6. Notes Receivable

IntelGenx Technologies Corp.

As of September 30, 2024, considering relevant facts and circumstances, the Company has estimated the fair value of the various notes receivables with IntelGenx to be based on the fair value of the underlying collateral of the secured debt and the relative seniority of the debt. As the DIP Loan (as defined below) is the senior secured debt, the Company will apply the fair value of the underlying collateral first to the DIP loan with the residual fair value in excess of the DIP Loan (as defined below) principal and interest being applied to the IntelGenx Term Loan. The Initial Order is an event of default under the terms of the various notes receivables, and, accordingly, the notes receivables have all been reflected as short-term as of September 30, 2024.

IntelGenx Term Loan, as amended

In March 2021, the Company and IntelGenx entered into a loan agreement (the “Original Loan Agreement”) under which the Company provided a loan to IntelGenx for an aggregate principal amount of $2.0 million. In May 2021, the Company paid an additional advance of $0.5 million as an additional term loan. In September 2021, the Company entered into an amended and restated loan agreement which, among other things, increased the principal amount of loans available to IntelGenx by $6.0 million, for a total of up to $8.5 million, collectively the “Initial Tranches”. The additional $6.0 million loan amount was funded via two separate $3.0 million tranches in January 2022 and January 2023. The loan bears an annualized interest rate of 8% and such interest is accrued daily.

On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses, as further discussed in Note 2, which resulted in a $0.4 million increase to accumulated deficit and allowance for credit losses related to the IntelGenx loan.

In August 2023, the Company and IntelGenx entered into the first amendment to the amended and restated loan agreement (the “First Amendment”) which, among other things, extended the maturity date from January 5, 2024 to January 5, 2025 and granted the Company additional security over any non-licensed intellectual property owned or controlled by IntelGenx.

Effective September 2023, the Company and IntelGenx entered into a second amendment to the amended and restated loan agreement (the “Second Amendment”) which, subject to obtaining certain shareholder approvals, entitles the Company to convert any portion of the outstanding and unpaid principal and accrued interest into common shares of IntelGenx at a conversion price per share of $0.185 (the “Conversion Feature”). There are limits over the conversion of the IntelGenx Term Loan (as defined below), along with Initial Units, Subsequent Units, and Call Options Units into common shares.

In November 2023, upon shareholder approval, the Conversion Feature was effective. The Company evaluated this modification subject to accounting guidance in ASU 2022-02, Financial Instruments – Credit Losses and determined the Conversion Feature was considered the addition of a substantive conversion option and the modification is more than minor. Therefore, the Second Amendment was treated as an extinguishment of the existing loan and the issuance of a new convertible debt instrument. The IntelGenx Term Loan, as amended, meets the definition of a security and was accounted for under ASC 320. Pursuant to the remeasurement event, the Company was eligible and has elected the fair value option to account for its investment in the IntelGenx Term Loan. The Company believes that the fair value option better reflects the underlying economics of the loan. The Company recorded the new convertible debt instrument at its fair value of $9.2 million in Convertible notes receivable – related party on the consolidated balance sheets. The IntelGenx Term Loan will be subsequently remeasured at each reporting date until settled or converted. The Company will recognize subsequent changes in fair value, including interest earned of the IntelGenx Term Loan in Change in fair value of assets and liabilities, net, a component of other income (expense), net in its consolidated statements of operations.

In March 2024, the Company and IntelGenx entered into the Third Amendment (together with the Original Loan Agreement, the First Amendment, and the Second Amendment, the “IntelGenx Term Loan”) pursuant to which the Company immediately provided an additional $1.0 million term loan (“Tranche 1 Additional Term Loan”), and would provide an additional $1.0 million term loan (“Tranche 2 Additional Term Loan”) contingent upon certain of the Company's clinical milestones. The IntelGenx Term Loan, as amended includes a conversion feature that allows for:

In connection with the Third Amendment, the Company received warrants to purchase up to 4 million shares of IntelGenx Common Shares at an exercise price of $0.17, subject to certain adjustments and beneficial ownership limitations, which were recorded at fair value of $0.4 million in Other investments held at fair value in the consolidated balance sheet, with a corresponding deferred vendor credit included in Other liabilities in the consolidated balance sheet. See Note 5 above for further discussion.

As a result of the Third Amendment, the Company recorded the Tranche 1 Additional Term Loan principal of $1.0 million in Convertible notes receivable – related party on the consolidated balance sheet.

In May 2024, the Company paid the Tranche 2 Additional Term Loan and recorded the principal of $1.0 million in Convertible notes receivable – related party on the consolidated balance sheet.

As of September 30, 2024, the Company estimated that the fair value of the underlying collateral of the secured debt is less than the principal and interest of the DIP Loan (as defined below). Accordingly, the Company determined that the fair value of the IntelGenx Term Loan is zero as of September 30, 2024. As of December 31, 2023, the $8.6 million fair value of the amended IntelGenx Term Loan was recorded in Convertible notes receivable – related party on the consolidated balance sheet. For the three months ended September 30, 2024, the Company recorded $7.0 million in Change in fair value of assets and liabilities, net for the change in fair value of IntelGenx Term Loan. For the nine months ended September 30, 2024, the Company recorded $11.1 million in Change in fair value of assets and liabilities, net for the change in fair value of IntelGenx Term Loan.

For the three months ended September 30, 2024 and 2023, the Company recognized zero and $0.2 million of interest income, respectively, associated with the IntelGenx Term Loan. For the nine months ended September 30, 2024 and 2023, the Company recognized zero and $0.5 million of interest income, respectively, associated with the IntelGenx Term Loan.

IntelGenx Convertible Notes

On August 30, 2023, the Company and IntelGenx entered into the Subscription Agreement (as defined in Note 5), under which the Company paid IntelGenx $2.2 million for 2,220 convertible debenture units (the "Initial Units"), with each convertible debenture unit consisting of:

(i) $1,000 principal amount convertible promissory notes (the “2023 Initial Notes”) bearing interest at a rate of 12.0% per annum, payable quarterly in arrears beginning September 30, 2023, with all principal and accrued interest convertible into common shares of IntelGenx, at any time from the date that is six months following their issuance up to and including August 31, 2026 at a conversion price equal to $0.185 per common share; and

(ii) 5,405 common share purchase warrants of IntelGenx, each exercisable at an exercise price of $0.26 per common share for a period of three years following their issuance.

Pursuant to the Subscription Agreement, the Company agreed to subscribe for an additional 750 convertible debenture units (the "2023 Subsequent Units") at a price of $750,000 subject to obtaining certain shareholder approvals. The Subsequent Units contain the same terms as the Initial Units, with each Subsequent Unit consisting of (i) $1,000 principal amount convertible promissory notes ("2023 Subsequent Notes") and (ii) 5,405 common share purchase warrants of IntelGenx ("2023 Subsequent Warrants").

The Company qualified for and elected to account for its investment in the convertible debenture units and call option under the fair value option. The Company believes that the fair value option better reflects the underlying economics of the convertible debenture units and call option. The convertible promissory notes related to the debenture units are accounted for at fair value under ASC 320 and recorded in Short-term convertible notes receivable - related party in the unaudited condensed consolidated balance sheet. The Company will recognize unpaid interest and subsequent changes in fair value of the convertible promissory notes related to the debenture units as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the unaudited condensed consolidated statements of operations.

The Company determined that the initial aggregate fair value of its $2.2 million investment was equal to the transaction price and recorded the 2023 Initial Notes at $1.5 million and the 2023 Initial Warrants at $0.7 million resulting in no initial gain or loss recognized in the consolidated statements of operations.

In November 2023, upon shareholder approval, the Company paid $750,000 for the subscription of the 2023 Subsequent Units. The Company determined that the initial aggregate fair value of its $0.8 million investment was equal to the transaction price and recorded the 2023 Subsequent Notes at $0.6 million and the 2023 Subsequent Warrants at $0.2 million resulting in no initial gain or loss recognized in the unaudited condensed consolidated statements of operations.

As of September 30, 2024, the Company has estimated the fair value of various notes receivables with IntelGenx based on the fair value of the underlying collateral of the secured debt. As the 2023 Initial Notes and 2023 Subsequent Notes are not secured by underlying collateral, the Company has determined the fair value of the 2023 Initial Notes and 2023 Subsequent Notes are zero, respectively, as of September 30, 2024. As of December 31, 2023, the fair value of the 2023 Initial Notes and 2023 Subsequent Notes were $1.8 million and $0.5 million, respectively, and recorded in Convertible notes receivable – related party in the unaudited condensed consolidated balance sheets.

For the three months ended September 30, 2024, the Company recognized $0.9 million and $0.3 million in Change in fair value of assets and liabilities, net relating to the 2023 Initial Notes and 2023 Subsequent Notes, respectively, in its unaudited condensed consolidated statements of operations. For the nine months ended September 30, 2024, the Company recognized $1.8 million and $0.5 million in Change in fair value of assets and liabilities, net relating to the 2023 Initial Notes and 2023 Subsequent Notes, respectively in its unaudited condensed consolidated statements of operations. For the three and nine months ended September 30, 2023, the company recognized $0.1 million and $0.1 million in Change in fair value of assets and liabilities, net relating to the 2023 Initial Notes, respectively, in its unaudited condensed consolidated statements of operations.

Debtor-in-Possession Loan

In May 2024, pursuant to the Initial Order authorizing the DIP Financing, the Company and IntelGenx entered into a senior secured super-priority, interim, non-revolving multiple draw credit facility ("DIP Loan") up to a maximum of CDN 8.0 million (USD $5.9 million). The DIP Loan bears an annualized interest rate equal to the National Bank of Canada prime rate, which was 6.45% at September 30, 2024. The outstanding principal and interest of the DIP Loan is due and payable on the earlier of (i) September 30, 2024, (ii) the termination of the stay period in the CCAA proceedings, (iii) the CCAA proceedings are converted into a bankruptcy or receivership, (iv) implementation of a restructuring plan or sale of the IntelGenx business during the CCAA proceedings, or (v) an event of default as defined in the DIP Loan agreement.

The Company qualified for and elected to account for the DIP Loan under the fair value option. The Company believes that the fair value option better reflects the underlying economics of the DIP Loan. The DIP Loan is accounted for at fair value under ASC 825 and recorded in Short term notes receivable - related party, net in the unaudited condensed consolidated balance sheet. The Company will recognize

unpaid interest and subsequent changes in fair value of the DIP Loan Note as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the unaudited condensed consolidated statements of operations.

As of September 30, 2024, IntelGenx has drawn CDN $7.8 million (USD $5.7 million) pursuant to the DIP Loan. As of September 30, 2024, the fair value of the DIP Loan was $5.7 million and recorded in Short-term notes receivable - related party, net in the unaudited condensed consolidated balance sheets. For the three and nine months ended September 30, 2024, the Company recognized $0.2 million gain and an immaterial loss in Change in fair value of assets and liabilities, net, respectively, relating to the DIP Loan in its unaudited condensed consolidated statements of operations.

The Company is committed to fund IntelGenx up to an additional CDN $0.2 million (USD $0.1 million ) as of September 30, 2024. Accordingly, the Company recorded a liability for the remaining balance of the DIP Loan ("Subsequent DIP Loan Commitment"). The Company qualified for and elected to account for the Subsequent DIP Loan Commitment under the fair value option. The Company believes that the fair value option better reflects the underlying economics of the Subsequent DIP Loan Commitment. The Subsequent DIP Loan Commitment is accounted for at fair value under ASC 825 and recorded at fair value and is recorded in Other current liability in the unaudited condensed consolidated balance sheet. The Company will recognize changes in fair value of the contingent forward as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the unaudited condensed consolidated statements of operations.

As of September 30, 2024, the fair value of the Subsequent DIP Loan Commitment was $0.1 million and recorded in Other current liability in the unaudited condensed consolidated balance sheet. For the three and nine months ended September 30, 2024, the Company recognized a $0.5 million gain and a $0.5 million gain, respectively.

IntelGenx 2023 Term Loan Note

In December 2023, the Company and IntelGenx entered into a new term loan agreement under which the Company provided the aggregate principal amount of $500,000 (the “2023 Term Loan Note”). The loan bears an annualized interest rate of 14.0% compounding monthly. Principal and interest outstanding shall be due and payable from proceeds of future IntelGenx fundraising. The outstanding principal and interest on the 2023 Term Loan Note is due and payable under the terms of the agreement.

The Company qualified for and elected to account for the 2023 Term Loan Note under the fair value option. The Company believes that the fair value option better reflects the underlying economics of the 2023 Term Loan Note. The IntelGenx 2023 Term Loan Note is accounted for at fair value under ASC 825 and recorded in Short-term notes receivable - related party, net in the consolidated balance sheet. The Company will recognize unpaid interest and subsequent changes in fair value of the IntelGenx 2023 Term Loan Note as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the consolidated statements of operations.

As of September 30, 2024, the Company has estimated the fair value of various notes receivables with IntelGenx based on the fair value of the underlying collateral of the secured debt. As the 2023 Term Loan Note is not secured by underlying collateral, the Company has determined the fair value of the 2023 Term Loan Note is zero as of September 30, 2024. As of December 31, 2023, the 2023 Term Loan Note had a fair value of $0.5 million and recorded in Short-term notes receivable - related party, net.

For the three and nine months ended September 30, 2024, the Company recognized a $0.2 million loss and $0.5 million loss, respectively in Change in fair value of assets and liabilities, net relating to the IntelGenx 2023 Term Loan Note in its unaudited condensed consolidated statements of operations.

15. Net Loss Per Share

HSOP Shares issued to the Partnership and allocated to the HSOP Participants are not considered outstanding for accounting purposes and not included in the calculation of basic weighted average common shares outstanding in the table above because the HSOP Participants have a forfeitable right to distributions until the HSOP Options vest and are exercised, at which time the right becomes nonforfeitable.

The following also represents the maximum amount of outstanding shares of potentially dilutive securities that were excluded from the computation of diluted net loss per share attributable to common shareholders for the periods presented because including them would have been antidilutive: