What changed in this filing

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Item 1. Financial Statements

2020-11-16 compared with 2020-08-05 · 402 added, 301 removed, 263 unchanged (73% of the section changed)

3 unchanged sentences

Dollars and shares in thousands)

June 30, 2020

September 30, 2020

Current assets:

5 unchanged sentences

Deferred issuance costs

Amortization of deferred issuance costs

Accumulated amortization of deferred issuance costs

Total non-current assets:

17 unchanged sentences

Fennec Pharmaceuticals

Condensed Consolidated

Statements of Operations

and shares in thousands, except per share amounts)

Condensed Consolidated Statements of

Dollars and shares in thousands,

except per share amounts)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating expenses:

2 unchanged sentences

Loss from operations

Other income (expense):

Other gain/(loss)

Other (expense) income :

Other (loss)/gain

Amortization expense

3 unchanged sentences

Diluted net loss per common share

Weighted-average number of common shares outstanding, basic

Weighted-average number of common shares outstanding, diluted

Weighted-average number of common shares

outstanding, basic

Weighted-average number of common shares

outstanding, diluted

The accompanying notes are an integral part

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cash flows used in:

11 unchanged sentences

Financing activities:

Issuance of shares, net of issuance costs

Issuance of shares, net of issuance cost

Capitalized deferred issuance cost

Net cash provided by financing activities

Increase/(decrease) in cash and cash equivalents

Net cash (used in)/provided by financing activities

(Decrease)/increase in cash and cash equivalents

Cash and cash equivalents - Beginning of period

Cash and cash equivalents - End of period

Non-cash deferred issuance

cost (warrant value)

Non-cash deferred issuance cost (warrant value)

The accompanying notes are an integral part

1 unchanged sentence

Fennec Pharmaceuticals Inc.

Condensed Consolidated Statements of

Stockholders' Equity

Three and Six-Months Ended June 30,

Consolidated Statements of Stockholders' Equity

Three and Nine-months Ended September 30,

2020 and 2019

1 unchanged sentence

Comprehensive

Stockholders'

Stockholders’

Number (Note 5)

2 unchanged sentences

Stock options issued to contractors

Warrants issued to consultants

Balance at March 31, 2020

1 unchanged sentence

Stock options issued to contractors

Issuance of securities

Balance at June 30, 2020

Stock options issued to employees

Stock options issued to contractors

Exercise of options

Balance at September 30, 2020

Balance at December 31, 2018

1 unchanged sentence

Stock options issued to contractors

Warrants issued to consultants

Balance at March 31, 2019

Issuance of securities

Stock options issued to employees

1 unchanged sentence

Balance at June 30, 2019

Stock options issued to employees

Stock options issued to contractors

Balance at September 30, 2019

The accompanying notes are an integral part

1 unchanged sentence

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed

Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Notes to Unaudited Condensed Consolidated

Financial Statements

September 30, 2020

(All dollar amounts shown in thousands)

Nature of Business and Going Concern

4 unchanged sentences

“us,”

or “our”) is a biopharmaceutical company focused on the development of PEDMARK TM

(a unique formulation of sodium thiosulfate) for the prevention of platinum-induced ototoxicity in pediatric cancer patients.

incorporated under the Canada Business Corporations Act (“CBCA”) in September 1996.

Effective on August 25,

2011, the Company continued from the CBCA to the Business Corporations Act (British Columbia) (the “Continuance”).

The Continuance was approved by our shareholders at our June 2011 Annual and Special Meeting and by resolution of the Board

of Directors on August 10, 2011.

or “our”) is a biopharmaceutical company focused on

the development of PEDMARK TM (a unique formulation of sodium thiosulfate) for the prevention of platinum-induced ototoxicity

in pediatric cancer patients.

We incorporated under the Canada Business Corporations Act (“CBCA”) in September 1996.

Effective on August 25, 2011, the Company continued from the CBCA to the Business Corporations Act (British Columbia) (the

“Continuance”).

The Continuance was approved by our shareholders at our June 2011 Annual and Special Meeting and

by resolution of the Board of Directors on August 10, 2011.

We have four wholly-owned subsidiaries:

Oxiquant, Inc.

and Fennec Pharmaceuticals, Inc.,

both Delaware corporations, Cadherin Biomedical Inc., a Canadian company and Fennec Pharmaceuticals (EU) Limited (“Fennec

Limited”), an Ireland company formed in 2018.

With the exception of Fennec Pharmaceuticals, Inc., all subsidiaries are

These unaudited interim condensed consolidated financial statements

have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”)

that are applicable to a going concern which contemplates that the Company will continue in operation for the foreseeable future

and will be able to realize its assets and discharge its liabilities in the normal course of business.

During the three and six-months ended June 30, 2020, the

Company incurred a loss from operations of $4,845 and $8,680, respectively.

At June 30, 2020, it had an accumulated deficit

of $152.7 million and had experienced negative cash flows from operating activities during the three and six-months ended June 30,

2020 in the amount of $3,116 and $6,865, respectively.

Fennec Pharmaceuticals, Inc., both Delaware corporations, Cadherin Biomedical Inc., a Canadian company and Fennec Pharmaceuticals

(EU) Limited (“Fennec Limited”), an Ireland company formed in 2018.

With the exception of Fennec Pharmaceuticals, Inc.,

all subsidiaries are inactive.

These unaudited interim condensed consolidated

financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America

(“US GAAP”) that are applicable to a going concern which contemplates that the Company will continue in operation for

the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business.

During the three and nine-months ended

September 30, 2020, the Company incurred a loss from operations of $5,859 and $14,539, respectively.

At September 30, 2020, the

Company had an accumulated deficit of $158,902 and had experienced negative cash flows from operating activities during the three

and nine-months ended September 30, 2020 in the amount of $5,446 and $12,311, respectively.

On May 5, 2020, the Company announced

2 unchanged sentences

over-allotment option.

The approximate total gross proceeds from the offering was $34.1 million ($32.0 million net of commissions,

fees and issue costs).

On February 1, 2019, Fennec entered into a Loan and Security

Agreement with Bridge Bank, a division of Western Alliance Bank, an Arizona corporation, pursuant to which the Bank agreed to loan

$12.5 million to the Company, to be made available upon New Drug Application NDA approval of PEDMARK by no later than September 30,

The proceeds from the loan will be used for working capital purposes and to fund general business requirements in accordance

with the terms of the Loan and Security Agreement.

Interest under the Term Loans shall bear interest, on the outstanding daily

balance thereof, at a floating per annum rate equal to the Effective Interest Rate (as defined in the Loan and Security Agreement)

which is equal to the sum of the Prime Rate published in the Wall Street Journal (currently 3.25%) plus one percent (1.00%).

debt facility is to have interest-only monthly payments due for the first eighteen months from the funding date and then monthly

principal and interest payments are due through the remainder of the term which has a maturity date of October 1, 2023.

connection with the facility, Fennec granted Bridge Bank a warrant to purchase up to 39 common shares at an exercise price of $6.80

per common share, for a term of ten years from the date of issuance, subject to early termination under certain conditions.

On June 26, 2020, Fennec announced an amendment to the

Loan and Security Agreement with Bridge Bank.

This amendment provides Fennec with an $18 million debt facility comprised

of two term loans.

Term Loan A consists of $12.5 million to be funded upon New Drug Application (NDA) approval of PEDMARK TM

Term Loan B consists of $5.5 million to be funded upon the occurrence of a revenue event in 2021.

The interest-only

period for the facility has the ability to be extended from 18 months to 24 months from the funding of Term Loan A, provided that

Term Loan B is funded, and certain conditions are met.

The fee in connection with Loan B, can either be 2.13% of the Loan B amount

in cash, or the Company can issue a warrant with a value equal to 3.25% of the Loan B amount.

The Company has until August 6,

2020 to decide how to pay for the extended facility.

These statements reflect the fee being settled with a warrant.

Under Accounting

Standards Codification ("ASC") 470-50, Modifications and Extinguishments, the amendment was considered a modification.

As such, the Company is amortizing the loan fee and the value of the warrant over the remainder of the loan term.

The Company intends

to use the proceeds from the loans to provide working capital for commercialization activities for PEDMARK TM upon

NDA approval.

The approximate total gross proceeds from the offering was $31,967 ($34,100 net of commissions, fees and

issue costs).

On February 1, 2019, Fennec entered

into a Loan and Security Agreement with Bridge Bank, a division of Western Alliance Bank, an Arizona corporation, pursuant to which

the Bank agreed to loan $12,500 to the Company, to be made available upon New Drug Application (NDA) approval of PEDMARK by no

later than September 30, 2020.

The proceeds from the loan will be used for working capital purposes and to fund general business

requirements in accordance with the terms of the Loan and Security Agreement.

Interest under the Term Loans shall bear interest,

on the outstanding daily balance thereof, at a floating per annum rate equal to the Effective Interest Rate (as defined in the

Loan and Security Agreement) which is equal to the sum of the Prime Rate published in the Wall Street Journal (currently 3.25%)

plus one percent (1.00%).

The debt facility is to have interest-only monthly payments due for the first eighteen months from the

funding date and then monthly principal and interest payments are due through the remainder of the term which has a maturity date

of October 1, 2023.

In connection with the facility, Fennec granted Bridge Bank a warrant to purchase up to 39 common shares

at an exercise price of $6.80 per common share, for a term of ten years from the date of issuance, subject to early termination

under certain conditions.

On June 26, 2020, Fennec announced

an amendment to the Loan and Security Agreement with Bridge Bank.

This amendment provides Fennec with an $18,000 debt facility

comprised of two term loans.

Term Loan A consists of $12,500 to be funded upon New Drug Application NDA approval of PEDMARK TM

to be made available upon NDA approval of PEDMARK by no later than December 31, 2020 and Term Loan B consists

of $5,500 to be funded upon the occurrence of a revenue event in 2021.

The interest-only period for the facility has the

ability to be extended from 18 months to 24 months from the funding of Term Loan A, provided that Term Loan B is funded, and certain

conditions are met.

The fee in connection with Loan B, can either be 2.13% of the Loan B amount in cash, or the Company can issue

a warrant with a value equal to 3.25% of the Loan B amount.

On August 6, 2020, the Company paid cash for the extended facility.

These statements reflect that fee being settled with cash instead of a warrant.

Under Accounting Standards Codification ("ASC")

470-50, Modifications and Extinguishments, the amendment was considered a modification.

As such, the Company had been amortizing

the loan fee and the value of the warrant over the remainder of the loan term.

Following the receipt of the U.S.

Food and Drug

Administration’s (FDA) Complete Response Letter (CRL), management decided to fully amortize the remining portions of the

loan fee and the value of the warrants.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed

Consolidated Financial Statements

dollars and shares in thousands, except per share information)

The Company believes the aforementioned debt facility, plus

funds raised in the public offering which closed in May 2020, provides sufficient funding for the Company to carry-out its

planned activities including NDA approval and the commencement of commercialization efforts for at least the next twenty months

as it continues its strategic development of PEDMARK TM .

These financial statements do not reflect the potentially material

adjustments in the carrying values of assets and liabilities, the reported expenses, and the balance sheet classifications used,

that would be necessary if the going concern assumption were not appropriate.

Notes to Unaudited Condensed Consolidated

Financial Statements

September 30, 2020

(All dollar amounts shown in thousands)

On August 10, 2020, the Company received a CRL from the FDA

regarding its New Drug Application (NDA) for PEDMARK TM .

According to the CRL, after recent completion of a pre-approval

inspection of the manufacturing facility of our drug product manufacturer, the FDA identified deficiencies that are required to

be resolved prior to the approval of PEDMARK TM .

Importantly, no clinical safety or efficacy issues were identified during

the review and there is no requirement for further clinical data.

The Company plans to work closely with the third-party drug manufacturer

and the FDA to fully address the CRL and plan to resubmit the NDA for PEDMARK TM as quickly as possible.

of the FDA’s CRL the anticipated product launch did not occur as of September 30, 2020 and thus the Bridge Bank Term Loan

A has not yet been funded.

The Company does not believe it will receive FDA approval by December 31, 2020 and thus has fully amortized

the deferred asset associated with Term Loan A.

Furthermore, the Company believes the delay in approval will mean it will not be

able to meet the revenue target to fund Term Loan B.

As such, the deferred asset associated with Term Loan B has been expensed.

The Company is currently in negotiations with Bridge Bank to receive an extension on both Term Loan A and B.

The Company believes the funds raised in

the public offering which closed in May 2020, provides sufficient funding for the Company to carry-out its planned activities

including potential NDA approval and the commencement of commercialization efforts for at least the next twelve months as it continues

its strategic development of PEDMARK TM .

These financial statements do not reflect

the potentially material adjustments in the carrying values of assets and liabilities, the reported expenses, and the balance sheet

classifications used, that would be necessary if the going concern assumption were not appropriate.

Significant Accounting Policies

Basis of presentation

The accompanying unaudited interim condensed consolidated financial

statements have been prepared in accordance with US GAAP and are the responsibility of the Company’s management.

These unaudited

interim condensed consolidated financial statements do not include all of the information and notes required by US GAAP for annual

financial statements.

Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction

with the Company's audited consolidated financial statements and notes filed with the Securities and Exchange Commission (“SEC”)

in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

The Company's accounting policies are

consistent with those presented in the audited consolidated financial statements included in the Annual Report on Form 10-K

for the year ended December 31, 2019.

These unaudited interim condensed consolidated financial statements have been prepared

The accompanying unaudited interim condensed

consolidated financial statements have been prepared in accordance with US GAAP and are the responsibility of the Company’s

These unaudited interim condensed consolidated financial statements do not include all of the information and notes

required by US GAAP for annual financial statements.

Accordingly, these unaudited interim condensed consolidated financial statements

should be read in conjunction with the Company's audited consolidated financial statements and notes filed with the Securities

and Exchange Commission (“SEC”) in the Company's Annual Report on Form 10-K for the year ended December 31,

The Company's accounting policies are consistent with those presented in the audited consolidated financial statements included

in the Annual Report on Form 10-K for the year ended December 31, 2019.

These unaudited interim condensed consolidated

financial statements have been prepared in U.S.

All amounts presented are in thousands except for per share amounts.

Use of estimates

The preparation of financial statements in conformity with US

GAAP requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities and disclosure

of contingent assets and liabilities as of the date of the interim condensed consolidated financial statements and the reported

amounts of expense during the reporting period.

The preparation of financial statements

in conformity with US GAAP requires management to make estimates and assumptions that impact the reported amounts of assets and

liabilities and disclosure of contingent assets and liabilities as of the date of the interim condensed consolidated financial

statements and the reported amounts of expense during the reporting period.

Actual results could differ from those estimates.

In the opinion of management, these unaudited interim condensed

consolidated financial statements include all adjustments, which are normal and recurring in nature, necessary for the fair presentation

of the Company’s financial position at June 30, 2020 and to state fairly the results for the periods presented.

most significant estimates utilized during the quarter ended June 30, 2020 included estimates necessary to value grants of

stock options to employees and various contractors, disclosed in Note 4.

In the opinion of management, these unaudited

interim condensed consolidated financial statements include all adjustments, which are normal and recurring in nature, necessary

for the fair presentation of the Company’s financial position at September 30, 2020 and to state fairly the results

for the periods presented.

The most significant estimates utilized during the quarter ended September 30, 2020 included estimates

necessary to value grants of stock options to employees and various contractors, disclosed in Note 4.

Fennec Pharmaceuticals Inc.

Notes to Unaudited Condensed Consolidated

Financial Statements

September 30, 2020

(All dollar amounts shown in thousands)

New accounting pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value

Measurement (Topic 820):

In August 2018, the FASB issued ASU

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.

ASU 2018-13 removes

certain disclosures, modifies certain disclosures and adds additional disclosures.

The ASU was effective for us on January 1,

2020, and interim periods within that fiscal year.

Certain disclosures in ASU 2018-13 would need to be applied on a retrospective

basis and others on a prospective basis.

The Company concluded after evaluation, that the impact of ASU 2018-13 on our consolidated

financial statements and disclosures was de minimis.

ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures.

The ASU was effective

for us on January 1, 2020, and interim periods within that fiscal year.

Certain disclosures in ASU 2018-13 would need to be

applied on a retrospective basis and others on a prospective basis.

The Company concluded after evaluation, that the impact of

ASU 2018-13 on our consolidated financial statements and disclosures was de minimis.

In August 2020, FASB issued ASU 2020-06, Debt—Debt

with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which, among other things, provides

guidance on how to account for contracts on an entity’s own equity.

This ASU simplifies the accounting for certain financial

instruments with characteristics of liabilities and equity.

Specifically, the ASU eliminated the need for the Company to assess

whether a contract on the entity’s own equity (1) permits settlement in unregistered shares, (2) whether counterparty

rights rank higher than shareholder’s rights, and (3) whether collateral is required.

In addition, the ASU requires

incremental disclosure related to contracts on the entity’s own equity and clarifies the treatment of certain financial instruments

accounted for under this ASU on earnings per share.

This ASU may be applied on a full retrospective of modified retrospective basis.

This ASU is effective January 1, 2022 and interim periods presented.

Early adoption of the ASU is permitted by the Company

effective January 1, 2021.

The Company is in the process of assessing the adoption of the ASU on the Company’s financial

Cash and cash equivalents

Cash equivalents consist of highly liquid investments with original

maturities at the date of purchase of three months or less.

The Company places its cash and cash equivalents in investments held

by highly rated financial institutions in accordance with its investment policy designed to protect the principal investment.

June 30, 2020, the Company had $38,729 in cash, savings and money market accounts ($13,650 at December 31, 2019).

June 30, 2020, the Company held $604 in cash of which $34 (as presented in U.S.

dollars) was in Canadian dollars ($24 at December 31,

2019 as presented in U.S.

At June 30, 2020, the Company held $38,125 in money market investments.

investments typically have minimal risks.

The Company has not experienced any loss or write-down of its money market investments

since inception.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed

Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Cash equivalents consist of highly liquid

investments with original maturities at the date of purchase of three months or less.

The Company places its cash and cash equivalents

in investments held by highly rated financial institutions in accordance with its investment policy designed to protect the principal

At September 30, 2020, the Company had $33,166 in cash, savings and money market accounts ($13,650 at December 31,

At September 30, 2020, the Company held $19 in cash of which $11 (as presented in U.S.

dollars) was in Canadian dollars

($24 at December 31, 2019 as presented in U.S.

At September 30, 2020, the Company held $33,147 in money

market investments.

Money market investments typically have minimal risks.

The Company has not experienced any loss or write-down

of its money market investments since inception.

Earnings per Share

Earnings per common share is presented under two formats:

earnings per common share and diluted earnings per common share.

Basic earnings per common share is computed by dividing net income

attributable to common shareholders by the weighted average number of common shares outstanding during the period.

Diluted earnings

per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period,

plus the potentially dilutive impact of common stock equivalents (i.e.

Earnings per common share is presented

under two formats:

basic earnings per common share and diluted earnings per common share.

Basic earnings per common share is computed

by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the

Diluted earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding

during the period, plus the potentially dilutive impact of common stock equivalents (i.e.

stock options and warrants).

Dilutive common share equivalents

consist of the incremental common shares issuable upon exercise of stock options and warrants.

The following table sets forth the

computation of basic and diluted net loss per share:

Three Months Ended June 30,

Six Months Ended June 30,

common share equivalents consist of the incremental common shares issuable upon exercise of stock options and warrants.

The following

table sets forth the computation of basic and diluted net loss per share:

Three Months Ended September 30,

Nine-month Ended September 30,

Weighted-average common shares, basic

4 unchanged sentences

Net (loss) per share, basic and diluted

Fennec Pharmaceuticals Inc.

Notes to Unaudited Condensed Consolidated

Financial Statements

September 30, 2020

(All dollar amounts shown in thousands)

The following outstanding options and warrants

1 unchanged sentence

have had an anti-dilutive effect:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine-month Ended September 30,

Options to purchase common stock

5 unchanged sentences

Purchase Common Stock

During the three and six-months

ended June 30, 2020, there were no warrants issued or exercised.

During the three and six-months ended June 30, 2019,

During the three and nine-months ended

September 30, 2020, there were no warrants issued or exercised.

During the three and nine-months ended September 30,

2019, the Company issued warrants to purchase common stock priced in U.S.

dollars with a weighted average price of $6.80.

These warrants

have not been exercised and have weighted average remaining life of 8.58 years as of June 30, 2020.

The following table details

the Company’s warrant activity from December 31, 2019:

warrants have not been exercised and have weighted average remaining life of 8.58 years as of September 30, 2020.

The following

table details the Company’s warrant activity from December 31, 2019:

Investor Warrants

Common Shares Issuable Upon

Exercise of Outstanding

Exercise of Outstanding Warrants

Weighted-Average

3 unchanged sentences

Outstanding June 30, 2020

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed

Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Outstanding September 30, 2020

Investor Warrants

Common Shares Issuable Upon

Exercise of Outstanding

Exercise of Outstanding Warrants

Weighted-Average

3 unchanged sentences

Outstanding June 30, 2019

Outstanding September 30, 2019

The value of warrants issued was estimated

2 unchanged sentences

using historical volatility of our stock based on the contractual life of the award.

The Company capitalized the non-cash expense

of $179 associated with the anticipated issuance of warrants for the Loan B facility on August 6, 2020 and the $255 associated

with issuing the above warrants on February 1, 2019.

The Company also incurred legal, professional and share registration

fees totaling $23 in 2020 and $71 in 2019 which were also capitalized.

The combined capitalized asset, deferred issuance cost,

has been placed on the balance sheet and is being amortized over the life of the loan facility.

Fennec Pharmaceuticals Inc.

Notes to Unaudited Condensed Consolidated

Financial Statements

September 30, 2020

(All dollar amounts shown in thousands)

Valuation Assumptions

6 unchanged sentences

Stock option plan

On June 22, 2020, shareholders

of the Company approved a resolution adopting the Equity Incentive Plan (the “Plan”).

This Plan replaces the Amended

and Restated Stock Option Plan passed by shareholders in 2019.

The Plan expands the types of instruments which may be issued as

incentive compensation to employees, directors and designated contractors.

On June 22, 2020, shareholders of

the Company approved a resolution adopting the Equity Incentive Plan (the “Plan”).

This Plan replaces the Amended and

Restated Stock Option Plan passed by shareholders in 2019.

The Plan expands the types of instruments which may be issued as incentive

compensation to employees, directors and designated contractors.

In addition to stock options, the Plan may also issue:

stock appreciation rights, restricted stock awards, restricted stock units, unrestricted stock awards, cash-based awards and dividend

equivalent rights.

stock appreciation

rights, restricted stock awards, restricted stock units, unrestricted stock awards, cash-based awards and dividend equivalent rights.

The Company believes this Plan gives it the ability to align incentives with strategic objectives.

14 unchanged sentences

The table below outlines recognized contractor and employee expense for the three and

six-month periods ended June 30, 2020 and 2019.

Three Months Ended June 30,

Six Months Ended June 30,

nine-month periods ended September 30, 2020 and 2019.

Three Months Ended September 30,

Nine-month Ended September 30,

Contractor options expense recognized

1 unchanged sentence

Total option expense recognized

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed

Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Stock option activity

The following is a summary of option

activity for each of the quarterly periods in fiscal year 2020 for stock options denominated in U.S.

The following is a summary of option activity

for each of the quarterly periods in fiscal year 2020 for stock options denominated in U.S.

Weighted-Average

5 unchanged sentences

Outstanding at June 30, 2020

During the three-month period ended June 30,

Outstanding at September 30, 2020

During the three-month period ended September 30,

2020, there were 180 US denominated options issued.

Of the 2,915 US denominated options granted and outstanding at June 30,

2020, 2,023 are fully vested and exercisable.

For the nine months ended September 30, 2020 there were 655 options issued.

Of the 3,095 US denominated options granted and outstanding at September 30, 2020, 2,230 are fully vested and exercisable.

The following is a summary of option activity

7 unchanged sentences

Outstanding at June 30, 2019

Outstanding at September 30, 2019

Fennec Pharmaceuticals Inc.

Notes to Unaudited Condensed Consolidated

Financial Statements

September 30, 2020

(All dollar amounts shown in thousands)

The following is a summary of option activity

for the three and six-month periods ended June 30, 2020 for stock options denominated in Canadian dollars:

for the three and nine-month periods ended September 30, 2020 for stock options denominated in Canadian dollars:

Weighted-Average

5 unchanged sentences

Outstanding at June 30, 2020

For the three and six-month periods ended

June 30, 2020, there was no issuance activity related to Canadian dollar denominated options.

As of June 30, 2020, all

648 outstanding options denominated in Canadian dollars were fully vested and exercisable.

Outstanding at September 30, 2020

For the three and nine-month periods ended

September 30, 2020, there was no issuance activity related to Canadian dollar denominated options.

During the period ended

September 30, 2020, all 648 outstanding options denominated in Canadian dollars were fully exercised pursuant to a cashless

As a result, the Company did not receive any cash and issued 454 shares.

The following is a summary of option activity

for the three and six-month periods ended June 30, 2019 for stock options denominated in Canadian dollars:

for the three and nine-month periods ended September 30, 2019 for stock options denominated in Canadian dollars:

Weighted-Average

5 unchanged sentences

Outstanding at June 30, 2019

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed

Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Outstanding at September 30, 2019

Valuation assumptions

The value of options granted were

estimated using the Black-Scholes option pricing model using the following assumptions in the table below.

The expected volatility

was determined using historical volatility of our stock based on the contractual life of the award.

There were 475 options issued

during the three months ended June 30, 2020, (345 for the same period in 2019).

Assumptions for the valuation of the option

grants are described in the table below:

Three Months Ended June 30,

The value of options granted were estimated

using the Black-Scholes option pricing model using the following assumptions in the table below.

The expected volatility was determined

using historical volatility of our stock based on the contractual life of the award.

There were 180 options issued during the three

months ended September 30, 2020, (175 for the same period in 2019).

Assumptions for the valuation of the option grants are

described in the table below:

Three Months Ended September 30,

Black-Scholes Model Assumptions

3 unchanged sentences

Expected life

Fennec Pharmaceuticals Inc.

Notes to Unaudited Condensed Consolidated

Financial Statements

September 30, 2020

(All dollar amounts shown in thousands)

Fair Value Measurements

5 unchanged sentences

and expands disclosure about fair value measurements.

This Topic enables the reader of the financial statements to assess the inputs

used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used

to determine fair values.

The Topic requires that financial assets and liabilities carried at fair value be classified and disclosed

in one of the following three categories:

This Topic enables the reader of the financial statements to assess the

inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information

used to determine fair values.

The Topic requires that financial assets and liabilities carried at fair value be classified and

disclosed in one of the following three categories:

Quoted market prices in active

4 unchanged sentences

corroborated by market data.

Fair Value Measurement at June 30, 2020

and December 31, 2019

Fair Value Measurement at September 30, 2020 and December 31, 2019

(in thousands)

5 unchanged sentences

Cash and cash equivalents

The Company held approximately, $604 in cash as of June 30, 2020, of which approximately, $34 was in Canadian funds (translated into U.S.

As of December 31, 2019, the Company held approximately $347 of which approximately $30 was in Canadian funds (translated into U.S.

The Company held approximately $19 in cash as of September 30, 2020, of which approximately $11 was in Canadian funds (translated into U.S.

As of December 31, 2019, the Company held approximately $347 in cash of which approximately $30 was in Canadian funds (translated into U.S.

These amounts are held in a Money Market account.

Commitments and Contingencies

Oregon Health & Science University

On February 20, 2013, Fennec

entered into a new exclusive license agreement with OHSU for exclusive worldwide license rights to intellectual property directed

to thiol-based compounds, including sodium thiosulfate and their use in oncology (the "OHSU Agreement").

receive certain milestone payments, royalty on net sales for licensed products and a royalty on any consideration received from

sublicensing of the licensed technology.

On May 18, 2015, Fennec negotiated an amendment ("Amendment

1") to the OHSU Agreement, which expands Fennec’s exclusive license to include the use of N-acetylcysteine as a standalone

therapy and/or in combination with sodium thiosulfate for the prevention of ototoxicity induced by chemotherapeutic agents to treat

Further, Amendment 1 adjusts select milestone payments entered in the OHSU Agreement including but not limited to the

royalty rate on net sales for licensed products, royalty rate from sublicensing of the licensed technology and the fee payable

upon the regulatory approval of a licensed product.

On February 20, 2013, Fennec entered

into a new exclusive license agreement with OHSU for exclusive worldwide license rights to intellectual property directed to thiol-based

compounds, including sodium thiosulfate and their use in oncology (the "OHSU Agreement").

OHSU will receive certain

milestone payments, royalty on net sales for licensed products and a royalty on any consideration received from sublicensing of

the licensed technology.

On May 18, 2015, Fennec negotiated

an amendment ("Amendment 1") to the OHSU Agreement, which expands Fennec’s exclusive license to include the use

of N-acetylcysteine as a standalone therapy and/or in combination with sodium thiosulfate for the prevention of ototoxicity induced

by chemotherapeutic agents to treat cancers.

Further, Amendment 1 adjusts select milestone payments entered in the OHSU Agreement

including but not limited to the royalty rate on net sales for licensed products, royalty rate from sublicensing of the licensed

technology and the fee payable upon the regulatory approval of a licensed product.

The term of the OHSU Agreement as amended

by Amendment 1 expires on the date of the last to expire claim(s) covered in the patents licensed to Fennec or 8 years, whichever

In the event a licensed product obtains regulatory approval and is covered by the Orphan Drug Designation, the parties

will in good faith amend the term of the agreement.

Sodium thiosulfate is currently protected by methods of use patents that the

Company exclusively licensed from OHSU that expire in Europe in 2021 and that expire in the United States in 2038.

The OHSU Agreement

is terminable by either Fennec or OHSU in the event of a material breach of the agreement by either party after 45 days prior written

Fennec also has the right to terminate the OHSU Agreement at any time upon 60 days prior written notice and payment of

all fees due to OHSU under the OHSU Agreement.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed

Consolidated Financial Statements

dollars and shares in thousands, except per share information)

The term of the OHSU Agreement as amended by Amendment 1 expires

on the date of the last to expire claim(s) covered in the patents licensed to Fennec or 8 years, whichever is later.

event a licensed product obtains regulatory approval and is covered by the Orphan Drug Designation, the parties will in good faith

amend the term of the agreement.

Sodium thiosulfate is currently protected by methods of use patents that the Company exclusively

licensed from OHSU that expire in Europe in 2021 and that expire in the United States in 2038.

The OHSU Agreement is terminable

by either Fennec or OHSU in the event of a material breach of the agreement by either party after 45 days prior written notice.

Fennec also has the right to terminate the OHSU Agreement at any time upon 60 days prior written notice and payment of all fees

due to OHSU under the OHSU Agreement.

Notes to Unaudited Condensed Consolidated

Financial Statements

September 30, 2020

(All dollar amounts shown in thousands)

Class Action Suit

Following the U.S.

Food and Drug Administration’s (FDA’s)

Complete Response Letter (CRL) regarding its New Drug Application (NDA) for PEDMARK TM as described in Note 1, a putative

lawsuit was filed against us purportedly on behalf of purchasers of the Company’s securities between February 11, 2020 and August

The lawsuit seeks to recover damages for Fennec investors under federal securities laws.

While we believe that

the lawsuit is without merit and intend to vigorously defend against it, the lawsuit is in its early stages and no assessment can

be made as to their likely outcome or whether the outcome will be material to us.

This litigation, and any other securities class actions that

may be brought against us, could result in substantial costs and a diversion of our management’s attention and resources.

Executive Severance

2 unchanged sentences

Raykov a one-time severance payment equal to twelve months of salary

(as of August 5, 2020 $430,000).

In the event of his termination with us other than for cause, we will be obligated to pay

Andrade a one-time severance payment equal to six months of salary (as of August 5, 2020 $155,875).

of her termination with us other than for cause, we will be obligated to pay Ms.

Goel a one-time severance payment equal to

three months of salary (as of August 5, 2020 $90,000)

(as of November 5, 2020, $430,000).

In the event of his termination with us other than for cause, we will be obligated to

Andrade a one-time severance payment equal to nine-months of salary (as of November 5, 2020, $155,875).

event of her termination with us other than for cause, we will be obligated to pay Ms.

Goel a one-time severance payment equal

to three months of salary (as of November 5, 2020, $90,000)

We have an operating lease in Research

11 unchanged sentences

The Office Service Agreement commenced

on January 27, 2020 and terminates on July 31, 2020, thereafter the lease may continue on a month-to-month basis

with either party being able to terminate the agreement by providing one months' advance written notice of termination.

The Company’s operations may be affected by the recent

and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which was declared a pandemic by the World Health Organization

in March 2020.

on January 27, 2020 and terminated on July 31, 2020, where it automatically renewed for a successive period equal to

the original term.

Either party is able to terminate the agreement by providing no less than three months' advance written

notice of termination.

The Company’s operations may be affected

by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which was declared a pandemic by the World Health

Organization in March 2020.

The ultimate disruption which may be caused by the outbreak is uncertain;

however, it may result in a material

adverse impact on the Company’s financial position, operations and cash flows.

Possible effects may include, but are not

limited to, disruption to the Company’s product launch which includes the ability of sales reps to communicate with oncologists,

absenteeism in the Company’s labor workforce, unavailability of products and supplies used in operations, and a decline in

value of assets held by the Company, including inventories, property and equipment, and marketable securities.

COVID-19 has not

had a material effect on the Company’s operations to date as the Company has historically had a workforce which works remotely,

preparations for product launch have been under the assumption of a virtual launch and product supplies have not been impacted.

however, it may result

in a material adverse impact on the Company’s financial position, operations and cash flows.

Possible effects may include,

but are not limited to, disruption to the Company’s product launch which includes the ability of sales reps to communicate

with oncologists, absenteeism in the Company’s labor workforce, unavailability of products and supplies used in operations,

and a decline in value of assets held by the Company, including inventories, property and equipment, and marketable securities.

COVID-19 has not had a material effect on the Company’s operations to date as the Company has historically had a workforce

which works remotely, preparations for product launch have been under the assumption of a virtual launch and product supplies have

not been impacted.

Loan Security Agreement

3 unchanged sentences

with Bridge Bank, a division of Western Alliance Bank, an Arizona corporation (the “Bank”), pursuant to which the Bank

agreed to loan $12.5 million to Fennec Pharmaceuticals, Inc., to be made available upon New Drug Application (“NDA”)

approval of PEDMARK by no later than September 30, 2020.

The proceeds from the loan will be used for working capital purposes

and to fund general business requirements in accordance with the terms of the Loan and Security Agreement.

Interest under the Term

Loans shall bear interest, on the outstanding daily balance thereof, at a floating per annum rate equal to the Effective Interest

Rate (as defined in the Loan and Security Agreement) which is equal to the sum of the Prime Rate published in the Wall Street Journal

(currently 3.25%) plus one percent (1.00%).

The debt facility is to have interest-only monthly payments due for the first eighteen

months from the funding date and then monthly principal and interest payments are due through the remainder of the term which has

a maturity date of October 1, 2023.

In connection with the facility, Fennec granted Bridge Bank a warrant to purchase up to

39 common shares at an exercise price of $6.80 per common share, for a term of ten years from the date of issuance, subject to

early termination under certain conditions.

agreed to loan $12,500 to Fennec Pharmaceuticals, Inc., to be made available upon NDA approval of PEDMARK by no later than

September 30, 2020.

The proceeds from the loan will be used for working capital purposes and to fund general business requirements

in accordance with the terms of the Loan and Security Agreement.

Interest under the Term Loans shall bear interest, on the outstanding

daily balance thereof, at a floating per annum rate equal to the Effective Interest Rate (as defined in the Loan and Security Agreement)

which is equal to the sum of the Prime Rate published in the Wall Street Journal (currently 3.25%) plus one percent (1.00%).

debt facility is to have interest-only monthly payments due for the first eighteen months from the funding date and then monthly

principal and interest payments are due through the remainder of the term which has a maturity date of October 1, 2023.

connection with the facility, Fennec granted Bridge Bank a warrant to purchase up to 39 common shares at an exercise price of $6.80

per common share, for a term of ten years from the date of issuance, subject to early termination under certain conditions.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed

Consolidated Financial Statements

dollars and shares in thousands, except per share information)

On June 26, 2020, Fennec announced an amendment to the

Loan and Security Agreement with Bridge Bank.

This amendment provides Fennec with an $18 million debt facility comprised

of two term loans.

Term Loan A consists of $12.5 million to be funded upon New Drug Application (NDA) approval of PEDMARK TM

Term Loan B consists of $5.5 million to be funded upon the occurrence of a revenue event in 2021.

The interest-only

period for the facility has the ability to be extended from 18 months to 24 months from the funding of Term Loan A, provided that

Term Loan B is funded, and certain conditions are met.

Under Accounting Standards Codification ("ASC") 470-50, Modifications

and Extinguishments, the amendment was considered a modification.

As such, the Company is amortizing the loan fee and the value

of the warrant over the remainder of the loan term.

The Company intends to use the proceeds from the loans to provide working capital

for commercialization activities for PEDMARK TM upon NDA approval.

Notes to Unaudited Condensed Consolidated

Financial Statements

September 30, 2020

(All dollar amounts shown in thousands)

On June 26, 2020, Fennec announced

an amendment to the Loan and Security Agreement with Bridge Bank.

This amendment provides Fennec with an $18,000 debt facility

comprised of two term loans.

Term Loan A consists of $12,500 to be funded upon NDA approval of PEDMARK TM in the U.S.

by no later than December 31, 2020 and Term Loan B consists of $5,500 to be funded upon the occurrence of a revenue event

The interest-only period for the facility has the ability to be extended from 18 months to 24 months from the funding

of Term Loan A, provided that Term Loan B is funded, and certain conditions are met.

Under Accounting Standards Codification ("ASC")

470-50, Modifications and Extinguishments, the amendment was considered a modification.

As such, the Company had been amortizing

the loan fee and the value of the warrant over the remainder of the loan term.

Following the receipt of the FDA’s CRL, management

decided to fully amortize the remining portions of the loan fee and the value of the warrants.

The combined value of the granted warrants

and the associated costs to secure the loan facility (approximately $466 thousand) were capitalized on the balance sheet as a long-term

The asset, deferred issuance cost, will be amortized evenly over the full term of the agreement (56 months).

quarter ended June 30, 2020, the Company recorded amortization expense of roughly $30 as a result of the amortization of the

asset related to deferred issuance cost.

A total of $111 has been amortized as of June 30, 2020.

As a result of the CRL and delays with FDA approval and product launch, the Company does not believe it will meet the conditions

to fund Term Loan A or B and thus has fully amortized all remaining unamortized value associated with the deferred issuance costs.

During the quarter ended September 30, 2020, the Company recorded amortization expense of roughly $355 and a total of $466

has been amortized as of September 30, 2020.

Subsequent Events

Management has evaluated subsequent events through the date

of this filing and concluded there are no events of significance which require disclosure.

S-3 Registration and At The Market Facility

On October 30, 2020, the Company

filed a S-3 registration of common shares (File No.

333-249775) pursuant to which the Company may offer from time to time,

shares of our common stock having an aggregate offering price of up to $90.0 million.

Under the Sales Agreement, the Company

may sell shares by any method permitted by law and deemed to be an “at-the-market”

offering as defined in

Rule 415 promulgated under the Securities Act, as amended, including sales made directly on the NASDAQ, on any other

existing trading market for our common stock or to or through a market maker.

The S-3 (File No.

333-249775) was declared

effective on November 10, 2020.

Further, on October 30, 2020, the

Company entered into an At The Market Offering Agreement (the “Agreement”) with H.C.

Wainwright & Co., LLC

(“HCW”), pursuant to which the Company may sell and issue its common shares (the “Shares”) from time to

time through HCW, as the Company’s sales agent (the “ATM Offering”).

The Company has no obligation to sell any

of the Shares, and may at any time suspend offers under the Agreement or terminate the Agreement.

The Shares will be offered and

sold pursuant to the Company’s shelf registration statement on Form S-3 (File No.

333-221093), which was declared

effective on November 3, 2017.

As of the date of this filing, there have been no such sales.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements