What changed in this filing

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Item 9A. Controls and Procedures

2024-03-29 compared with 2023-03-29 · 409 added, 309 removed, 917 unchanged (44% of the section changed)

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Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer) have concluded based on their evaluation as of December 31, 2022 that our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act are effective.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer and principal accounting officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting, as defined in rules promulgated under the Exchange Act, is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and affected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Consolidated Financial Statements for external purposes in accordance with GAAP.

Internal control over financial reporting includes those policies and procedures that:

● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our Board of Directors;

● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our Consolidated Financial Statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations.

Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures.

Internal control over financial reporting can also be circumvented by collusion or improper override.

Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting.

However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022.

In making its assessment, management used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in its 2013 Internal Control — Integrated Framework .

Based on its assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2022.

Because we are a non-accelerated filer and smaller reporting company, Haskell & White LLP, our independent registered public accounting firm, is not required to attest to or issue a report on the effectiveness of our internal control over financial reporting.

The Company’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of December 31, 2023.

The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports the Company files under the Exchange Act is recorded, processed, summarized and reported within the time

periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosures.

In designing and evaluating our disclosure controls and procedures, the Company’s management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.

Our disclosure controls and procedures have been designed to meet reasonable assurance standards.

In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints that require the Company’s management to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2023, the Company's disclosure controls and procedures were not effective because of a material weakness in the Company's internal control over financial reporting related to fees and allowances paid to distributors for distinct services.

Management's Report on Internal Control over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

The Company's management evaluated the effectiveness of its internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Based on that evaluation, the Company’s management has concluded that, as of December 31, 2023, our internal controls over financial reporting were not effective because of the existence of a material weakness in internal control over financial reporting related to fees and allowances paid to distributors for distinct services.

Material Weaknesses in Internal Control Over Financial Reporting

A material weakness is defined as a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

With respect to the fees and allowances paid to distributors for distinct services, the execution of the controls over the application of accounting literature did not operate effectively with respect to:

● Measurement and classification of fees paid to customers for distinct services under ASC 606 Revenue from Contracts with Customers .

● Measurement of services received and expensed in a reporting period, measurement of services that pertain to future periods, and the periods of attribution for those future services.

Remediation Process

The Company is evaluating the material weaknesses and developing a plan of remediation to strengthen the effectiveness of the design and operation of its internal control environment.

The remediation plan will include the following actions:

● Enhance the formality of its review procedures with respect to accounting for new contracts with customers.

● Strengthen the review process to improve the operation of accounting and review controls with respect to complex and non-recurring ransactions, as well as those transactions that require significant estimates and judgments.

● Engaging additional service providers or hiring additional full-time employees may be necessary and advisable to address these weaknesses.

The actions that the Company is taking are subject to ongoing senior management review as well as Audit Committee oversight.

The Company is committed to maintaining a strong internal control environment and believes that these remediation efforts will represent significant improvements in its controls.

The Company has started to implement these steps;

however, some of these steps will take time to be fully integrated and confirmed to be effective and sustainable.

Additional controls may also be required over time.

Until the remediation steps set forth above are fully implemented and tested, the material weakness described above will continue to exist.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of our internal control over financial reporting that occurred during the last fiscal quarter covered by this Annual Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There were no changes to the Company’s internal control over financial reporting during the fourth quarter of 2023 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitation on the Effectiveness of Internal Controls

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Other Information

Insider Adoption or Termination of Trading Arrangements

During the fiscal quarter ended December 31, 2023, Rostislav Raykov , informed us of the adoption of a 10b5-1 trading arrangement for 133,000 shares to be sold with a termination date of December 13, 2024 .

No additional directors or officers informed us of the adoption , modification or termination of a “ Rule 10b5-1 trading arrangement ” or “ non-Rule 10b5-1 trading arrangement ,” as those terms are defined in Regulation S-K, Item 408.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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CEO of Fennec Pharmaceuticals Inc.

previously Portfolio Manager at Alchem Partners;

previously Portfolio Manager at John Levin & Company

Robert Andrade, Texas, USA

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CFO of Fennec Pharmaceuticals

previously senior analyst at Magnetar Capital;

previously Portfolio Manager at Millennium Partners

Haigh, Dublin, Ireland

Chief Operating Officer

Senior Vice President and General Manager of EMEA Region at PTC Therapeutics;

previously Chief Operating Officer at Gentium GmbH;

previously Regional VP Commercial Operations at Biogen Idec

Rallis, North Carolina,

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VP Preclinical Development at Nerviano Medical Sciences.

Haigh, Dublin, Ireland

Director (1)(3)

Former SVP, Head of International at PTC Therapeutics;

previously Chief Operating Officer at Gentium GmbH;

previously Regional VP Commercial Operations at Biogen Idec

Khalid Islam, Lugano, Switzerland

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As a result of these and other professional experiences, Mr.

Raykov has financial expertise and experience with the Corporation as it has developed within the drug development industry and, as such, is able to provide the Corporation with unique insight and guidance.

Raykov has financial expertise and experience with the Company as it has developed within the drug development industry and, as such, is able to provide the Company with unique insight and guidance.

Robert Andrade

Andrade has served as Chief Financial Officer since November 2015.

Andrade was previously Chief Financial Officer and Director of Fennec from September 2009 until August 2013.

Andrade has served as Chief Financial Officer of Fennec since November 2015.

Andrade was previously Chief Financial Officer and a director of Fennec from September 2009 until August 2013.

In addition to his role with Fennec, Mr.

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Andrade graduated from University of Southern California, where he earned a Masters of Arts degree and Bachelor of Arts degree in economics.

Haigh has served as Chief Operating Officer of Fennec since August 2023.

Haigh served as a director of Fennec from April 2014 through July of 2023.

Haigh retired from PTC Therapeutics on December 31, 2022, where his last role at PTC was Senior Vice President and Head of International.

He joined PTC in 2014 as Head of EMEA and built its international organization.

Previously, Mr.

Haigh served as Chief Operating Officer at Gentium GmbH since March 2011.

Prior to joining Gentium, Mr.

Haigh served as Regional VP Commercial Operations at Biogen Idec where he managed several affiliates and also the global distributor business and prior to that he was the General Manager of Amgen Nordic and Portugal.

He served as the Executive Vice President of Global Marketing and Corporate Planning at EUSA Pharma and joined EUSA from Amgen where he led the international oncology franchise.

Haigh previously has held senior commercial and marketing positions at SmithKline Beecham, Schering Plough, Organon and Novo Nordisk.

He has been a director of Fennec since April 2014.

He received a Bachelor of Arts with Honors in Economic History from Huddersfield Polytechnic, West Yorkshire, England, a Diploma in Marketing from the Institute of Marketing and a Diploma in Company Direction from the Institute of Directors.

Rallis has served as a director of Fennec since August 2011.

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His knowledge in particular, of clinical drug development in Europe, deepens the Board’s collective qualifications, skills and experience.

Haigh has been a director of Fennec since April 2014.

Haigh retired from PTC Therapeutics on Dec 31 st 2022, his last role at PTC was Senior Vice President and Head of International, he joined the company in 2014 as Head of EMEA and built the company’s international organization.

Previously Mr.

Haigh served as Chief Operating Officer at Gentium GmbH since March 2011.

Prior to joining Gentium, Mr.

Haigh served as Regional VP Commercial Operations at Biogen Idec where he managed several affiliates and also the global distributor business and prior to that was the General Manager of Amgen Nordic and Portugal.

He served as the Executive Vice President of Global Marketing and Corporate Planning at EUSA Pharma and joined EUSA from Amgen where he led the international oncology franchise.

Haigh previously has held senior commercial and marketing positions at SmithKline Beecham, Schering Plough, Organon and Novo Nordisk.

He has been a Director of Fennec Pharmaceuticals Inc.

since April 28, 2014.

As a result of these and other professional experiences, Mr.

Haigh has extensive international oncology development expertise which strengthens the Board’s collective qualifications, skills and experience.

Islam has been a director of Fennec since April 2014 and is our current Chairman of the Board.

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The directors have appointed an Audit Committee consisting of three directors:

Rallis, Khalid Islam and Adrian Haigh, each of whom is independent and financially literate within the meaning of National Instrument 52-110 – Audit Committees and is independent under Rule 5605(a)(2) of the Nasdaq listing standards.

Rallis, Khalid Islam and Adrian Haigh, each of whom is independent and financially literate within the meaning of National Instrument 52-110 – Audit

Committees and is independent under Rule 5605(a)(2) of the Nasdaq listing standards.

In addition, the Board has determined that Mr.

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Code of Ethics

In February 2004, our Board adopted a Mandate of the Board of Directors, Corporate Governance Guidelines and a Code of Business Conduct and Ethics (the “Conduct and Ethics Code”) applicable to all of our officers, directors and

We are committed to adhering to applicable legal requirements and maintaining the highest standards of conduct and integrity.

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Code of Ethics Request, Fennec Pharmaceuticals Inc., 68 TW Alexander Drive, PO Box 13628, Research Triangle Park, North Carolina 27709.

Insider Trading Policy

The Company has adopted an insider trading policy which governing the purchase, sale and/or other dispositions of its securities by directors, officers and employees (or the company itself) that are reasonably designed to promote compliance with insider trading laws, rules and regulations and any applicable listing standards.

The policy has been filed as Exhibit 10.16 to this Annual Report.

Executive Compensation

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Robert Andrade, CFO

Adrian Haigh, COO

Shubh Goel, CCO

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Dollar value amounts are based on individual grants to each of Mr.

Andrade and Ms.

Goel of 300,000, 250,000 and 75,000, 100,000 and 75,000, 100,000 options, respectively, on December 20, 2021 and June 2, 2021, at an exercise price of $4.08 and $7.53 per common share, respectively.

On December 20, 2021, Mr.

Andrade and Ms.

Goel were also awarded 37,500 Restricted Share Units each.

The December 20, 2021 awards and grants to the executives all vested conditionally upon FDA approval of PEDMARK ® in calendar year 2022 with executive still employed at the Company.

All option grants expire 10 years after grant date.

The June, 2021 grants vest in the following manner:

Andrade and Mr.

Haigh of 175,000, 75,000 and 200,000 options, respectively.

Such option grants were received on March 31, 2023 for Mr.

Raykov and Mr.

Andrade and August 7, 2023 for Mr.

March grants have an exercise price of $8.32, while the August grant was at an exercise price of $8.03.

On March 31, 2023, Mr.

Raykov and Mr.

Andrade were also awarded 87,500 and 37,500 Restricted Share Units each, respectively.

All option grants expire 10 years after the grant date.

All equity awards vest in the following manner:

one-third of these options shall vest and may be exercised one year after the grant date (the “Vesting Commencement Date”).

The remaining two-thirds of the options shall vest monthly at a rate of 1/24 th of the remaining grant and shall be exercisable as of the last day of each following month after the Vesting Commencement Date.

The remaining two-thirds of the options shall vest monthly at a rate of 1/24 th of the

remaining grant and shall be exercisable as of the last day of each following month after the Vesting Commencement Date.

As of the third anniversary of the grant date, all of the options shall be vested.

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Raykov’s employment terminates due to a change of control of Fennec, Mr.

Raykov’s remaining unvested options shall immediately vest and be fully exercisable.

Raykov’s remaining unvested equity shall immediately vest and be fully exercisable.

Raykov is dismissed from employment by us for any reason other than “for cause,” we are obligated to pay Mr.

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(a) received an initial annual salary in the amount of $165,000, and (b) may receive annual bonuses at the sole discretion of the Board.

Andrade’s employment terminates due to a change of control of the Fennec, Mr.

Andrade’s remaining unvested options shall immediately vest and be fully exercisable.

Andrade’s employment terminates due to a change of control of Fennec, Mr.

Andrade’s remaining unvested equity shall immediately vest and be fully exercisable.

Andrade is dismissed from employment by us for any reason other than “for cause,” we are obligated to pay Mr.

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Andrade’s salary is $423,982 per year.

Haigh has been employed by us since August of 2023.

Haigh was a director of the Company from April 2014 through July of 2023.

Haigh is employed by us as our Chief Operating Officer and:

(a) received an initial annual salary in the amount of €400,000 (Approximately $441,000 translated on December 31, 2023), and (b) may receive annual bonuses at the sole discretion of the Board.

Haigh’s employment terminates due to a change of control of Fennec, Mr.

Haigh’s remaining unvested options shall immediately vest and be fully exercisable.

Haigh is dismissed from employment by us for any reason other than “for cause,” we are obligated to pay Mr.

Haigh severance compensation equal to three month’s salary.

Effective December 31, 2023, Mr.

Haigh’s salary is €400,000 per year.

Goel commenced employment with us in September 2019.

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In addition to their employment agreements, Mr.

Andrade and Ms.

Haigh and Ms.

Goel are a party to a confidentiality and intellectual property agreement with the Company.

In the employment agreements for each of Mr.

Andrade and Ms.

Haigh and Ms.

Goel, “for cause” is generally defined as (1) material breach of the terms of the employment or intellectual property agreements;

(2) failure to perform the duties inherent in their position in good faith and in a reasonable and appropriate manner;

(2) failure to perform

the duties inherent in their position in good faith and in a reasonable and appropriate manner;

or (3) acts of fraud or embezzlement or other intentional misconduct which adversely affects our business.

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Robert Andrade, CFO

Shubh Goel, CCO

Adrian Haigh, COO 1

Haigh’s severance figures translated to U.S.

dollars as of December 31, 2023.

Payments on Change of Control

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Robert Andrade, CFO

Adrian Haigh, COO

(1) Change of control payments are calculated based on the two-year annualized average salary plus cash bonus as calculated as of December 31, 2023.

