What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-12 · 194 added, 242 removed, 309 unchanged (59% of the section changed)

3 unchanged sentences

Dollars and shares in thousands)

June 30, 2022

September 30, 2022

Current assets

10 unchanged sentences

Accrued liabilities

Current portion of long-term debt

Total current liabilities

18 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating expenses:

3 unchanged sentences

Other (expense)/income

Foreign currency transaction gain/(loss)

Foreign currency transaction loss

Amortization expense

11 unchanged sentences

Dollars in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows (used in) provided by:

13 unchanged sentences

Long-term debt

Long-term debt paid

Debt discount

Capitalized deferred issuance costs

Cash paid for taxes on restricted share release

Issuance of shares, options exercise

Net cash provided by financing activities

(Decrease)/increase in cash and cash equivalents

Increase/(decrease) in cash and cash equivalents

Cash and cash equivalents - Beginning of period

Cash and cash equivalents - End of period

Non-cash investing and financing activities:

Warrants issued for long-term debt

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Stockholders’ Equity

Three and Six Months Ended June 30, 2022, and 2021

Three and Nine Months Ended September 30, 2022, and 2021

dollars and shares in thousands)

11 unchanged sentences

Balance at June 30, 2022

Stock options issued to employees

Stock options issued to contractors

Warrants issued to creditor

Stock option exercise

Restricted stock unit release

Balance at September 30, 2022

Comprehensive

7 unchanged sentences

Balance at June 30, 2021

Stock options issued to employees

Balance at September 30, 2021

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3 unchanged sentences

Nature of Business and Going Concern

Fennec Pharmaceuticals Inc., a British Columbia corporation (“Fennec,” ”the “Company,” “we,” “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.

Fennec Pharmaceuticals Inc., a British Columbia corporation (“Fennec,” ”the “Company,” “we,” “us,” or “our”), is a commercial stage specialty biopharmaceutical company focused on PEDMARK ® (sodium thiosulfate injection) for the prevention of platinum-induced ototoxicity in pediatric cancer patients.

We have four wholly-owned subsidiaries:

4 unchanged sentences

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, 2022, the Company incurred a loss from operations of $ 5,009 and $ 8,555 , respectively.

At June 30, 2022, the Company had an accumulated deficit of $ 188,254 and had experienced negative cash flows from operating activities during the three and six months ended June 30, 2022 in the amount of $ 3,390 and $ 6,246 , respectively.

On February 1, 2019, the Company’s wholly owned subsidiary Fennec Pharmaceuticals, Inc.

entered into a Loan and Security Agreement (the “Bridge Bank 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 Bridge Bank 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 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 loan term.

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 warrant issued to Bridge Bank remains outstanding.

On June 24, 2021, the Company announced it had negotiated a second amendment to the Bridge Bank Loan and Security Agreement.

This amendment provides Fennec with a $ 20,000 debt facility comprised of three term loans.

Term Loan A consists of $ 5,000 , which was funded upon closing.

Term Loan B consists of $ 7,500 to be funded upon NDA approval of PEDMARK TM (the “Approval Event”) in the U.S.

Term Loan C consists of $ 7,500 to be funded upon the Company achieving consolidated trailing six-month revenues of $ 11 million on or before December 31, 2022.

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

On January 31, 2022, the Company announced a third amendment to the Bridge Bank Loan and Security Agreement.

This amendment redefines certain definitions in the agreement.

The term “Resubmission Event” is the resubmission by Fennec for final NDA approval from the FDA for PEDMARK on or before March 31, 2022.

Fennec did achieve the Resubmission Event on March 24, 2022.

The “Approval Event” is the receipt of the final NDA approval by Fennec from the U.S.

Food and Drug Administration for PEDMARK TM on or before September 30, 2022.

The Company intends to use the proceeds from the loans to provide working capital for commercial readiness activities prior to NDA approval as well as commercialization activities for PEDMARK TM , if approved by the FDA.

During the three and nine months ended September 30, 2022, the Company incurred a loss from operations of $ 7,899 and $ 16,454 , respectively.

At September 30, 2022, the Company had an accumulated deficit of $ 196,343 and had experienced negative cash flows from operating activities during the nine months ended September 30, 2022 in the amount of $ 11,256 .

On August 1, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”) with Petrichor Opportunities Fund I LP (the “Creditor”) in connection with the issuance of up to $ 45,000 of senior secured floating rate convertible notes (the “Notes”), issuable in multiple tranches (the “Note Financing”).

On August 19, 2022, the Company closed on the initial tranche of $ 5,000 (the “First Closing Note”) which has an Initial Conversion Price equal to $ 8.11 per share, which was calculated based on a 20 % premium of the 5 -day volume weighted average price of the Company’s common shares as traded on the Nasdaq Capital Market (the “VWAP”) immediately prior to the announcement of the Securities Purchase Agreement (“SPA”) dated August 1, 2022.

