 1,571,713 shares of our common stock constituting, respectively,
29.4%, 29.4% and 9.8% of our common stock that will be issued and outstanding.
Pursuant to the terms of the Support Agreement, the holders
of the Exchangeable Shares will economically benefit to the same extent as our
direct shareholders of Big Flash in the event of any dividend or other
distribution.
Exchangeco shall on any day ("Redemption Date") to be
determined by Exchangeco's board of directors after the tenth anniversary of the
date of the IntelGenx Acquisition, redeem the then outstanding Exchangeable
Shares for an amount per Exchangeable Share (the "Redemption Price") equal to (i)
the current market price of our common stock on the last business day prior to
the Redemption Date (which may be satisfied in full by Exchangeco causing an
instruction to be given to the Trustee to deliver, in respect of each
Exchangeable Share held by each respective holder thereof, one share of our
common stock, and obtaining written confirmation of such delivery by the
Trustee), plus (ii) the unpaid dividend amount, if any, on each such
Exchangeable Share held by such holder on any dividend record date which
occurred prior to the Redemption Date.
The Exchangeable Shares may, at any time prior to the
Redemption Date, be exchanged by any of the IntelGenx Principals in exchange for
the same number of shares of our common stock. The number of shares of our
common stock to be transferred to the holders of the Exchangeable Shares upon
such exchange will be subject to corresponding adjustment in the event of any
securities dividend, forward split, reverse split, or similar event. The holders
of the Exchangeable Shares will also benefit to an identical extent as all our
other shareholders in the event of a tender offer or other similar transaction.
11  All events related to payment of dividends, redemption or
purchase or any capital distribution in respect of our common shares or any
shares other than the Exchangeable Shares, redemption or purchase of any shares
other than the Exchangeable Shares, or issuance of any other exchangeable
shares, shall in each case be subject to approval by holders of not less than
66.6% of then-outstanding Exchangeable Shares. In addition, we must obtain the
same consent prior to any action to reclassify, subdivide, re-divide or make any
similar change to our outstanding shares of, or effect an amalgamation, merger,
reorganization or other transaction affecting our shares of common stock. 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 had an accumulated deficit of approximately $837,474 since 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, 2006, December 31, 2005 and December 31, 2004 were $265,901, $19,990 and $257,374 respectively. Our revenues consisted primarily of development fee revenues from three 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 2007, 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 and our debt 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. 12    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.   We derive our revenues from research and development fees, milestone fees and royalty fees all of which are paid to us 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 collaborations 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, either on their own or in collaboration with others,
  that may be competitive with the product as to which they are collaborating
  with us, which could affect our collaborator's commitment to the collaboration
  with us.
  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, which have been common in recent years in these
  industries. 13   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, Penwest, Andrx, and Labopharm. 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. We expect competition to 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, cause 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.  14   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. 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 manufacturer 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. 15   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. We will need to make substantial financial and man-power investments in order to assess our internal controls over financial reporting and our internal controls over financial reporting may be found to be deficient. Section 404 of the Sarbanes-Oxley Act of 2002 requires management to assess its internal controls over financial reporting and requires auditors to attest to that assessment. Current regulations of the Securities and Exchange Commission, or SEC, will require us to include this assessment in our Annual Report on Form 10-KSB commencing with the annual report for the fiscal year ended December 31, 2007 and to include the auditor's attestation in our Annual Report for the fiscal year ended December 31, 2008. We will incur significant increased costs in implementing and responding to the new requirements. In particular, the rules governing the standards that must be met for management to assess its internal controls over financial reporting under Section 404 are complex, and require significant documentation, testing and possible remediation. Our process of reviewing, documenting and testing our  internal controls over financial reporting may cause a significant strain on our management, information systems and resources. We may have to invest in additional accounting and software systems. We may be required to hire additional personnel and to use outside legal, accounting and advisory services. In addition, we will incur additional fees from our auditors as they perform the additional services necessary for them to provide their attestation. If we are unable to favorably assess the effectiveness of our internal control over financial reporting when we are required to, or if our independent auditors are unable to provide an unqualified attestation report on such assessment, we may be required to change our internal control over financial reporting to remediate deficiencies. In addition, investors may lose confidence in the reliability of our financial statements causing our stock price to decline. 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 2 U.S. patents and have applied
for 4 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. 16   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. 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 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. 17   Risks Related to Our Securities The price of our common stock could be subject to significant fluctuations. Our common stock started trading on the OTC Bulletin Board on January 16, 2007. 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. In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs and divert our management's time and attention, which would otherwise be used to benefit our business. We expect such factors to impact our market price for the foreseeable future. We have a significant number of options and warrants outstanding that could be exercised in the future. Subsequent re-sales 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. 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 have a majority of independent directors. In the absence of a majority of independent directors, our executive officers, who are also principal stockholders and directors, 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 traded 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. 18   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. ITEM 2. DESCRIPTION OF PROPERTY Facilities We currently occupy 3,100 square feet of leased space at a rate of (Cdn.) $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 2007. 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, 2006 no matters were submitted to a vote of security holders. 19   PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION Our common stock is traded over-the-counter and its quotations are carried in the OTC Bulletin Board.  Our stock commenced trading on January 16, 2007 with an opening price of $0.67. Between January 16, 2007 and March 15, 2007, the range of high and low bid quotations for our common stock was between $0.67 and $1.20. Records of our stock transfer agent indicate that as of March 17, 2007 there were approximately 75 record holders of our common stock. 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 will be 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 Item 1  Description of Business  The IntelGenx Acquisition). 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 23, 2007 1,119,000 options have been granted under the 2006 Option Plan. No options granted under the 2006 Stock Option Plan have been exercised. Equity Compensation Plan Information Number of Securities
  Weighted-
  Number of securitiesto be issued upon
  Average
  remaining availableexercise of
  Exercise Price of
  for future issuanceoutstanding options,
  outstanding
  under equitywarrants, and rights
  options,
  compensation planswarrants, and
  (excluding securitiesrights
  reflected in the firsttwo columnsEquity Compensation Plans Approved by Security Holders
  1,600,749
  $0.41
  481,749Equity Compensation Plans Not Approved by Security Holders
  None
  None
  NoneTotal
  1,600,749
  $0.41
  481,749  20   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, vested immediately 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 immediately 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 an management employee. These options have an exercise price of $0.41, vest immediately 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, 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, 25% every six months and expire on November 16, 2016. As of March 23, 2007 there are 481,749 options remaining to be granted under the 2006 Option Plan. None of the options have been exercised as of March 23, 2007. SALES OF UNREGISTERED SECURITIES The following issuance of shares were exempt from registration under section 4 (2) of the Securities Act, Regulation D-Rule 506 and/or Regulation S promulgated there under: On April 28, 2006 our Canadian subsidiary, IntelGenx, completed a private placement to certain accredited investors and issued 3,191,489 of its common shares for cash consideration of $1,341,750. Those shares where than exchanged into 3,191,489 shares of our common stock as part of the IntelGenx Acquisition (see Item 1  Description of Business  The IntelGenx Acquisition). After deduction of costs related to the IntelGenx Acquisition , the net proceeds from this private placement were $792,421. On April 28, 2006 our special purpose Canadian subsidiary completed the acquisition of 10,991,000 common shares of IntelGenx, pursuant to the Share Exchange Agreement and other agreements. Under the Share Exchange Agreement, Exchangeco acquired all of the issued and outstanding common shares of IntelGenx in exchange for 10,991,000 Class A Special Shares of Exchangeco, where each Class A Special Share of Exchangeco is exchangeable into one share of our common stock. We also acquired 100,000 common share purchase warrants of IntelGenx pursuant to a securities purchase agreement which we entered into with Patrick J. Caruso, in exchange for warrants exercisable for 100,000 shares of our common stock. Additionally, we entered into a business consultancy agreement with Mr. Caruso pursuant to which we issued to Mr. Caruso 325,000 shares of common stock as a non-refundable retainer, and in full payment of investor relations services to be rendered by Mr. Caruso under the agreement. We also issued warrants to purchase 90,691 shares of common stock at $0.41 per share for services rendered in connection with the IntelGenx Acquisition in April 2006.  The issuance of the warrants were not registered under the Securities Act. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following information should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2006 and 2005 and notes thereto appearing elsewhere in this Form 10-KSB. On August 10, 2006, pursuant to a vote by our shareholders, we changed our corporate name from Big Flash Corp. to IntelGenx Technologies Corp. Unless otherwise indicated or the context otherwise requires, the Company we, us, and our refer to IntelGenx Technologies Corp. and its subsidiaries including IntelGenx Corp. (Intelgenx) 21   Overview Company Background We are a drug delivery company established in 2003 and headquartered in Montreal, Quebec, Canada, which focuses on the development of novel oral immediate-release and controlled-release products for the generic pharmaceutical market Our business strategy is to develop pharmaceutical products based on its proprietary drug delivery technologies and then license commercial rights for such products to pharmaceutical partners once the viability of a product has been demonstrated. We expect a partner company will, in some cases, fund development of the licensed products, complete the regulatory approval process with the U.S. Food and Drug Administration (FDA) or other regulatory agencies relating to the licensed products, and assume responsibility for marketing and distributing such products. In addition, the Company anticipates that it may undertake full development of certain products without seeking a partner until the product reaches the marketing and distribution stage.  The Company will assess the potential for successful development of a product and associated costs, and then determine at which stage it is most prudent to seek a partner, balancing such costs against the potential for additional returns earned by partnering later in the development process. The Company has also undertaken a strategy under which it will work with pharmaceutical companies in order to develop new dosage forms in addition to already existing ones for pharmaceutical products for which patent protection is about to expire.  Under §(505)(b)(2) of the FDA will grant a market exclusivity of up to three years for such a new dosage form. The Company anticipates significant returns from successfully obtaining market exclusivity in this manner. The Company is currently continuing to develop the existing products in its pipeline and may also perform research and development on other potential products as the opportunities present themselves. The Company does not currently plan to acquire a manufacturing facility. The Company currently purchases and or leases, on an as-needed basis, the equipment necessary for performing research and development activities related to its products. The Company will hire new personnel, primarily in the area of research and development, on an as-needed basis as the Company enters into partnership agreements and increases its research and development activities. The IntelGenx Acquisition On April 28, 2006, the Company entered into a Share Exchange Agreement, whereby the Company, (through its wholly-owned subsidiary 6544361 Canada, Inc., a Canadian company) acquired 100% of the issued and outstanding common stock and warrants of IntelGenx, (the IntelGenx Acquisition). Pursuant to the Share Exchange Agreement, and several separate related agreements, we issued, as consideration for the IntelGenx common stock, 14,507,489 shares of our common stock to various shareholders of IntelGenx   along with 100,000 common stock purchase warrants to an IntelGenx shareholder. The warrants granted are exercisable at $0.41 per share of common stock, and expire on April 28, 2008. The total shares of common stock issued by the Company pertaining to the IntelGenx Acquisition constituted 90.6 % of the 16,007,489 shares of our common stock then outstanding. Following the completion of the IntelGenx Acquisition, IntelGenx continued its operations as subsidiary of the Company. As part of the IntelGenx Acquisition, we issued a controlling amount of shares to the former IntelGenx  shareholders who effectively gained controlling interest in the Company. According to US GAAP regulations, IntelGenx is deemed to be the accounting acquirer of the Company and the discussion of operations below relates to the operations of IntelGenx. 22    Results of Operations  Year ended December 31, 2006 compared to Year ended December 31, 2005. 2006
  
  
  2005
  
  
  Increase/
(Decrease)
  
  
  Percentage
ChangeRevenue
  
  $
  265,901
  
  
  $
  19,990
  
  
  $
  245,911
  
  
  1230%Research and Development Expenses
  
  
  510,407
  
  
  
  91,969
  
  
  
  418,438
  
  
  455%General and Administrative Expenses
  
  
  489,602
  
  
  
  74,555
  
  
  
  414,047
  
  
  555%Interest and financing fees
  
  
  54,724
  
  
  
  8,541
  
  
  
  46,183
  
  
  541%Net income (loss)
  
  
  (781,136)
  
  
  
  (125,520)
  
  
  
  655,616
  
  
  522%  Revenue Our revenues from R&D services provided were $265,901 for the year ended December 31, 2006, compared to $19,990 for the same period in 2005. We expect our revenue from signed development contracts in place at the time of filing of this report to be approximately $600,000 for the year 2007. We also expect increased revenue from additional research and development service contracts for which we are presently in discussions with potential clients. If we are successful in signing on potential clients, we could receive some additional upfront fees and research and development fees during 2007. Research and development Costs related to research and development increased from $91,969 in 2005 to  $510,407 for 2006, which reflects the commencement of projects with certain partners started in 2005 and 2006. Included in these costs are R&D Salaries of $294,778, $54,164 of which are non-cash compensation. Since research and development expenses are directly related to the amount of R&D work performed, management expects a further increase of R&D expenses in 2007 due to a further increase of development projects. To the extent that those projects are covered by development agreements, a portion of those expenses will be offset by development fees received from development partners for development services provided. General and Administrative General administrative expenses increased by $414,047 from $74,555 for the year ended December 31, 2005 to $489,602 for the year ended December 31, 2006.  Included in those expenses are management salaries and compensation of $245,637, $137,097 of which are non cash compensation in the form of options granted to directors and management employees. Also included are $158,925 for professional fees, $76,900 of which are non cash compensation for investor relation contracts and approximately $60,000 are related to our regulatory filing obligations. The additional increase in general and administrative expenses is attributed to the increase in corporate operations. Management expects general and administrative expenses from operation to increase according to an increase in operating activities in 2007. Stock Based Compensation Expense, Warrants and Stock Based Payments Stock based compensation expenses, warrants and share based payments totaled $306,440 for the year ended December 31, 2006 as compared to $0 for the year ended December 31, 2005. We issued 100,000 warrants in conjunction with a promissory note for a bridge loan received and 90,691 warrants as consideration for financing fees as part of the IntelGenx Acquisition in April 2006. We expensed a total of $37,699 for the issuance of those warrants during the year ended December 31, 2006 with no comparable expense in the previous year. All warrant were amortized during the reporting period. 23    We also granted 1,119,000 options during the year, resulting in $202,116 in stock based compensation expenses for the amortization of options granted under the 2006 Stock Option Plan. We also amortized $66,625 stock based payments in consideration of investor relation services rendered during the year ended December 31, 2006. No options were issued in prior years. There remains about  $113,750 in stock based compensation to be expensed in fiscal 2007 and 2008 related to the issuance of options during 2006. We anticipate issuance of additional options and warrants in the future, which will continue to result in stock based compensation expense and may result in warrant amortization expense. Interest Expenses We incurred interest and financing fee expenses of $54,724 during the year ended December 31, 2006 compared to $8,541 for the same period in 2005.  Included in the interest expense  $37,699 representing the value of 190,691 warrants issued as a non-cash financing fee payment in connection with the IntelGenx Acquisition in April 2006. Management expects the interest expense to be significantly lower for 2007. Net Loss We recorded a net loss of $781,136 in the period ended December 31, 2006 compared to a net loss of $125,520 for the same period in 2005. Management believes that we will continue to operate at a net loss until such time as we can complete our business development efforts and begin to realize increased sales revenues by early 2007. Income taxes There were Canadian and provincial net operating losses of approximately $350,000 (2005 - $98,000) and $387,000 (2005 - $132,000) 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 (see Note 13  Income Taxes - in Financial Statements). As at December 31, 2006 we had non-refundable tax credits of $93,000 expiring in 2016 and undeducted research and development expenses of $340,000 (2005-$18,000) with no expiration date. Prepaid Expenses At December 31, 2006 we had prepaid expenses of $72,914 compared to $3,186 for the same period in 2005. The increase is due to the issuance of 325,000 shares in consideration of investor relation services. This investor relation contract was acquired as a prepaid asset of $133,250 at the time of the IntelGenx Acquisition in April 2006. $ 66,625 of the total amount of the investor relations contract was expensed in the last two quarters of 2006. Contractual Obligations and Commitments Excluding trade accounts payable and accrued liabilities, the Company is committed to the following contractual obligations and commitments. 2007
  2008
  2009
  2010
  2011Operating Lease Obligations
  $ 13,000
  $13,500
  $9,200
  -
  -Long Term Debt
  $24,026
  $24,026
  $24,026
  $24,026
  $10,583Total
  $37,026
  37,526
  $33,226
  $24,026
  $10,583 24   Liquidity and Capital Resources At December 31, 2006, we had cash and cash equivalent of $227,578. We also had accounts receivable of $135,223, $88,895 of the amount is the expected sales tax refund, receivable in the first quarter of 2007. We also had income taxes recoverable of $9,380 and estimated investment tax credits receivable from provincial and federal government of $39,025. At December 31, 2006, we had accounts payable and accrued liabilities of $129,994. Of these liabilities, approximately $22,500 was payable to shareholders and approximately $66,000 was due for legal fees in connection with our regulatory filing obligations.  The current portion of long term debt was $24,026 for the repayment of the loan made in the fourth quarter of 2005 and the first quarter of 2006 to finance laboratory equipment purchases. At December 31, 2006, we had an operating line of credit in place with a maximum of $43,000 of which $0 was borrowed. Management believes that our cash supply and expected tax refunds will be sufficient to satisfy our cash requirements for the first six month of 2007, even in the unlikely event, that no additional revenue would be received during that time period (see  Revenue).  At December 31, 2006, we had total assets of $650,836 and shareholders' equity of $328,079. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. ITEM 7. FINANCIAL STATEMENTS FOR 2006 AND 2005 The financial statements for the fiscal years ending December 31, 2006 and 2005, required by Item 7 are set forth on pages F-1 through F-19. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable ITEM 8A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The Company's chief executive officer and the Company's chief financial officer and principal accounting officer are responsible for establishing and maintaining disclosure controls and procedures for the Company. Based on their evaluation as of December 31, 2006, the chief executive officer and the chief financial officer have concluded that the Company's disclosure controls and procedures (as defined in Rule 13a-14(c) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) are effective to ensure that information required to be disclosed by the Company in reports that the Company files or submits under the Securities Exchange Act, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. 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, 2006 that  has materially affected or is reasonably likely to materially affect  the Company's internal controls over financial reporting. 25   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 Directors and Executive Officers The following table identifies our directors and executive officers as of December 31, 2006. Name
  
  Age
  
  Position
  Director sinceHorst G. Zerbe
  
  60
  
  Chairman of the Board, President
and Chief Executive Officer
  April 2006Joel Cohen (1)
  
  35
  
  Director and Chief Financial Officer
  April 2006J. Bernard Boudreau (1) (2)
  
  62
  
  Director
  June, 2006David Coffin-Beach (2)
  
  59
  
  Director
  June, 2006Reiza Rayman (1) (2)
  
  43
  
  Director
  June, 2006Ingrid Zerbe (3)
  
  52
  
  Secretary,
Director, Finance and Administration
  April  2006  (1)
  Audit Committee member(2)
  Compensation Committee member(3)
  Pursuant to the Company's annual meeting of shareholders held on August 10, 2006, Mrs. Zerbe ceased to be a director of the Company.  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, PhD 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. Joel Cohen, CFA Mr. Cohen is our  Chief Financial Officer and a Director and works on a consulting basis for the Company. Mr. Cohen has extensive experience in biotechnology and high tech financings and in financial analysis. From 2002 until present, Mr. Cohen has been a consulting CFO for Osta Biotechnologies a publicly traded Company on the TSX venture. From 1999 to 2002, Mr. Cohen was an investment banker at Canaccord Capital Corporation, where he specialized in biotechnology financings.  He has worked on numerous IPOs and private and public financings worth over $100 million for various companies including Neurochem Inc, Adherex Technologies Inc., Bioniche Lifr Sciences Inc., Diagnocure Inc., Qbiogene Inc. and Aeterna Zentaris Inc. Mr. Cohen holds a Bachelor of Commerce degree in Finance from Concordia University and is a Chartered Financial Analyst. 26   J. Bernard Boudreau Sr. VP, PharmEng Inc. Since 2004, Mr. Boudreau has been serving as a Senior Vice President of PharmEng Inc., a full-service consulting and contract manufacturing company that serves the pharmaceutical, biotechnology and medical device industries in North America and internationally. From 2000 to 2004, Mr. Boudreau was president of Radcliffe and Investments LTD. Prior thereto, he was appointed as Queen's Counsel in 1985. Mr. Boudreau was elected to the provincial legislature of Nova Scotia, in which he has served from 1988 to 1997.  He has served as Chair of the Public Accounts Committee and opposition critic for Finance and Economic Development. In 1993 he was re-elected as a member of government and held responsibilities as Minister of Finance, Minister of Health, Chair of the Cabinet Priorities and Planning Committee. Dr. Reiza Rayman Currently, Dr. Rayman is pursuing a PhD in the area of Tele-surgery. From 2000 until 2005, Dr. Rayman was serving as Principal Investigator, Robotic Tele-surgery and Hybrid Cardiac Surgery, CSTAR, and Assistant Professor, Department of Surgery, at the University of Western Ontario.  In September 1999, Dr. Rayman in collaboration with Dr. Doug Boyd, performed the world's first robotic beating heart cardiac bypass surgery.  He holds an MSc (biophysics) from the University of Western Ontario and an MD from the University of Toronto.  Dr. Rayman is currently completing his PhD in Medical Biophysics. David Coffin-Beach, Ph.D. Since January 1, 2005, Dr. Coffin-Beach has been serving 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 is the former President and Board Member of TorPharm (1994-2004), the U.S. division of Apotex Inc. During his tenure as President and CEO, the company grew from start-up to over $400 million in revenue and 1,000+ employees. Prior to that, Dr. Coffin-Beach held various positions at Schering-Plough Corporation ending with the position of Associate Director. Prior to that, Dr. Coffin-Beach took a position as Director of Research at Superpharm Corporation, a Division of Goldline Laboratories, where he was in charge of all research and development of generic products which resulted in ten new abbreviated new drug application (ANDA) products being filed for the company during his tenure. Prior to that, Dr. Coffin-Beach joined DuPont Pharmaceuticals as a senior scientist and among other accomplishments, was a key participant in the design and qualification of a new pharmaceutical research facility in Wilmington, Delaware. He is also was a co-inventor on two U.S. patents. Dr. Coffin-Beach received his bachelor of science in Pharmacy from Union University and practiced both community and clinical pharmacy before returning for graduate studies at the University of Maryland at Baltimore to finish graduate school with a PhD in Pharmaceutics. 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 has been a director of IntelGenx.  She holds a bachelor degree in economics from the business school in Bottrop, Germany, and a bachelor degree in social sciences from the University of Dortmund, Germany. Key Personnel and Consultants Nadine Paiement, MSc Ms. Paiement serves as IntelGenx's Head of Formulation.  She holds a M.Sc. degree in Polymer Chemistry from Sherbrooke University, and is co-inventor of IntelGenx's Tri-Layer technology.  Prior to joining IntelGenx, she worked for five years as a formulation scientist at Smartrix Technologies, Inc. 27   Committees of the Board of Directors On June 21, 2006, we formed our Audit Committee and Compensation Committee. 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, our Chief Financial Officer, 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. 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, 2006, 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:  On December 13, 2006 Form 3s were filed late by our CEO, Mr. Horst G. Zerbe, our CFO, Mr. Joel Cohen, Mrs. Ingrid Zerbe, our Secretary and our Directors, Mr. Bernard Boudreau, Mr. David Coffin-Beach and Mr. Reiza Rayman. 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 do follow what are considered proper business ethics and labor law in Canada. 28   Item 10. COMPENSATION OF DIRECTORS AND OFFICERS Summary of Executive Compensation The following table provides a summary of the compensation paid to date during the last two  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 $100,000 in the most recent year (Named Executive Officers). SUMMARY COMPENSATION TABLEName and principal position 
(a)
  Year 
(b)
  Salary ($) 
(c)
  Bonus ($)
(d)
  Stock Awards ($)
(e)
  Option Awards ($)
(f)
  Non-Equity Incentive Plan Compensation ($)
(g)
  Nonqualified Deferred Compensation Earnings ($) 
(h)
  All Other Compensation ($)
(i)
  Total ($) 
(j)Horst Zerbe, President and CEO
  2006
  139,053
  Nil
  Nil
  69,680
  Nil
  Nil
  $5,185
  213,9182005
  8,174
  Nil
  Nil
  Nil
  Nil
  Nil
  10,978(1)
  19,152Joel Cohen, CFO
  2006
  Nil
  Nil
  Nil
  Nil
  Nil
  Nil
  108,227(2)
  108,2272005
  Nil
  Nil
  Nil
  Nil
  Nil
  Nil
  Nil
  Nil (1).Mr Zerbe was paid $10,978 in 2005 under a consulting agreement  before his employment at IntelGenx commenced. (2).Mr. Cohen was paid $95,000 for consulting work performed in connection with Intelgenx's private placement and the  IntelGenx Acquisition. See "Item1  Description of Business  - The IntelGenx Acquisition.  $13,227 was paid for consulting services as CFO.  OPTION AWARDSName 
(a)
  Number of Securities Underlying Unexercised Options 
(#) 
Exercisable 
(b)
  Number of Securities Underlying Unexercised Options 
(#) 
Unexercisable
(c)
  Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#)
(d)
  Option Exercise Price
($)
(e)
  Option Expiration Date
(f)Horst Zerbe
  225,000 1
  Nil
  Nil
  0.41
  Nov.9, 2016Joel Cohen
  Nil
  250,0002
  Nil
  0.41
  Nov.16, 2016  1On November 9, 2006 225,000 options were granted to Mr. Zerbe, vesting immediately. 2 On November 16, 2006, 250,000 options were granted to Mr. Cohen in connection with the IntelGenx Acquisition. The options vest over two years, none of which are exercisable as of the date of this report. 29   Summary of Directors' Compensation At present, directors are not compensated for attending meetings of the board of directors or other committee meetings. Our directors do not have service contracts.  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. DIRECTOR COMPENSATIONName 
(a)
  Fees Earned or Paid in Cash 
($) 
(b)
  Stock Awards ($) 
(c)
  Option Awards ($)
(d)
  Non-Equity Incentive 
Plan Compensation
($)
(e)
  Non-Qualified Deferred Compensation Earnings
($)
(f)
  All 
Other Compensation ($)
(g)
  Total ($) 
(j)Horst Zerbe
  Nil
  Nil
  Nil
  Nil
  Nil
  Nil
  NilJoel Cohen
  Nil
  Nil
  Nil
  Nil
  Nil
  Nil
  NilBernard Boudreau
  Nil
  Nil
  16,6671
  Nil
  Nil
  Nil
  16,667David Coffin-Beach
  Nil
  Nil
  16,6672
  Nil
  Nil
  Nil
  16,667Reiza Rayman
  Nil
  Nil
  16,6673
  Nil
  Nil
  Nil
  16,667Ingrid Zerbe
  Nil
  Nil
  Nil
  Nil
  Nil
  Nil
  Nil 1 75,000 Options were granted September 26, 2006, vesting immediately, none exercised as of March 23, 2007. 2 75,000 Options were granted September 26, 2006, vesting immediately, none exercised as of March 23, 2007. 3 75,000 Options were granted September 26, 2006, vesting immediately, none exercised as of March 23, 2007.  Directors' and Officers' Liability Insurance We do carry directors' and officers' liability insurance for our directors and officers.  The annual cost for the insurance is $ 20,185. 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 23, 2007 there were 16,007,489 shares of common stock issued and outstanding. The number of shares beneficial owned in the table includes options exercisable within sixty days of this Annual Report. Name and Address
  Amount and Nature of
  Percent ofOf Owner
  Beneficial Owner
  ClassHorst G. Zerbe(1)
  4,934,643.5
  30.4%Ingrid Zerbe(1)
  4,934,643.5
  30.4%Joel Cohen(1)
  1,634,213
  10.2%Bernard Boudreau
  75,000
  0%David Coffin-Beach
  128,191
  0%Reiza Raymen
  128,191
  0%All directors and officers as a group (6 persons)
  12,022,382
  71.8% (1) The shares indicated are Exchangeable Shares in the capital stock of 6544631 Canada Inc., a Canadian special purpose corporation which wholly owns IntelGenx as a result of the completion of the IntelGenx Acquisition.  The Exchangeable Shares are exchangeable for 10,991,000 shares of our common stock currently held by the Escrow Agent.  See  Item I Business - the IntelGenx Acquisition. 30    ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS On May 26, 2006, Joel Cohen our Director and Chief Financial Officer, received consulting fees from Intelgenx (our wholly owned subsidiary) of $95,000 for consulting work performed for Intelgenx in connection with Intelgenx's private placement and our acquisition of Intelgenx. See Item I "Business-The IntelGenx Acquisition" During the year ended December 31, 2006 $5,304 of interest on a shareholder loan and $17,850 under an equipment lease were paid to Ingrid Zerbe, our Secretary and Director of Finance and Administration. ITEM 13. EXHIBITS The following exhibits are filed as part of this Annual Report: 2.1
  Share exchange agreement dated April 10, 2006, incorporated by reference to 99.1 from the 8K/A filed on April 28, 20063.1
  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 on November 16, 1999)3.3
  Amendment to the Articles of Incorporation, filed with amendment No. 2 to Form SB-2 (File No. 333-135591), filed on August 28, 20064.1
  Warrants dated March 16, 2006 issued to Patrick J. Caruso, incorporated by reference to exhibit 4.1 of the registrant's SB-2 No. 333-135591, filed July 3, 20069.1
  Voting Trust agreement, incorporated by reference to 99.1 from the 8K/A filed on April 28, 200610.1
  Horst Zerbe employment agreement, incorporated by reference to exhibit 10.1 of the registrant's SB-2 No. 333-135591, filed July 3, 200610.2
  Joel Cohen consulting agreement, incorporated by reference to exhibit 10.2 of the registrant's SB-2 No. 333-135591, filed July 3, 200610.3
  Ingrid Zerbe employment agreement, incorporated by reference to exhibit 10.3 of the registrant's SB-2 No. 333-135591, filed July 3, 200610.4
  Registration rights agreement, incorporated by reference to exhibit 10.4 of the registrant's SB-2 No. 333-135591, filed July 3, 200610.5
  Principal's registration rights agreement, incorporated by reference to exhibit 10.5 of the registrant's SB-2 No. 333-135591, filed July 3, 200610.6
  Investor relations consulting agreement, incorporated by reference to exhibit 10.6 of the registrant's SB-2 No. 333-135591, filed July 3, 2006.10.7
  2006 Stock Option Plan adopted August 10, 2006, incorporated by reference to exhibit 10.1 of the Form  S-8 , filed November 21, 2006.16.1
  Letter on change in certifying accountant, incorporated by reference to exhibit 16.1 of the registrant SB-2 No. 333-135591, filed July 3, 200621.1
  Subsidiaries of the small business issuer, incorporated by reference to exhibit 21.1 of the registrant SB-2 No. 333-135591, filed July 3, 2006.23.1
  Consents of Auditor  31   ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The following table sets forth, for each of the years indicated, the fees billed by our independent public accountants., During 2005, the fees were billed by Chisholm, Bierwolf & Nilsen. After the IntelGenx Acquisition, the Company's auditors were changed to RSM Richter LLP. The 2006 fees were billed by RSM Richter LLP and include fees billed to our Canadian subsidiary for the audit since inception in 2003 to the year ended December 31, 2005, as well as fees for all  necessary financial reviews in connection with our regulatory filings and the IntelGenx Acquisition. Year Ended December 312006
  2005Audit Fees
  $ 72,308
  $ 3,300Audit-related FeesTax Fees
  0
  0All Other Fees
  0
  0Total
  $ 72,308
  $ 3,300 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 2006 are audit fees and incurred on an as-needed basis. Prior to June 2006, the directors served as Audit Committee. 100% of the audit fees in 2006 and 2005 were approved by the directors. No issue regarding these services has arisen in the last two fiscal years.  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 29, 2007 IntelGenx Technologies Corp.By: /s/ Horst G. ZerbeHorst G. Zerbe, President andChief Executive Officer  32    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 29, 2007 IntelGenx Technologies Corp. Directors:
  Date:/s/  Horst G. Zerbe
  March 29, 2007Horst G. Zerbe, CEO and Chairman/s/  Joel Cohen
  March 29, 2007Joel Cohen , CFO and  Director/s/  Bernard Boudreau
  March 29, 2007Bernard Boudreau, Director/sDavid Coffin-Beach
  March 29, 2007David Coffin-Beach, Director/s/ Reiza Rayman
  March 29, 2007Reiza Rayman, Director  33  
 IntelGenx Technologies Corp. (Formerly Big Flash Corporation)Consolidated Financial Statements 
December 31, 2006 
(Expressed in U.S. Funds)
Contents
Report of Independent Registered Public
    Accounting Firm
    1Balance Sheet
    2Statement of Shareholders' Equity
    3Statement of Operations and Comprehensive
    Loss
    4Statement of Cash Flows
    5Notes to Financial Statements
    6 - 19RSM Richter S.E.N.C.R.L. 
    Comptables agréés 
    Chartered Accountants2, Place Alexis Nihon 
    Montréal, (Québec) H3Z 3C2 
    Téléphone / Telephone : (514) 934-3400 
    Télécopieur / Facsimile : (514) 934-3408 
    www.rsmrichter.comReport of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of IntelGenx Technologies Corp. 
(Formerly Big Flash Corporation)
We have audited the accompanying consolidated balance sheets
of IntelGenx Technologies Corp. as at December 31, 2006 and 2005 and the related
consolidated statements of operations, 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, 2006 and 2005 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.
Signed RSM Richter LLP
Chartered Accountants
Montreal, Quebec 
March 22, 2007
IntelGenx Technologies Corp. (Formerly Big Flash Corporation)
Consolidated Balance Sheet 
As At December 31, 2006 
(Expressed in U.S. Funds)
2006
    
    2005AssetsCurrentCash and cash equivalent (note 6)
    $
    227,578
    $
    10,938Accounts receivable
    
    135,223
    
    5,858Income taxes recoverable
    
    9,380
    
    9,400Prepaid expenses
    
    72,914
    
    3,186Investment tax credits receivable
    
    43,880
    
    69,576488,975
    
    98,958Property and Equipment(note 5)
    
    161,861
    
    100,176$
    650,836
    $
    199,134LiabilitiesCurrentAccounts payable and accrued liabilities (note 7)
    
    129,994
    
    67,322Current maturity of long-term debt
    
    24,026
    
    14,000154,020
    
    81,322Long-Term Debt(note 9)
    
    82,661
    
    63,386Loan Payable, Shareholder(note 8)
    
    86,076
    
    86,253Commitment (note 10)Shareholders' EquityCapital Stock(note 11)
    
    925,748
    
    77Additional Paid-In Capital(note 12)
    
    239,815
    
    -(837,484)
    
    (31,904)Deficit328,079
    
    (31,827)$
    650,836
    $
    199,134See accompanying notes
Approved on Behalf of the Board

, Director
, Director
F - 2
IntelGenx Technologies Corp. (Formerly Big Flash Corporation)
Consolidated Statement of Shareholders' Equity 
For the Year Ended December 31, 2006 
(Expressed in U.S. Funds)
AccumulatedAdditional
    
    Other
    
    
    
    TotalCapital
    Stock
    
    Paid-In
    
    Comprehensive
    
    Accumulated
    
    Shareholders'Number
    
    Amount
    
    Capital
    
    Gain (Loss)
    
    Deficit
    
    EquityBalance - December 31, 2004
    10,000
    $
    77
    $
    -
    $
    6,493
    $
    88,791
    $
    95,361Foreign currency translation adjustment for
    the year
    -
    
    -
    
    -
    
    (1,668)
    
    -
    
    (1,668)Net loss for the year
    -
    
    -
    
    -
    
    -
    
    (125,520)
    
    (125,520)Balance - December 31, 2005
    10,000
    
    77
    
    -
    
    4,825
    
    (36,729)
    
    (31,827)March 9, 2006 - recall and cancellation of
    issued
    (10,000)
    
    (77)
    
    -
    
    -
    
    -
    
    (77)sharesMarch 9, 2006 - issue of common shares
    10,991,000
    
    77
    
    -
    
    -
    
    -
    
    77April 28, 2006 - issue of common shares
    3,191,489
    
    792,421
    
    -
    
    -
    
    -
    
    792,421April 28, 2006 - asset acquired (note 1)
    1,825,000
    
    133,250
    
    -
    
    -
    
    -
    
    133,250Foreign currency translation adjustment for
    the year
    -
    
    -
    
    -
    
    (24,444)
    
    -
    
    (24,444)Warrants issued
    -
    
    -
    
    37,699
    
    -
    
    -
    
    37,699Stock options issued
    -
    
    -
    
    212,778
    
    -
    
    -
    
    212,778Compensation expense related to services not
    yetrendered (note 12)
    -
    
    -
    
    (10,662)
    
    -
    
    -
    
    (10,662)Net loss for the year
    -
    
    -
    
    -
    
    -
    
    (781,136)
    
    (781,136)Balance - December 31, 2006
    16,007,489
    $
    925,748
    $
    39,815
    $
    (19,619)
    $
    (817,865)
    $
    328,079See accompanying notesF - 3 IntelGenx Technologies Corp. (Formerly Big Flash Corporation) Consolidated Statement of Operations and Comprehensive Loss 
For the Year Ended December 31, 2006 
(Expressed in U.S. Funds)
2006
    
    2005Revenue
    $
    265,901
    $
    19,990ExpensesResearch and development
    
    510,407
    
    91,969(39,025)
    
    (44,298)Research and development tax creditsManagement salaries
    
    245,637
    
    23,10584,040General and administrative
    
    
    
    41,088Professional fees
    
    158,925
    
    10,362Depreciation
    
    33,912
    
    24,323(1,583)Foreign exchange
    
    
    
    465Interest and financing fees
    
    54,724
    
    8,5411,047,037
    
    155,555Loss Before Income Taxes
    
    (781,136)
    
    (135,565)Current income taxes (note 13)
    
    -
    
    (10,045)Net Loss
    $
    (781,136)
    $
    (125,520)Other Comprehensive Loss(24,444)
    
    (1,668)Foreign currency translation adjustmentComprehensive Loss
    $
    (805,580)
    $
    (127,188)Basic Weighted Average Number of Shares Outstanding
    
    14,335,000
    
    10,991,000Basic and Diluted Loss Per Common Share(note 16)
    $
    (0.05)
    $
    (0.01)See accompanying notesF - 4 IntelGenx Technologies Corp. (Formerly Big Flash Corporation)
Consolidated Statement of Cash Flows 
For the Year Ended December 31, 2006 
(Expressed in U.S. Funds)
2006
    
    2005Funds Provided (Used) -Operating ActivitiesNet loss
    $
    (781,136)
    $
    (125,520)Depreciation
    
    33,912
    
    24,323Investor relations services
    
    66,625
    
    -Financing fees paid in warrants
    
    37,699
    
    -Share-based compensation
    
    202,116
    
    -(440,784)
    
    (101,197)(48,867)
    
    (9,641)Changes in non-cash operating elements of working
    capital(489,651)
    
    (110,838)Financing ActivitiesPromissory note
    
    134,689
    
    -Repayment of promissory note
    
    (134,689)
    
    -Increase in long-term debt
    
    53,754
    
    77,386Repayment of long term debt
    
    (22,632)
    
    -Loan payable, shareholder
    
    -
    
    44,396Issue of capital stock
    
    1,341,750
    
    -Transaction costs
    
    (549,329)
    
    -823,543
    
    121,782Investing ActivitiesAdditions to property and equipment
    
    (97,511)
    
    (4,819)Increase in Cash and Cash Equivalent
    
    236,381
    
    6,125Effect of Foreign Exchange on Cash Balance
    
    (19,741)
    
    (1,668)Cash and Cash EquivalentBeginning of Year
    
    10,938
    
    6,481End of Year
    $
    227,578
    $
    10,938See accompanying notesF - 5 IntelGenx Technologies Corp. (Formerly Big Flash Corporation) Notes to Consolidated Financial Statements 
December 31, 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 - 6
IntelGenx Technologies Corp. (Formerly Big Flash Corporation)
Notes to Consolidated Financial Statements 
December 31, 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 $837,484 (2005 - $31,904). 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 development fee revenues from three clients and have not been
sufficient to sustain operations. In order to achieve profitability, revenue
streams will have to increase significantly and even though management expects
increased revenues from development fees in 2007, there is no assurance that
revenues can increase to such a level. 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 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 - 7
IntelGenx Technologies Corp. (Formerly Big Flash Corporation)
Notes to Consolidated Financial Statements 
December 31, 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.
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
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.
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.
Cash and Cash Equivalent
Cash and cash equivalent comprise
cash on hand and a demand deposit.
F - 8
IntelGenx Technologies Corp. ( Formerly Big Flash
Corporation) 
Notes to Consolidated Financial Statements 
December 31, 2006 
(Expressed in U.S. Funds) 4. Summary of Significant Accounting Policies
(Cont'd) 
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, 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 -Computer equipment
    30%Laboratory and office equipment
    20%On the straight-line method -Leasehold improvements
    5 yearsUpon 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 - 9
IntelGenx Technologies Corp. (Formerly Big Flash Corporation)
Notes to Consolidated Financial Statements 
December 31, 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.
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. When options are forfeited because the service requirements
are not met, any expense previously recorded is reversed in the period of
forfeiture. The Company uses the Black-Scholes-Merton option pricing model to
determine the fair value of the options.
F - 10
IntelGenx Technologies Corp. (Formerly Big Flash Corporation)
Notes to Consolidated Financial Statements 
December 31, 2006 
(Expressed in U.S. Funds) 4. Summary of Significant Accounting Policies (Cont'd)
Loss Per Share

Basic loss per share is calculated
based on the weighted average number of shares outstanding during the year. The
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 May 2005, the FASB issued SFAS No.
154, "Accounting and Error Corrections". This Statement replaces APB Opinion No.
20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes
in Interim Financial Statements, and changes the requirements for the accounting
for and reporting of a change in accounting principle. This Statement applies to
all voluntary changes in accounting principles. It also applies to changes
required by an accounting pronouncement in the unusual instance that the
pronouncement does not include specific transition provision. When a
pronouncement includes specific transition provisions, those provisions should
be followed. This Statement shall be effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005.
The adoption of this pronouncement did not have any impact on the Company's
financial position or statement of operations.
In February 2006, the FASB issued
SFAS No. 155, "Accounting or Certain Hybrid Financial Instruments" ("SFAS No.
155"), which amends SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (SFAS No. 133"), and SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities". SFAS No.
155 resolves issues addressed in SFAS No. 133 Implementation Issue No. D1,
"Application of Statement 133 to Beneficial Interests in Securitized Financial
Assets", among other matters, permits fair value re-measurement for any hybrid
financial instrument that contains an embedded derivative that otherwise would
require bifurcation. SFAS No. 155 is effective for all financial instruments
acquired or issued after the beginning of an entity's fiscal year that begins
after September 15, 2006, except earlier adoption is allowed in certain
circumstances. The adoption of this pronouncement is not expected to have any
impact on the Company's financial position or statement of operations.
In July 2006, the FASB issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109" ("FIN 48"), which clarifies the
accounting for uncertainty in tax positions. This Interpretation requires that
the Company recognize in its financial statements, the impact of a tax position,
if that position is more likely than not for being sustained on audit, based on
the technical merits of the position. The provisions of FIN 48 shall be
effective as of January 1, 2007. The adoption of this pronouncement is not
expected to have any impact on the Company's financial position or statement of
operations.
F - 11
IntelGenx Technologies Corp. (Formerly Big Flash Corporation)
Notes to Consolidated Financial Statements 
December 31, 2006 
(Expressed in U.S. Funds) 4. Summary of Significant Accounting Policies (Cont'd)
In September 2006, the FASB issued FASB Statement No.
157, Fair Value Measurements ("FAS 157"). FAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and enhances disclosures about fair value measurements
required under other accounting pronouncements, but does not change existing
guidance as to whether or not an instrument is carried at fair value. The
adoption of this pronouncement did not have any impact on the Company's
financial position or statement of operations.
In February 2007, the Financial Accounting Standards
Board issued FASB Statement No. 159, the Fair Value Option for Financial Assets
and Financial Liabilities (FAS 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. Statement 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.
5. Property and Equipment

2006
    2005Accumulated
    Net Carrying
    Net CarryingCost
    Depreciation
    Amount
    AmountLaboratory and office equipment
    $
    169,915
    $
    56,947
    $
    112,968
    $
    81,020Computer equipment
    
    14,562
    
    5,378
    
    9,184
    
    2,996Leasehold improvements
    
    53,578
    
    13,869
    
    39,709
    
    16,160$
    238,055
    $
    76,194
    $
    161,861
    $
    100,176 6. Credit Facility
As at December 31, 2006, the Company had a credit
facility of $43,000. Borrowings under the credit facility bear interest at prime
rate plus 1.3% per annum. As security for the credit facility, the Company has
pledged its assets to a maximum of $49,500.
7. Accounts Payable and Accrued Liabilities

Included in accounts payable and accrued liabilities
is approximately $22,500 (2005 - $31,600) payable to shareholders.
F - 12
IntelGenx Technologies Corp. (Formerly Big Flash Corporation)
Notes to Consolidated Financial Statements 
December 31, 2006 
(Expressed in U.S. Funds) 8. Loan Payable, Shareholder
The loan payable, shareholder is unsecured, bears
interest at 6% per annum and is not repayable prior to January 1, 2008. An
amount of $63,000 has been postponed in favor of the Business Development Bank
of Canada (see note 9). Interest incurred during the year amounted to
approximately $5,300 (2005 - $4,000) which is measured at the exchange amount.
9. Long-Term Debt

2006
    
    2005Loan from Business Development Bank of
    Canada, bearing interest atthe lender's prime rate (8%) plus 1.5% per annum,
    maturing in 2011and payable in annual instalments of $24,026
    $
    106,687
    $
    77,386Current maturity
    
    24,026
    
    14,000$
    82,661
    $
    63,386Principal payments due in each of the next
    five years are as follows:2007
    $
    24,0262008
    
    24,0262009
    
    24,0262010
    
    24,0262011
    
    10,583As security for the loan from
Business Development Bank of Canada, the Company has pledged all of its assets.
As additional security, two shareholders of the Company have provided a
guarantee for an amount representing 25% of the current commitment, and the loan
payable, shareholder has been postponed for an amount of $63,000.
The terms of the loan agreement
require the Company to comply with certain financial covenants.
F - 13
IntelGenx Technologies Corp. (Formerly Big Flash Corporation)
Notes to Consolidated Financial Statements 
December 31, 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
three years are approximately as follows:
2007
    $ 13,0002008
    13,5002009
    9,20011.    Capital Stock
2006
    2005Authorized -20,000,000 common shares of $0.00001 par
    valueIssued -16,007,489 (2005 - 10,000) common shares
    $
    925,748
    $ 77On 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 Intelgenx Corp.
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, Intelgenx Corp.
completed a share exchange transaction with IntelGenx Technologies Corp. in
which it acquired prepaid investor relations services amounting to $133,250.
F  14
IntelGenx Technologies Corp. (Formerly Big Flash Corporation)
Notes to Consolidated Financial Statements 
December 31, 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 yearsRisk-free interest rate
      3.91% and 4.78%Dividend yield
      Nil
As at December 31, 2006, no stock
purchase warrants were exercised.
Stock Options
During the year ended December 31,
2006, for the first time, the Company granted 1,119,000 stock options to
employees, directors and consultants to purchase common shares. The stock
options are exercisable at $0.41 per share and have a maximum term of 5 to 10
years with vesting provisions ranging from immediate to vesting in equal
increments over two years. A total of 1,600,749 common shares have been
registered under the stock option plan. As at December 31, 2006, no stock
options were exercised.
The stock options were accounted for
at their fair value, as determined by the Black-Scholes-Merton valuation model,
of $212,778, using the following assumptions:
Expected volatility
      
      88%Expected life
      2.50 - 5.75 yearsRisk-free interest rate
      
      4.78%Dividend yield
      
      NilWeighted average fair value of options at grant date
      $
      0.29
F - 15
IntelGenx Technologies Corp. (Formerly Big Flash Corporation)
Notes to Consolidated Financial Statements 
December 31, 2006 
(Expressed in U.S. Funds)

12.   Additional Paid-In Capital (Cont'd)
As a result of the grants, the
Company recorded a compensation expense in the accounts as follows:
Options Outstanding at December 31, 2006
    Vested OptionsWeighted
    Aggregate
    
    
    Aggregate
    IntrinsicAverage Remaining
    IntrinsicNumber
    Contractual Life (Years)
    Value
    Number
    
    ValueDirectors
    475,000
    9.88
    $
    146,958
    225,000
    $
    69,535Non employee directors
    225,000
    4.75
    
    50,000
    225,000
    
    50,000Consultants
    94,000
    9.88
    
    29,066
    69,000
    
    21,807Employees
    325,000
    9.88
    
    100,504
    225,000
    
    71,4361,119,000
    8.84
    $
    326,528
    744,000
    $
    212,778Compensation expense related to
    services not yet rendered
    
    
    
    
    (10,662)Compensation Expense
    
    
    
    
    
    
    202,116As of December 31, 2006, total
unrecognized compensation expense related to unvested stock options was
$113,750. 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 - 16
IntelGenx Technologies Corp. (Formerly Big Flash Corporation)
Notes to Consolidated Financial Statements 
December 31, 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:
2006
    
    2005Statutory income taxes
    $ (242,000)
    $ (42,000)Net operating losses for which no tax
    benefits have been recorded
    
    76,000
    
    33,000Excess of amortization over capital cost
    allowance
    
    11,000Non-deductible expenses
    
    98,000
    
    4,955Undeducted research and development expenses
    
    105,000
    
    6,000Tax deductible portion of transaction costs
    
    (34,000)
    
    -Investment tax credit
    
    (14,000)
    
    (12,000)$ -
    $ (10,045)The major components of the
    deferred tax assets classified by the source of temporary differences are as
    follows:2006
    
    2005Property and equipment
    
    $(2,000)
    
    $(1,500)Net operating losses carryforward (expiring
    2015-2016)
    
    109,000
    
    33,000Undeducted research and development expenses
    
    105,000
    
    6,000Non-refundable tax credits carryforward
    
    93,000
    
    -Transaction costs to be deducted in future years
    
    136,000
    
    -441,000
    
    37,500Valuation allowance
    
    (441,000)
    
    (37,500)$-
    
    $-There were Canadian and provincial net operating losses of
approximately $350,000 (2005 - $98,000) and $387,000 (2005 - $132,000)
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.
F - 17
IntelGenx Technologies Corp. (Formerly Big Flash Corporation)
Notes to Consolidated Financial Statements 
December 31, 2006 
(Expressed in U.S. Funds)

13.   Income Taxes (Cont'd)
As at December 31, 2006 the Company
had non-refundable tax credits of $93,000 expiring in 2016 and undeducted
research and development expenses of $340,000 (2005 - $18,000) with no
expiration date.
Due to the reorganization of the
corporation, there were $549,000 of transaction costs of which only $109,000 was
deductible in the current year. The remaining transaction costs are deductible
for income tax purposes in equal amounts over the next four years.
The deferred tax benefits of these
items was not recognized in the accounts.
14.   Statement of Cash Flows Information
2006
    
    2005Accounts receivable
    $
    (132,948)
    $
    12,301Prepaid expenses
    
    (6,721)
    
    1,564Investment tax credits receivable
    
    26,258
    
    (17,872)Accounts payable and accrued liabilities
    
    64,544
    
    13,890Income taxes payable
    
    -
    
    (19,524)Changes in non-cash operating elements of working capital
    $
    (48,867)
    
    $
    (9,641)Additional Cash Flow Information:Interest paid
    $
    35,000
    $
    7,760Income taxes paid
    $
    -
    $
    9,000 15.   Major Customers One customer accounts for more than
60% of the Company's revenue. Outstanding accounts receivable from this customer
are $24,500 as at December 31, 2006.
F - 18
IntelGenx Technologies Corp. (Formerly Big Flash Corporation)
Notes to Consolidated Financial Statements 
December 31, 2006 
(Expressed in U.S. Funds)

16.   Related Party Transactions
During the year, the Company incurred
expenses of approximately $17,850 (2005 - $17,500) for laboratory equipment
leased from a shareholder. The agreement to lease the laboratory equipment
expires in August 2007 and the future minimum lease payments are $11,500.
Included in research and development
expenses are $52,000 for options granted to a shareholder in payment of services
rendered.
Included in management salaries are
$87,000 for options granted to shareholders and $50,000 for options granted to
non employee directors in payment of services rendered.
The transaction costs include
approximately $95,000 paid to a company controlled by an executive.
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.
17.   Comparative Figures
Certain reclassifications of 2005
amounts have been made to facilitate comparison with the current year.
F - 19