What changed in this filing

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Item 1. Financial Statements

2025-05-14 compared with 2024-11-08 · 232 added, 431 removed, 362 unchanged (65% of the section changed)

3 unchanged sentences

Dollars and shares in thousands)

September 30,

March 31, 2025

December 31, 2024

Current assets

5 unchanged sentences

Non-current assets

Non-current accounts receivable, net

Other non-current assets, net of amortization

4 unchanged sentences

Accrued liabilities

Operating lease liability - current

Contract liability-current

Operating lease liability - current

Total current liabilities

Non-current liabilities

Long-term liabilities

Debt discount

Contract liability - long-term

Total non-current liabilities

Total long-term liabilities

Total liabilities

8 unchanged sentences

Total stockholders’ deficit

Total liabilities and holders’ deficit

Total liabilities and stockholders’ deficit

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

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Product sales, net

PEDMARK product sales, net

Licensing revenue

8 unchanged sentences

Other (expense)/income

Realized foreign exchange (loss)/gain

Unrealized foreign exchange gain/(loss)

Amortization expense

11 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity / (Deficit)

Three and Nine Months Ended September 30, 2024, and 2023

Three Months Ended March 31, 2025 and 2024

dollars and shares in thousands)

1 unchanged sentence

Stockholders’

Equity/(Deficit)

Balance at December 31, 2024

Stock-based compensation - employees

Restricted stock release

Balance at March 31, 2024

Stock-based compensation - employees

Stock option exercise

Restricted stock release

Balance at June 30, 2024

Stock-based compensation - employees

Stock option exercise

Restricted stock release

Balance at September 30, 2024

Balance at March 31, 2025

Comprehensive

Stockholders’

Equity/(Deficit)

(Deficit)/Equity

Balance at December 31, 2023

Stock-based compensation - employees

Stock-based compensation - consultants

Stock option exercise

1 unchanged sentence

Balance at March 31, 2024

Stock-based compensation - employees

Stock-based compensation - consultants

Stock option exercise

Restricted stock release

Balance at June 30, 2023

Stock-based compensation - employees

Stock-based compensation - consultants

Stock option exercise

Restricted stock release

Balance at September 30, 2023

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

2 unchanged sentences

Dollars in thousands)

Nine Months Ended

September 30,

Cash flows provided by (used in):

Three Months Ended

Cash flows (used in)/provided by:

Operating activities:

Net income/(loss)

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

Inventory reserve

Allowance for doubtful accounts

Amortization of debt discount

Loss on securities

Net (loss) / income

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

Allowance for credit losses

Amortization of Norgine asset

Amortization of debt discount

Amortization of debt access fees

Unrealized loss on securities

Stock-based compensation - employees

5 unchanged sentences

Accrued liabilities

Contract liability - Norgine

Net cash provided by / (used in) operating activities

Contract liability - current

Net cash (used in) / provided by operating activities

Financing activities:

1 unchanged sentence

Cash paid for taxes on restricted share release

Deferred costs

Net cash (used in) / provided by financing activities

Increase/(decrease) in cash and cash equivalents

Deferred issuance costs

Net cash provided by / (used in ) financing activities

(Decrease) / increase in cash and cash equivalents

Cash and cash equivalents - Beginning of period

Cash and cash equivalents - End of period

Supplemental disclosures of cash flow information:

Non-cash investing and financing activities:

Capitalized lease asset

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

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

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

Notes to the Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Nature of Business and Going Concern

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

Nature of Business and Liquidity

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 is a commercial stage specialty pharmaceutical company with one U.S.

Food and Drug Administration (“FDA”) approved and European Commission approved product, PEDMARK ® in the U.S.

and PEDMARQSI ® the European branded name for PEDMARK ® (collectively, “PEDMARK”), 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.

The Company has four wholly owned subsidiaries:

Oxiquant, Inc.

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

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

and Fennec Limited all subsidiaries are inactive.

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

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 unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) that are applicable to a going concern which contemplates that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business.

During the three and nine-month period ended September 30, 2024, the Company earned a (loss)/income from operations of $( 5,202 ) and $ 3,502 respectively.

At September 30, 2024, it had an accumulated deficit of $ 217,696 and had experienced positive cash flows from operating activities during the nine months ended September 30, 2024, in the amount of $ 28,454 .

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

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

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

During the three months ended March 31, 2025, the Company experienced a net loss from operations of $ 808 .

On March 31, 2025, it had an accumulated deficit of $ 220,846 and had experienced negative cash flows from operating activities in the amount of $ 4,318 for the period ended March 31, 2025.

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.

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

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

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

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

A commitment fee of 2.0 % of the Notes was payable under the SPA, which was paid by the Company issuing the Investor warrants to purchase 110,996 of the Company’s common shares (one half issued at the closing of the First Closing Note and the other half issued at the closing of the Second Closing Note).The warrants are exercisable at a price per share of $ 8.11 and have a term of five years from the date of the grant.

On December 4, 2023, the Company closed the third tranche of the Note Financing in the amount of $ 5,000 (the “Third Closing Note”) which is convertible at a price equal to $ 7.89 per share, calculated as 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.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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 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 to $ 7.89 per share.

On March 17, 2024, the Company announced it had entered into an exclusive licensing agreement with Norgine Pharma UK Limited (“Norgine”) to commercialize PEDMARQSI ® (EU brand name for PEDMARK) in Europe, New Zealand and Australia.

The licensing agreement provided Fennec with approximately $ 43,200 up front and may provide Fennec with up to approximately $ 230,000 in milestone and royalty payments in the future.

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 ® .

The Company believes current funds provide sufficient funding for the Company to carry out its planned activities, including the continuation of commercialization efforts of PEDMARK, for at least the next twelve months and into 2026.

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

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

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

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

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 Petrichor, which, among other things, extend the period that the Company could 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.

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 $ 1,271 in Payment-in-kind (“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 March 31, 2025, there remains outstanding Second Closing Notes in the aggregate principal amount (inclusive of PIK interest) of approximately $ 19,477 .

In March of 2024, the Company announced that it had secured an exclusive licensing agreement with Norgine Pharma UK Limited (“Norgine”) to commercialize PEDMARQSI ® , which is the branded name for PEDMARK ® outside of the U.S., 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, provide sufficient funding for the Company to carry out its planned activities, including the continuation of commercialization efforts of PEDMARK ® , for at least the next twelve months.

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.

1 unchanged sentence

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with US GAAP and are the responsibility of the Company’s management.

These unaudited interim condensed consolidated financial statements do not include all of the information and notes required by US GAAP for annual financial statements.

Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited condensed consolidated financial statements and notes filed with the Securities and Exchange Commission (“SEC”) in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S.

GAAP and are the responsibility of the Company’s management.

These unaudited interim condensed consolidated financial statements do not include all of the information and notes required by U.S.

GAAP for annual financial statements.

Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes filed with the Securities and Exchange Commission (“SEC”) in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

The Company’s accounting policies are consistent with those presented in the audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2024.

2 unchanged sentences

Use of Estimates

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

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

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 the amount of current and non-current trade receivables, contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period.

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

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.

Also, 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.

As of September 30, 2024, the Company had an operating lease in Ireland which is scheduled to terminate on January 31, 2025.

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

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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

Stock-Based Compensation

10 unchanged sentences

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

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

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

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

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

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

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

Revenue Recognition

4 unchanged sentences

License Agreements

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

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

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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.

Optional future services where any additional consideration paid to us 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.

5 unchanged sentences

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).

Costs to Obtain Contract

As the majority of the Company's contracts are short-term in nature, sales commissions are generally expensed when incurred as the amortization period would have been less than one year.

These costs are recorded within selling and marketing expenses in the condensed consolidated statements of operations.

For contracts that extend beyond one year, the incremental expense recognition matches the recognition of related revenue.

Net Product Revenue

1 unchanged sentence

PEDMARK ® became commercially available on October 17, 2022.

PEDMARK is the Company’s first and only commercial product.

Certain specialty distributors of the Company subsequently resell the Company’s products to health care providers and patients.

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

PEDMARK ® is the Company’s first commercial product.

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

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

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

Further, on March 17, 2024, the Company announced it had entered into an exclusive licensing agreement with Norgine to commercialize PEDMARQSI ® (EU brand name for PEDMARK) in Europe, New Zealand and Australia.

Product Sales Discounts and Allowances

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

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

Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as current

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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 and PEDMARQSI ® (European branded product name) is the Company’s first and only commercial product.

The Company records U.S.

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

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

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.

2 unchanged sentences

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

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

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

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

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

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

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

3 unchanged sentences

Discounts for Prompt Payment:

Customers typically receive a small discount 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.

2 unchanged sentences

The allowance for rebates is based on statutory or contractual discount rates and expected utilization.

The Company’s estimates for the expected utilization of rebates are based on customer and payor data received from the specialty distributors and historical utilization rates that will develop over time, as PEDMARK is the Company’s first and only commercial product.

The Company’s estimates for the expected utilization of rebates are based on Customer and payer data received from the specialty distributors and historical utilization rates that will develop over time as PEDMARK ® is the Company’s first commercial product.

Rebates are generally invoiced by the payor and paid in arrears, such that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s shipments to the Customers, plus an accrual balance for known prior quarters’ unpaid rebates.

5 unchanged sentences

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

To the extent the services received are distinct from the sale of products to its customers, the Company classifies these payments in selling and marketing expenses in its condensed consolidated statements of operations.

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

Distribution and Other Fees:

The Company pays distribution and other fees to certain customers in connection with the sales of PEDMARK.

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

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

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

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

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

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

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

The following table summarizes net product revenues for PEDMARK earned during the three and nine months ended September 30, 2024, and 2023, respectively:

The following table summarizes net product revenues for PEDMARK ® in the United States earned in the three months ended March 31, 2025 and 2024, respectively:

Three Months Ended

Nine Months Ended

September 30,

Product revenues:

2 unchanged sentences

Net product revenues

For the three and nine months ended September 30, 2024, the Company had one and four distributors that each represented more than 10% of net sales, respectively.

For the three and nine months ended September 30, 2023, the Company had two distributors that each represented more than 10% of net sales.

The activities and ending allowance balances for each significant category of discounts and allowances for PEDMARK (which constitute variable consideration) for the nine months ended September 30, 2024, were as follows:

For the three months ended March 31, 2025 and 2024, the Company had three distributors that each represented more than 10% of net sales.

The activities and ending allowance balances for each significant category of discounts and allowances for PEDMARK ® (which constitute variable consideration) for the three months ended March 31, 2025, was as follows:

Rebates, Customer

8 unchanged sentences

Balance at March 31, 2025

Provision related to sales made in:

Current period

Prior periods

Payments and customer credits issued

Balance at June 30, 2024

Provision related to sales made in:

Current period

Prior periods

Payments and customer credits issued

Balance at September 30, 2024

The allowances for chargebacks, fees due to customers, rebates and discounts for prompt payment are recorded as a contra-asset to accounts receivable, while Medicaid rebates and return allowances are in accrued liabilities in the accompanying condensed consolidated balance sheets.

Trade Receivables

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

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

Trade accounts receivable are recorded at the invoiced amount and are typically non-interest bearing.

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

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

The Company considers various factors, including loss history,

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

individual credit risk associated to each customer, and the current and future condition of the general economy.

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

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

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

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

Sales to non-specialty distributors outside the United States have greater potential for losses.

It is the policy of the Company to use a sliding scale to establish a reserve of its gross sales to non-specialty distributors, based on the aging category, in combination with management's specific review of each past due customer balance.

The Company had a balance in allowance for credit losses of $ 4,971 as of September 30, 2024.