In connection with the first closing, the Company repaid in full its secured indebtedness with Bridge Bank in the amount of $ 5,000 .

On September 23, 2022, the Company closed on the second tranche of the Note Financing in the amount of $ 20,000 (the “Second Closing Note”), which has an Initial Conversion Price equal to $ 7.89 per share, which was calculated based on a 20 % premium of the 5 -day VWAP immediately prior to September 20, 2022, which was the date the Company obtained FDA approval of PEDMARK (the “Second Closing Trigger”).

Subsequent to the funding of the Second Closing Note, and before December 31, 2023, the Company may draw up to $ 20,000 of additional financing under the SPA, in one or more tranches of $ 10,000 upon mutual agreement of the Company and the Creditor (the “Subsequent Closing Notes”).

The Subsequent Closing Notes will be convertible at a price per share equal to $ 7.89 per share, which price is calculated on the same basis as for the Second Closing Note.

A commitment fee of 2.0 % of the Notes is payable under the SPA.

Half of such fee was paid by the issuance on the first closing of warrants to purchase 55,498 of the Company's common shares (“First Closing Warrant”) and half is payable in cash or warrants of 55,498 of the Company’s common shares (“Second Closing Warrant”), at our election, on the second closing.

The warrants are exercisable at a price per share of $ 8.11 and will have a term of five years from the date of the grant.

Subsequently, the Company elected to have the all the commitment fee of the Notes paid in warrants.

The Company believes current funds, along with the funds from the Note Financing issued as part of the Creditor financing provide sufficient funding for the Company to carry out its planned activities, including the commencement of commercialization efforts for at least the next twelve months of PEDMARK.

The Company also has the ability to obtain additional funds under the Subsequent Closing Notes.

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

The Company believes current funds, along with the funds from the Bridge Bank Loan and Security Agreement or from the securities purchase agreement dated August 1, 2022 with Petrichor Opportunities Fund I LP (the “Petrichor Agreement”) (see Subsequent Events), provide sufficient funding for the Company to carry out its planned activities, including, if PEDMARK TM is approved by the FDA, 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 or if there was a materially adverse event which affected the Company’s solvency.

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 was not appropriate or if there was a materially adverse event which affected the Company’s solvency.

Significant Accounting Policies

8 unchanged sentences

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

The results of operations for the three and six monthsended June 30.

2022 are not necessarily indicative of results to be expected for the full fiscal year.

The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of results to be expected for the full fiscal year.

Use of estimates

2 unchanged sentences

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, 2022 and to state fairly the results for the periods presented.

The most significant estimates utilized during the three and six months ended June 30, 2022 include estimates necessary to value grants of various equity instruments to employees and contractors, as 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, 2022 and to state fairly the results for the periods presented.

The most significant estimates utilized during the three and nine months ended September 30, 2022 include estimates necessary to value grants of various equity instruments to employees and contractors and the warrants issued to the Creditor, as disclosed in Note 4.

New accounting pronouncements

The Company did not adopt any new accounting pronouncements during the quarter ended June 30, 2022.

The Company did not adopt any new accounting pronouncements during the quarter ended September 30, 2022.

Cash and cash equivalents

1 unchanged sentence

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.

At June 30, 2022, the Company had $ 14,915 in cash, savings and money market accounts ($ 21,100 at December 31, 2021).

At June 30, 2022, the Company held $ 278 in cash of which $ 37 (as presented in U.S.

At September 30, 2022, the Company had $ 29,752 in cash, savings and money market accounts ($ 21,100 at December 31, 2021).

At September 30, 2022, the Company held $ 438 in cash of which $ 33 (as presented in U.S.

dollars) was in Canadian dollars ($ 34 at December 31, 2021 as presented in U.S.

At June 30, 2022, the Company held $ 14,637 in money market investments.

At September 30, 2022, the Company held $ 29,314 in money market investments.

Money market investments typically have minimal risks.

While 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 amount insured by the FDIC and may lose value.

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

investments typically have minimal risks.

Inventory is stated at the lower of cost or estimated net realizable value with cost determined under the first-in first-out method.

Inventory costs include third-party contract manufacturing, third-party packaging services and freight.

At this time, we primarily use actual costs to determine the cost basis for inventory.

The determination of whether inventory costs will be realizable requires management review of the expiration dates of PEDMARK ® compared to our forecasted sales.

If actual market conditions are less favorable than projected by management, write-downs of inventory may be required, which would be recorded as cost of goods sold in the condensed consolidated statement of operations.

Prior to FDA approval of PEDMARK ® , we incurred expenses for the manufacture of PEDMARK ® that could potentially be available to support the commercial launch of our products.