In addition to the payments above, an incentive plan has been established pursuant to which, upon completion of a change in control transaction prior to December 31, 2023, 1% of the transaction value up to $350 million and 1.25% of the transaction value in excess of $350 million up to $400 million and 1.5% of transaction value in excess of $400 million,

with 50% of such incentive pool being payable to the CEO, 30% to the CFO and the balance to other key personnel as determined by the CEO in consultation with the Compensation Committee.

Haigh’s figures translated to U.S.

dollars as of December 31, 2023.

In addition to the payments above, an incentive plan has been established pursuant to which, upon completion of a change in control transaction prior to December 31, 2024, 1% of the transaction value up to $350 million and 1.25% of the transaction value in excess of $350 million up to $400 million and 1.5% of transaction value in excess of $400 million, with 50% of such incentive pool being payable to the CEO, 30% to the CFO and the balance to other key personnel as determined by the CEO in consultation with the Compensation Committee.

Equity Grants, Exercises and Holdings

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We do not require our non-executive directors to own a specific amount of our common shares.

Each of Adrian J.

Haigh, Khalid Islam, Marco Brughera, Jodi Cook and Chris A.

Each of current directors Khalid Islam, Marco Brughera, Jodi Cook and Chris A.

Rallis has entered into an Independent Director Agreement with the Company, which provides for cash compensation as set forth by the Compensation Committee commensurate with that member’s responsibilities.

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Sonic Fund II, LP.

Solas Capital Management, LLC (5)

(1) For purposes of this table “beneficial ownership” is determined in accordance with Rule 13d-3 under the Exchange Act, pursuant to which a person or group of persons is deemed to have “beneficial ownership” of any common shares that such person or group has the right to acquire within 60 days after March 25, 2023.

For purposes of computing the percentage of outstanding common shares held by each person or group of persons named above, any shares that such person or group has the right to acquire within 60 days after March 27, 2023 are deemed outstanding but are not deemed to be outstanding for purposes of computing the percentage ownership of any other person or group.

For purposes of computing

the percentage of outstanding common shares held by each person or group of persons named above, any shares that such person or group has the right to acquire within 60 days after March 25, 2023 are deemed outstanding but are not deemed to be outstanding for purposes of computing the percentage ownership of any other person or group.

As of March 25, 2024 there were 27,099,908 common shares issued and outstanding.

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(3) Essetifin SpA, Via Sudafrica 20, Rome, Italy 00144.

Mario Artali holds voting and investment power over the shares owned by Essetifin SpA.

Roberto Capriata holds voting and investment power over the shares owned by Essetifin SpA.

(4) Sonic Fund II, LP, 400 Hobron Lane, Suite 3709, Honolulu, HI 96815.

Lawrence Kam holds voting and investment power over the shares held by Sonic Fund II, LP.

(5) Avaro Capital Advisors, LLC, 110 Greene Street, Suite 800, New York, NY 10012.

Scott Epstein holds voting and investment power over the shares owned by Avoro Capital Advisors, LLC.

(5) Solas Capital Management, LLC, 1063 Post Road, 2 nd Floor Darien, CT 06820.

Frederick Tucker Golden hold voting and investment power over the shares held by Solas Capital Management, LLC.

Equity Compensation Plan Information

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dollars and Canadian dollars.

At December 31, 2022, there were 2.2 million common shares available for future grants under our current stock option plan.

As of December 31, 2023, there were 1.7 million common shares available for future grants under our current stock option plan.

Certain Relationships and Related Transactions, and Director Independence

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The Board of Directors is composed of a majority of independent directors.

The Board applies the definition of independence found in the Nasdaq listing standards and in Canadian National Instruments 52-110 and 58-101 and National Policy 58-201.

The Board applies the definition of independence found in the Nasdaq listing standards and in Canadian National Instruments 52-110 and 58-101 and National

Policy 58-201.

The Board has determined that Mr.

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Exhibit 3.1 to the Form 8-K of the Company filed September 9, 2014

Fennec Pharmaceuticlas, Inc.

Description of the Registrant’s Securities

Filed herewith

Fennec Amended and Restated Stock Option Plan*

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Exhibit 4.5 to the Form S-3 of the Company filed December 1, 2022

First Amendment to Securities Purchase Agreement and Third Closing of Financing Transaction, dated as of December 4, 2023, between Fennec Pharmaceuticals, Inc.

and Petrichor Opportunities Fund I LP

Exhibit 4.6 to the form 8-K of the Company filed December 6, 2023.

Fennec Pharmaceuticals, Inc.

Insider Trading Policy, dated July 11, 2009.

Filed herewith

Letter Regarding Change in Certifying Accountant

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Filed herewith

Fennec Pharmaceuticals, Inc.

Incentive Compensation Recovery Policy

Filed herewith

Press Release for Fiscal Year Ended December 31, 2022

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/s/ Adrian J.

Chief Operating Officer

March 29, 2024

(principal operations office)

March 29, 2024

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Report of Independent Registered Public Accounting Firm

Bookmark not defined.

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Shareholders’ (Deficit) Equity

Consolidated Statements of Shareholders’ Deficit

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheets of Fennec Pharmaceuticals Inc.

and subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, shareholders’ (deficit) equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

and subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, shareholders’ deficit, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and Canadian generally accepted auditing standards.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)

Estimated Product Discounts and Allowances

Estimated Product Allowances and Discounts

Critical Audit Matter Description

As discussed in Note 2 to the consolidated financial statements, the Company recognizes revenues at the net sales price, which includes estimates of variable consideration for which reserves are established primarily from rebates, chargebacks, discounts, returns and other allowances (the “allowances”).

The estimation of these allowances is an important factor in the determination of net sales price and requires subjective management assumptions.

Allowances totaled approximately $234,000 for the year ended December 31, 2022, and such amounts were recorded as reductions to trade receivables or accrued expenses as of December 31, 2022, depending on the nature of the contract and the related settlement.

As described in Note 2 to the consolidated financial statements, the Company recognizes revenues based on the net sales price, which includes estimates of variable consideration for which reserves are established primarily from rebates, chargebacks, discounts, returns, and other allowances.

In addition, certain distributors provide distinct and estimable services to the Company in exchange for product discounts.

The estimated fair value of distinct and estimable services

performed by the distributor and the attribution of those amounts to the period of benefit are important factors in the determination of net sales price and requires subjective management assumptions.

Allowances totaled $2.5 million for the year ended December 31, 2023, and distinct and estimable distributor services totaled $6.3 million for the year ended December 31, 2023, of which $2.0 million is presented as a prepaid expense as of December 31, 2023.

How the Critical Audit Matter was Addressed in the Audit

Auditing the Company’s estimated allowances was complex and judgmental because the estimates involve subjective management assumptions about the product’s end users at the time of product distribution.

Auditing estimates of the amount and timing of distinct distributor services provided to the Company was complex and judgmental because the estimates involve significant measurement uncertainty about the fair value of services received by the Company and when such services were rendered to the Company.

Reductions to gross product revenue are sensitive to changes in management’s assumptions.

Furthermore, PEDMARK® is the Company’s first commercial product, and as a result, management does not have Company-specific historical experience to make those estimates and relies on industry data and any known trends in making those estimates.

To test the allowances, our audit procedures included, among others:

◾ Through inquiry and observation, we obtained an understanding of the significant management assumptions supporting each potentially significant component of the allowances, including the nature of each allowance and the related percentage estimated by management.

◾ We assessed the methodologies used to determine the allowances and tested estimated percentages by corroborating the underlying data used to develop the estimate, which included the completeness and accuracy of such data.

Our testing included comparing key assumptions used to calculate the allowances to external data, customer contracts, and payment data.

◾ We evaluated information subsequent to the balance sheet date to determine whether there was any new information that would require adjustment to the previously recorded allowances.

Furthermore, PEDMARK® is the Company’s first commercial product, and as a result, management has limited Company-specific historical experience to make estimates.

A high degree of auditor judgment, subjectivity and effort was required in performing procedures and evaluating evidence related to management’s assumptions in these areas.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others:

◾ Through interviews, inquiries, and observations, we obtained an understanding of the significant management assumptions behind the potentially significant components of the allowances, including the nature of each allowance and the amounts estimated by management.

Through interviews, inquiries, and observations, we obtained an understanding of the significant management assumptions supporting the fair value estimates of distinct distributor services and the timing of performance.

◾ We assessed the methodologies used to determine the allowances and the fair value of distinct distributor services and tested estimated percentages by corroborating the underlying data used to develop the estimate, which included evaluating the completeness and accuracy of such data.

Our testing of allowances included comparing key assumptions to customer contracts, payment data, and other third-party sources, as applicable.

Our testing of the fair value of distinct distributor services included evaluating management’s estimate of costs to perform necessary services and assessing the reasonableness of estimated timeframes associated with the performance of those services.

◾ We evaluated information subsequent to the balance sheet date to determine whether there was any new information that would require adjustment to the previously estimated amounts.

/s/ Haskell & White LLP

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Non-current assets

Deferred issuance cost, net of amortization

Deferred issuance cost

Deferred issuance cost (amortization)

Total non-current assets

Liabilities and shareholders’ (deficit) equity

Liabilities and shareholders’ deficit

Current liabilities:

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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

Commitments and contingencies (Note 7)

Shareholders’ (deficit) equity:

Common stock, no par value;

Shareholders’ deficit:

Common shares, no par value;

unlimited shares authorized;

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Accumulated other comprehensive income

Total shareholders’ (deficit) equity

Total liabilities and shareholders’ (deficit) equity

Total shareholders’ deficit

Total liabilities and shareholders’ deficit

(The accompanying notes are an integral part of these consolidated financial statements)

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dollars and shares in thousands, except per share information)

PEDMARK product sales, net

PEDMARK (R) product sales, net

Cost of products sold

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Other (expense)/income

Unrealized foreign exchange loss

Unrealized foreign exchange gain/(loss)

Amortization expense

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Fennec Pharmaceuticals Inc.

Consolidated Statements of Shareholders’ (Deficit) Equity

Consolidated Statements of Shareholders’ Deficit

dollars and shares in thousands)

Comprehensive

Stockholders’

Shareholders’

Number (Note 6)

(Deficit) Equity

Balance at December 31, 2021

1 unchanged sentence

Stock options issued to employees

Warrants issued in connection with term loan

Issuance of securities

Exercise of stock options

Restricted stock release

Balance at December 31, 2022

Stock options issued to consultants

Stock options issued to employees

Warrants issued in connection with term loan

Stock options and restricted share units issued to employees

Exercise of stock options

27 unchanged sentences

Net cash provided by financing activities

Increase/(decrease) in cash and cash equivalents

(Decrease)/increase in cash and cash equivalents

Cash and cash equivalents - Beginning of year

14 unchanged sentences

(“CBI”), a Canadian corporation and Fennec Pharmaceuticals (EU) Limited (“Fennec Limited”), collectively referred to herein as the “Company,” is a biopharmaceutical company with one FDA approved product developed to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors.

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

With the exception of Fennec Pharmaceuticals, Inc., and Fennec Pharmaceuticals (EU) Limited, all subsidiaries are inactive.

These 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.

5 unchanged sentences

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 ® .

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”).

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 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 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.

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

The Company elected to have all the commitment fee of the Notes payable in warrants.

The Company believes current funds, which include funds from the First Closing Note and the Second Closing Note, provide sufficient funding for the Company to carry out its planned activities, including the continuation of commercialization efforts for at least the next twelve months of PEDMARK ® .

On December 4, 2023, the Company closed a third tranche under the SPA in the amount of $ 5,000,000 (the “Third 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 ® .

Also on December 4, 2023, the Company entered into a First Amendment to the Securities Purchase Agreement (the “SPA Amendment”) with the Investor, which, among other things, extends the period that the Company may draw the remaining $ 15,000,000 under the SPA from December 31, 2023, to December 31, 2024.

Subsequent draws are subject to mutual agreement of the Company and the Investor and will be represented by Notes that will also be convertible at a price equal

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

to $ 7.89 per share.

The Company believes current funds, which include funds from the First, Second and Third Closing Notes, provide sufficient funding for the Company to carry out its planned activities, including the continuation of commercialization efforts for at least the next twelve months of PEDMARK ® .

In addition to the aforementioned, the Company announced in March of 2024 that is had secured an exclusive licensing agreement with Norgine to commercialize PEDMARQSI in Europe, Australia and New Zealand.

The deal provided the Company with approximately $ 43 million up front, with the potential of approximately another $ 230 million in future royalties and milestone payments.

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.

5 unchanged sentences

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period.

Significant estimates include revenue recognition, allowance against trade receivables, measurement of stock-based compensation and estimates of the Company’s capital requirement over the next twelve months from the date of issuance of the consolidated financial statements.

Significant estimates include revenue recognition, amount and timing of marketing and other services performed by certain distributors, allowance against trade receivables, measurement of stock-based compensation over the next twelve months from the date of issuance of the consolidated financial statements.

Actual results could differ from those estimates.

2 unchanged sentences

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

As of December 31, 2022 and 2021, the Company has no net assets located outside of the United States.

As of December 31, 2023, the Company had an operating lease in Ireland.

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

Stock-Based Compensation

7 unchanged sentences

The risk-free interest rate used for each grant is based on the United States Treasury yield curve in effect at the time of grant for instruments with a similar expected life.

The Company utilizes a dividend yield of zero based on the fact that the Company has never paid cash dividends and at present, has intention to pay cash dividends.

Inventories are valued under a standard costing methodology on a first-in, first-out basis and are stated at the lower of cost or net realizable value.

The Company capitalizes inventory costs related to products to be sold in the ordinary course of business.

The Company makes a determination of capitalizing inventory costs for a product based on, among other factors, status of regulatory approval, information regarding safety, efficacy and expectations relating to commercial sales and recoverability of costs.

Capitalized costs of inventories mainly include third party manufacturing, logistics and distribution

The Company utilizes a dividend yield of zero based on the fact that the Company has never paid cash dividends and at present, has no intention to pay cash dividends.

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

Inventories are valued under a standard costing methodology on a first-in, first-out basis and are stated at the lower of cost or net realizable value.

The Company capitalizes inventory costs related to products to be sold in the ordinary course of business.

Capitalized costs of inventories mainly include third party manufacturing, logistics and distribution costs.

The Company assesses recoverability of inventory each reporting period to determine any write down to net realizable value resulting from excess or obsolete inventories.

10 unchanged sentences

PEDMARK ® is the Company’s first commercial product.

The Company sells its products principally through the following specialty distributors:

Amerisource Specialty Distribution (“ASD”), McKesson Plasma and Biologics, McKesson Specialty and Cardinal Health Specialty (collectively the "Customers"

and each a "Customer").

The Company sells its products through select specialty distributors in the U.S.

and through distributors purchasing PEDMARK product globally.

These Customers subsequently resell the Company’s products to health care providers and patients.

2 unchanged sentences

Product Sales Discounts and Allowances

The Company records revenues from product sales at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established primarily from discounts, chargebacks, rebates, co-pay assistance, returns and other allowances that are offered within contracts between the Company and its Customers, health care providers, payors and other indirect customers relating to the sales of its products.

The Company records U.S.

based revenues from product sales at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established primarily from discounts, chargebacks, rebates, co-pay assistance, returns and other allowances that are offered within contracts between the Company and its Customers, health care providers, payors and other indirect customers relating to the sales of its products.

These reserves are based on the amounts to be claimed on the related sales and are classified as a contra-asset or a current liability.

4 unchanged sentences

If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenues and earnings in the period such variances become known.

Chargebacks are discounts that occur when contracted customers purchase directly from a specialty distributor.

Contracted customers, which currently consist of Public Health Service institutions and Federal government entities purchasing via the Federal Supply Schedule, generally purchase the product at a discounted price.

The specialty distributor, in turn, charges back to the Company the difference between the price initially paid by the specialty distributor

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

and the discounted price paid to the specialty distributor by its contracted customer.

The Company also utilizes select distributors to introduce its product into global markets.

These distributors take on the function of shipping, storage, marketing and other services related to the sale of our product.

We record distribution and other fees paid to these distributors as a reduction of revenue, unless the payment is for a distinct good or service from the customer and we can reasonably estimate the fair value of the goods or services received.

If both conditions are met, we record the consideration paid to the distributor as an operating expense.

These costs are typically known at the time of sale, resulting in minimal adjustments subsequent to the period of sale.

Chargebacks are discounts that occur when contracted customers purchase directly from a specialty distributor.

The specialty distributor, in turn, charges back to the Company the difference between the price initially paid by the specialty distributor and the discounted price paid to the specialty distributor by its contracted customer.

The allowance for chargebacks is based on actual chargebacks received and an estimate of sales by the specialty distributor to its contracted customers.

13 unchanged sentences

The Company pays fees to 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, general and administrative expenses in its Consolidated Statements of Operations.

The following table summarizes net product revenues for PEDMARK ® in the United States earned in the years ended December 31, 2022 and 2021, respectively:

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 expenses in its Consolidated Statements of Operations.

Distribution and Other Fees:

We pay distribution and other fees to certain customers in connection with the sales of our products.

We record distribution and other fees paid to our customers as a reduction of revenue, unless the payment is for a distinct good or service from the customer and we can reasonably estimate the fair value of the goods or services received.

If both conditions are met, we record the consideration paid to the customer as an operating expense.

These costs are typically known at the time of sale, resulting in minimal adjustments subsequent to the period of sale.

The following table summarizes net product revenues for PEDMARK ® in the years ended December 31, 2023, and 2022, respectively:

Product revenues:

2 unchanged sentences

Net product revenues

The following table summarizes the percentage of total product revenues for PEDMARK ® in the United States by any Customer who individually accounted for 10 % or more of total product revenues earned in the years ended December 31, 2022 and 2021, respectively:

Cardinal Health Specialty

The activities and ending allowance balances for each significant category of discounts and allowances for PEDMARK ® (which constitute variable consideration) for the year ended December 31, 2022 were as follows:

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

For the years ended December 31, 2023 and 2022, the Company had 4 distributors and 3 distributors that represented more than 10% of net sales, respectively.

Rebates, Customer

8 unchanged sentences

Balance at December 31, 2022

Provision related to sales made in:

Current period

Prior periods

Payments and customer credits issued

Balance at December 31, 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 Consolidated Balance Sheets.

Trade Receivables

The Company records gross trade receivables at the time of product sale to its Customers.

The Company records gross trade receivables at the time of product sale to its Customers, both specialty and other select global distributors.

Amounts estimated for the associated chargebacks, cash discounts for prompt payment and any allowances for credit losses are booked as a reserve against accounts receivable and reduction of revenue.

The Company considers its historical losses, if any, to estimate credit losses.

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

The Company determines its allowance methodology by pooling receivable balances at the Customer level.

The Company considers various factors, including loss history, individual credit risk associated with each Customer, and the current and future condition of the general economy.

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.

Customers categorized as specialty distributors, and accordingly, the Company considers the risk of potential credit losses to be low.

Sales to other select global distributors have the potential for losses.

The Company evaluates the risk of credit losses on sales on an individual basis using the above mentioned criteria.

The Company had a balance in allowance for credit losses of $ 0.3 million as of December 31, 2023.

Cost of Products Sold

5 unchanged sentences

As of December 31, 2023, the Company capitalized approximately $ 2.2 million of costs as inventory on the Consolidated Balance Sheet.

Of the items capitalized, $ 0.4 million was capitalized as work in process, $ 0.2 million was capitalized into finished goods, with $ 0.1 million of that being reclassified to cost of product sold.

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

capitalized, $ 1.4 million was capitalized as work in process and raw materials, $ 0.8 million was capitalized into finished goods.

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 December 31, 2022, the Company had $ 23.8 million in cash and money market accounts (2021- $ 21.1 million).

As of December 31, 2023, the Company had $ 13.3 million in cash and money market accounts (2022- $ 23.8 million).

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

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Financial Instruments

Financial instruments recognized on the balance sheets at December 31, 2022 and December 31, 2021 consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities 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 December 31, 2023 and 2022, consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities 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.

7 unchanged sentences

Common Shares and Warrants

The Company has 0.2 million warrants with a weighted average strike price of $ 7.71 outstanding to purchase common shares that were denominated in United States dollars (“USD”) and have a weighted average life of 5.05 years.

The Company has 0.2 million warrants with a weighted average strike price of $ 7.71 outstanding to purchase common shares that have a weighted average life of 4.05 years.

Research and Development Costs and Investment Tax Credits

9 unchanged sentences

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

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

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

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

The Company’s trade receivables includes amounts billed to Customers, both specialty and select global distributors, for product sales of PEDMARK ® .

Both specialty and select global distributors are a limited group of distributors, and accordingly, the Company considers the risk of potential credit losses to be low.

The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates.

3 unchanged sentences

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.

Under ASC 740-10, we may recognize the tax benefit from an uncertain tax position only if it is

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position.

Under ASC 740-10, we 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.

Foreign Currency Translation

3 unchanged sentences

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the year.

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 4.5 million of our common shares at December 31, 2022, were not included in loss per share.

Diluted net loss per share is computed using the same method, except the weighted average number of common shares outstanding includes convertible debentures, restricted share units, 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, restricted share units of 0.2 million to obtain our common shares, and options to purchase 4.8 million of our common shares at December 31, 2023, were not included in loss per share.

Such options would have an antidilutive effect.

In 2021, 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.

In 2022, warrants to purchase 0.2 million of our common shares, restricted share units to obtain 0.04 million of our common shares and options to purchase 4.5 million common shares were excluded from the computation of loss per share as their inclusion would have been antidilutive.

Recent Accounting Pronouncements

In May 2021, the FASB issued Accounting Standards Update ("ASU") 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40).

This ASU provides measurement guidance for a modification, or an exchange of a freestanding equity classified written call option that is not within the scope of another Topic.

The Company adopted the ASU as of January 1, 2022 and its adoption did not have a significant impact on the Company's consolidated financial statements.

The Company will apply the amendments prospectively to modifications or exchanges occurring on or after January 1, 2022.

In June 2016, the FASB issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses (Topic 326) and subsequently related amendments (ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11 and ASU 2022-02).

This guidance replaces the existing incurred loss impairment guidance and establishes a single allowance framework for financial assets carried at amortized cost based on expected credit losses.

The estimate of expected credit losses requires the incorporation of historical information, current conditions, and reasonable and supportable forecasts.

This ASU will be effective for the quarter ended March 31, 2023.

The Company is evaluating the effect the adoption of this ASU will have on the consolidated financial statements.

In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).

2 unchanged sentences

This ASU will be effective for the year ended December 31, 2024.

The Company is currently evaluating the effect the adoption of this ASU will have on the consolidated financial statements.

In June 2022, the FASB issued Accounting Standards Update ("ASU") 2022-03, Fair Value Measurement (Topic 820):

The Company adopted this ASU in Q1 of 2023.

In June 2022, the FASB issued Accounting Standards Update ("ASU") 2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which (1) clarifies the guidance in Topic 820 on the fair value measurement of an equity security that is subject to contractual restrictions that prohibit the sale of an equity security and (2) requires specific disclosures related to such an equity security.

This ASU will be effective for the year ended December 31, 2024.

The Company is currently evaluating the effect the adoption of this ASU will have on the consolidated financial statements.

The Company adopted this ASU in 2023.

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses (Topic 326) and subsequently related amendments (ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11 and ASU 2022-02).

This guidance replaces the existing incurred loss impairment guidance and establishes a single allowance framework for financial assets carried at amortized cost based on

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

expected credit losses.

The estimate of expected credit losses requires the incorporation of historical information, current conditions, and reasonable and supportable forecasts.

This ASU will be effective for the year ended December 31, 2023.

The Company is currently evaluating the effect the adoption of this ASU will have on the consolidated financial statements.

In December 2023 , the Financial Accounting Standards Board issued Accounting Standards Update No.

2023-09 , “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures,” which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction.

This guidance will be effective for the annual periods beginning the year ended December 31, 2025.

The Company is currently evaluating the effect the adoption of this ASU will have on the consolidated financial statements.

Loss per Share

10 unchanged sentences

Dilutive effect of warrants

Dilutive effect of restricted share units

Incremental dilutive shares

1 unchanged sentence

Net loss per share, basic and diluted

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 (in thousands):

The following outstanding options, restricted share units, 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 (in thousands):

Year Ended December 31,

Options to purchase common shares

Restricted share units to obtain common shares

Warrants to purchase common shares

Stock Options

The Compensation Committee of the Board of Directors administers the Company’s stock option plan.

The Compensation Committee of the Board of Directors administers the Company’s 2020 Equity Incentive Plan (The “Plan”).

The Compensation Committee designates eligible participants to be included under the plan and approves the number of options to be granted from time to time under the plan.

1 unchanged sentence

The Plan Maximum Amendment relates to changing the maximum number of common shares issuable under the stock option plan from a fixed number of 6.7 million to the number of shares that represents twenty-five percent ( 25 %) of the total number of all issued and outstanding common shares.

Based upon the current shares outstanding, a maximum of 6.6 million of our common shares are authorized for issuance under the plan.

Based upon the current shares outstanding, a maximum of 6.8 million of our

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

common shares are authorized for issuance under the plan.

The option exercise price for all options issued under the plan is based on the fair value of the underlying shares on the date of grant.

5 unchanged sentences

There are no outstanding $CAD denominated options.

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Summary of $USD Option Activity

24 unchanged sentences

Expected life

1.50 - 6 years

The Company uses the historical volatility and adjusts for available relevant market information pertaining to the Company’s share price.

2 unchanged sentences

The following is a summary of RSU activity for the years ended December 31, 2023, and 2022.

All granted RSUs are denominated in U.S.

Prior to June 2021, there was no activity involving RSUs.

Of the 219 RSUs awarded, 86 were forfeited in fiscal year 2022 and 98 were released from restriction.

The Company recognized $ 0.3 million in RSU expense for the year ended December 31, 2022 and $ 0.1 million for the same period in 2021.

Standard vesting of RSUs is over three years with 1/3 vesting on the first anniversary date of the grant and then 1/24 on the last day of each subsequent month.

There were 26 RSUs awarded to employees with standard vesting released from restriction in 2022.

The Compensation Committee may also award RSUs with alternative

During the year ended December 31, 2023, 365 RSUs were awarded, 96 were forfeited and 86 were released from restriction.

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

There were 34 RSUs awarded to various contractors which were released from restriction in 2022 on the one year anniversary of the award.

There were 38 RSUs awarded to our CFO which conditionally released from restriction upon FDA approval of PEDMARK ® in 2022.

The Company recognized all of the expense associated with this release upon FDA approval of PEDMARK ® .

recognized $ 1.3 million in RSU expense for the year ended December 31, 2023, and $ 0.3 million for the same period in 2022.

Standard vesting of RSUs is over three years with 1/3 vesting on the first anniversary date of the grant and then 1/24 on the last day of each subsequent month.

The Compensation Committee may also award RSUs with alternative vesting.

Number of Restricted

32 unchanged sentences

Processa common shares

(1) The Company held approximately, $ 307 in cash as of December 31, 2022, of which approximately $ 33 was in Canadian funds (translated into U.S.

(1) The Company held approximately, $ 1,340 in cash as of December 31, 2023, of which approximately $ 473 was in Canadian funds and $97 in Euro (both translated into U.S.

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

(2) The Company received 41 restricted common shares of Processa (PSCA).

The share restriction expired in three tranches:

50 % , 25 % and 25 % at the 6 , 9 and 12 month intervals, respectively from October 30, 2020.

As of December 31, 2022, the restrictions have expired.

(2) The Company has 41 unrestricted common shares of Processa (PSCA).

Stockholders’ Equity

10 unchanged sentences

Oregon Health & Science University (“OHSU”) Agreement

On February 20, 2013, Fennec entered into a new exclusive license agreement with OHSU for exclusive worldwide license rights to intellectual property directed to thiol-based compounds, including 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 PEDMARK ® for the prevention of ototoxicity induced by chemotherapeutic agents to treat cancers.

Further, Amendment 1 adjusts select milestone payments entered in the OHSU Agreement including but not limited to the royalty rate on net sales for licensed

Further, Amendment 1 adjusts select milestone payments entered in the OHSU Agreement including but not limited to the royalty rate on net sales for licensed products, royalty rate from sublicensing of the licensed technology and the fee payable upon the regulatory approval of a licensed product.

Certain milestone payments are due upon FDA approval and achievement of sufficient positive EBITDA

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

products, royalty rate from sublicensing of the licensed technology and the fee payable upon the regulatory approval of a licensed product.

Certain milestone payments are due upon FDA approval and achievement of sufficient positive EBITDA over a specified period.

over a specified period.

PEDMARK ® received FDA approval in September 2022, however at this time, due to significant uncertainty surrounding timing and magnitude of certain milestones, the Company has only recorded a royalty liability associated with net revenue.

5 unchanged sentences

The Company had accrued approximately $ 106 ( 1 % net sales) in royalty expense to OHSU at December 31, 2023.

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

The operating lease has payments of $ 0.4 per month with no scheduled increases.

This operating lease is terminable with 30 days’ notice and has no penalties or contingent payments due.

On January 23, 2020, the Company entered into an Office Service Agreement (the “Office Service Agreement”) with Regus to lease office space at in Hoboken, New Jersey.

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

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 terminates on July 31, 2020, thereafter the lease may continue on a month-to-month basis with either party being able to terminate the agreement by providing one months’ advance written notice of termination.

Securities Class Action Suit

Fennec Pharmaceuticals Inc.

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.

et al ., Case No.

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 ® , 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.

On February 1, 2021, the lead plaintiff filed an amended complaint.

The amended complaint added members of our Board of Directors as defendants, asserts a putative class period from December 20, 2018 through August 10, 2020, makes allegations similar to those in the original complaint, claims the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, and seeks an unspecified amount of compensatory damages and attorneys’ fees and costs.

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

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, 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.

Fennec Pharmaceuticals Inc.

Notes to the 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.

On February 15, 2023, the Magistrate Judge recommended the motion for post judgment relief be denied.

Lead plaintiff filed no timely objection to the recommendation, and on March 2, 2023, the U.S.

District Court Judge issued an order adopting the Magistrate Judge’s recommendation, denying the motion for post judgment relief, and entering judgment for defendants.

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

We cannot predict the outcome of this lawsuit.

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 December 31, 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.

On February 9, 2022, plaintiff Jeffrey D.

Fisher filed a putative federal securities class action lawsuit against the Company and our CEO and CFO in the United States District Court for the Middle District of North Carolina, captioned Fisher v.

Fennec Pharmaceuticals Inc.

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 ® 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.

On April 11, 2022, plaintiff Jeffrey D.

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, 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.

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 had until November 14, 2022 to file a notice of appeal and did not file a notice of appeal.

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

We cannot predict the outcome of this lawsuit.

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.

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

(“Hope”) filed two petitions for inter partes review (“IPR”) with the Patent Trial and Appeal Board (“PTAB”) of the USPTO.

In its petitions, Hope seeks to invalidate our U.S.

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

10,596,190 (“US ‘190 Patent”), which is exclusively in-licensed from Oregon Health & Science University (“OHSU”) and relates to a method of using our PEDMARK ® product, and our U.S.

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

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

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

On January 11, 2022, OHSU filed a Request for Supplemental Examination of US ‘190 Patent (Control No.

96.000,390) 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 issued a Supplemental Examination Certificate, identified a Substantial New Question (“SNQ”) on the patentability of the US ‘190 Patent claims, and ordered a Reexamination of US ‘190 Patent on March 9, 2022.

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

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

On December 5, 2022, OHSU filed a Revised Motion to Amend the single claim of the US ‘190 Patent.

We expect a decision in the ‘190 Patent 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 Patent IPR, we disclaimed the ‘363 Patent claims directed to the anhydrous morphic form of STS, and filed a Motion to Amend the remaining method of manufacture claims.

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

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

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 Reexamination.

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”).

CIPLA ANDA Litigation

(“Hope”) filed a Petition for inter partes review (IPR2022-00123) with the Patent Trial and Appeal Board (“PTAB”) of the USPTO to invalidate U.S.

10,596,190 (the “‘190 Patent”), which is exclusively in-licensed from Oregon Health & Science University (“OHSU”) and relates to a method of using PEDMARK ® .

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

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

The final written decision became effective June 20, 2023.

The ‘190 Patent was previously listed in the United States Approved Drug Products with Therapeutic Equivalence Evaluations (also known as the “Orange Book”).

In light of PTAB’s final written decision on the invalidity of the ‘190 Patent, we requested that the FDA remove the ’190 Patent from the Orange Book.

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

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

(“Hope”) filed a Petition for inter partes review (IPR2022-00125) to invalidate our wholly owned U.S.

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 October 6, 2020.

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.

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.

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

The USPTO has now granted three additional U.S.

patents that cover the PEDMARK ® formulation, each of which have been listed in the U.S.

FDA’s “Orange Book” (U.S.

11,291,728 (issued April 5, 2022), U.S.

11,510,984 (issued November 29, 2022), and U.S.

11,617,793 (issued April 4, 2023)), and seven additional United States patent applications from this family are pending at the USPTO.

We plan to vigorously defend our intellectual property rights to PEDMARK ® if challenged.

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 ® in the United States under Orphan Drug Designation.

CIPLA Litigation

On December 1, 2022, we received a letter dated November 30, 2022, notifying us that CIPLA Ltd.

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218028) for a generic version of PEDMARK ® (sodium thiosulfate solution) that contains Paragraph IV Certifications on two of our patents covering PEDMARK ® :

the OHSU licensed US ‘190 Patent, expiration date January 2038;

and our US 11,291,728 Patent, expiration date July 2039.

On January 6, 2023, we received a letter dated January 5, 2023, notifying us that CIPLA submitted to the FDA a Paragraph IV Certification on our newly issued US 11,510,984 Patent.

the OHSU licensed ‘190 Patent, expiration date January 2038;

and our US 11,291,728 Patent (the “’728 Patent”), expiration date July 2039.

On January 6, 2023, we received a letter dated January 5, 2023, notifying us that CIPLA submitted to the FDA a Paragraph IV Certification on our newly issued US 11,510,984 Patent (the “’984 Patent”).

These patents are listed in FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the Orange Book, for PEDMARK ® .

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 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 ® .

1 unchanged sentence

On January 10, 2023, we filed suit against the CIPLA entities in the United States District Court for the District of New Jersey (Case No.

3:23-cv-00123), for infringement of the ‘190 Patent and the ‘728 Patent.

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 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.

On May 11, 2023, we received written notice of CIPLA’s Paragraph IV Certification as to the ’793 Patent, which was dated May 10, 2023, along with an enclosed statement of alleged factual and legal bases for stating that the ’793 Patent is invalid, unenforceable, and/or will not be infringed by CIPLA’s ANDA Product.

On July 27, 2023, we filed a Second Amended Complaint to assert the ‘793 Patent.

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”).

Executive Severance

In the event of Mr.

Raykov's termination with the Company other than for cause, the Company will be obligated to pay him a one -time severance payment equal to twelve months of salary (currently $ 585 ).

In the event of Mr.

Andrade’s termination with the Company other than for cause, the Company will be obligated to pay him a one -time severance payment equal to six months of salary (currently $ 212 ).

In the event of Mr.

Haigh’s termination with the Company other than for cause, the Company will be obligated to pay him a one -time severance payment equal to three months of salary (currently approximately $ 110 as translated into U.S.

dollars at December 31, 2023).

The Company has an operating lease in Research Triangle Park, North Carolina utilizing a small space within a commercial building.

The operating lease has payments of $ 0.4 per month with no scheduled increases.

This operating lease is terminable with 30 days’ notice and has no penalties or contingent payments due.

On January 23, 2020, the Company entered into an Office Service Agreement (the “Office Service Agreement”) with Regus to lease office space in Hoboken, New Jersey.

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

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 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 month’s 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.

1 unchanged sentence

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 (currently $ 513 ).

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 (currently $ 186 ).

commenced after August 2023.

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

December 31, 2023

Remaining lease terms (in months)

Discount rate

Maturities of lease liabilities as of December 31, 2023 were as follows (in thousands):

Year Ending December 31,

Less imputed interest

Total lease liabilities

Current operating lease liabilities

Non-current operating lease liabilities

Total lease liabilities

Employee Benefit Plan

7 unchanged sentences

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.

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.

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.

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

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

The Company elected to have all the commitment fee of the Notes payable in warrants.

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

FDA approval of PEDMARK ® .

Subsequent draws are subject to mutual agreement of the Company and the Investor and will be represented by Notes that will also be convertible at a price equal to $ 7.89 per share.

Cash interest on outstanding principal shall accrue at a rate of prime, plus 4.5 % per annum, from the date of funding ( 11 % as of December 31, 2023).

10 unchanged sentences

Years Ending December 31,

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Total future payments

6 unchanged sentences

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.

Upon drawing tranche 1 through 3, 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 life of the SPA.

The Company operates in both U.S.

and Canadian tax jurisdictions.

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

The Company operates in U.S., Canadian and Ireland tax jurisdictions.

Its income is subject to varying rates of tax and losses incurred in one jurisdiction cannot be used to offset income taxes payable in another.

6 unchanged sentences

Change in valuation allowance

Effect of foreign exchange rate differences

Effect of change in future enacted tax rates

Tax credits and other adjustments

Effect of tax rate changes and other

1 unchanged sentence

The Canadian statutory income tax rate of 26.5 percent is comprised of federal income tax at approximately 15.0 percent and provincial income tax at approximately 11.5 percent.

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

The primary temporary differences which gave rise to future income taxes (recovery) at December 31, 2023 and December 31, 2022:

8 unchanged sentences

Net future tax assets

Subsequent Events

Management has evaluated subsequent events through the date of this filing and concluded there are no events of significance which require disclosure.

Tax Cuts and Jobs Act

3 unchanged sentences

In December 2017, in accordance with the SEC Staff Accounting Bulletin (“SAB”) 118–Income Tax Accounting Implications of the TCJA, the Company recorded tax effects on a provisional basis based on a reasonable estimate.

The TCJA did not have a material impact on the Company's financial statements because its deferred temporary differences are fully offset by a valuation allowance and the Company does not have any offshore earnings from which to record the mandatory transition tax.

During 2018, the Company completed its analysis under SAB 118 and no additional tax effects due to rate-remeasurement were required to be recorded.

There are no current income taxes owed, nor are any income taxes expected to be owed in the near term.

At December 31, 2022, the Company has unclaimed Scientific Research and Experimental Development ("SR&ED") expenditures, income

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

tax loss carry-forwards and non-refundable investment tax credits.

mandatory transition tax.

During 2018, the Company completed its analysis under SAB 118 and no additional tax effects due to rate-remeasurement were required to be recorded.

There are no current income taxes owed, but the Norgine deal will cause the Company to be closer to using its historical tax losses.

Once those losses are used up, the Company will owe income taxes.

As of December 31, 2023, the Company has unclaimed Scientific Research and Experimental Development ("SR&ED") expenditures, income tax loss carry-forwards and non-refundable investment tax credits.

The unclaimed amounts and their expiry dates are as listed below:

3 unchanged sentences

Investment tax credits (expiry date):

Revision to Prior Period Financial Statements

In preparing the annual report on Form 10-K for the year ended December 31, 2023, the Company determined that it overstated sales and marketing expenses associated with select distributors, which does not accurately match the expense to the proper period that related sales and marketing expenses were received.

The Company determined that, based on the timeline of services provided by these distinct distributors, it would be more accurate to defer a portion of the sales and marketing expenses to future periods and amortize the remaining expense over the expected service period.

The Company also determined that a portion of such expenses would be more accurately characterized as distribution fees and has presented such amounts as a reduction of revenues.

These revisions resulted in adjustments to net product sales, sales and marketing expenses and current assets as previous reported in the Company’s September 30, 2023 condensed consolidated financial statements.

Net product sales were adjusted down in the amount of $ 0.2 million, sales and marketing expenses were decreased by $ 1.2 million and current assets increased by $ 1.0 million as of September 30, 2023.

The effect on our September 30, 2023 financial results are presented below.

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

The effect of the revisions to the unaudited condensed consolidated financial statements is as follows (amount in thousands):

Condensed Consolidated Balance Sheet (Unaudited)

As of September 30, 2023

Prepaid expenses

Total current assets

Accumulated deficit

Total shareholders' deficit

Total liabilities and shareholder's deficit

Condensed Consolidated Statements of Operations (Unaudited)

Three Months Ended

Nine Months Ended

September 30, 2023

PEDMARK® product sales, net

Sales and marketing expense

Net loss attributable to common shareholders

Basic net loss per common share

Diluted net loss per common share

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30, 2023

Stockholders’

As Previously Reported

Balance at September 30, 2023

Condensed Consolidated Statement of Cash Flows (Unaudited)

For the Nine Months Ended

September 30, 2023

Cash Flows from Operating Activities:

Reconciliation of net loss to net cash used in operating activities:

Prepaid expenses

Subtotal of non-cash charges

Net cash used in operating activities

Subsequent Events

On March 17, 2024, the Company announced it had entered into an exclusive licensing agreement with Norgine to commercialize PEDMARQSI ® in Europe, Australia, and New Zealand.

The Company received approximately $ 43 million up front with the potential of up to approximately $ 230 million related to royalty and milestone payments.

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-K

Item 9A. Controls and Procedures