What changed in this filing

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Item 1. Financial Statements

2021-05-13 compared with 2020-11-16 · 466 added, 533 removed, 132 unchanged (88% of the section changed)

3 unchanged sentences

Dollars and shares in thousands)

September 30, 2020

March 31, 2021

Current assets:

3 unchanged sentences

Total current assets

Non-current assets:

Deferred issuance costs

Accumulated amortization of deferred issuance costs

Total non-current assets:

Liabilities and stockholders' equity

3 unchanged sentences

Total current liabilities

Commitments and Contingencies (Note 6)

Commitments and

Contingencies (Note 6)

Stockholders' equity:

7 unchanged sentences

Total liabilities and stockholders’

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

Fennec Pharmaceuticals

Condensed Consolidated Statements of

Dollars and shares in thousands,

except per share amounts)

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

Pharmaceuticals Inc.

Condensed Consolidated Statements of Operations

Dollars and shares in thousands, except

per share amounts)

Three Months Ended

Nine Months Ended

September 30,

Operating expenses:

1 unchanged sentence

General and administrative

Total operating expenses

Loss from operations

Other (expense) income:

Other (loss)/gain

Unrealized gain on securities

Amortization expense

Interest income and other

Total other income/(expense), net

Interest income

Total other income, net

Basic net loss per common share

Diluted net loss per common share

Weighted-average number of common shares

outstanding, basic

Weighted-average number of common shares

outstanding, diluted

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

Weighted-average number of common shares outstanding, basic

Weighted-average number of common

shares outstanding, diluted

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

Fennec Pharmaceuticals Inc.

Condensed Consolidated Statements of

Condensed Consolidated Statements of Cash Flows

Dollars in thousands)

Three Months Ended

Nine Months Ended

September 30,

Cash flows used in:

2 unchanged sentences

Amortization of deferred issuance cost

Stock-based compensation - contractors

Unrealized gain on securities

Stock-based compensation - employees

Stock-based compensation - contractors

Changes in operating assets and liabilities:

4 unchanged sentences

Net cash used in operating activities

Financing activities:

Issuance of shares, net of issuance cost

Capitalized deferred issuance cost

Net cash (used in)/provided by financing activities

(Decrease)/increase in cash and cash equivalents

Decrease 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)

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

Fennec Pharmaceuticals Inc.

Consolidated Statements of Stockholders' Equity

Three and Nine-months Ended September 30,

2020 and 2019

Condensed Consolidated Statements of Stockholders'

Three Months Ended March 31, 2021 and 2020

dollars and shares in thousands)

Comprehensive

Stockholders’

Number (Note 5)

Stockholders'

Balance at December 31, 2020

2 unchanged sentences

Balance at March 31, 2021

Stock options issued to employees

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, 2019

1 unchanged sentence

Stock options issued to contractors

Warrants issued to consultants

Balance at March 31, 2020

Stock options issued to employees

Stock options issued to contractors

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

of these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

Fennec Pharmaceuticals Inc.

Notes to Unaudited Condensed Consolidated

Notes to the Unaudited Interim Condensed Consolidated

Financial Statements

September 30, 2020

(All dollar amounts shown in thousands)

dollars and shares in thousands, except

per share information)

Nature of Business and Going Concern

Fennec Pharmaceuticals Inc.

(“Fennec,”

Fennec Pharmaceuticals Inc., a British Columbia

corporation (“Fennec,”

the “Company,”

1 unchanged sentence

“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.

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.

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 have four wholly-owned subsidiaries:

Oxiquant, Inc.

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.

and Fennec Pharmaceuticals, Inc.,

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

an Ireland company.

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

the completion of an underwritten public offering of 4,800,000 common shares at a public offering price of $6.25 per share.

addition, Fennec issued an additional 660,204 common shares in connection with the partial exercise of the underwriters’

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 months ended March 31, 2021,

the Company incurred a loss from operations of $4,923.

At March 31, 2021, the Company had an accumulated deficit of $166,900 million and

had experienced negative cash flows from operating activities during the three months ended March 31, 2021 in the amount of $3,593.

On May 5, 2020, the Company announced the completion

of an underwritten public offering of 4,800,000 common shares at a public offering price of $6.25 per share.

In addition, Fennec issued

an additional 660,204 common shares in connection with the partial exercise of the underwriters’

over-allotment option.

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 Unaudited Condensed Consolidated

The approximate

total gross proceeds from the offering were $34,100 ($32,189 net of commissions, fees and issue costs).

On February 1, 2019, the Company’s wholly

owned subsidiary Fennec Pharmaceuticals, Inc.

entered into a Loan and Security Agreement (the “Loan and Security Agreement”)

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

agreed to loan $12,500 to Fennec Pharmaceuticals, Inc., to be made available upon New Drug Application (“NDA”) approval of

PEDMARK TM by the U.S.

Food and Drug Administration (“FDA”) no later than September 30, 2020.

The Loan and Security

Agreement was amended on June 26, 2020 to increase the total potential amount of the loan to $18,000 and to extend the outside date to

receive NDA approval of PEDMARK TM to December 31, 2020.

In connection with this facility, the Company issued Bridge Bank a

warrant to purchase up to 39,000 of the Company’s common shares at an exercise price of $6.80 per share, with an exercise period

of ten years from the date of issuance subject to certain early termination conditions .

Under Accounting Standards Codification ("ASC") 470-50, Modifications and Extinguishments, the amendment to the facility 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

Following receipt of the FDA’s Complete Response Letter (“CRL”) in August 2020, which identified deficiencies

in the third-party manufacturing facility that manufactures PEDMARK TM on the Company’s

behalf, the Company decided to fully amortize the remaining portions of the loan fee and the value of the warrants.

The Loan and Security

Agreement expired on December 31, 2020 as a result of the Company not obtaining NDA approval of PEDMARK TM by that date, with

no amounts advanced under the facility prior to its termination.

The warrant issued to Bridge Bank remains outstanding notwithstanding

termination of the facility.

The Company believes the funds raised in its May 2020

public offering provide sufficient funding for the Company to carry out its planned activities, including NDA resubmission and, if approved,

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.

Fennec Pharmaceuticals

Notes to the Unaudited Interim 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.

dollars and shares in thousands, except

per share information)

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

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.

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.

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, 2020.

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

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 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)

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 March 31, 2021 and to state fairly the results for the periods presented.

The most significant estimates utilized during the quarter ended March 31, 2021 included estimates necessary to value grants of stock

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

New accounting pronouncements

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.

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

In January 2021, the FASB issued ASU No.

Reference Rate Reform (Topic 848).

In this ASU, the FASB refines the scope of Topic 848 to clarify that certain optional expedients and

exceptions therein for contract modifications and hedge accounting apply to contracts that are affected by the discounting transition.

Specifically, modifications related to reference rate reform would not be considered an event that requires reassessment of previous accounting

The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification

and to tailor the existing guidance to derivative instruments affected by the discounting transition.

The amendments in the ASU are effective

immediately for all entities.

Entities may choose to apply the amendments retrospectively as of any date from the beginning of an interim

period that includes or is subsequent to March 12, 2020, or prospectively to new modifications from any date within an interim period

that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued.

chose to apply amendments prospectively and concluded after evaluation that ASU 2021-01 has no significant effect on our condensed consolidated

financial statements.

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

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.

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.

2021, the Company had $26,751 in cash, savings and money market accounts ($30,344 at December 31, 2020).

At March 31, 2021, the Company

held $668 in cash of which $34 (as presented in U.S.

dollars) was in Canadian dollars ($45 at December 31, 2020 as presented in U.S.

March 31, 2021, the Company held $26,083 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:

the Company has not experienced any loss or write-down of its money market investments, the amounts it holds in money market accounts

are substantially above the $250,000 amount insured by the FDIC and may lose value.

Financial instruments

Financial instruments recognized on the balance

sheets at March 31, 2021 and December 31, 2020 consist of cash and cash equivalents, accounts receivable, accounts payable and

accrued liabilities, the carrying values of which approximate fair value due to their relatively short time to maturity.

does not hold or issue financial instruments for trading.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated

Financial Statements

dollars and shares in thousands, except

per share information)

The Company’s investment policy is to manage

investments to achieve, in the order of importance, the financial objectives of preservation of principal, liquidity and return on investment.

when made, are made in U.S.

or Canadian bank securities, commercial paper of U.S.

or Canadian industrial companies, utilities, financial

institutions and consumer loan companies, and securities of foreign banks provided the obligations are guaranteed or carry ratings appropriate

to the policy.

Securities must have a minimum Dun & Bradstreet rating of A for bonds or R1 low for commercial paper.

The policy risks are primarily the opportunity

cost of the conservative nature of the allowable investments.

As the main purpose of the Company is research and development, the

Company has chosen to avoid investments of a trading or speculative nature.

The Company's revenue is generated

through sales of intellectual property (“IP”).

The Company generates its revenue through one segment and the revenue

recognized under each of the Company's arrangements during the current period is described below.

The terms of these agreements may contain

multiple promised goods or services or optional goods and services, including licenses to product candidates, referred to as exclusive

licenses, as well as research and development activities to be performed by the Company on behalf of the collaboration partner related

to the licensed product candidates.

Revenue recognition

Revenue is recognized when control

of the promised goods or services are transferred to customers in an amount that reflects the consideration the Company expects to be

entitled to in exchange for transferring those goods or providing services.

The Company accounts for a contract when it has approval and

commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance

and collectability of consideration is probable.

When determining whether the customer

has obtained control of the goods or services, the Company considers the point at which the customer may benefit from the goods or services.

For sale of IP to, revenue is recognized upon grant or transfer of the IP, as the Company's IP is considered functional in nature.

Performance obligations

A performance obligation is a

promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606.

A contract’s

transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation

is satisfied.

The Company's contracts may contain multiple performance obligations if a promise to transfer goods or services is separately

identifiable from other promises in a contract and, therefore, is considered distinct.

For contracts with multiple performance obligations,

the Company determines the standalone selling price of each performance obligation and allocates the total transaction price using the

relative selling price basis.

The Company recognizes performance obligations based on their nature.

Significant payment terms

The Company’s revenue arrangements

include payments to the Company of one or more of the following:

a non-refundable, upfront payment;

milestone payments and royalties on

commercial sales of IP product candidates, if any.

To date, the Company has received upfront payments and several milestone payments but

has not received any license or option fees or earned royalty revenue as a result of product sales.

Under ASC 606, the Company estimates

the amount of consideration to which it will be entitled in exchange for satisfying performance obligations.

Based on the Company’s

current contracts, variable consideration primarily exists in the following forms:

development and regulatory milestones, royalties and

sales-based milestones.

The Company utilizes the "most likely amount"

variable consideration method for estimating development

and regulatory milestone consideration to include in the transaction price.

The Company only includes an amount of variable consideration

in the transaction price to the extent it is probable that a significant reversal in the cumulative revenue recognized will not occur

when the uncertainty associated with the variable consideration is subsequently resolved.

The Company refers to this as the variable consideration

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated

Financial Statements

dollars and shares in thousands, except

per share information)

to the uncertainty associated with the occurrence of the underlying events which would trigger development and regulatory milestone consideration

under its revenue arrangements, with the exception of certain initial conditions precedent milestones ,

the Company has concluded the variable consideration associated with all development and regulatory milestones to be fully constrained

as of the ASC 606 transition date and as of March 31, 2021, and therefore has not included such consideration in the transaction

price for any of its revenue arrangements.

The Company will reassess this conclusion at each subsequent reporting period and will only

include amounts associated with regulatory or development milestones in the transaction price when, or if, the variable consideration

is determined to be released from the constraint.

In accordance with ASC 606, the

Company is required to adjust the transaction price for the effects of the time value of money if the timing of payments agreed to by

the parties to the contract, explicitly or implicitly, provides the Company or its customer with a significant benefit of financing the

transfer of goods or services.

The Company concluded that its licensing and collaboration arrangements do not contain a significant financing

component because the payment structure of its agreements arise from reasons other than providing a significant benefit of financing.

Contract assets

The Company did not have

a contract asset as of March 31, 2021 or December 31, 2020.

Contract liabilities

The Company did not have

a contract liability as of March 31, 2021 or December 31, 2020.

Revenue arrangements

In May 2016, the Company sold Eniluracil

to Elion Oncology, LLC (“Elion”).

The agreement called for $40,000 in cash and 5% royalties to be paid to Fennec for any income

derived from the sale of Eniluracil.

The agreement was for the sale, not license of IP.

In addition, the agreement did not call for any

additional good or service beyond the transfer of IP and related assets (e.g.

“all information and know-how”, documentation, etc.).

In August 2020, Elion entered into a license

agreement with Processa Pharmaceuticals, Inc.

(“Processa”).

The license agreement called for equity and cash upon satisfying

the Condition Precedent, along with development and regulatory milestone payments, Sales Milestone Payments, and Product Royalties.

grant of the license was conditioned upon the “Condition Precedent”

which was defined as (i) Processa’s closing

of a public offering by October 30, 2020 in which Processa raised at least $15M and (ii) Processa’s shares being listed

Upon satisfying the Condition Precedent, which occurred in October 2020, Elion was entitled to receive $100,000 in cash and

825,000 in shares of Processa of which the Company is entitled to 5%.

As a result, in January 2021, the Company received $5,000 in

cash and 41,250 restricted shares of Processa common shares.

The agreement between Elion and

Processa entitles Elion to the payments outlined in the table below.

Fennec would be eligible to receive 5% of the following based on

future milestone events:

Milestone Event

Milestone Payment ($)

1st Year Anniversary of Effective Date

100,000 Restricted Shares

2nd Year Anniversary of Effective Date

100,000 Restricted Shares

1st Patient in Dose Confirmation Study

100,000 Restricted Shares

NDA Submission

300,000 Restricted Shares

1st FDA Approval in US

2nd FDA Approval in US

1st Regulatory Approval Outside US

2nd Regulatory Approval Outside US

Since the Condition Precedent was achieved, and

only the passage of time must occur in order for the 1 st and 2 nd Year Anniversary payments to become due, the Company

concluded the 1 st and 2 nd Year Anniversary milestone payments are also probable of coming to fruition and thus were

included in the transaction price during the 4 th quarter of 2020 along with the aforementioned Condition Precedent payments.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated

Financial Statements

dollars and shares in thousands, except

per share information)

The arrangement with Elion contains

consideration that is variable based on the Processa’s achievement of the above referenced development and regulatory milestones.

The next milestone payment the Company may be entitled to receive is 5,000 restricted shares for 1 st patient in Dose Confirmation

Study and then another 15,000 restricted shares for the NDA submission.

These are considered variable consideration that is fully constrained

due to the uncertainty associated with the achievement of the development milestone.

The considerations related to royalties (first and

second FDA approval in US and first and second regulatory approval outside of US) are also variable consideration that are fully constrained

in accordance with the royalty recognition constraint.

The variable consideration related to royalties will be recognized in the period

the products are sold by Processa and the Company has a present right to payment.

The Company recognized $0.2

million in revenue associated with the aforementioned cash and shares it became entitled to for the year ended December 31,

Due to the one year lockup provision on the Processa shares, the Company deemed it reasonable to apply a liquidity discount of 20%

to the valuation of the shares associated with the achievement of the Condition Precedent.

Shares associated with the one- and two-year

anniversary milestones had a 30% and 40% liquidity discount applied to their fair market valuations.

Recognizing the passage of time,

the Company adjusted its liquidity discount to the original shares of 15% and then 25 and 30% for the one- and two-year anniversary tranches.

Subsequent changes to the fair

value of the underlying securities are recognized as unrealized gains or losses on marketable equity securities within the consolidated

statement of operations and comprehensive loss.

During the quarter ended March 31, 2021, the Company reported $182 in unrealized gain

on the fair value of the underlying Processa shares.

Loss per Share

Earnings per common share is presented under two

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.

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.

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).

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,

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 March 31,

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

were excluded from the computation of basic and diluted net loss per share for the periods presented because including them would

have had an anti-dilutive effect:

Three Months Ended September 30,

Nine-month Ended September 30,

were excluded from the computation of basic and diluted net loss per share for the periods presented because including them would have

had an anti-dilutive effect:

Three Months Ended March 31,

Options to purchase common stock

Warrants to purchase common stock

Stockholders' Equity

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated

Financial Statements

dollars and shares in thousands, except

per share information)

Stockholders'

Authorized capital stock

The Company’s authorized capital

stock consists of an unlimited number of shares of no-par common stock.

Purchase Common Stock

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.

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:

The Company’s authorized capital stock consists

of an unlimited number of common shares, no par value per share.

to Purchase Common Stock

During the three months ended March 31, 2021 and

2020, there were no warrants issued or exercised.

Outstanding warrants have a weighted average life of 7.85 years on March 31, 2021.

following tables detail the Company’s warrant activity for the three months ended March 31, 2021 and 2020, respectively:

Investor Warrants

Common Shares Issuable Upon

Exercise of Outstanding Warrants

Weighted-Average

Exercise Price $USD

Common Shares Issuable Upon Exercise of Outstanding Warrants

Weighted-Average Exercise Price $USD

Outstanding December 31, 2020

Outstanding March 31, 2021

Outstanding June 30, 2020

Outstanding September 30, 2020

Investor Warrants

Common Shares Issuable Upon

Exercise of Outstanding Warrants

Weighted-Average

Exercise Price $USD

Common Shares Issuable Upon Exercise of Outstanding Warrants

Weighted-Average Exercise Price $USD

Outstanding December 31, 2019

Outstanding March 31, 2020

Outstanding June 30, 2019

Outstanding September 30, 2019

The value of warrants issued was 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.

Fennec Pharmaceuticals Inc.

Notes to Unaudited Condensed Consolidated

Financial Statements

September 30, 2020

(All dollar amounts shown in thousands)

Valuation Assumptions

Black-Scholes Model Assumptions

February 1, 2019

Expected dividend

Risk free rate

Expected volatility

Expected life

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.

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.

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

The Compensation Committee of the Board

of Directors administers the Company’s Plan.

The Compensation Committee designates eligible participants to be included

under the Plan and approves the number of options to be granted from time to time under the Plan.

Currently, the maximum number

of option shares issuable is twenty-five percent (25%) of the total number of issued and outstanding shares of common stock.

upon the current shares outstanding, a maximum of 6,452 options are authorized for issuance under the Plan.

Equity Incentive Plan

The Compensation Committee of the Board of Directors

administers the Company’s equity incentive plan (the “Plan”).

The Compensation Committee designates eligible participants

to be included under the Plan and approves the number of options to be granted from time to time under the Plan.

Currently, the maximum

number of option shares issuable under the Plan, together with the Company’s prior stock option plan, is twenty-five percent (25%)

of the total number of issued and outstanding common shares.

Based upon the current shares outstanding, a maximum of 6,501 shares

of common stock are authorized for issuance pursuant to stock options or other equity awards granted under the Plan.

For all options

issued under the Plan, the exercise price is the fair value of the underlying shares on the date of grant.

All options vest

within three years or less and are exercisable for a period of ten years from the date of grant.

The Plan allows the issuance

of Canadian and U.S.

All options vest within

three years or less and are exercisable for a period of ten years from the date of grant.

The Plan allows the issuance of Canadian

dollar grants.

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

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

Three Months Ended September 30,

Nine-month Ended September 30,

The table below outlines recognized contractor and employee expense from option awards for the three month

periods ended March 31, 2021 and 2020.

Three Months Ended March 31,

Contractor options expense recognized

3 unchanged sentences

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

US Denominated Options

Options (thousands)

Exercise Price $USD

Outstanding December 31, 2019

Outstanding at March 31, 2020

Outstanding at June 30, 2020

Outstanding at September 30, 2020

During the three-month period ended September 30,

2020, there were 180 US denominated options issued.

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

for each of the quarterly periods in fiscal year 2019 for stock options denominated in U.S.

for the three months ended March 31, 2021 and 2020 for stock options denominated in U.S.

and Canadian dollars.

As of August 2020, there

were no Canadian denominated options outstanding.

Weighted-Average

4 unchanged sentences

Outstanding at March 31, 2021

Outstanding at June 30, 2019

Outstanding at September 30, 2019

Fennec Pharmaceuticals Inc.

Notes to Unaudited Condensed Consolidated

Notes to the Unaudited Interim 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 nine-month periods ended September 30, 2020 for stock options denominated in Canadian dollars:

Weighted-Average

Canadian Denominated Options

Options (thousands)

Exercise Price $CAD

Outstanding December 31, 2019

Outstanding at March 31, 2020

Outstanding at June 30, 2020

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

Weighted-Average

Canadian Denominated Options

dollars and shares in thousands, except

per share information)

Weighted-Average Exercise

US Denominated Options

Options (thousands)

Exercise Price $CAD

Price $USD and $CAD

Outstanding December 31, 2019

Outstanding at March 31, 2020

Outstanding at June 30, 2019

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 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

Expected dividend

Risk free rate

Expected volatility

Expected life

Fennec Pharmaceuticals Inc.

Notes to Unaudited Condensed Consolidated

Financial Statements

September 30, 2020

(All dollar amounts shown in thousands)

Figure represents 2,440 US denominated with a weighted average price of $4.05, and 648 $CAD denominated

options with a weighted average price of $1.87 translated at $CAD/$USD 0.768174.

Figure represents 2,440 US denominated with a weighted average price of $4.05, and 648 $CAD denominated options with a weighted

average price of $1.72 translated at $CAD/$USD 0.70978.

During the three month periods ended March 31,

2021 and 2020, there was no US denominated option activity.

Of the 2,952 options granted and outstanding at March 31, 2021, 2,154 are

fully vested and exercisable.

Fair Value Measurements

The Company adopted the Fair Value Measurements

and Disclosure Topic of the FASB in 2011.

The Company has adopted ASC 820 the Fair Value

Measurements and Disclosure Topic of the FASB.

This Topic applies to certain assets and liabilities that are being measured and reported

on a fair value basis.

The Topic defines fair value, establishes a framework for measuring fair value in accordance with US GAAP,

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:

Quoted market prices in active

markets for identical assets or liabilities.

Observable market-based inputs

or unobservable inputs that are corroborated by market data.

Unobservable inputs that are not

corroborated by market data.

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

(in thousands)

The Fair value Measurements Topic defines fair value, establishes a framework for measuring fair value in accordance

with US GAAP, 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:

Quoted market prices in active markets

for identical assets or liabilities.

Observable market-based inputs or unobservable

inputs that are corroborated by market data.

Unobservable inputs that are not corroborated

by market data.

Quoted Price in Active

Market for Identical

Significant Other

Observable Inputs

Significant Other Observable Inputs

Unobservable Inputs

Cash and cash equivalents

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").

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.

Processa common shares

The Company held approximately, $668 in cash as of March 31, 2021, of which approximately, $34 was in Canadian funds (translated into U.S.

As of December 31, 2020, the Company held approximately $347 of which approximately $45 was in Canadian funds (translated into U.S.

Company received 41,250 restricted common shares of Processa (PSCA).

The share restriction will expire in three tranches:

25% at the 6, 9 and 12 month intervals, respectively from October 30, 2020.

At October 30, 2020 Processa shares were trading

at $4.11 per share.

The Company originally applied a 20%, 30% and 40% liquidity discount to the shares and will mark to market at each

balance sheet date.

Fennec Pharmaceuticals Inc.

Notes to Unaudited Condensed Consolidated

Notes to the Unaudited Interim 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.

dollars and shares in thousands, except

per share information)

Commitments and Contingencies

Oregon Health & Science University Agreement

On February 20, 2013, Fennec entered into a new

exclusive license agreement with Oregon Health & Science University (“OHSU”) for exclusive worldwide license rights to

intellectual property directed to thiol-based compounds, including PEDMARK TM , and their use in oncology (the "OHSU Agreement").

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 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.

Securities Class Action Suit

Following the FDA’s CRL regarding our 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 December 20, 2018 and August 10, 2020.

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 its 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

In the event of his termination with us

other than for cause, we will be obligated to pay Mr.

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

(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

Triangle Park, North Carolina utilizing small space within a commercial building.

The operating lease has payments of $400 per

month with no scheduled increases.

In the event of his termination with us other

than for cause, we will be obligated to pay Mr.

Raykov a one-time severance payment equal to twelve months of salary ($442,900 as of March

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

Andrade a one-time severance

payment equal to six months of salary ($160,423 as of March 31, 2021).

In the 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 ($92,700 as of March 31, 2021).

We have an operating lease in Research Triangle

Park, North Carolina utilizing small space within a commercial building.

The operating lease has payments of $400 per month with no scheduled

This operating lease is terminable with 30 days’

notice and has no penalties or contingent

payments due.

notice and has no penalties or contingent payments due.

On January 23, 2020, the Company entered into an

Office Service Agreement (the “Office Service Agreement”) with Regus to lease office space at in Hoboken,

Office Service Agreement (the “Office Service Agreement”) with Regus to lease office space at in Hoboken, New Jersey.

Per the terms of the Office Service Agreement, the monthly rent payments are $1,441.

The Company was required to pay

a security deposit of $2,300, which is the equivalent to two months of rent.

The Office Service Agreement commenced

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.

Loan Security Agreement

On February 1, 2019, the Company’s

wholly owned subsidiary Fennec Pharmaceuticals Inc.

entered into a Loan and Security Agreement (the “Loan and Security Agreement”)

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

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.

The Company was required to pay a security deposit

of $2,300, which is the equivalent to two months of rent.

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.

Fennec Pharmaceuticals Inc.

Notes to Unaudited Condensed Consolidated

Notes to the Unaudited Interim 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

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.

dollars and shares in thousands, except

per share information)

Our operations may be affected by the ongoing

COVID-19 pandemic.

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

however, it may result in a material adverse

impact on our financial position, operations and cash flows.

Possible effects may include, but are not limited to, disruption to our product

launch which includes the ability of sales reps to communicate with oncologists, absenteeism in our labor workforce, unavailability of

products and supplies used in operations, and a decline in value of our assets, including inventories, property and equipment, and marketable

COVID-19 has not had a material effect on our operations to date as we have 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.

Subsequent Events

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.

Management has evaluated subsequent events through

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

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