We will begin to capitalize inventory costs associated with PEDMARK during the fourth quarter of 2022.

Management could not determine that FDA approval was probable in advance of the actual event and therefore, could not determine whether its product inventory had a probable future economic benefit.

As a result, we did not capitalize any pre-launch inventory.

Financial instruments

Financial instruments recognized on the balance sheets at June 30, 2022 and December 31, 2021 consist of cash and cash equivalents, shares of Processa Pharmaceuticals, Inc., accounts payable, accrued liabilities and current portion of long-term debt, the carrying values of which approximate fair value due to their relatively short time to maturity.

Financial instruments recognized on the balance sheets at September 30, 2022 and December 31, 2021 consist of cash and cash equivalents, common shares of Processa Pharmaceuticals, Inc., accounts payable and accrued liabilities, the carrying values of which approximate fair value due to their relatively short time to maturity.

The Company does not hold or issue financial instruments for trading.

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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 nominal historical revenue has been generated through sales of its intellectual property (“IP”).

For the periods presented, there is no revenue.

For periods when the Company has generated its revenue through one segment and the revenue recognized under each of the Company’s arrangements during those periods 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, 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.

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.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Significant payment terms

The Company’s revenue arrangements may 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.

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 constraint.

Due to the uncertainty associated with the occurrence of any 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 June 30, 2022, 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.

The Company adjusts 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.

In relation to the royalties from the sale of Eniluracil to Elion (described under “Revenue arrangements” below), 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 any contract assets as of June 30, 2022 or December 31, 2021.

Contract liabilities

The Company did not have any contract liabilities as of June 30, 2022 or December 31, 2021.

Revenue arrangements

In May 2016, the Company sold its rights in the drug Eniluracil to Elion Oncology, LLC (“Elion”).

The agreement called for $ 40 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 the 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.

The grant of the license was conditioned upon the

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

“Condition Precedent” which was defined as (i) Processa’s closing of a public offering by October 30, 2020 in which Processa raised at least $ 15,000 and (ii) Processa’s shares being listed on NASDAQ.

Upon satisfying the Condition Precedent, which occurred in October 2020, Elion was entitled to receive $ 100 in cash and 825 in shares of Processa of which the Company is entitled to 5 %.

As a result, in January 2021, the Company received $ 5 in cash and 41 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 Restricted Shares

2nd Year Anniversary of Effective Date

100 Restricted Shares

1st Patient in Dose Confirmation Study

100 Restricted Shares

NDA Submission

300 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 fourth quarter ended December 31, 2020 along with the aforementioned Condition Precedent payments.

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 restricted shares for 1 st patient in Dose Confirmation Study and then another 15 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 U.S.

and first and second regulatory approval outside U.S.) 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 $ 200 in revenue associated with the aforementioned cash and shares it became entitled to for the year ended December 31, 2020.

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 0 % and then 0 % and 20 % 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 condensed consolidated statements of operations.

During the quarter ended June 30, 2022, the Company reported $ 8 in unrealized loss on the fair value of the underlying Processa shares.

Net loss over the life of the Processa shares was $ 25 at June 30, 2022.

As our main purpose is preservation of capital while we endeavor to become cash flow positive through the sale of product, we have chosen to avoid investments of a trading or speculative nature.

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

The policy also provides for investment limits on concentrations of securities by issuer and a maximum-weighted average time to maturity of twelve months.

Product revenue, net

The Company received FDA approval of PEDMARK ® on September 20, 2022, and will begin recognizing product revenues after the initial product launch of PEDMARK ® in October 2022.

Loss Per Share

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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

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

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

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.

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,

Three Months Ended September 30,

Nine Months Ended September 30,

Weighted-average common shares, basic

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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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Options to purchase common shares

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Warrants to purchase common stock

During the three and six months ended June 30, 2022, there were no warrants issued or exercised.

Outstanding warrants have a weighted average life of 6.60 years on June 30, 2022.

The following tables detail the Company’s warrant activity for the three and six months ended June 30, 2022:

During the three and nine months ended September 30, 2022, the Company issued 111 warrants at a strike price of $ 8.11 .

The Company capitalized $ 441 in non-cash expense, and cash expense of $ 175 associated with issuing the SPA.

During the three and nine month ended September 30, 2022, there were no warrants exercised.

Outstanding warrants have a weighted average life of 5.30 years on September 30, 2022.

The following tables detail the Company’s warrant activity for the three and nine months ended September 30, 2022:

Common Shares

2 unchanged sentences

Weighted-Average

Investor Warrants

Exercise Price $USD

Creditor Warrants

Exercise Price

Outstanding December 31, 2021

Outstanding June 30, 2022

Outstanding March 31, 2022

Outstanding June 30, 2022

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 equity instruments to be granted from time to time under the Plan.

Currently, the maximum number of equity instruments

Outstanding September 30, 2022

Fennec Pharmaceuticals Inc.

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dollars and shares in thousands, except per share information)

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.

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 equity instruments to be granted from time to time under the Plan.

Currently, the maximum number of equity instruments 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 6,559 shares of common stock are authorized for issuance pursuant to stock options or other equity awards granted under the Plan.

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dollar grants.

The table below outlines recognized contractor and employee expense from equity awards for the three and six month period ended June 30, 2022 and 2021.

Three Months Ended June 30,

Six Months Ended June 30,

The table below outlines recognized contractor and employee expense from equity awards for the three and nine month periods ended September 30, 2022 and 2021.

Three Months Ended September 30,

Nine Months Ended September 30,

Contractor options expense recognized

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Stock Option Activity

The following is a summary of option activity for the three and six months ended June 30, 2022, for stock options denominated in U.S.

The following is a summary of option activity for the three and nine months ended September 30, 2022, for stock options denominated in U.S.

Since August of 2020, there have been no Canadian denominated options outstanding.

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Options (thousands)

Exercise Price $USD

Exercise Price

Outstanding at December 31, 2021

1 unchanged sentence

Outstanding at June 30, 2022

During the three and six month periods ended June 30, 2022, there were 305 and 505 options granted, respectively.

During the three and six month periods ended June 30, 2022, there were 26 and 45 exercises of options, respectively.

Outstanding at September 30, 2022

During the three and nine month periods ended September 30, 2022, there were 310 and 815 options granted, respectively.

During the three and nine month periods ended September 30, 2022, there were 151 and 196 exercises of options, respectively.

This resulted in a cash inflow of $ 188 and $ 249 , respectively.

During the three and nine month periods ended September 30, 2022, there were 30 and 412 option grant forfeitures by departing employees.

Of the 4,466 U.S.

denominated options granted and outstanding at June 30, 2022, 3,050 are fully vested and exercisable.

The value of options issued was estimated using the Black-Scholes option pricing model using the assumptions in the table below.

denominated options granted and outstanding at September 30, 2022, 3,448 are fully vested and exercisable.

The value of options and warrants issued was estimated using the Black-Scholes option pricing model using the assumptions in the table below.

The expected volatility was determined using historical volatility of our stock based on the expected term of the award.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Valuation Assumptions

Black-Scholes Model Assumptions

June 30, 2022

September 30, 2022

Expected dividend

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Expected life

5 - 6.0 years

Restricted Share Units Activity

The Plan allows for the issuance of restricted share units (“RSU’s”).

The following is a summary of RSU activity for the three and six months ended June 30, 2022, for RSU’s denominated in U.S.

During the quarter ended June 30,

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

2022, there were 8 RSU’s released from restriction.

During the six months ended June 30, 2022, there were 88 RSU’s forfeited by departing employees.

The following is a summary of RSU activity for the three and nine months ended September 30, 2022.

During the three and nine month ended September 30, 2022, there were 20 and 28 RSU’s released from restriction, respectively.

During the nine months ended September 30, 2022, there were 88 RSU’s forfeited by departing employees.

All RSU’s vest over one to three years .

5 unchanged sentences

Outstanding at June 30, 2022

Outstanding at September 30, 2022

The value of RSU’s issued was estimated using the share price on the date of the award multiplied by the number of shares granted.

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Unobservable inputs that are not corroborated by market data.

Fair Value Measurement at June 30, 2022 and December 31, 2021

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Fair Value Measurement at September 30, 2022 and December 31, 2021

(in thousands)

6 unchanged sentences

Processa common shares

The Company held approximately $ 278 in cash as of June 30, 2022, of which approximately $ 37 was in Canadian funds (translated into U.S.

The Company held approximately $ 438 in cash as of September 30, 2022, of which approximately $ 33 was in Canadian funds (translated into U.S.

As of December 31, 2021, the Company held approximately $ 82 in cash of which approximately $ 34 was in Canadian funds (translated into U.S.

The Company holds 46 unrestricted common shares of Processa (NASDAQ:PCSA).

The Company expects to receive another 5 restricted common shares of Processa on October 20, 2022 which will become unrestricted one year after receipt.

At October 30, 2020, Processa shares were trading at $ 4.11 per share.

The Company holds 46 unrestricted common shares of Processa Pharmaceuticals, Inc.

(NASDAQ:PCSA) (“Processa”).

The Company received another 5 restricted common shares of Processa on October 20, 2022 which will become unrestricted one year after receipt.

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

The Company will also adjust the liquidity discounts being applied to the share valuation to appropriately reflect the passage of time and the existence of any restrictions on the shares.

Valuation of the shares at June 30, 2022 had a 0 %, 0 % and 20 % liquidity discount applied to the 41 , 5 and 5 share tranches, respectively.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Valuation of the shares at September 30, 2022 had a 0 %, 0 % and 15 % liquidity discount applied to the 41 , 5 and 5 share tranches, respectively.

Commitments and Contingencies

Oregon Health & Science University Agreement

On February 20, 2013, Fennec entered into an 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”).

On February 20, 2013, Fennec entered into an exclusive license agreement with Oregon Health & Science University (“OHSU”) for exclusive worldwide license rights to intellectual property directed to thiol-based compounds, including PEDMARK, 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.

3 unchanged sentences

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 the United States in 2038.

PEDMARK is currently protected by methods of use patent that the Company exclusively licensed from OHSU 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.

6 unchanged sentences

1:20-cv-00812.

The complaint alleged that prior to our August 10, 2020 receipt of a CRL from the FDA concerning our NDA for PEDMARK TM , defendants made materially false or misleading statements and failed to disclose material facts about our third-party PEDMARK TM product manufacturing facility and the impact the facility would have on regulatory approval for PEDMARK TM .

The complaint alleged that prior to our August 10, 2020 receipt of a Complete Response Letter from the FDA

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

concerning our NDA for PEDMARK, defendants made materially false or misleading statements and failed to disclose material facts about our third-party PEDMARK product manufacturing facility and the impact the facility would have on regulatory approval for PEDMARK.

On December 3, 2020, the court appointed a lead plaintiff to represent the putative class.

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On March 3, 2021, defendants filed a motion to dismiss the amended complaint.

On April 2, 2021, plaintiff filed an opposition to the motion to dismiss.

On April 2, 2021, lead plaintiff filed an opposition to the motion to dismiss.

On April 16, 2021, defendants filed a reply in support of the motion to dismiss, and on December 16, 2021, the Magistrate Judge entered an order recommending that defendants’ motion to dismiss be granted in its entirety.

On January 24, 2022, plaintiff filed objections to the Magistrate Judge’s recommendation, and defendants filed their response on February 3, 2022.

On January 24, 2022, lead plaintiff filed objections to the Magistrate Judge’s recommendation, and defendants filed their response on February 3, 2022.

On March 2, 2022, the U.S.

District Court Judge adopted the Magistrate Judge’s order and recommendation and entered an order and judgment dismissing the amended complaint with prejudice.

On March 30, 2022, plaintiff filed a motion for post judgment relief, seeking leave to file a second amended complaint.

In his proposed second amended complaint, plaintiff seeks to add allegations stemming from the receipt of a second CRL following our resubmission of our NDA for PEDMARK TM , which we received on November 29, 2021, among other

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

On March 30, 2022, lead plaintiff filed a motion for post judgment relief, seeking leave to file a second amended complaint.

In his proposed second amended complaint, lead plaintiff seeks to add allegations stemming from the receipt of a second CRL following our resubmission of our NDA for PEDMARK, which we received on November 29, 2021, among other things.

Defendants filed an opposition to plaintiff’s motion for post judgment relief on April 20, 2022.

On May 4, 2022, lead plaintiff submitted a reply in support of his motion.

On September 27, 2022, defendants filed a request for judicial notice regarding the FDA’s press release announcing that it has approved PEDMARK.

On October 18, 2022, lead plaintiff filed his opposition to request for judicial notice.

On October 21, 2022, defendants filed a reply in support of the request for judicial notice.

We believe that this lawsuit is without merit and intend to defend it vigorously.

1 unchanged sentence

Failure by us to obtain a favorable resolution of the lawsuit could have a material adverse effect on our business, results of operations, and financial condition.

We have not recorded a liability as of June 30, 2022, because we believe a potential loss is not probable or reasonably estimable given the nature of the proceedings and our success so far by obtaining a dismissal with prejudice of the amended complaint.

We have not recorded a liability as of September 30, 2022, because we believe a potential loss is not probable or reasonably estimable given the nature of the proceedings and our success so far by obtaining a dismissal with prejudice of the amended complaint.

Fennec Pharmaceuticals Inc.

3 unchanged sentences

1:22-cv-00115.

The complaint asserts a putative class period from May 28, 2021 through November 28, 2021, and alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 by making materially false and misleading statements or omissions regarding the status of our third-party PEDMARK TM product manufacturing facility, the facility’s compliance with cGMP, and the impact its status and compliance would have on regulatory approval for PEDMARK TM in the period leading up to the Company’s November 29, 2021 receipt of a CRL for a subsequent NDA for PEDMARK TM .

The complaint asserts a putative class period from May 28, 2021 through November 28, 2021, and alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 by making materially false and misleading statements or omissions regarding the status of our third-party PEDMARK TM product manufacturing facility, the facility’s compliance with cGMP, and the impact its status and compliance would have on regulatory approval for PEDMARK in the period leading up to the Company’s November 29, 2021 receipt of a CRL for a subsequent NDA for PEDMARK.

The complaint seeks an unspecified amount of damages and attorneys’ fees and costs.

1 unchanged sentence

Fisher filed a motion to be appointed lead plaintiff and represent the putative class and on May 9, 2022, the court appointed him as lead plaintiff.

On June 23, 2022, the lead plaintiff filed an amended complaint.

The amended complaint asserts the same putative class period from May 28, 2021 through November 28, 2021, is brought against the same defendants, makes allegations similar to those in the original complaint.

On June 23, 2022, lead plaintiff filed an amended complaint.

The amended complaint asserts the same putative class period from May 28, 2021 through November 28, 2021, is brought against the same defendants and makes allegations similar to those in the original complaint.

On August 5, 2022, defendants filed a motion to dismiss the amended complaint.

On August 26, 2022, lead plaintiff filed an opposition to the motion to dismiss.

On September 9, 2022, defendants filed a reply in support of the motion to dismiss.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

On September 27, 2022, defendants filed a request for judicial notice regarding the FDA’s press release announcing that it approved PEDMARK.

On September 30, 2022, lead plaintiff filed an opposition to the request for judicial notice.

On October 6, 2022, defendants filed a reply in support of the request for judicial notice.

On October 12, 2022, the U.S.

District Court Judge issued a memorandum opinion and order dismissing the amended complaint in its entirety and with prejudice, and on October 14, 2022, entered judgment.

Lead plaintiff has until November 14, 2022 to file a notice of appeal.

We believe that the lawsuit is without merit and intend to defend it vigorously.

1 unchanged sentence

Failure by us to obtain a favorable resolution of the lawsuit could have a material adverse effect on our business, results of operations, and financial condition.

Hope Medical Enterprises, Inc.

7 unchanged sentences

On January 11, 2022, OHSU filed a Request for Supplemental Examination of US ‘190 requesting the consideration by the Central Re-examination Unit (“CRU”) of the USPTO of certain prior art references, including references cited by Hope in its Petition for IPR that are relevant to the granted claim of the patent.

On January 28, 2022, the CRU found that the cited references constitute a substantial new question of patentability and ordered an ex parte reexamination of the single US ‘190 claim of pursuant to 35 U.S.C.

On March 11, 2022, the CRU issued a substantive Office Action.

We filed a preliminary response to Hope’s Request for IPR of the ‘190 Patent in February 2022, requesting that the ‘190 IPR be denied on the basis that the CRU is already reviewing the relevant issues in the Supplemental Examination Proceeding and is further advanced than PTAB in its consideration.

On May 9, the PTAB granted Hope Medical’s Petition to Institute the IPR against the ‘190 patent and a stayed the Supplemental Examination pending the result of the ‘190 IPR.

On August 12, 2022, we filed a Motion to Amend the single claim of the ‘190 Patent in the IPR to focus on the treatment of medulloblastoma.

We expect a decision in the ‘190 IPR in May 2023, which can be appealed by the losing party.

Further, in May 2022, the PTAB granted Hope Medical’s Petition to Institute the IPR against the ‘363 patent.

During the ‘363 IPR, we disclaimed the patent claims directed to the anhydrous morphic form of STS and continued with claims directed to its method of manufacture.

We expect a decision in the ‘363 IPR in May 2023, which can be appealed by the losing party.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

In February and April 2022, the USPTO issued Notices of Allowance to Fennec for two additional patents that cover the PEDMARK TM pharmaceutical formulation.

On April 5, 2022, the USPTO issued U.S.

11,291,728 (‘728) that covers the PEDMARK pharmaceutical formulation.

On September 14, 2022, the USPTO issued Notices of Allowance to us for two additional patent applications that cover the PEDMARK pharmaceutical formulation.

We expect these two additional U.S.

patents to issue in the second half of 2022 and will be listed in the FDA’s Orange Book if our ending NDA for PEDMARK TM is approved.

These patents will expire in 2039, unless held invalid or unenforceable by a court or final jurisdiction.

We plan to vigorously defend our intellectual property rights related to PEDMARK™.

However, we are unable to predict the outcome of Hope’s IPR petitions, or the Supplemental Examination, and an invalidation of one or both of the ‘190 and ‘363 patents may have a material adverse effect on our ability to protect our rights in PEDMARK™ beyond periods of marketing exclusivity for PEDMARK TM possible in the United States under Orphan Drug Designation and in Europe under European Market Exclusivity for Pediatric Use (“PUMA”).

patents to issue in Q4 of 2022 or Q1 of 2023.

These patents will expire in 2039, unless held invalid or unenforceable by a court of final jurisdiction.

On approval of PEDMARK, we listed the ‘728 and the ‘190 patents in the FDA Orange Book.

We plan to update the Orange Book with additional patents granted by the USPTO on issuance.

We obtained U.S.

Orphan Drug Designation for the use of PEDMARK TM in the prevention of platinum-induced ototoxicity in pediatric patients in 2004.

Orphan Drug Designation for the use of PEDMARK in the prevention of platinum-induced ototoxicity in pediatric patients in 2004.

We plan to pursue PUMA upon approval of the MAA, which would allow for 10 years of market exclusivity upon PUMA approval.

We plan to vigorously defend our intellectual property rights related to PEDMARK.

However, we are unable to predict the outcome of Hope’s IPR petitions, or the Supplemental Examination.

While we now have, or will shortly receive, additional U.S.

patents that cover PEDMARK over the IPR challenged patents, an invalidation of our patents covering PEDMARK could have a material adverse effect on our ability to protect our rights in PEDMARK beyond periods of marketing exclusivity for PEDMARK possible in the United States under Orphan Drug Designation and in Europe under European Market Exclusivity for Pediatric Use (“PUMA”).

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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 ($ 458 as of June 30, 2022).

Raykov a one-time severance payment equal to twelve months of salary ($ 513 as of September 30, 2022).

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 ($ 166 as of June 30, 2022).

Andrade a one-time severance payment equal to six months of salary ($ 186 as of September 30, 2022).

We have an operating lease in Research Triangle Park, North Carolina utilizing small space within a commercial building.

10 unchanged sentences

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.

On June 24, 2021, the Company announced it had negotiated a second amendment to the Bridge Bank Loan and Security Agreement with Bridge Bank.

This amendment provides Fennec with a $ 20,000 debt facility comprised of three term loans.

Term Loan A consists of $ 5,000 , which was funded upon closing.

Term Loan B consists of $ 7,500 to be funded upon NDA approval of PEDMARK TM in the U.S.

Term Loan C consists of $ 7,500 to be funded upon the occurrence the Company achieving consolidated trailing six-month revenues of $ 11,000 on or before December 31, 2022.

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 B,

On August 1, 2022, the Company entered into the SPA with the Creditor in connection with the issuance of up to $ 45,000 of Notes, issuable in multiple tranches.

On August 19, 2022, the Company closed on the initial tranche of $ 5,000 , which has an Initial Conversion Price equal to $ 8.11 per share, which was calculated based on a 20 % premium of the 5 -day VWAP immediately prior to the announcement of the SPA.

In connection with the first closing, the Company repaid in full its secured indebtedness with Bridge Bank in the amount of $ 5,000 .

The note becomes due on the maturity date, which is August 19, 2027.

On September 23, 2022, the Company closed on the second tranche of the Note Financing in the amount of $ 20,000 , which has an Initial Conversion Price equal to $ 7.89 per share, which was calculated based on a 20 % premium of the 5 -day VWAP immediately prior to the Second Closing Trigger.

The Subsequent Closing Notes will be convertible at a price per share equal to $ 7.89 per share, which price is calculated on the same basis as for the Second Closing Note.

A commitment fee of 2.0 % of the Notes is payable under the SPA.

Half of such fee was paid by the issuance on the first closing of warrants to purchase 55,498 of the Company’s common shares and half was payable in cash or warrants of 55,498 of the Company’s common shares, at our election, on the second closing.

The Company chose to issue warrants to

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

provided that Term Loan C is funded, and certain conditions are met.

On June 24, 2021, the Company drew $ 5,000 from Term Loan A.

Term Loan A matures on July 1, 2025.

Payments are for interest only through December 31, 2022.

The Company shall make equal monthly payments of principal, together with applicable interest, following the interest only period until the maturity date.

Interest shall accrue on the outstanding balance at a rate of 1 % above prime as published by the Wall Street Journal on the first day of each month (5.75% at June 30, 2022).

The Company is obligated to maintain a cash balance greater or equal to three times its monthly cash burn as calculated on the last date of the immediately preceding month.

If Company fails to maintain the aforementioned cash balance, the bank can call the full amount of loan outstanding.

Collateral for Term Loan A, B and C shall not include any copyrights, patents, trademarks, servicemarks and applications therefor, now owned or hereafter acquired, or any claims for damages by way of any past, present, and future infringement of any of the foregoing (collectively, the “Intellectual Property”);

provided, however, that the Collateral shall include all accounts and general intangibles that consist of rights to payment and proceeds from the sale, licensing or disposition of all or any part, or rights in the foregoing (the “Rights to Payment”).

Notwithstanding the foregoing, if a judicial authority (including a U.S.

Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary to have a security interest in the Rights to Payment, then the Collateral shall automatically, and effective as of the Effective Date, include the Intellectual Property to the extent necessary to permit perfection of Bridge Bank’s security interest in the Rights to Payment.

Aggregate annual payments due on Term Loan A as of June 30, 2022 are as follows (in thousands):

satisfy the payable on second closing.

The warrants will be exercisable at a price per share of $ 8.11 and will have a term of five years from the date of the grant.

The maturity date of the second tranche is September 23, 2027.

Cash interest on outstanding principal shall accrue at a rate of prime, plus 4.5 % per annum ( 10.75 % as of September 30, 2022), from the date of funding.

Cash interest is due on the first business day of each calendar quarter (“Interest Date”).

Payment-in-kind (“PIK”) interest will commence on funding date and accrue at a rate of 3.5 % per annum ( 9.75 % as of September 30, 2022).

PIK interest will stop accruing on August 24, 2024.

Any accrued PIK interest shall remain outstanding and be payable on each Interest Date and be added to the outstanding principal amount.

The SPA notes are convertible into fully paid, non-assessable share of common shares at any point after their issuance dates and before the maturity date.

Any amount of the SPA notes may be converted into common shares so long as it does not create partial shares.

The conversion rate is determined by dividing the conversion amount by the conversion price.

Aggregate annual payments due on the SPA as of September 30, 2022, are as follows:

Years Ending December 31,

2 unchanged sentences

Total term loan, net of debt discount

In the event of default or change of control, all unpaid principal and all accrued and unpaid interest amounts (if any) become immediately due and payable including the prepayment fee.

Events of default include, but are not limited to, a payment default, failure to achieve Approval Event before September 30, 2022, a material adverse change, and insolvency.

The Bridge Bank facility is secured by all of the Company’s assets, including all capital stock held by the Company.

Debt issuance costs amounting to $ 55 securing access to Term Loans A, B and C were paid in cash to Bridge Bank on June 24, 2021.

This amount was capitalized and is being amortized over the access period of the Term Loans.

Upon drawing Term Loan A, the Company recorded a debt discount of $ 14 , which was based on a pro-rata allocation of the issue costs to Loan A, reducing the capitalized amount by the same amount.

The debt discount is being amortized over the life of Term Loan A.

In the event of default or change of control, all unpaid principal and all accrued and unpaid interest amounts (if any) become immediately due and payable.

Events of default include, but are not limited to, a payment default, a material adverse change, and insolvency.

The SPA facility is secured by all of the Company’s assets, including all capital stock held by the Company.

Debt issuance costs amounting to $ 175 were paid in cash to the Creditor and warrants valued at $ 441 (non-cash) secured access to the SPA.

These amounts were capitalized and are being amortized over the access period of the SPA.

Upon drawing tranche 1 and tranche 2, the Company recorded a debt discount of $ 314 , which was based on a pro-rata allocation of the issue costs to secure the SPA, reducing the capitalized amount by the same amount.

The debt discount is being amortized over the term of the SPA.

Subsequent Events

On August 1, 2022, Fennec entered into a Securities Purchase Agreement (the “SPA”) with Petrichor (the “Investor”) in connection with the issuance of up to $ 45,000 of senior secured floating rate convertible notes (the “Notes”), issuable in multiple tranches.

Upon certain closing conditions being satisfied, an initial tranche of $ 5,000 (the “First Closing Note”) will be issued and convertible at a price per share equal to the Initial Conversion Price equal to $ 8.11 per share, a 20 %

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

premium of the 5 -day volume weighted average price (the “VWAP”) of the Company’s common shares as traded on the Nasdaq Capital Market immediately prior announcement of the SPA.

A second tranche (the “Second Closing Notes”) of $ 20,000 is to be funded upon the approval of the United States Food and Drug Administration of the Company’s PEDMARK and satisfaction of other closing conditions.

Each of the Second and Subsequent Closing Notes will be convertible at a price per share equal to a 20 % premium to the 5 -day VWAP of the Company’s common shares as traded on the Nasdaq Capital Market immediately prior to the date on which the Company obtains FDA approval of PEDMARK (the “Second Closing Trigger”), provided, however, that the Second Closing Note and Subsequent Closing Notes Conversion Price shall be no more than one hundred and fifty percent ( 150 %) of the Initial Conversion Price.

A commitment fee of 2.0 % of the Notes is payable under the SPA.

Half of such fee will be paid by the issuance on the first closing of warrants to purchase 55,498 Fennec common shares and half is payable in cash or warrants, at our election, on the second closing.

The warrants will be exercisable at a price per share of $ 8.11 and will have a term of five years from the date of the grant.The initial $ 5 million tranche will be used to pay off the outstanding balance of the Bridge Bank Loan Security Agreement (Note 7).

On October 17, 2022, the Company announced the U.S.

commercial launch and availability of PEDMARK ® for pediatric patients one month of age and older.

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