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Item 9A. Controls and Procedures

2025-03-26 compared with 2024-03-29 · 369 added, 711 removed, 615 unchanged (64% of the section changed)

2 unchanged sentences

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, 2024.

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.

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.

2 unchanged sentences

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.

Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2024, the Company's disclosure controls and procedures were effective.

Management's Report on Internal Control over Financial Reporting

1 unchanged sentence

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.

on that evaluation, the Company’s management has concluded that, as of December 31, 2024, our internal controls over financial reporting were effective.

Changes in Internal Control over Financial Reporting

7 unchanged sentences

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 .

Rostislav Raykov , a current member of our Board of Directors , adopted a trading arrangement on September 23, 2024 , which is intended to satisfy the Rule 10b5-1 affirmative defense.

This trading arrangement covers the disposition of up to 120,000 shares of the Company’s common shares, and will terminate on December 31, 2025 , unless earlier terminated in accordance with its terms.

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.

2 unchanged sentences

Directors, Executive Officers and Corporate Governance

The following table sets forth the name of each of our executive officers and directors, such person’s principal occupation or employment, all other positions with us held by such person, if any, the year in which such person became a director of Fennec and such person’s age.

Our Board has an Audit Committee, a Compensation Committee, and a Governance Committee.

The current members of such committees are noted in the table below:

Name and Province/State and

Country of Residence, Position

Current Principal Occupation and Principal Occupation

For Previous Five Years

Director Since

Rostislav Raykov, New Jersey,

Chief Executive Officer, Director

CEO of Fennec Pharmaceuticals Inc.

Robert Andrade, Texas, USA

Chief Financial Officer

CFO of Fennec Pharmaceuticals

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,

Director (1)(2)(3)

Executive-in-residence at Pappas Capital;

previously CEO of ImmunoBiosciences

Marco Brughera, Milano, Italy

Director (1(2)(3)

Former Group CEO of Leadiant Biosciences SpA;

previously Global Head Rare Disease and R&D at Sigma-tau;

VP Preclinical Development at Nerviano Medical Sciences.

Khalid Islam, Lugano, Switzerland

Chairman of Board, Director (1)

Founder and Chairman of Gain Therapeutics ;

previously Chairman and CEO of Gentium S.p.A.;

previously CEO of Arpida AG

Cook, PhD South Carolina, USA,

Director (2)(3)

CEO of Skylark Bio Inc, Former SVP, Head of Gene Therapy Strategy PTC Therapeutics, Inc, Former COO Agilis Biotherapeutics, Former Assistant Professor of Audiology Mayo Clinic

September 2019

(1) Member of the Audit Committee

(2) Member of the Compensation Committee

(3) Member of the Governance Committee

Rostislav Raykov

Raykov has served as a director of Fennec since July 2009 and as Chief Executive Officer since July 2009.

From January 2006 to December 2007, Mr.

Raykov was a portfolio manager for Alchem Investment Partners and John Levin & Co.

Prior to founding Alchem, Mr.

Raykov was a portfolio manager and securities analyst for John A.

Event Driven Fund (2002-2005).

Prior to joining John A.

Levin & Co., Mr.

Raykov was a securities analyst for the Merger Fund at Tiedemann Investment Group (1999-2002) and an investment banking analyst at Bear Stearns (1998-1999).

Raykov earned a B.S.

in Business Administration from the University of North Carolina at Chapel Hill.

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

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 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.

Andrade was a private investor in 2015, and a senior analyst at Magnetar Capital from 2013 - 2014.

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.

Rallis has been an executive-in-residence at Pappas Capital, a life science venture capital firm since January 2008.

Previously, Mr.

Rallis was the President and Chief Executive Officer of ImmunoBiosciences, Inc.

(“IBI”), a vaccine technology company formerly located in Raleigh, North Carolina from April 2006 through June 2007.

Prior to joining IBI, Mr.

Rallis served as an executive-in-residence (part-time) for Pappas Capital, and as a consultant for Duke University and Panacos Pharmaceuticals, Inc.

Rallis is the former President and Chief Operating Officer (“COO”) and director of Triangle Pharmaceuticals, Inc., which was acquired by Gilead Sciences in January 2003 for approximately $465 million.

Prior to assuming the role of President and COO in March 2000, he was Executive Vice President, Business Development and General Counsel.

While at Triangle, Mr.

Rallis participated in 11 equity financings generating gross proceeds of approximately $500 million.

He was also primarily responsible for all business development activities which included a worldwide alliance with Abbott Laboratories and the in-licensing of ten compounds.

Before joining Triangle in 1995, Mr.

Rallis served in various business development and legal management roles with Burroughs Wellcome Co.

over a 13-year period, including Vice President of Strategic Planning and Business Development.

Rallis also serves on the board of Lung Cancer Initiative of NC, located in Raleigh, North Carolina.

Rallis received his A.B.

degree in economics from Harvard College and a J.D.

from Duke University.

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

Rallis possesses particular healthcare industry knowledge and experience which strengthens the Board’s collective qualifications, skills, and experience.

Marco Brughera

Brughera has been a director of Fennec since August 2016.

Currently, he is the founder at Brucon srls and Strategic Advisor at Essetifin.

From 2011 until 2021, Dr.

Brughera had been CEO of Lediant Biosciences and has held several positions for the Sigma-Tau Group, including CEO and Global Head of Sigma Tau Rare Disease, President of Sigma-Tau Research and President of Sigma-Tau Pharmaceuticals.

He drove the commercial revival of a lead oncology product line resulting in its successful sale for a total of around $900M.

He also successfully out-licensed the Defibrotide US rights to Jazz Pharmaceuticals.

From 2004 to 2010, Dr.

Brughera served as the Vice President of Preclinical Development at Nerviano Medical Sciences (NMS), a pharmaceutical oncology-focused integrated discovery and development company.

He also served as the Managing Director at Accelera, an independent contract research organization with the NMS Group.

From 1999 to 2004, Dr.

Brughera held several senior level positions in the areas of research and development with Pharmacia and Pfizer.

Prior to 1999, he held various positions at Pharmacia & Upjohn and Farmitalia Carlo Erba SpA, an Italian pharmaceutical company.

He currently serves on the Board of Leadiant Biosciences Inc and Limited;

advisor and biotech champion at Indaco Ventures Partners SGR.

Previously was a Board member of Gentium, Exelead, Soligenix, Lee’s Pharmaceuticals and Naicons.

Brughera earned his degree in veterinary medicine from the University of Milan and is a European Registered Toxicologist.

Brughera has wide-spread experience and knowledge of pharmaceutical drug development in international companies.

His knowledge in particular, of clinical drug development in Europe, deepens 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.

Islam was the Chairman and CEO of Gentium S.p.A.

(a Nasdaq-listed company;

2009-2014) where he led the transition from a loss-making to a cash-flow positive and profitable company.

Under his leadership, the company value increased from US$25 million leading to a successful all cash US$1 billion merger with Jazz Pharmaceuticals, plc.

Subsequent to the sale of Gentium, Dr.

Islam has been involved from both an advisory and board level in several public and private healthcare related companies.

From 1999-2008, Dr.

Islam was President and CEO of Arpida AG where he transitioned the early-stage start-up to a SWX-listed company and raised US$300 million in the IPO and follow-ons.

From 1987-1999, he held various positions in HMR & MMD (now Sanofi-Aventis).

From 1977-1987, Dr.

Islam worked in academia at Imperial College (Univ.

of London) and in Milan University, where he was a contract professor.

Islam is a graduate of Chelsea College and received his Ph.D.

from Imperial College, University of London.

He holds several patents and has published over 80 articles in leading journals.

He is an advisor to the venture group Kurma Biofund (Paris).

He is a founder/co-founder of Gain Therapeutics Inc.

(GANX), Sirius Healthcare Partners GmbH (Zurich), PrevAbr LLC (D.C.), BioAim LLC (L.A.) & Life Sciences Management GmbH (Zug).

Islam is Board Chair at Minoryx Therapeutics (Spain) and Gain Therapeutics Inc.

(GANX), a public company.

In the past, he has served on the Board of Directors of Immunomedics (USA), Processa Pahramacueticals (PCSA), Pcovery Aps (Denmark), Adenium Aps (Denmark), C10 Pharma AS (Norway), Karolinska Development (KDEV, Sweden) and MolMed S.p.A.

(MLMI, Italy).

Islam’s extensive international pharmaceutical expertise in transitioning companies from development to production strengthens the Board’s collective qualifications, skills and experience.

Cook has been a director of Fennec since September 2019.

Cook is currently CEO of Skylark Bio Inc, an early-stage Company working on gene therapy for genetic disorders.

Cook previously served as SVP and Head of Gene Therapy Strategy at PTC Therapeutics from August 2018 until February 2020.

Previously she was one of the founding members and Chief Operating Officer of Agilis Biotherapeutics, a clinical-stage company focused on gene therapies for rare diseases of the central nervous system, from December 2013 until its acquisition by PTC Therapeutics in August 2018.

While at Agilis she led the sale of the company to PTC in a deal that represented significant value to all parties.

Cook’s career spans a wide range of experiences including VP of Clinical Research at InSound Medical and Director of Audiology at Songbird Hearing, both successful biotech start-up companies within the hearing industry.

She has been Assistant Professor of Audiology and Director of the Hearing Aid Program at Mayo Clinic.

Cook earned a BA from Loyola University in Maryland, M.Aud.

from University of South Carolina, and PhD from Arizona State University in Hearing Science.

She completed a clinical fellowship at Johns Hopkins School of Medicine in Baltimore, MD.

Her extensive scientific, clinical and executive business experience strengthens the Board’s collective qualifications, skills and expertise.

Audit Committee

On behalf of the Board, the Audit Committee of the Board retains, oversees and evaluates our independent auditors, reviews the financial reports and other financial information provided by us, including audited financial statements, and discusses the adequacy of disclosure with management and the auditors.

The Audit Committee also reviews the performance of the independent auditors in the annual audit and in assignments unrelated to the audit, assesses the independence of the auditors, and reviews their fees.

The Audit Committee is also responsible for reviewing our internal controls over financial reporting and disclosure.

The Audit Committee operates under a written charter adopted by the Board.

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.

In addition, the Board has determined that Mr.

Rallis qualifies as an “audit committee financial expert,” as defined in Item 407(d)(5) of Regulation S-K promulgated by the SEC based on his business and financial experience described above.

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 employees.

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

The Conduct and Ethics Code sets out the legal and ethical standards of conduct for our personnel and addresses topics such as:

reporting obligations and procedures;

honest and ethical conduct and conflicts of interest;

compliance with applicable laws and Company policies and procedures;

confidentiality of corporate information;

use of corporate assets and opportunities;

public disclosure and books and records;

and non-retaliation.

The Conduct and Ethics Code was updated in June of 2019 and is available on our website at www.fennecpharma.com.

We will post any amendment to this code, as well as any waivers that are required to be disclosed by the rules of the SEC, on our website promptly following the date of such amendment or waiver.

We undertake to provide to any person without charge, upon request, a copy of the Conduct and Ethics Code by writing to Attn:

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.

The Company has an insider trading policy that governs the purchase, sale, and other dispositions of its securities by directors, officers, employees, and contractors, as well as by the Company itself.

We believe that the insider trading policy is reasonably designed to promote compliance with insider trading laws, rules, and regulations and applicable listing standards.

A copy of our insider trading policy is filed with this Annual Report on Form 10-K as Exhibit 19.

The remaining information required by this Item is incorporated herein by reference from our Proxy Statement for our 2025 Annual Meeting of Stockholders.

Executive Compensation

Summary Compensation Table

The following table sets out certain information respecting the compensation paid to our Chief Executive Officer, our Chief Financial Officer, and our former Chief Commercial Officer (“Named Executive Officers”) for the fiscal years ended December 31, 2023 and December 31, 2022.

Restricted Share

Option Awards

Name and Principal Position

Unit Awards ($) (2)

Rostislav Raykov, CEO

Robert Andrade, CFO

Adrian Haigh, COO

Shubh Goel, CCO

(1) Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.

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

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.

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

Rostislav Raykov

Raykov has been employed by us since July 2009.

Pursuant to an employment agreement dated May 3, 2010 between Mr.

Raykov and Fennec, Mr.

Raykov is employed as our Chief Executive Officer and:

(a) received an initial annual salary in the amount of $140,000, subject to annual adjustment by our Board of Directors, (b) upon approval by shareholders of our amended stock option plan was granted options to purchase up to 5.0% of our common shares estimated by us to be outstanding upon completion of our 2010 rights offering, and (c) may receive annual bonuses at the sole discretion of the Board.

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

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.

Raykov severance compensation equal to twelve months of salary.

The initial term of the agreement was for one year and the agreement automatically extends for additional one-year periods unless terminated by either party in accordance with the agreement.

Effective December 31, 2023, Mr.

Raykov’s salary is $585,276 per year.

Robert Andrade

Andrade has been employed by us since November 2015.

Pursuant to an employment agreement dated November 13, 2015, Mr.

Andrade is employed as our Chief Financial Officer and:

(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 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.

Andrade severance compensation equal to six months of salary.

Effective December 31, 2023, Mr.

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.

Pursuant to an employment agreement dated September 9, 2019, Ms.

Goel was employed as our Chief Commercial Officer and:

(a) received an initial annual salary in the amount of $360,000, subject to annual adjustment by our Board of Directors, and (b) was eligible to receive an annual bonus of up to 40% of her base salary per twelve month period, at the discretion of the CEO and the Board of Directors.

Goel’s employment was terminated by us for any reason other than “for cause”, we would have been obligated to pay Ms.

Goel (i) severance in the amount of six months of employees base salary, (ii) prorated share of any target bonus earned by Ms.

Goel and, (iii) accelerated vesting of stock options.

The initial term of the agreement was for one year and the agreement automatically extended for additional one-year periods unless terminated by either party in accordance with the agreement.

Goel tendered her resignation on January 31, 2022.

In addition to their employment agreements, Mr.

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.

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;

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

Payments on Termination

The following table provides details regarding the estimated incremental payments from us to each of the Named Executive Officers assuming termination without cause on December 31, 2023.

Goel’s resignation was voluntary and there is no severance owed.

Estimated Bonus

Value of benefits

Rostislav Raykov, CEO

Robert Andrade, CFO

Adrian Haigh, COO 1

Haigh’s severance figures translated to U.S.

dollars as of December 31, 2023.

Payments on Change of Control

The following table provides details regarding the estimated incremental payments from us to each of the Named Executive Officers upon change of control.

Change of Control

Estimated Bonus (1)

Value of benefits

Rostislav Raykov, CEO

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.

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

The following table sets forth information concerning the number and value of unexercised options held by each Named Executive Officer as of December 31, 2023.

All executive awards, with the exception of those expiring 03/31/2033, 06/02/2031 and 08/07/2033, are exercisable immediately.

Grants expiring 12/20/2031 fully vested upon FDA approval of PEDMARK ® .

Our current stock option plan provides for equity awards and grants denominated in US and CAD dollars.

Number of Options

Option Exercise Price

Expiration Date

Rostislav Raykov

Robert Andrade

Compensation of Directors

Director Compensation Table

The following table summarizes the compensation earned by our non-executive directors for the year ended December 31, 2023.

Fees paid in Cash

Option Awards (1)(2)

(1) Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.

(2) Detail of option grants are presented in the following table:

Date of Grant

Number of Options Granted

Option Exercise Price $USD

June 12, 2023

The annual compensation considerations for non-executive directors also include the awarding of stock options.

We believe that granting of options to the non-executive directors serves three primary purposes:

(1) to recognize the significant time and effort commitments of being a member of our Board;

(2) to provide long-term incentives for future efforts since the value of the options is directly dependent on our market valuation;

and (3) to retain quality individuals.

When determining whether and how many new option grants will be made, the Compensation Committee takes into account the amount and terms of any outstanding options.

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

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.

The Compensation Committee may also remunerate members in the form of a grant of options to purchase shares of our common shares.

The options immediately vest when granted and are otherwise subject to the terms and conditions of our stock option plan, as amended.

The Independent Director Agreements also provide for the reimbursement of such director’s reasonable travel and related expenses incurred in the course of attending board meetings.

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2025 Annual Meeting of Stockholders.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth information regarding our common shares beneficially owned as of March 25, 2024 by:

(i) each of our officers and directors;

(ii) all officers and directors as a group;

and (iii) each person known by us to beneficially own five percent or more of our outstanding common shares.

Except as indicated below, the security holders listed possess sole voting and investment power with respect to the shares beneficially owned by that person.

Except as otherwise indicated below, the address for each listed shareholder is c/o Fennec Pharmaceuticals Inc., 68 TW Alexander Drive, PO Box 13628, Research Triangle Park, North Carolina 27709.

Common shares

Total Stock and

Common shares

Within 60 Days

Ownership (1)

Robert Andrade

Marco Brughera

Rostislav Raykov

All Officers and Directors as a Group

Southpoint Capital Advisors, LP.

Essetifin SpA (3)

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 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.

(2) Southpoint Capital Advisors, LP, 623 Fifth Avenue, Suite 2503, New York, New York 10022.

Clark, II holds voting and investment power over the shares owned by Southpoint Capital Advisors, LP.

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

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) 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

The following table provides certain information with respect to securities authorized for issuance under equity incentive plans as of December 31, 2023.

(share amounts are in thousands):

Number of securities remaining

available for future issuance under

Number of securities to be issued

Weighted-average exercise price of

equity compensation plans

upon exercise of outstanding

outstanding options, warrants and

(excluding securities reflected in

Plan Category

options warrants and rights

Equity compensation plans approved by security holders

Our current stock option plan allows for the issuance of equity awards and grants denominated in both U.S.

dollars and Canadian dollars.

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

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2025 Annual Meeting of Stockholders.

Certain Relationships and Related Transactions, and Director Independence

Related Party Transactions

There were no reportable transactions with related parties during the year ended December 31, 2023 in which the amount involved exceeded the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years.

Indemnifications Related to Officers and the Board of Directors.

We have agreed to indemnify members of our Board of Directors (the “Board”) and certain of our officers if they are named or threatened to be named as a party to any proceeding by reason of the fact that they acted in such capacity.

We maintain directors’ and officers’ (“D&O”) insurance coverage to protect against such losses.

We have not historically incurred any losses related to these types of indemnifications.

Presently, we are defending a suit against our Board and certain named officers.

Management is unable to estimate a dollar value related to the suit, nor can it determine the probability of an outcome either in favour or against the Company.

As a result, we have not recorded any liabilities related to such indemnifications as of December 31, 2023.

In addition, as a result of D&O insurance policy coverage, we believe these indemnification agreements are not significant to our results of operations.

Director Independence

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 has determined that Mr.

Brughera, Haigh, Islam, Rallis and Ms.

Cook are “independent.” Mr.

Raykov, our Chief Executive Officer, is considered to have a material relationship with us by virtue of his executive officer position and is therefore not independent.

We are of the view that the composition of our Board reflects a diversity of background and experience that are important for effective corporate governance.

Other directorships held by Board members are described in this Annual Report under the heading “Directors and Executive Officers.”

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2025 Annual Meeting of Stockholders.

Principal Accounting Fees and Services

The following presents the aggregate fees for professional services and other services rendered by our independent auditors, Haskell & White LLP (PCAOB ID# 200 ), in fiscal year 2023 and 2022:

Audit Fees (1)

Audit-Related Fees (2)

All Other Fees (4)

(1) Audit Fees include fees for the standard audit work that needs to be performed each year in order to issue an opinion on the consolidated financial statements of the Company.

It also includes fees for services that can only be provided by the Company’s auditor such as auditing of non-recurring transactions.

(2) Audit-Related Fees include fees assurance and related services that are reasonably related to the performance of the audit or review and are traditionally performed by the independent accountant.

(4) All Other Fees include fees for products and services other than Audit Fees, Audit Related Fees and Tax Fees.

The Audit Committee does not have formal pre-approval policies and procedures;

however, prior to their engagement by us, the Audit Committee approved all of the services performed by Haskell & White LLP as required by SEC regulation.

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2025 Annual Meeting of Stockholders.

Exhibits and Financial Statement Schedules

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

Fennec Pharmaceuticlas, Inc.

Fennec Pharmaceuticals, Inc.

Description of the Registrant’s Securities

Filed herewith

Fennec Amended and Restated Stock Option Plan*

Exhibit 10.1 to the Form 8-K of the Company filed September 29, 2017

Executive Employment Agreement dated May 3, 2010 by and between Fennec and Rostislav Raykov*

Exhibit 4.1 to the Form 10-K of the Company filed March 29, 2024

Fennec Pharmaceuticals, Inc.

2020 Equity Incentive Plan*

Schedule B to the Management Proxy Circular of the Company filed May 11, 2020

Executive Employment Agreement dated May 3, 2010 by and between Fennec Pharmaceuticals Inc.

and Rostislav Raykov*

Exhibit 10.28 to the Form 10-Q of the Company filed May 14, 2010

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Exhibit 10.31 to the Form 10-Q of the Company filed May 14, 2010

Executive Employment Agreement dated November 12, 2015 by and between Fennec and Robert Andrade*

Executive Employment Agreement dated November 12, 2015 by and between Fennec Pharmaceuticals Inc.

and Robert Andrade*

Exhibit 10.40 to the Form 10-Q of the Company filed November 12, 2015

Purchase Agreement, dated May 9, 2016, between Fennec Pharmaceuticals Inc.

and Elion Oncology, LLC.

Exhibit 10.42 to the Form 10-Q of the Company filed May 12, 2016

Loan and Security Agreement dated as of February 1, 2019 by and between Fennec Pharmaceuticals, Inc.

and Western Alliance Bank

Exhibit 10.1 to the Form 8-K of the Company filed February 4, 2019

First Amendment to Loan and Security Agreement dated as of June 25, 2020 by and between Fennec Pharmaceuticals, Inc.

and Western Alliance Bank

Exhibit 10.1 to the Form 8-K of the Company filed June 26, 2020

Second Amendment to Loan and Security Agreement dated as of June 24, 2021 by and between Fennec Pharmaceuticals, Inc and Western Alliance Bank

Exhibit 10.1 to the form 8-K of the Company filed June 24, 2021

Third Amendment to Loan and Security Agreement dated as of January 27, 2022 by and between Fennec Pharmaceuticals, Inc and Western Alliance Bank

Exhibit 10.1 to the form 8-K of the Company filed January 31, `

Form of Stock Option Award Agreement under 2020 Equity Incentive Plan*

Filed herewith

Form of Restricted Stock Award Agreement under 2020 Equity Incentive Plan*

Filed herewith

Confidential Separation Agreement between Fennec Pharmaceuticals (EU) Limited, Fennec Pharmaceuticals Inc., and Adrian Haigh, dated June 30, 2024*

Exhibit 10.1 to the Form 8-K of the Company filed July 2, 2024

Confidential Separation Agreement between Fennec Pharmaceuticals, Inc.

and Rostislav Raykov, dated August 5, 2024*

Exhibit 10.1 to the Form 8-K of the Company filed August 7, 2024

Executive Employment Agreement between Fennec Pharmaceuticals, Inc.

and Jeffrey S.

Hackman, dated August 5, 2024*

Exhibit 10.2 to the Form 8-K of the Company filed August 7, 2024

At The Market Offering Agreement, dated October 30, 2020, between Fennec Pharmaceuticals Inc.

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Exhibit 1.1 to the Form 8-K of the Company filed October 30, 2020

Executive Employment Agreement of Shubh Goel

Exhibit 10.1 to the form 8-K of the Company filed September 9, 2019

First Closing of Financing Transaction, dated August 22, 2022, by and between Fennec Pharmaceuticals Inc.

Securities Purchase Agreement, dated as of August 1, 2022, by and between Fennec Pharmaceuticals Inc.

and Petrichor Opportunities Fund I LP

Exhibit 10.1 to the form 8-K of the Company filed August 1, 2022

Second Closing of Financing Transaction, dated September 23, 2022, by and between Fennec Pharmaceuticals Inc.

First Closing Senior Secured Convertible Note, dated August 19, 2022, by and between Fennec Pharmaceuticals Inc.

and Petrichor Opportunities Fund I LP

Exhibit 4.1 to the form 8-K of the Company filed August 22, 2022

Second Closing Senior Secured Convertible Note, dated September 23, 2022, by and between Fennec Pharmaceuticals Inc.

and Petrichor Opportunities Fund I LP

Exhibit 4.1 to the form 8-K of the Company filed September 26, 2022

Share Registration Agreement, dated as of December 1, 2022, between Fennec Pharmaceuticals, Inc.

First Amendment to Securities Purchase Agreement, dated as of December 4, 2023, between Fennec Pharmaceuticals Inc.

and Petrichor Opportunities Fund I LP

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.

Exhibit 10.1 to the Form 8-K of the Company filed December 6, 2023

Third Closing Senior Secured Convertible Note, dated as of December 4, 2023, between Fennec Pharmaceuticals Inc.

and Petrichor Opportunities Fund I LP

Exhibit 4.1 to the Form 8-K of the Company filed December 6, 2023

License and Supply Agreement, dated March 15, 2024, between Fennec Pharmaceuticals, Inc.

and Norgine Pharma UK Limited

Exhibit 10.1 to the Form 8-K of the Company filed March 21, 2024

Waiver and Redemption Agreement, dated December 18, 2024, between Fennec Pharmaceuticals Inc.

and Petrichor Opportunities Fund I LP

Exhibit 10.1 to the Form 8-K of the Company filed December 20, 2024

Fennec Pharmaceuticals, Inc.

Insider Trading Policy, dated July 11, 2009.

Filed herewith

Letter Regarding Change in Certifying Accountant

Exhibit 16.1 to the Form 8-K of the Company filed May 17, 2017

Exhibit 10.16 to the Form 10-K of the Company filed March 29, 2024

Exhibit 21 to the 10-K of the Company filed February 14, 2020

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Incentive Compensation Recovery Policy

Filed herewith

Exhibit 97 to the Form 10-K of the Company filed March 29, 2024

Press Release for Fiscal Year Ended December 31, 2022

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Fennec Pharmaceuticals Inc.

/s/ Rostislav Raykov

Rostislav Raykov

Chief Executive Officer and Director

/s/ Jeffrey Hackman

Jeffrey Hackman

Chief Executive Officer

March 26, 2025

We, the undersigned directors and officers of Fennec Pharmaceuticals Inc., do hereby constitute and appoint Rostislav Raykov, as our true and lawful attorney-in-fact and agent with power of substitution, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which such attorney-in-fact and agent may deem necessary or advisable to enable said corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Annual Report on Form 10-K, including specifically but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments hereto;

We, the undersigned directors and officers of Fennec Pharmaceuticals Inc., do hereby constitute and appoint Jeffrey Hackman, as our true and lawful attorney-in-fact and agent with power of substitution, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which such attorney-in-fact and agent may deem necessary or advisable to enable said corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Annual Report on Form 10-K, including specifically but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments hereto;

and we do hereby ratify and confirm all that said attorney-in-fact and agent, shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Rostislav Raykov

/s/ Jeffrey Hackman

Chief Executive Officer

March 26, 2025

Rostislav Raykov

Jeffrey Hackman

(principal executive officer) and Director

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accounting officer)

/s/ Adrian J.

Chief Operating Officer

March 26, 2025

(principal operations office)

March 26, 2025

March 29, 2024

/s/ Marco Brughera

1 unchanged sentence

Marco Brughera

/s/ Rostislav Raykov

March 26, 2025

Rostislav Raykov

/s/ Jodi Cook

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID :

Consolidated Balance Sheets

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

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”).

(the “Company”) as of December 31, 2024 and 2023, 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, 2024 and 2023, 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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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)

Norgine License and Supply Agreement

Critical Audit Matter Description

As described in Note 1 to the consolidated financial statements, the Company entered into a 10-year licensing and supply agreement with Norgine Pharma UK Limited (“Norgine”) to commercialize PEDMARQSI in contractually defined territories.

The Company received $43 million in upfront consideration in connection with this agreement, and the agreement provides for up to $227 million in additional commercial and regulatory milestone payments and tiered royalties on net sales of PEDMARQSI in the licensed territories.

During the year ended December 31, 2024, the Company recognized related licensing revenue of $18.0 million and product sales revenue of $813,000, and as of December 31, 2024, the Company has a contract liability of $24.8 million.

How the Critical Audit Matter was Addressed in the Audit

Accounting for this transaction involved significant estimates and judgments to evaluate the contract’s distinct performance obligations, determine the transaction price, estimate related standalone selling prices of distinct performance obligations, and allocate the transaction price to the distinct performance obligations based on standalone selling price.

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:

◾ We obtained and read the customer contract to obtain an understanding of the contractual responsibilities of the parties and the terms and conditions of the relationship;

we evaluated management’s accounting policies and practices with respect to revenue recognition for compliance with accounting principles generally accepted in the United States of America.

◾ We tested the Company’s application of the revenue recognition model under Accounting Standards Codification (“ASC”) Topic 606, including its identification of distinct performance obligations (delivery of a functional intellectual property license and a material supply right);

we tested management’s determination of the transaction price by evaluating the accounting guidance and contract terms;

we assessed the reasonableness of management’s estimates of standalone selling price by testing significant judgments made in the areas of forecasted 10-year sales performance, future market product pricing and sales volumes in the covered territories, market royalty rates, upfront payments and milestone payments in comparable transactions, and discount rates;

we evaluated the timing and pattern of revenue recognition for license fees, milestone payments, and supply arrangements;

and we considered the impact of potential future sales-based royalty and milestone payments on the Company’s application of ASC Topic 606.

◾ We reviewed management’s estimates of variable consideration, including the probability of achieving milestone payments and the constraint applied to revenue recognition.

◾ We assessed the adequacy of the Company’s financial statement disclosures regarding this agreement and related revenue recognition policies.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)

Estimated Product Allowances and Discounts

1 unchanged sentence

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.

Further, certain distributors provide distinct and estimable services to the Company in exchange for product allowances.

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 provided to distributors in excess of the estimated fair value of services received by the Company are presented as sales discounts.

Allowances provided to such distributors during the year ended December 31, 2024 for distinct and estimable distributor services totaled $8.0 million, of which $1.7 million is presented as prepaid expenses as of December 31, 2024.

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 has limited Company-specific historical experience to make estimates.

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

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.

1 unchanged sentence

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 obtained and read related customer contracts to obtain an understanding of the contractual responsibilities of the parties;

we evaluated management’s accounting policies and practices with respect to distinct distributor provided services for compliance with accounting principles generally accepted in the United States of America;

and we obtained an understanding of management’s monitoring and oversight of such services.

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

◾ 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.

2 unchanged sentences

◾ 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.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)

Estimated Allowances for Expected Credit Losses

Critical Audit Matter Description

As described in Note 2 to the consolidated financial statements, the Company recognizes an allowance for expected credit losses related to trade receivables from customers.

The determination of the allowance involves significant management judgment, including assessments of historical collection experience, customer creditworthiness, aging of receivables, macroeconomic conditions, country-specific risks in international markets, and management’s expectations of future events.

The estimation uncertainty regarding the allowance is exacerbated by the fact that the Company’s first commercial sale to a domestic customer occurred in October 2022, and its first commercial sale to a global distributor occurred in March 2023.

The allowance is particularly sensitive to evolving payment behaviors of global distributors and changes in economic conditions that may impact the collectability of receivables of these global distributors.

Given the complexity and subjectivity involved in estimating potential uncollectible accounts, especially in emerging markets with heightened credit risk, we identified the evaluation of management’s estimate of an allowance for expected credit loss as a critical audit matter.

The Company recorded a $2.5 million credit loss (bad debt) expense during the year ended December 31, 2024, and as of December 31, 2024, the allowance for credit losses totaled $3.8 million.

How the Critical Audit Matter was Addressed in the Audit

Auditing the Company’s estimated allowances was challenging and required significant judgment due to the reliance on subjective management assumptions about the creditworthiness of global distributors.

While domestic specialty distributor customers pose a lower credit risk due to their size, established relationships, and payment history, estimating expected credit losses for international customers involves greater estimation uncertainty.

These customers have limited credit history with the Company and may lack formal credit ratings, increasing dependence on management’s judgment in assessing creditworthiness and potential payment default risk.

As a result, auditing these estimates required a high degree of judgment, subjectivity, and effort in evaluating management’s assumptions and supporting evidence.

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:

◾ We evaluated management’s accounting policies and practices for estimating expected credit losses with respect to domestic and international customers for compliance with accounting principles generally accepted in the United States of America.

◾ Through interviews, inquiries, and observations, we obtained an understanding of the significant management assumptions used in developing the allowance, including evaluating the reasonableness of key assumptions used in estimating expected credit losses and the recoverability of receivables.

◾ We assessed the historical accuracy of management’s estimates by comparing prior year allowances to actual write-offs.

◾ We evaluated potentially uncollectible accounts on a customer-specific basis, considering each customer’s history and unique circumstances.

We also inspected available objective support, such as customer communications and cash receipts, to assess whether the evidence (or lack thereof) corroborated or contradicted management’s assertions.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)

◾ 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

Deferred issuance cost (amortization)

Other non-current assets

Other non-current assets amortization

Total non-current assets

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Operating lease liability - current

Contract liability - current

Total current liabilities

1 unchanged sentence

Debt discount

Operating lease liability - net of current portion

Contract liability - long-term

Total non-current liabilities

2 unchanged sentences

Shareholders’ deficit:

Common shares, no par value;

Common stock, no par value;

unlimited shares authorized;

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dollars and shares in thousands, except per share information)

PEDMARK (R) product sales, net

Cost of products sold

Product sales, net

Licensing revenue

Total net revenues

Operating expenses:

Cost of product sales

Research and development

2 unchanged sentences

Total operating expenses

Loss from operations

Income / (Loss) from operations

Other (expense)/income

Unrealized foreign exchange gain/(loss)

Unrealized foreign exchange (loss)/gain

Amortization expense

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Interest expense

Total other (expense)/income

Total other expense

Loss before income tax

Basic net loss per common share

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Balance at December 31, 2022

Stock options issued to consultants

Stock options issued to employees

Warrants issued in connection with term loan

Issuance of securities

Exercise of stock options

1 unchanged sentence

Balance at December 31, 2023

Stock options and restricted share units issued to employees

Stock options issued to employees

Exercise of stock options

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dollars in thousands)

Cash flows (used in) provided by:

Cash flows provided by (used in):

Operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by / (used in) operating activities:

Inventory reserve

Allowance for credit losses

Amortization of contract asset

Amortization of debt access fees

1 unchanged sentence

Unrealized loss on securities

Stock-based compensation - consultants

Stock-based compensation - employees

Stock-based compensation

Changes in operating assets and liabilities:

Accounts receivable, net

Accounts receivable

Prepaid expenses

1 unchanged sentence

Accrued liabilities

Net cash used in operating activities

Contract liability

Net cash provided by / (used in) operating activities

Financing activities:

Issuance of shares, options exercise

Proceeds from long-term debt

Long term debt paid

Payment of long-term debt

Debt discount

Cash paid for taxes on restricted share release

Capitalized deferred issuance costs

Net cash provided by financing activities

(Decrease)/increase in cash and cash equivalents

Deferred issuance costs

Net cash (used in) / provided by financing activities

Increase/(decrease) in cash and cash equivalents

Cash and cash equivalents - Beginning of year

Cash and cash equivalents - End of year

Supplemental disclosures of cash flow information:

Non-cash investing and financing activities:

Right-of-use assets obtained in exchange for operating lease liabilities

Financed insurance policy

Warrants issued in connection with term loan

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

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Nature of Business and Liquidity

Fennec Pharmaceuticals Inc.

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

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

and subsequently changed its name on September 3, 2014.

Fennec, together with its wholly owned subsidiaries Oxiquant, Inc.

(“Oxiquant”) and Fennec Pharmaceuticals, Inc., both Delaware corporations, and Cadherin Biomedical Inc.

(“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., and Fennec Pharmaceuticals (EU) Limited, all subsidiaries are inactive.

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

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.

During the year ended December 31, 2023, the Company incurred a net loss from operations of $ 16,045 .

At December 31, 2023, it had an accumulated deficit of $ 219,245 and had experienced negative cash flows from operating activities in the amount of $17,143 for the year ended December 31, 2023.

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

During the year ended December 31, 2024, the Company earned a net income from operations of $ 2,568 .

At December 31, 2024, it had an accumulated deficit of $ 219,681 and had experienced positive cash flows from operating activities in the amount of $ 26,980 for the year ended December 31, 2024.

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

The notes are due in August 2027.

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

6 unchanged sentences

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

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

The ability to draw the remaining $ 15,000 under the SPA expired on December 31, 2024.

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.

On December 18, 2024, the Company entered into a Waiver and Redemption Agreement (the “Redemption Agreement”) with Petrichor, pursuant to which the Company repurchased and redeemed Notes in an aggregate principal amount of $ 13,000 (consisting of approximately $11,794 of original principal balance and approximately $1,206 in PIK interest) (collectively, the “Note Redemptions”).

As a result of the Note Redemptions , the First and Third Closing Notes were repurchased and redeemed in full, and, as of December 19, 2024, there remains outstanding Second Closing Notes in the aggregate principal amount (inclusive of PIK interest) of approximately $ 19,500 .

In March of 2024, the Company announced 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 $ 43,000 up front, with the potential of approximately another $ 230,000 in future royalties and milestone payments.

The Company believes current funds, which include funds from the upfront payment from Norgine Pharma UK Limited (“Norgine”), 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 ® .

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.

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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, 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.

Significant estimates include revenue recognition, amount and timing of marketing and other services performed by certain distributors, allowance against trade receivables, and 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.

Credit Losses

The Company estimates and records a provision for its expected credit losses related to its trade receivables.

The Company considers historical collection rates, the current financial status of its customers, macroeconomic factors, and other industry-specific factors when evaluating for current expected credit losses.

Forward-looking information is also considered in the evaluation of current expected credit losses.

To determine the provision for credit losses for accounts receivable, the Company has disaggregated its accounts receivable by class of customer, as the Company determined that risk profile of its customers may vary based on certain characteristics such as credit history, past payment history and geography.

Each class of customer component is analyzed for estimated credit losses individually.

In doing so, the Company establishes a customer profile, based on the previous collections of accounts receivable by the age of such receivables, and evaluates the current and forecasted financial position of its customers, as available.

Further, the Company considers macroeconomic factors and the status of the life sciences industry to estimate if there are current expected credit losses within its trade receivables based on the trends and the Company’s expectation of the future status of such economic and industry-specific factors.

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

specific allowance amounts are established based on review of outstanding invoices to record the appropriate provision for customers that have a higher probability of default.

Segment and Geographic Information

Operating segments are defined as components of an enterprise engaging in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

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

The Company views its operations and manages its business in one operating segment and employees are supporting only one operating segment which is the production and commercialization of PEDMARK.

Stock-Based Compensation

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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.

Notes to the Consolidated Financial Statements

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.

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As part of the accounting for these arrangements, the Company must make significant judgments, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each performance obligation.

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

License Agreements

The Company generates revenue from license or similar agreements with pharmaceutical companies for the commercialization of its product.

Such agreements may include the transfer of intellectual property rights in the form of licenses.

Payments made by the customers may include non-refundable upfront fees, payments based upon the achievement of defined milestones, and royalties on sales of product.

If a license to the Company's intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes the transaction price allocated to the license as revenue upon transfer of control of the license.

All other promised goods or services in the agreement are evaluated to determine if they are distinct.

If they are not distinct, they are combined with other promised goods or services to create a bundle of promised goods or services that is distinct.

Optional future services where any additional consideration paid to the Company reflects their standalone selling prices do not provide the customer with a material right and, therefore, are not considered performance obligations.

If optional future services are priced in a manner which provides the customer with a significant or incremental discount, they are material rights, and are accounted for as separate performance obligations.

Contingent milestones at contract inception are estimated at the amount which is not probable of a material reversal and included in the transaction price using the most likely amount method.

Milestone payments that are not within the Company's control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received and therefore the variable consideration is constrained.

The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied.

At the end of each reporting period, the Company re-evaluates the probability of achieving development or sales-based milestone payments that may not be subject to a material reversal and, if necessary, adjust the estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect license and other revenue, as well as earnings, in the period of adjustment.

For arrangements that include sales-based royalties, including sales-based milestone payments, and a license of intellectual property that is deemed to be the predominant item to which the royalties relate, revenue is recognized at the later of when the related sales occur or when the performance obligation to which some or all of the royalties have been allocated has been satisfied (or partially satisfied).

Net Product Revenue

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Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, forecasted Customer buying and payment patterns, and the Company’s historical experience that will develop over time as PEDMARK ® is the Company’s first commercial product.

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

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

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

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.

Overall, these reserves reflect the Company’s best estimates of

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

the amount of consideration to which it is entitled based on the terms of its contracts.

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

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

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Discounts for Prompt Payment:

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

The Customers receive a discount of for prompt payment which may range from 0.5 % to 2.0 %.

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

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

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

The following table summarizes net product revenues for PEDMARK ® in the years ended December 31, 2024, and 2023, respectively:

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Net product revenues

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

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.

For the years ended December 31, 2024 and 2023, the Company had four distributors and three distributors that represented more than 10% of net sales, respectively.

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, 2024, and 2023 were as follows:

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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.

For Customers that are large specialty distributors, the Company considered 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.

The Company had an allowance for credit losses of $ 3,803 as of December 31, 2024.

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Cost of Products Sold

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

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

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

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

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

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

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.

As of December 31, 2024, the Company capitalized approximately $ 1,060 of costs as inventory, net of obsolescence reserve, on the consolidated balance sheet.

Of the items capitalized, $ 377 was capitalized as raw materials and $ 1,201 was capitalized into finished goods.

There was a reserve against finished goods valuation for inventory which the Company believes will expire before it is sold in the amount of $ 518 .

Cash and Cash Equivalents

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The Company places its cash and cash equivalents in investments held by highly rated financial institutions in accordance with its investment policy designed to protect the principal investment.

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

As of December 31, 2024, the Company had $ 26,634 in cash and money market accounts (2023 - $ 13,269 ).

Money market investments typically have minimal risks.

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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 have a weighted average life of 4.05 years.

At December 31, 2024, the Company had 150 warrants with a weighted average strike price of $ 7.71 outstanding to purchase common shares that have a weighted average life of 3.05 years.

Research and Development Costs and Investment Tax Credits

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Development costs, including drug substance costs, clinical study expenses and regulatory expenses are expensed as incurred.

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Investment tax credits, which are earned as a result of qualifying research and development expenditures, are recognized when the expenditures are made and their realization is reasonably assured.

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

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’s trade receivables includes amounts billed to customers for product sales of PEDMARK ® .

In the U.S., the customers are a limited group of specialty distributors, and accordingly, the Company considers the risk of potential credit losses to be low.

The Company also sells to a select group of global distributors.

These global distributors are established companies and although the Company regards credit losses with these distributors to be remote, it does recognize the potential for credit losses with this group.

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.

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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

Foreign Currency Transaction

dollar is the functional currency for the Company’s consolidated operations.

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

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

Loss Per Share

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Such options would have an antidilutive effect.

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 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).

The new standard eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity's own equity.

The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity's own equity.

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

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 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

At December 31, 2023, warrants to purchase 0.2 million of our common shares, restricted share units to obtain 0.2 million of our common shares and options to purchase 4.8 million common shares were excluded from the computation of loss per share as their inclusion would have been antidilutive.

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.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued amended guidance for improvements to reportable segment disclosures (ASU) No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures,” that requires a public entity disclose significant segment expenses regularly reviewed by the chief operating decision maker (CODM), including public entities with a single reportable segment.

The amended guidance is effective for fiscal years beginning January 1, 2024, and interim periods beginning January 1, 2025 and should be applied on a retrospective basis.

The Company adopted the annual and interim disclosure requirements of ASU 2023-07 effective December 31, 2024 (refer to Note 11.

Segment Reporting ).

The adoption of this ASU only affects the Company’s disclosures, with no impact to its financial condition and results of operations.

In December 2023, the FASB issued Accounting Standards Update (ASU) No.

2023-09, “Income Taxes (Topic 740):

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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.

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

On March 21, 2024, the FASB issued Accounting Standards Update (ASU) 2024-01, “Compensation-Stock Compensation (Topic 718):

Scope Application of Profits Interest and Similar Awards”, which provides illustrative guidance to help entities determine whether profits interest and similar awards should be accounted for as share-based payment arrangements within the scope of FASB Accounting Standards Codification (FASB ASC) 718, Compensation-Stock Compensation.

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

The Company believes that ASU 2024-01 will not have a material impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses,” which requires disclosure of additional disaggregated information about significant expenses within relevant income statement captions, such as purchases of inventory, employee compensation, depreciation, amortization and depletion.

The new guidance is effective for annual periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027.

We are currently evaluating the impact of this standard on our consolidated financial statements.

Loss per Share

8 unchanged sentences

Weighted-average common shares, basic

Dilutive effect of stock options

Dilutive effect of warrants

Dilutive effect of restricted share units

Incremental dilutive shares

Weighted-average common shares, diluted

Net loss per share, basic and diluted

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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):

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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.

On June 24, 2010, at the Company’s annual meeting, shareholders approved an amendment to the Company’s Stock Option Plan (the “Plan Maximum Amendment”).

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 6.8 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 Compensation Committee designates eligible participants to be included under the Plan and approves the number of options, restricted stock, and other awards to be granted from time to time under the Plan.

The maximum number of common shares issuable under the Plan is the number of shares that represents twenty-five percent ( 25 %) of the total number of all the Company’s issued and outstanding common shares.

Based upon the current shares outstanding, a maximum of 6.9 million of our 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.

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

The stock option plan, as amended, allows the issuance of Canadian and U.S.

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

dollar grants.

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dollar grants, for the years ended December 31, 2024 and 2023 is below.

Unrecognized stock-based compensation at December 31, 2024 was $ 5,020 that will be recognized over a weighted-average service period of 2.3 years.

There are no outstanding $CAD denominated options.

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(in thousands)

Stock compensation expense for the fiscal years ended December 31, 2023, and 2022 was $ 5.4 million and $ 4.2 million, respectively.

Stock compensation expense for the years ended December 31, 2024, and 2023 was $ 5,061 and $ 5,354 , respectively.

These amounts have been included in general and administrative expenses for the respective periods.

The weighted average fair value per share of options granted and or vested during the fiscal years ended December 31, 2023, and 2022 was $ 4.73 and $ 5.43 , respectively.

The intrinsic value (being the difference between the share price at December 31, 2023 and exercise price) of stock options exercisable at December 31, 2023 was $ 23.8 million.

The intrinsic value of options exercised during the fiscal year ended December 31, 2023, was $ 2.97 million.

The fair value of all options vested during the fiscal year ended December 31, 2023, was $ 6.4 million.

The fair values of options granted in fiscal years ended December 31, 2023 and 2022 were estimated on the date the options were granted based on the Black-Scholes option-pricing model, using the following weighted average assumptions for all options with a ten-year expiration:

Year Ended December 31, 2023

Year Ended December 31, 2022

The weighted average fair value per share of options granted and or vested during the years ended December 31, 2024, and 2023 was $ 4.55 and $ 4.73 , respectively.

The intrinsic value (being the difference between the share price at December 31, 2024 and exercise price) of stock options exercisable at December 31, 2024 was $ 3,331 .

The intrinsic value of options exercised during the year ended December 31, 2024, was $ 1,820 .

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

The fair value of all options vested during the year ended December 31, 2024, was $ 2,622 .

The fair values of options granted in years ended December 31, 2024 and 2023 were estimated on the date the options were granted based on the Black-Scholes option-pricing model, using the following weighted average assumptions for all options with a ten-year expiration:

December 31, 2024

December 31, 2023

Expected dividend

3 unchanged sentences

1.50 - 6 years

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

4 unchanged sentences

During the year ended December 31, 2024, 316 RSUs were awarded, 30 were forfeited and 180 were released from restriction.

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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

The Company recognized $ 1,382 in RSU expense for the year ended December 31, 2024, and $ 1,300 for the same period in 2023.

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.

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Unobservable inputs that are not corroborated by market data.

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Financial assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement.

The Company measures the fair value of its Processa common shares by taking into consideration valuations obtained from public financial markets.

The Company measures the fair value of the Processa Pharmaceuticals Inc.

(“Processa”) common shares held by the Company by taking into consideration valuations obtained from public financial markets.

The Company uses Yahoo Finance to obtain share price data and Oanda for foreign currency pricing services to estimate fair value.

2 unchanged sentences

During the year ended December 31, 2024, the Company did not have any transfers of financial assets between Levels 1 and 2.

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Assets/Liabilities Measured at Fair Value on a Recurring Basis

9 unchanged sentences

(1) The Company held approximately, $ 2,020 in cash as of December 31, 2024, of which approximately $ 110 was in Canadian funds and $ 245 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 has 41 unrestricted common shares of Processa (PSCA).

As of December 31, 2023, the Company held approximately $ 1,340 in cash, of which approximately $ 33 was in Canadian funds (translated into U.S.

(2) The Company has 51 unrestricted common shares of Processa (Nasdaq:

Stockholders’ Equity

3 unchanged sentences

At December 31, 2024, the Company had warrants outstanding to purchase 150 common shares at a weighted average exercise price of $ 7.71 .

The following table summarized our warrant activity for the fiscal years ended December 31, 2023 and 2022.

The following table summarizes our warrant activity for the years ended December 31, 2024 and 2023.

(in thousands)

2 unchanged sentences

Outstanding and exercisable at December 31, 2024

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Commitments and Contingencies

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").

On February 20, 2013, Fennec entered into an 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.

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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.

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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.

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

PEDMARK ® received FDA approval in September 2022.

The Company has accrued $201 based on EBITDA targets as of December 31, 2024.

The term of the OHSU Agreement as amended by Amendment 1 expires on the date of the last to expire claim(s) covered in the patents licensed to Fennec or 8 years, whichever is later.

The Company now has a licensed product with regulatory approval that is covered by the Orphan Drug Designation, the parties amended the term of the agreement.

Sodium thiosulfate is currently protected by methods of use patents that the Company exclusively licensed from OHSU that expired in Europe in 2021 and that expire in the United States in 2038.

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

1 unchanged sentence

The Company had accrued approximately $ 576 ( 1 % net sales) in royalty expense to OHSU at December 31, 2024.

Securities Class Action Suit

Hope Medical Enterprises, Inc.

Inter Partes Review (IPR) Challenges

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

(“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

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and CIPLA USA (“CIPLA”) submitted to the FDA an ANDA (ANDA No.

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

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

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

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

Under the Food, Drug, and 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.

In addition to the 30-month stay, because we have received Orphan Drug Exclusivity, the FDA may not approve CIPLA’s ANDA for at least 7 years from PEDMARK’s FDA approval date of September 20, 2022, which is September 20, 2029.

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.

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

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

On April 4, 2023, we were granted US 11,617,793 Patent (the “US ‘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 US ‘793 Patent, which was dated May 10, 2023, along with an enclosed statement of alleged factual and legal bases for stating that the US ‘793 Patent is invalid, unenforceable, and/or will not be infringed by CIPLA’s ANDA Product.

On July 27, 2023, we filed a Second

Fennec Pharmaceuticals Inc.

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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 ® .

In addition to the 30 -month stay, because we have received Orphan Drug Exclusivity, the FDA may not approve CIPLA’s ANDA for at least 7 years from PEDMARK ® ’s FDA approval date of September 20, 2022.

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.

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.

Amended Complaint to assert the US ‘793 Patent.

CIPLA filed an Answer to the Second Amended Complaint on August 31, 2023.

On April 23, 2024, we were granted US 11,964,018 Patent (the “US ‘018 Patent) covering a method of using our PEDMARK product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer, which was listed in the Orange Book on or around May 8, 2024, and has an expiration date of July 2039.

On May 28, 2024, we were granted US 11,992,530 Patent (the “US ‘530 Patent”) covering a method of using our PEDMARK product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer, which was listed in the Orange Book on or around June 20, 2024, and has an expiration date of July 2039.

On June 4, 2024, we were granted US 11,998,604 Patent (the “US ‘604 Patent”) covering a method of using our PEDMARK product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer, which was listed in the Orange Book on or around June 24, 2024, and has an expiration date of July 2039.

On June 13, 2024, we filed a Motion for Leave to File a Third Amended Complaint to focus the ANDA litigation against CIPLA on the US ‘018 Patent and the US ‘793 Patent only.

The non-asserted patents remain listed in the Orange Book.

On July 22, 2024, CIPLA filed a response indicating that they do not oppose our Motion for Leave to File a Third Amended Complaint.

On July 30, 2024, the court granted us leave to file the Third Amended Complaint, which we filed on September 16, 2024.

In coordination with the Third Amended Complaint, we entered into a covenant not to sue CIPLA on the US ‘363 Patent, US ‘728 Patent, US ‘984 Patent, US ‘530 Patent, and US ‘604 Patent, subject to the limitation that such shall not apply to the extent CIPLA alters the product or formulation described in its FDA ANDA application.

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).

In the event of termination of Mr.

Hackman's (Chief Executive Officer) employment 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 $ 550 ).

In the event of termination of Mr.

Andrade’s (Chief Financial Officer) employment with the Company other than for cause, the Company will be obligated to pay him a one -time severance payment equal to nine months of salary which is equivalent to $ 331 .

Further, certain other Executive Employment Agreements generally provide that if employment is terminated without “Cause” (as defined in the applicable Executive Employment Agreement) and other conditions are satisfied, then such executive officer shall receive as severance an amount equal to their then current base salary for a period of nine ( 9 ) months, less standard withholdings for tax and social security purposes.

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

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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

This lease was terminated.

Fennec Pharmaceuticals Inc.

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commenced after August 2023.

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 Company uses an incremental borrowing rate consisting of the current prime rate plus 150 basis points for operating leases that commenced after August 2023.

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

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As of December 31, 2024, the Company does not offer matching contributions.

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

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

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

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

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

Fennec Pharmaceuticals Inc.

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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).

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

The ability for subsequent draws expired on December 31, 2024.

On December 18, 2024, the Company entered into a Waiver and Redemption Agreement (the “Redemption Agreement”) with Petrichor, pursuant to which the Company repurchased and redeemed Notes in an aggregate principal amount of $ 13,000 (consisting of approximately $ 11,800 of original principal balance and approximately $ 1,270 in PIK interest) (collectively, the “Note Redemptions”).

Cash interest on outstanding principal shall accrue at a rate of prime, plus 4.5 % per annum, from the date of funding ( 12 % and 13 % at December 31, 2024 and 2023, respectively).

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

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

PIK interest will stop accruing on August 24, 2024.

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

PIK interest stopped accruing on August 24, 2024.

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

The Company has accrued $ 1,271 in PIK interest and has classified the PIK interest in long-term liabilities.

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Years Ending December 31,

Payment in kind interest

Total future payments

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

Debt issuance costs of $ 175 were paid in cash for legal fees and to the Investor in 2022 and warrants valued at $ 441 were granted the Investor to secure access to the SPA.

Debt issuance costs of $ 175 were paid in cash for legal fees and to the Petrichor in 2022 and warrants valued at $ 441 were granted the Petrichor to secure access to the SPA.

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

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.

Upon drawing under the First Closing Note, the Second Closing Note, and the Third Closing Note, the Company recorded a debt discount of $ 314 , which was based on a pro-rata allocation of the issue costs to secure the SPA,

Fennec Pharmaceuticals Inc.

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reducing the capitalized amount by the same amount.

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

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

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Domestic loss

Foreign income/(loss)

Loss before income taxes

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Future tax assets:

SR&ED expenditures

Income tax loss carryforwards

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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

The TCJA did not have a material impact on the Company's financial statements because its deferred temporary differences

Fennec Pharmaceuticals Inc.

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mandatory transition tax.

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.

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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.

License Agreement

License Agreement with Norgine Pharma UK Limited

On March 17, 2024, the Company announced that, through its wholly-owned subsidiary, Fennec Pharmaceuticals, Inc.

entered into a License and Supply Agreement (the “Agreement”) with Norgine Pharma UK Limited (“Norgine”), pursuant to which Norgine is granted an exclusive license to commercialize the Company’s product PEDMARQSI ® (known as PEDMARK in the United States) for all human indications in the European Economic Area, Switzerland, the United Kingdom, Australia and New Zealand (collectively, the “Territory”).

On July 26, 2024, Norgine and Fennec amended the exclusive licensing agreement.

The amended agreement maintains all principal payment terms with the primary addition of Norgine assuming responsibility for packaging and labeling of PEDMARQSI ® .

Pursuant to the terms of the Agreement, Fennec shall receive the following payments from Norgine:

(i) an upfront payment in the amount of € 40,000 or approximately $ 43,200 , which was paid to Fennec on March 15, 2024, (ii) up to € 210,000 (or

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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

approximately $ 230,000 ) upon the achievement of certain regulatory and commercial milestones, and (iii) tiered royalty payments based on net sales of PEDMARQSI ® in the Territory, which royalty payment range from mid-teen percent to mid-twenty percent based on the aggregate net sales of PEDMARQSI ® in the Territory.

The tiered royalty payments are subject to material reduction if an alternative or generic version of PEDMARQSI ® becomes available in any respective country or jurisdiction within the Territory.

Subject to customary rights of each party to earlier terminate the Agreement, the term of the Agreement continues for the longer of:

(i) March 15, 2034, or (ii) with respect to any particular country in the Territory, (a) the expiration of regulatory market exclusivity for PEDMARQSI ® in such country, or (b) the last-to-expire of all patents for PEDMARQSI ® in such country.

The term of the Agreement shall be automatically renewed for additional three-year periods unless either party provides the other party written notice of its intent not to renew the Agreement at least one year prior to the applicable termination date of the Agreement.

The Company evaluated the Agreement under ASC 606 and concluded that Norgine represents a customer in the transaction.

There were two performance obligations:

a license of functional IP and a material right for future supply.

The Company will allocate the transaction price, including currently unrecognized variable consideration, to the two performance obligations based on estimated standalone selling price, which was estimated using projected cash flows.

The initial transaction price consisted of the non-refundable upfront payment, a portion of which was allocated to and recognized as License Revenue in the first quarter of 2024 as the requirements for revenue recognition under ASC 606 were met.

The portion of the transaction price associated with the material right is deferred and reflected as deferred revenue in the condensed consolidated balance sheets.

Deferred revenue associated with the material right is recognized as contract liabilities under the supply arrangement are made.

The remaining forms of consideration are variable because they are dependent on the achievement of sales-based or other milestones.

The Company evaluated the constraint on variable consideration and concluded that the milestone payments are dependent on regulatory approvals and actions of third parties, and thus are highly susceptible to factors outside the Company’s influence.

Therefore, at contract inception, the milestones are not included in the transaction price as it is not probable that a significant reversal of revenue would not occur.

Sales-based milestones will be recognized as revenue or deferred as part of the material right in the period when the related sales threshold is met.

All other milestones will be recognized as revenue or deferred as part of the material right immediately in the period the underlying milestone is achieved.

Any consideration related to sales-based royalties will be recognized as revenue or deferred as part of the material right when the related sales occur.

For year ended December 31, 2024, the Company did not recognize any milestone or royalty revenue payments from Norgine sales of PEDMARQSI ® pursuant to the Agreement.

In conjunction with entering into the Agreement, the Company paid approximately $ 1,700 in incremental costs, which were capitalized and recorded within other non-current assets.

The Company amortizes the asset over the period of expected benefit using a systematic basis that reflects the pattern of transfer to the customer.

A portion that represents the license was recognized immediately and is recorded within selling and marketing expense in the condensed consolidated statements of operations.

As of December 31, 2024, $ 819 in incremental cost was capitalized.

Segment Reporting

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

Fennec’s chief operating decision maker is the senior executive team that includes the chief executive officer and chief financial officer.

The chief operating decision maker uses net loss to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into the single segment or any other part of the entity, such as for acquisitions or to pay dividends.

The accounting policies of the operating segment are the same as those described in Note 2, Significant Accounting Policies.

The chief operating decision maker evaluates the performance of the operating segment and allocates resources

Fennec Pharmaceuticals Inc.

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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

based on net loss that also is reported on the consolidated income statement as net loss.

The measure of the operating segment assets is reported on the consolidated balance sheet as total assets.

The chief operating decision maker uses net loss to monitor budget versus actual results and to analyze cash flows in assessing performance of the segment and allocating resources.

The significant expenses are presented in the Company’s Statements of Operations.

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.

On February 7, 2024, the Company announced that Norgine Pharmaceuticals Ltd.

had commercially launched PEDMARQSI ® in Germany.

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