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.

Accounts receivable that are expected to be received past 12 months are recorded as non-current accounts receivable.

The Company has determined any financing component of non-current receivables to be immaterial.

The Company had a balance in allowance for credit losses of $ 3,882 as of March 31, 2025.

Cost of Products Sold

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

Cost of products sold also consists of shipping and other third-party logistics and distribution costs for PEDMARK.

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

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

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

As of September 30, 2024, the Company capitalized approximately $ 1,125 of costs as inventory on the condensed consolidated balance sheet.

Of the items capitalized, $ 377 was capitalized as raw materials, $ 108 was capitalized as work in process, $ 640 was capitalized into finished goods.

Cost of products sold is related to the Company's product revenues for PEDMARK ® and consists primarily of product production costs associated with finished goods inventory.

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

As of March 31, 2025, the Company capitalized approximately $ 1,404 of costs as inventory on the condensed consolidated balance sheet.

Of the items capitalized, $ 665 was capitalized as work in process and raw materials, and $ 1,256 was capitalized as 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 $ 517 .

Cash and Cash Equivalents

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

At September 30, 2024, the Company had $ 40,320 in cash, savings and money market accounts ( 13,269 at December 31, 2023).

As of March 31, 2025, the Company had $ 22,675 in cash, savings and money market accounts ($ 26,634 at December 31, 2024).

Money market investments typically have minimal risks.

While the Company has not experienced any loss or write-down of its money market investments, the amounts it holds in money market accounts are substantially above the $ 250 amount insured by the FDIC and may lose value.

Financial Instruments

Financial instruments recognized on the balance sheets at September 30, 2024 and December 31, 2023 consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and term loans, the carrying values of which approximate fair value due to their relatively short time to maturity or interest rates that approximate market interest rates.

Financial instruments recognized on the balance sheets at March 31, 2025 and December 31, 2024 consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and term loans, the carrying values of which approximate fair value due to their relatively short time to maturity or interest rates that approximate market interest rates.

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

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

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Common Shares and Warrants

As of September 30, 2024, the Company has 150 warrants with a weighted average strike price of $ 7.71 outstanding to purchase common shares that have a weighted average life of 3.30 years.

As of March 31, 2025, the Company has warrants with a weighted average strike price of $ 7.71 outstanding to purchase 150 common shares that have a weighted average life of 2.80 years.

Research and Development Costs and Investment Tax Credits

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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.

These global distributors are established companies and although the Company regards credit losses with these distributors to be low, 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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Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized.

As of September 30, 2024, we maintained a full valuation allowance against our deferred tax assets.

As of March 31, 2025, we maintained a full valuation allowance against our deferred tax assets.

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

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

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

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Net Income/(Loss) Per Share

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

Loss Per Share

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

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

Accordingly, warrants to purchase 150 of our common shares, restricted share units to purchase 367 of our common shares and options to purchase 5,455 of our common shares at September 30, 2024, were not included in earnings per share.

Such warrants, options and convertible notes would have an antidilutive effect.

In 2023, warrants to purchase 150 of our common shares and options to purchase 5,005 common shares were excluded from the computation of loss per share as their inclusion would have been antidilutive.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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

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.

Early adoption is permitted.

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

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

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

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

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

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 condensed consolidated financial statements.

Net Income/(Loss) Per Share

Net income/(loss) per common share is presented under two formats:

basic net income/(loss) per common share and diluted income/(loss) per common share.

Basic net income/(loss) per common share is computed by dividing net income/(loss) attributable to common shareholders by the weighted average number of common shares outstanding during the period.

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

Income/(loss) per common share is presented under two formats:

basic income/(loss) per common share and diluted income/(loss) per common share.

Basic income/(loss) per common share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding during the period.

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

convertible debt, stock options and warrants).

Dilutive common share equivalents consist of the incremental common shares issuable upon exercise of convertible debt, restricted stock units, stock options and warrants.

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

The following table sets forth the computation of basic and diluted net income/(loss) per share (in thousands except per share data):

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Net (loss) / income

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Dilutive effect of stock options

Dilutive effect of restricted share units

Dilutive effect of warrants

Dilutive effect of convertible debt

Incremental dilutive shares

Weighted-average common shares, diluted

Net loss per share, basic and diluted

The following common stock equivalents, outstanding convertible debt, options and warrants were excluded from the computation of diluted net income/(loss) per share for the periods presented because including them would have had an anti-dilutive effect:

Nine Months Ended September 30,

Net (loss) / income per share basic

Net (loss) / income per share diluted

The following outstanding convertible debt, options and warrants were excluded from the computation of basic and diluted net income/(loss) per share for the periods presented because including them would have had an anti-dilutive effect:

At Three Months Ended March 31,

Options to purchase common shares

Convertible debt to purchase common shares

Restricted share units to purchase common shares

Warrants to purchase common shares

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Warrants to Purchase Common Stock

During the three and nine months ended September 30, 2024 and 2023, there were no warrants issued or exercised .

Outstanding warrants have a weighted average life of 3.30 years on September 30, 2024.

The following tables detail the Company’s warrant activity for the three and nine months ended September 30, 2024, and 2023, respectively:

Common Shares

Issuable Upon Exercise

of Outstanding

Weighted-Average

Investor Warrants

Exercise Price $USD

Outstanding December 31, 2023

Outstanding March 31, 2024

Outstanding June 30, 2024

Outstanding September 30, 2024

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

During the three months ended March 31, 2025, and 2024, there were no warrants issued or exercised.

Outstanding warrants have a weighted average life of 2.80 years on March 31, 2025.

The following tables detail the Company’s warrant activity for the three months ended March 31, 2025, and 2024, respectively:

Common Shares

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Outstanding March 31, 2025

Outstanding June 30, 2023

Outstanding September 30, 2023

Equity Incentive Plan

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Currently, the maximum number of equity instruments issuable under the Plan, together with the Company’s prior stock option plan, is twenty-five percent ( 25 %) of the total number of issued and outstanding common shares.

Based upon the current shares outstanding, a maximum of 6,825 shares of common stock are authorized for issuance pursuant to stock options or other equity awards granted under the Plan.

Based upon shares outstanding as of March 31, 2025, a maximum of 6,899 shares of common stock are authorized for issuance pursuant to stock options or other equity awards granted under the Plan.

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

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dollar grants.

The table below outlines recognized contractor and employee expense from equity awards for the three- and nine-month periods ended September 30, 2024, and 2023.

For all periods presented, there were no contractor option expense to recognize.

Three Months Ended

Nine Months Ended

September 30,

Employee options expense recognized

Total option expense recognized

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

The table below outlines recognized employee expense from equity awards for the three-month period ended March 31, 2025, and 2024.

Three Months Ended March 31,

Employee equity expense recognized

Total equity expense recognized

Stock Option Activity

The following is a summary of option activity for the three and nine months ended September 30, 2024 and 2023.

The following is a summary of option activity for the three months ended March 31, 2025, and 2024.

Weighted-Average

Options (thousands)

Exercise Price $USD

Exercise Price

Outstanding at December 31, 2024

Outstanding at March 31, 2025

Outstanding at June 30, 2024

Outstanding at September 30, 2024

Of the 5,455 options granted and outstanding at September 30, 2024, 4,278 are fully vested and exercisable.

Of the 5,857 options granted and outstanding at March 31, 2025, 4,257 are fully vested and exercisable.

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

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

Valuation Assumptions

Black-Scholes Model Assumptions

September 30, 2024

March 31, 2025

Expected dividend

Risk free rate

3.79 - 5.15 %

Expected volatility

Expected life

1.5 - 6.0 years

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Restricted Share Units Activity

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

The following is a summary of RSU activity for the three and nine months ended September 30, 2024 and 2023.

During the three and nine months ended September 30, 2024, there were 48 and 137 RSUs released from restriction, respectively.

Vesting of RSUs vary from one to three years .

Restricted Share

The following is a summary of RSU activity for the three months ended March 31, 2025, and 2024.

The Company recognized $ 255 in RSU expense for the three months ended March 31, 2025, and $ 300 for the same period in 2024.

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

The Compensation Committee may also award RSUs with alternative vesting.

Number of Restricted

RSUs Current Year

Units (thousands)

Share Units (thousands)

Outstanding at December 31, 2024

Outstanding at March 31, 2025

Outstanding at June 30, 2024

Outstanding at September 30, 2024

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

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

Fair Value Measurements

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This Topic applies to certain assets and liabilities that are being measured and reported on a fair value basis.

The Fair Value Measurements Topic defines fair value, establishes a framework for measuring fair value in accordance with US GAAP, and expands disclosure about fair value measurements.

The Fair Value Measurements Topic defines fair value, establishes a framework for measuring fair value in accordance with U.S.

GAAP, and expands disclosure about fair value measurements.

This Topic enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values.

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Unobservable inputs that are not corroborated by market data.

Fair Value Measurement at September 30, 2024 and December 31, 2023

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 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.

These inputs include reported trades of and broker- dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities and other observable inputs.

As of March 31, 2025, the Company had financial assets valued based on Level 1 inputs consisting of cash and cash equivalents and had financial assets based on Level 2 inputs consisting of Processa common shares.

the three months ended March 31, 2025, the Company did not have any transfers of financial assets between Levels 1 and 2.

Fair Value Measurement at March 31, 2025 and December 31, 2024

(in thousands)

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Processa common shares

The Company held approximately $ 37,271 in money market accounts as of September 30, 2024.

As of December 31, 2023, the Company held approximately $ 11,929 in money market accounts.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

The Company holds 41 unrestricted common shares of Processa Pharmaceuticals, Inc.

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

The Company held approximately $ 1,618 in cash as of March 31, 2025, of which approximately $ 1,514 was held in foreign currencies (translated into U.S.

As of December 31, 2024, the Company held approximately $ 1,314 in cash of which approximately $ 363 was in foreign currencies (translated into U.S.

The Company holds 51 unrestricted common shares of Processa (NASDAQ:PCSA) .

Commitments and Contingencies

Oregon Health & Science University Agreement

On February 20, 2013, Fennec entered into a new exclusive license agreement with OHSU for exclusive worldwide license rights to intellectual property directed to thiol-based compounds, including PEDMARK and their use in oncology (the "OHSU Agreement").

OHSU will receive certain milestone payments, royalty on net sales for licensed products and royalty on any consideration received from sublicensing of the licensed technology.

On May 18, 2015, Fennec negotiated an amendment ("Amendment 1") to the OHSU Agreement, which expands Fennec's exclusive license to include the use of N-acetylcysteine as a standalone therapy and/or in combination with PEDMARK for the prevention of ototoxicity induced by chemotherapeutic agents to treat cancers.

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

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

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.

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.

PEDMARK® 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.

Fennec also has the right to terminate the OHSU Agreement at any time upon 60 days prior written notice and payment of all fees due to OHSU under the OHSU Agreement.

The Company had accrued approximately $ 162 in royalty expense to OHSU for the nine-month period ended September 30, 2024.

The total amount accrued in royalty expense to OHSU as of September 30, 2024, was $ 460 .

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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 six additional U.S.

patents that cover the PEDMARK formulation and its use, each of which have been, or are in the process of being, 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), U.S.

11,617,793 (issued April 4, 2023), U.S.

11,964,018 (issued April 23, 2024)).

11,992,530 (issued May 28, 2024), and U.S.

11,998,604 (issued June 4, 2024) Five additional United States patent applications from this family are pending at the USPTO covering various sodium thiosulfate formulations and uses.

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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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.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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.

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 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 “’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 “’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 “’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 ’018 Patent and the ‘793 Patent only.

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.

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.

Further, 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

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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 $ 344 .

Further, as announced on October 28, 2024, each of Mr.

Evans, and Ms.

Cioffi’s Executive Employment Agreements generally provide that if their 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.

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.

4 unchanged sentences

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

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

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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

1 unchanged sentence

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

This lease will terminate on January 31, 2025.

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

The Second Office Service Agreement commenced on August 1, 2023 and terminated 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.

This lease was terminated.

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.

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

September 30, 2024

Remaining lease terms (in months)

Discount rate

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

Year Ending December 31,

Less imputed interest

Total lease liabilities

Current operating lease liabilities

Non-current operating lease liabilities

Total lease liabilities

Employee Benefit Plan

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Eligible employees are permitted to contribute to the 401(k) Plan within statutory and 401(k) Plan limits.

As of September 30, 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 (see Note 1).

As of March 31, 2025, the Company does not offer matching contributions.

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.

In connection with the first closing, the Company

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

repaid in full its secured indebtedness with Bridge Bank in the amount of $ 5,000 .

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

The Notes become due on the maturity date, which is August 19, 2027.

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

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

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

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

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

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

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

On December 4, 2023, the Company closed a third tranche under the SPA in the amount of $ 5,000 and issued the Investor a Note in the same amount that is convertible at a price equal to $ 7.89 per share, which price was calculated on the same basis as the Second Closing Note.

Also on December 4, 2023, the Company entered into the SPA Amendment, 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.

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 ( 13 % at September 30, 2024 and 13 % as of December 31, 2023).

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.

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 , 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 the SPA Amendment with the Petrichor, which, among other things, extended the period that the Company could 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 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 $ 1,271 in PIK interest).

Cash interest on outstanding principal shall accrue at a rate of prime, plus 4.5 % per annum, from the date of funding ( 12 % at March 31, 2025 and December 31, 2024, respectively).

Cash interest is due on the first business day of each calendar

quarter (“Interest Date”).

PIK interest will commence on funding date and accrue at a rate of 3.5 % per annum.

PIK interest stopped accruing on August 24, 2024.

All accrued PIK interest remained 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.

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

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

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

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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

Aggregate annual payments due on the SPA as of September 30, 2024, are as follows (in thousands):

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

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

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

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

Aggregate annual payments under the SPA as of March 31, 2025, are as follows (in thousands):

Years Ending December 31,

3 unchanged sentences

Total term loan, net of debt discount

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

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

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

The SPA facility is secured by all 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 to the Investor to secure access to the SPA.

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.

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 $ 227 , which was based on a pro-rata allocation of the issue costs to secure the SPA, reducing the capitalized amount by the same amount.

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

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

The debt discount was fully expensed when the Company redeemed $ 13,000 of principle amount in December 2024.

License Agreement

1 unchanged sentence

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.

entered into a License and Supply Agreement (the “Agreement”) with 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 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 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.

(i) an upfront payment in the amount of € 40 million or approximately $ 43.2 million, which was paid to Fennec on March 15, 2024, (ii) up to € 210 million (or approximately $ 230 million) 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.

1 unchanged sentence

(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

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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.

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 Norgine License Agreement under ASC 606 and concluded that Norgine represents a customer in the transaction.

There were two performance obligations:

10 unchanged sentences

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 the nine months ended September 30, 2024, the Company did not recognize any milestone or royalty revenue payments from Norgine sales of PEDMARQSI ® pursuant to the Agreement.

For the three months ended March 31, 2025, the Company did not recognize any milestone or royalty revenue payments to from the 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 September 30, 2024, $ 948 in incremental cost was capitalized.

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

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

As of March 31, 2025, $ 794 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 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 October 28, 2024, Fennec Pharmaceuticals Inc.’s (the “Company”) announced the appointments of Mr.

Sayad, PhD, M.S., as Chief Medical Officer (“CMO”), Mr.

Terry Evans as Chief Commercial Officer (“CCO”), and Ms.

Christiana Cioffi, MBA, as Chief Strategy Officer (“CSO”), all of which became effective on October 28, 2024.

There are no arrangements or understandings between each of Mr.

Evans, or Ms.

Cioffi, and any other person pursuant to which such individual was appointed as CMO, CCO, and CSO, respectively.

Evans, nor Ms.

Cioffi have any family relationships with any other executive officer or director of the Company.

None of these appointments have been involved in any related person transactions with the Company that would require disclosure under Item 404(a) of Regulation S-K.

In connection with their appointments to CMO, COO, and CSO, respectively, Mr.

Evans, and Ms.

Cioffi each entered into an Executive Employment Agreement with the Company effective as of October 28, 2024.

Each of these Executive Employment Agreements is an “at-will” agreement.

Pursuant to the terms of Mr.

Sayad’s Executive Employment Agreement, his initial base annualized salary will be at a rate of $ 450,000 , subject to review and increase from time to time by the Company in its sole discretion.

He shall be entitled to receive an annual target performance bonus (“Target Bonus”) of forty percent ( 40 %) of his base salary per 12-month period (which may be pro-rated for any partial period of less than 12 months ), based upon a determination by the Company’s Board of Directors (“Board”) of the achievement of objectives to be set from time to time by the Board, provided that he must remain employed through the payment date to be eligible to receive the Target Bonus.

In addition, the Company will grant Mr.

Sayad 150,000 options to purchase common shares of the Company which (i) have an exercise

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

price per share equal to the “Fair Market Value” (as defined in Company’s 2020 Equity Incentive Plan);

(ii) have a term of ten years, with one-third of the options vesting one year after the date of grant and the balance thereof vesting monthly thereafter for two years in equal increments, and (iii) are otherwise subject to the terms and conditions set forth in the Company’s 2020 Equity Incentive Plan.

Pursuant to the terms of Mr.

Evans’ Executive Employment Agreement, his initial base annualized salary will be at a rate of $ 400,000 , subject to review and increase from time to time by the Company in its sole discretion.

He shall be entitled to receive a Target Bonus of forty percent ( 40 %) of his base salary per 12-month period (which may be pro-rated for any partial period of less than 12 months ), based upon a determination by the Board of the achievement of objectives to be set from time to time by the Board, provided that he must remain employed through the payment date to be eligible to receive the Target Bonus.

In addition, the Company will grant Mr.

Evans 150,000 options to purchase common shares of the Company which (i) have an exercise price per share equal to the “Fair Market Value” (as defined in Company’s 2020 Equity Incentive Plan);

(ii) have a term of ten years, with one- third of the options vesting one year after the date of grant and the balance thereof vesting monthly thereafter for two years in equal increments, and (iii) are otherwise subject to the terms and conditions set forth in the Company’s 2020 Equity Incentive Plan.

Pursuant to the terms of Ms.

Cioffi’s Executive Employment Agreement, her initial base annualized salary will be at a rate of $ 375,000 , subject to review and increase from time to time by the Company in its sole discretion.

She shall be entitled to receive a Target Bonus of forty percent ( 40 %) of her base salary per 12-month period (which may be pro-rated for any partial period of less than 12 months ), based upon a determination by the Board of the achievement of objectives to be set from time to time by the Board, provided that she must remain employed through the payment date to be eligible to receive the Target Bonus.

In addition, the Company will grant Ms.

Cioffi 150,000 options to purchase common shares of the Company which (i) have an exercise price per share equal to the “Fair Market Value” (as defined in Company’s 2020 Equity Incentive Plan);

(ii) have a term of ten years, with one- third of the options vesting one year after the date of grant and the balance thereof vesting monthly thereafter for two years in equal increments, and (iii) are otherwise subject to the terms and conditions set forth in the Company’s 2020 Equity Incentive Plan.

Evans, and Ms.

Cioffi’s Executive Employment Agreements generally provide that if their 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.

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements