What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-08-07 · 217 added, 151 removed, 467 unchanged (44% of the section changed)

3 unchanged sentences

Dollars and shares in thousands)

June 30, 2023

September 30,

Current assets

5 unchanged sentences

Non-current assets

ROU asset non-current

Deferred issuance costs, net of amortization

4 unchanged sentences

Accrued liabilities

Operating lease liability - current

Total current liabilities

Long term liabilities

Non-current liabilities

Debt discount

Total long term liabilities

Operating lease liability - net of current portion

Total non-current liabilities

Total liabilities

14 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

PEDMARK® product sales, net

7 unchanged sentences

Other (expense)/income

Unrealized foreign exchange gain/(loss)

Realized foreign exchange (loss)/gain

Amortization expense

10 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity

Three and Six Months Ended June 30, 2023, and 2022

Three and Nine Months Ended September 30, 2023, and 2022

dollars and shares in thousands)

10 unchanged sentences

Balance at June 30, 2023

Stock-based compensation - employees

Stock option exercise

Restricted stock release

Balance at September 30, 2023

Comprehensive

11 unchanged sentences

Balance at June 30, 2022

Stock-based compensation - employees

Stock-based compensation - consultants

Warrants issued to creditor

Stock option exercise

Restricted stock release

Balance at September 30, 2022

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

2 unchanged sentences

Dollars in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows (used in) provided by:

13 unchanged sentences

Financing activities:

Long-term debt

Long-term debt paid

Issuance of shares, options exercise

Cash paid for taxes on restricted share release

Capitalized deferred issuance costs

Net cash provided by financing activities

Decrease 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:

Capitalized lease asset

Warrants issued for long-term debt

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

3 unchanged sentences

Nature of Business and Going Concern

Fennec Pharmaceuticals Inc.

(“Fennec,” “the Company,” “we,” “us,” or “our”) was originally formed as a British Columbia corporation under the name Adherex Technologies Inc.

Fennec Pharmaceuticals Inc., a corporation existing under the laws of British Columbia (“Fennec,” the “Company,” “we,” “us,” or “our”), was originally formed under the name Adherex Technologies Inc.

and subsequently changed its name on September 3, 2014.

5 unchanged sentences

(“CBI”), a Canadian corporation, and Fennec Pharmaceuticals (EU) Limited (“Fennec Limited”), an Ireland company, collectively referred to herein as the “Company.” With the exception of Fennec Pharmaceuticals, Inc.

all subsidiaries are inactive.

and Fennec Pharmaceuticals (EU) 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 six months ended June 30, 2023, the Company incurred a loss from operations of $ 4,666 and $ 9,936 , respectively.

At June 30, 2023, it had an accumulated deficit of $ 214,696 and had experienced negative cash flows from operating activities during the six months ended June 30, 2023, in the amount of $ 9,523 .

During the three and nine months ended September 30, 2023, the Company incurred a loss from operations of $ 1,017 and $ 10,953 , respectively.

At September 30, 2023, it had an accumulated deficit of $ 216,563 and had experienced negative cash flows from operating activities during the nine months ended September 30, 2023, in the amount of $ 12,283 .

On August 1, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”) with Petrichor Opportunities Fund I LP (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 (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 SPA dated August 1, 2022.

On August 19, 2022, the Company closed 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 SPA.

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®.

On September 23, 2022, the Company closed 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®.

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 Investor (the “Subsequent Closing Notes”).

1 unchanged sentence

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

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

Half of such fee was paid by the issuance on the first closing of warrants to purchase approximately 0.05 Fennec common shares (“First Closing Warrant”) and half was payable in cash or warrants of approximately 0.05 Fennec common shares (“Second Closing Warrant”), at the Company’s 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.

8 unchanged sentences

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, 2022.

Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited condensed 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, 2022.

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, 2022.

1 unchanged sentence

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

The results of operations for the three and six months ended June 30, 2023, 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, 2023, are not necessarily indicative of results to be expected for the full fiscal year.

Use of Estimates

5 unchanged sentences

The Company views its operations and manages its business in one operating segment principally in the United States.

As of June 30, 2023, the Company has no assets located outside of the United States.

As of September 30, 2023, the Company had an operating lease in Ireland.

This is the only asset located outside of the United States.

Stock-Based Compensation

Under the Company’s stock-based compensation programs, the Company periodically grants stock options and restricted stock to employees, directors, and consultants.

The Company also issues shares under an employee stock purchase plan.

Under the Company’s stock-based compensation programs, the Company periodically grants stock options and restricted stock units to employees, directors, and consultants.

The fair value of each award is recognized in the Company’s statements of operations over the requisite service period for such award.

15 unchanged sentences

The Company expensed pre-launch inventory as it could not reasonably anticipate FDA approval of PEDMARK ® .

New Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” This ASU replaces the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information for credit loss estimates on certain types of financial instruments, including trade receivables.

In addition, new disclosures are required.

The ASU, as subsequently amended, is effective for the Company for fiscal years beginning after December 15, 2022, as the Company is a smaller reporting company as defined in Item 10(f)(1) of Regulation S-K.

We adopted ASU 2016-13 on January 1, 2023.

Based on the composition of the Company’s accounts receivable, the adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures.

Specifically, the Company’s estimate of expected credit losses as of June 30, 2023, using its expected credit loss evaluation process, resulted in no adjustments to the provision for credit losses and no cumulative effect adjustment to accumulated deficit on the adoption date of the standard.

Revenue Recognition

5 unchanged sentences

On September 20, 2022, the FDA approved PEDMARK ® in the United States to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors.

PEDMARK ® became commercially available on October 17, 2022.

PEDMARK ® became commercially available in the United States on October 17, 2022.

PEDMARK ® is the Company’s first commercial product.

4 unchanged sentences

In addition to distribution agreements with Customers, the Company enters arrangements with health care providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s products.

Revenues from product sales are recognized when the Customer obtains control of the Company’s

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

product, which occurs at a point in time, typically upon delivery to the Customer.

Revenues from product sales are recognized when the Customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the Customer.

The amount of revenue recognized is net of these discounts in an amount equal to the cash expected to be collected.

4 unchanged sentences

Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of its contracts.

The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that it

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

The actual amounts of consideration ultimately received may differ from the Company’s estimates.

5 unchanged sentences

Discounts for Prompt Payment:

The Customers receive a discount of 0.65 % for prompt payment.

Customers receive a discount of 0.65 % for prompt payment.

The Company expects its Customers will earn 100 % of their prompt payment discounts and, therefore, the Company deducts the full amount of these discounts from total product sales when revenues are recognized.

8 unchanged sentences

The Company accrues a liability for co-payment assistance based on actual program participation and estimates of program redemption using Customer data provided by the third party that administers the copay program.

If actual program redemption varies from estimates, the Company may need to adjust its accruals, which would affect net product revenues in the period of adjustment.

Other Customer Credits:

The Company pays fees to certain of its Customers for account management, data management and other administrative services.

To the extent the services received are distinct from the sale of products to its Customers, the Company classifies these payments in selling and marketing, general and administrative expenses in its Consolidated Statements of Operations.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

The following table summarizes net product revenues for PEDMARK ® in the United States and abroad earned during the three and six months ended June 30, 2023 and 2022, respectively:

The following table summarizes net product revenues for PEDMARK ® in the United States and abroad earned during the three and nine months ended September 30, 2023 and 2022, respectively:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Product revenues:

2 unchanged sentences

Net product revenues

The following table summarizes the percentage of total product revenues for PEDMARK ® in the United States and abroad by Customers who individually accounted for 10 % or more of total product revenues earned in the three and six months ended June 30, 2023, and 2022, respectively:

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

The following table summarizes the percentage of total product revenues for PEDMARK ® in the United States and abroad by Customers who individually accounted for 10 % or more of total product revenues earned in the three and nine months ended September 30, 2023, and 2022, respectively:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Specialty Distributors

Subtotal-Specialty Distributors

Direct Customers and those less than 10%

The activities and ending allowance balances for each significant category of discounts and allowances for PEDMARK ® (which constitute variable consideration) for the six months ended June 30, 2023, was as follows:

Direct Customers

The activities and ending allowance balances for each significant category of discounts and allowances for PEDMARK ® (which constitute variable consideration) for the nine months ended September 30, 2023, was as follows:

Rebates, Customer

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Balance at June 30, 2023

Provision related to sales made in:

Current period

Prior periods

Payments and customer credits issued

Balance at September 30, 2023

The allowances for chargebacks, fees due to Customers, rebates and discounts for prompt payment are recorded as a contra-asset to accounts receivable, while Medicaid rebates and return allowances are in accrued liabilities in the accompanying Condensed Consolidated Balance Sheets.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Trade Receivables

4 unchanged sentences

These credit risk factors are monitored on a quarterly basis and updated as necessary.

To the extent that any individual debtor is identified whose credit quality has deteriorated, the Company establishes allowances based on the individual risk characteristics of such a customer.

To the extent that any individual debtor is identified whose credit quality has deteriorated, the Company establishes allowances based on the individual risk

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

characteristics of such a Customer.

The Customers are mainly specialty distributors, and accordingly, the Company considers the risk of potential credit losses to be low.

It is the policy of the Company to reserve 1% of its net sales to non-specialty distributors, as such the Company had an immaterial balance in allowance for doubtful accounts as of June 30, 2023.

It is the policy of the Company to reserve 1% of its net sales to non-specialty distributors, as such the Company had an immaterial balance in allowance for doubtful accounts as of September 30, 2023.

Cost of Products Sold

Cost of products sold is related to the Company's product revenues for PEDMARK ® and consists primarily of product production costs associated with finished goods inventory and royalties ( 1 % of net sales) the Company is required to pay to Oregon Health & Science University (“OHSU”) on all net sales of PEDMARK ® .

The cost of products sold also consists of shipping and other third party logistics and distribution costs for the Company’s product.

The Company considered regulatory approval of its product candidate to be uncertain and product manufactured prior to regulatory approval could not have been sold unless regulatory approval was obtained.

The cost of products sold also consists of shipping and other third party logistics and distribution costs for PEDMARK ® .

The Company considered regulatory approval of PEDMARK ® to be uncertain and product manufactured prior to regulatory approval could not have been sold unless regulatory approval was obtained.

As such, the manufacturing costs for PEDMARK ® incurred prior to regulatory approval were not capitalized as inventory but were expensed as research and development costs.

After FDA approval in September 2022, the Company had various lots of PEDMARK ® in various stages of production in connection with the fourth quarter product launch.

As of June 30, 2023, the Company capitalized approximately $ 1.4 million of costs as inventory on the Condensed Consolidated Balance Sheet.

Of the items capitalized, $ 0.1 million was capitalized as raw materials, $ 0.6 million was capitalized as work in process, $ 0.7 million was capitalized into finished goods, with $ 0.2 million of that being reclassified to cost of products sold.

After FDA approval in September 2022, the Company had various lots of PEDMARK ® in various stages of production in connection with the product launch.

As of September 30, 2023, the Company capitalized approximately $ 1.8 million of costs as inventory on the Condensed Consolidated Balance Sheet.

Of the items capitalized, $ 0.1 million was capitalized as raw materials, $ 0.9 million was capitalized as work in process, $ 0.8 million was capitalized into finished goods, with $ 0.6 million being reclassified to cost of products sold.

Cash and Cash Equivalents

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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, 2023, the Company had $ 14,958 in cash, savings and money market accounts ($ 23,774 at December 31, 2022).

At June 30, 2023, the Company held $ 3,501 in cash of which $ 507 (as presented in U.S.

At September 30, 2023, the Company had $ 12,399 in cash, savings and money market accounts ($ 23,774 at December 31, 2022).

At September 30, 2023, the Company held $ 2,007 in cash of which $ 488 (as presented in U.S.

dollars) was in Canadian dollars ($ 34 at December 31, 2022 as presented in U.S.

At June 30, 2023, the Company held $ 11,457 in money market investments.

At September 30, 2023, the Company held $ 10,392 in money market investments.

Money market investments typically have minimal risks.

1 unchanged sentence

Financial Instruments

Financial instruments recognized on the balance sheets at June 30, 2023 and December 31, 2022 consist of cash and cash equivalents, accounts receivable, accounts payable and term loans, the carrying values of which approximate fair value due to their relatively short time to maturity or interest rates that approximate market interest rates.

Financial instruments recognized on the balance sheets at September 30, 2023 and December 31, 2022 consist of cash and cash equivalents, accounts receivable, accounts payable and term loans, the carrying values of which approximate fair value due to their relatively short time to maturity or interest rates that approximate market interest rates.

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

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

or Canadian industrial companies, utilities, financial institutions and consumer

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.

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

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.

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This policy also limits the amount of credit exposure to any one issue or type of instrument.

The Company’s trade receivables:

include amounts billed to Customers for product sales of PEDMARK ® .

The Company’s trade receivables include amounts billed to Customers for product sales of PEDMARK ® .

The Customers are a limited group of specialty distributors and select customers abroad, with substantial financial resources, and accordingly, the Company considers the risk of potential credit losses to be low.

2 unchanged sentences

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized.

As of June 30, 2023, we maintained a full valuation allowance against our deferred tax assets.

The provisions of the Financial Accounting Standards Board (“FASB”) ASC 740-10, Uncertainty in Income Taxes, address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.

As of September 30, 2023, we maintained a full valuation allowance against our deferred tax assets.

The provisions of the FASB ASC 740-10, Uncertainty in Income Taxes, address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.

Under ASC 740-10, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position.

2 unchanged sentences

All gains and losses from currency transactions are included in results of operations.

New Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” This ASU replaces the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information for credit loss estimates on certain types of financial instruments, including trade receivables.

In addition, new disclosures are required.

The ASU, as subsequently amended, is effective for the Company for fiscal years

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

beginning after December 15, 2022, as the Company is a smaller reporting company as defined in Item 10(f)(1) of Regulation S-K.

We adopted ASU 2016-13 on January 1, 2023.

Based on the composition of the Company’s accounts receivable, the adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures.

Specifically, the Company’s estimate of expected credit losses as of September 30, 2023, using its expected credit loss evaluation process, resulted in no adjustments to the provision for credit losses and no cumulative effect adjustment to accumulated deficit on the adoption date of the standard.

In July 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-03 to amend various SEC paragraphs in the Accounting Standards Codification to primarily reflect the issuance of SEC Staff Accounting Bulletin No.

2023-03, “Presentation of Financial Statements (Topic 205), Income Statement-Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation-Stock Compensation (Topic 718):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280-General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock.” ASU 2023-03 amends the ASC for SEC updates pursuant to SEC Staff Accounting Bulletin No.

SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force (“EITF”) Meeting;

and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock.

These updates were immediately effective and did not have a material impact on our financial statements.

In October 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-06 to amend various SEC paragraphs in the Accounting Standards Codification to primarily reflect SEC Release No.

33-10532, Disclosure Update and Simplification.

ASU 2023-06 amends disclosure guidance over an entity’s accounting policy related to derivative instruments, material prior period adjustments upon a change in a reporting entity, earnings-per-share, encumbered assets, unused lines of credit and unfunded commitments, and liquidation preferences of preferred stock.

The amendments are effective prospectively on the date each individual amendment is effectively removed from Regulation S-X or Regulation S-K.

Loss Per Share

1 unchanged sentence

Diluted net loss per share is computed using the same method, except the weighted average number of common shares outstanding includes convertible debentures, stock options and warrants, if dilutive, as determined using the if-converted method and treasury methods.

Accordingly, warrants to purchase 0.2 million of our common shares and options to purchase 4.9 million of our common shares at June 30, 2023, were not included in loss per share.

Accordingly, warrants to purchase 0.2 million of our common shares and options to purchase 5.0 million of our common shares at September 30, 2023, were not included in loss per share.

Such instruments would have an antidilutive effect.

During the same period in 2022, warrants to purchase 0.04 million of our common shares and options to purchase 4.3 million common shares were excluded from the computation of loss per share as their inclusion would have been antidilutive.

Loss Per Share

Earnings per common share is presented under two formats:

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

Basic earnings per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period.

Diluted earnings per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period, plus the potentially dilutive impact of common stock equivalents (i.e.

stock options and warrants).

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

The following 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:

Six Months Ended June 30,

Nine Months Ended September 30,

Options to purchase common shares

3 unchanged sentences

The Company’s authorized capital stock consists of an unlimited number of common shares, no par value per share.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Warrants to Purchase Common Stock

During the three and six months ended June 30, 2023 and 2022, there were no warrants issued or exercised .

Outstanding warrants have a weighted average life of 4.56 years, and a weighted average strike price of $ 7.79 , on June 30, 2023.

During the three and nine months ended September 30, 2023 and 2022, there were no warrants issued or exercised .

The company has 150 outstanding warrants have a weighted average life of 4.30 years, and a weighted average strike price of $ 7.79 , on September 30, 2023.

Equity Incentive Plan

5 unchanged sentences

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

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

the issuance of Canadian and U.S.

The Plan allows the issuance of Canadian and U.S.

dollar grants.

The table below outlines recognized contractor and employee expense from equity awards for the three and six month periods ended June 30, 2023 and 2022.

The table below outlines recognized contractor and employee expense from equity awards for the three and nine month periods ended September 30, 2023 and 2022.

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Contractor options expense recognized

2 unchanged sentences

Stock Option Activity

The following is a summary of option activity for the three and six months ended June 30, 2023 for stock options denominated in U.S.

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

The following is a summary of option activity for the three and nine months ended September 30, 2023 for stock options denominated in U.S.

Weighted-Average

4 unchanged sentences

Outstanding at June 30, 2023

Outstanding at September 30, 2023

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Of the 5,005 U.S.

denominated options granted and outstanding at June 30, 2023, 3,870 are fully vested and exercisable.

denominated options granted and outstanding at September 30, 2023, 3,932 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.

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

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

Black-Scholes Model Assumptions

June 30, 2023

September 30, 2023

Expected dividend

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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, 2023.

During the three and six months ended June 30, 2023, there were 1 and 4 RSU’s

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

released from restriction, respectively.

During the three and six months ended June 30, 2023, there were 0 and 17 RSU’s forfeited by departing employees.

RSU’s vesting vary from one to three years .

The Plan allows for the issuance of restricted share units (“RSUs”).

The following is a summary of RSU activity for the three and nine months ended September 30, 2023.

During the three and nine months ended September 30, 2023, there were 32 and 36 RSU’s released from restriction, respectively.

During the three and nine months ended September 30, 2023, there were 84 and 101 RSUs forfeited by departing employees.

RSUs vesting vary from one to three years .

Restricted Share

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Outstanding at June 30, 2023

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.

Outstanding at September 30, 2023

The value of RSUs issued was estimated using the share price on the date of the award multiplied by the number of common shares granted.

Fair Value Measurements

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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.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share 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:

2 unchanged sentences

Unobservable inputs that are not corroborated by market data.

Fair Value Measurement at June 30, 2023 and December 31, 2022

Fair Value Measurement at September 30, 2023 and December 31, 2022

(in thousands)

6 unchanged sentences

Processa common shares

The Company held approximately $ 3,501 in cash as of June 30, 2023, of which approximately $ 507 was in Canadian funds (translated into U.S.

The Company held approximately $ 2,007 in cash as of September 30, 2023, of which approximately $ 488 was in Canadian funds (translated into U.S.

As of December 31, 2022, the Company held approximately $ 307 in cash of which approximately $ 33 was in Canadian funds (translated into U.S.

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(NASDAQ:PCSA), which it received as part of a royalty arrangement in 2020.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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, and their use in oncology (the “OHSU Agreement”).

On February 20, 2013, we 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.

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.

On May 18, 2015, we 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 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.

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Fennec Pharmaceuticals Inc., et al.

On September 3, 2020, plaintiff Jim Chapman filed a putative federal securities class action lawsuit against the Company, our Chief Executive Officer, Rostislav Raykov, and Chief Financial Officer, Robert Andrade, in the United States District Court for the Middle District of North Carolina, captioned Chapman v.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Court for the Middle District of North Carolina, captioned Chapman v.

Fennec Pharmaceuticals Inc., et al ., Case No.

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

On May 4, 2022,

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

lead plaintiff submitted a reply in support of his motion.

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 ® .

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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 ® .

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The ‘190 Patent was issued on March 24, 2020.

On May 9, 2022, the PTAB granted Hope’s Petition to Institute the IPR against the ‘190 Patent.

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

On December 5, 2022, a Revised Motion to Amend the single claim of the ‘190 Patent was filed in the IPR, maintaining the focus on the treatment of medulloblastoma.

On April 18, 2023, the PTAB issued a final written decision denying the Motion to Amend the claim of the ‘190 Patent, and invalidating the only claim of the‘190 Patent.

On December 5, 2022, a Fennec filed a Motion to Amend the single claim of the ‘190 Patent focing on the treatment of medulloblastoma.

On April 18, 2023, the PTAB invalidated the only claim of the‘190 Patent.

The final written decision became effective June 20, 2023.

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Two United States patent applications claiming priority through the ‘190 Patent remain pending at the United States Patent and Trademark Office (“USPTO”).

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

On October 29, 2021, Hope Medical Enterprises, Inc.

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10,792,363 (the “’363 Patent”), which relates to an anhydrous form of STS and its method of manufacture, which is the active pharmaceutical ingredient in the PEDMARK ® product.

The ‘363 Patent was issued on October 6, 2020.

The ‘363 Patent was issued October 6, 2020.

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

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Because the remaining claims in the ‘363 patent are directed to a method of manufacture, the ‘363 patent is not eligible for listing in the Orange Book.

On December 14, 2022, we filed a Revised Motion to Amend the remaining claims in the ‘363 Patent.

In April 2023, the PTAB extended the time for a decision on the ‘363 Patent IPR up to an additional 6 months, or November 2023, after which the decision can be reconsidered and/or appealed by the losing party.

In September 2023, the PTAB issued a Final Written Decision in favor of Fennec and upholding the amended claim.

Hope has until November 3, 2023 to request that PTAB reconsider the Final Written Decision, or alternatively, file an appeal of the Final Written Decision with the Court of Appeals for the Federal Circuit.

If no further actions are taken, the ‘363 Patent as amended will remain in force.

The USPTO has now granted three additional U.S.

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The certifications allege these patents are invalid or will not be infringed by the manufacture, use, or sale of CIPLA’s sodium thiosulfate solution.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Under the Food and Drug Cosmetic Act, as amended by the Drug Price Competition and Patent Term Restoration Act of 1984, as amended, after receipt of a valid Paragraph IV notice, the Company may bring a patent infringement suit in a federal district court against CIPLA within 45 days from the receipt of the Notice Letter and if such a suit is commenced within the 45 -day period, the Company is entitled to a 30 month stay on the FDA’s ability to give final approval to any proposed products that reference PEDMARK ® .

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2:23-cv-00123), for infringement of the ‘190 Patent, the ‘728 Patent, and the ‘984 Patent.

On April 20, 2023, we filed an Amended Complaint to only assert infringement of the ‘728 patent and the ‘984 Patent.

On April 20, 2023, we filed an Amended Complaint to assert infringement of the ‘728 patent and the ‘984 Patent.

On April 4, 2023, we were granted US 11,617,793 Patent (the “’793 Patent”) covering the formulation of the PEDMARK ® product, which was listed in the Orange Book on or around April 17, 2023, and has an expiration date of July 2039.

2 unchanged sentences

The suit is ongoing.

PEDMARQSI (EU Brand name for PEDMARK) received European Commission approval in June 2023 and was granted 10 years of market exclusivity in Europe under Pediatric Use (“PUMA”).

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

PEDMARQSI TM (EU Brand name for PEDMARK ® ) received European Commission approval in June 2023 and was granted 10 years of market exclusivity in Europe under Pediatric Use (“PUMA”).

Executive Severance

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The Company was required to pay a security deposit of $ 2 , which is the equivalent to two months of rent.

The Office Service Agreement commenced on January 27, 2020, and terminated on July 31, 2020, thereafter the lease may continue on a month-to-month basis with either party being able to terminate the agreement by providing one months’ advance written notice of termination.

The Office Service Agreement commenced on January 27, 2020, and terminated on July 31, 2020, thereafter the lease has been continuing on a month-to-month basis with either party being able to terminate the agreement by providing one months’ advance written notice of termination.

On August 1, 2023, the Company entered into a second Office Service Agreement (the “Second Office Service Agreement”) with Regus to lease office space in Dublin, Ireland.

Per the terms of the Second Office Service Agreement, the monthly rent payments are $ 2 .

The Company was required to pay a security deposit of $ 5 , which is the equivalent of two months rent.

The Second Office Service Agreement commenced on August 1, 2023 and terminates on January 31, 2025, thereafter the lease may continue on a month-to-month basis with either party being able to terminate the agreement by providing one months’ advance written notice of termination.

The Second Office Service Agreement does not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring the operating lease liability.

The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease within a particular currency environment.

The Company uses an incremental borrowing rate consisting of the current prime rate plus 150 basis points for operating leases that

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

commenced after August 2023.

The depreciable lives of operating leases and leasehold improvements are limited by the expected lease term.

September 30, 2023

Remaining lease terms (in months)

Discount rate

Maturities of lease liabilities as of September 30, 2023 were as follows (in thousands):

Year Ending December 31,

2023 (remaining three months)

Less imputed interest

Total lease liabilities

Current operating lease liabilities

Non-current operating lease liabilities

Total lease liabilities

On August 1, 2022, the Company entered into the SPA with the Investor 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.

On August 19, 2022, the Company closed 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 Notes become 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.

On September 23, 2022, the Company closed 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 Fennec common shares and half was payable in cash or warrants of 55,498 Fennec common shares, at our election, on the second closing.

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

Half of such fee was paid by the issuance on the first closing of warrants to purchase approximately 0.05 Fennec common shares and half was payable in cash or warrants of approximately 0.05 Fennec common shares, at our election, on the second closing.

The Company chose to issue warrants to satisfy the payable on both the first and second closing.

The warrants are exercisable at a price per share of $ 8.11 and respectively, and both have a maturity date of August 19, 2027.

Cash interest on outstanding principal shall accrue at a rate of prime, plus 4.5 % per annum, from the date of funding ( 12.75 % at June 30, 2023 and 12 % as of December 31, 2022).

The warrants are exercisable at a price per share of $ 8.11 and both have a maturity date of August 19, 2027.

Cash interest on outstanding principal shall accrue at a rate of prime, plus 4.5 % per annum, from the date of funding ( 12.75 % at September 30, 2023 and 12 % as of December 31, 2022).

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.

In addition to cash interest, payment-in-kind (“PIK”) interest will commence on funding date and accrue at a rate of 3.5 % per annum.

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 Company has accrued $ 0.71 million in PIK interest and has classified the PIK interest in long-term liabilities.

The Notes are convertible into fully paid, non-assessable shares of the Company’s common shares at any point after their issuance dates and before the maturity date.

Any amount of the Notes may be converted into the Company’s common

Any accrued PIK interest

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

shares so long as it does not create partial shares.

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

The Company has accrued $ 0.71 in PIK interest and has classified the PIK interest in long-term liabilities.

The Notes are convertible into fully paid, non-assessable shares of the Company’s common shares at any point after their issuance dates and before the maturity date.

Any amount of the Notes may be converted into the Company’s 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.

Provisions of the PSA create legal, valid and enforceable liens on, and security interests in, all of the Company’s and each of its subsidiaries assets.

Aggregate annual payments due on the SPA as of June 30, 2023 are as follows (in thousands):

Provisions of the SPA create legal, valid and enforceable liens on, and security interests in, all of the Company’s and each of its subsidiaries assets.

Aggregate annual payments due on the SPA as of September 30, 2023 are as follows (in thousands):

Years Ending December 31,

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Subsequent Events

On August 3, Fennec announced the appointment of Adrian Haigh as Chief Operating Officer of Fennec.

Further, with Adrian’s appointment he will be stepping down from Fennec’s board.

Adrian had been a board member of Fennec since 2014 and recently retired from PTC Therapeutics where his last role was Senior Vice President and Head of International.

Previously, Mr.

Haigh served as Chief Operating Officer at Gentium GmbH where he built and managed the company’s commercial and medical affairs organization and was also responsible for business development, playing a pivotal role in the sale of Gentium to Jazz Pharmaceuticals for $1 billion.

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