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Item 2. Management’s Discussion and Analysis

2025-05-14 compared with 2024-11-08 · 164 added, 120 removed, 111 unchanged (72% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 26, 2025 (the “Annual Report”) and our unaudited interim condensed consolidated financial statements and related notes appearing in this Quarterly Report on Form 10-Q (the “Quarterly Report”).

Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to the Company’s plans and strategy for its business, includes forward looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties.

Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact.

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As a result of many factors, including those factors set forth in Part I, Item 1A of the Annual Report under the heading “Risk Factors”, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

The following discussion should be read in conjunction with our Annual Report and the condensed consolidated financial statements and accompanying notes included elsewhere in this report.

We are a commercial-stage biopharmaceutical company focused on our only product PEDMARK in the United States and PEDMARQSI ® the European brand name for PEDMARK.

On September 20, 2022, we received approval from the US Food and Drug Administration (“FDA”) for PEDMARK (sodium thiosulfate injection) 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 following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024, and the condensed consolidated financial statements and accompanying notes included elsewhere in this report.

We are a commercial-stage biopharmaceutical company focused on our only product PEDMARK ® .

On September 20, 2022, we received approval from the FDA for PEDMARK ® (sodium thiosulfate injection) to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors.

This approval makes PEDMARK ® the first and only treatment approved by the FDA in this area of unmet medical need.

On October 17, 2022, we announced commercial availability of PEDMARK in the U.

On October 17, 2022, we announced commercial availability of PEDMARK ® in the U.S.

In addition, in January 2023, PEDMARK ® was included in the National Comprehensive Cancer Network (“NCCN”) clinical practice guidelines for Adolescent and Young Adult (“AYA”) Oncology with a category 2A recommendation.

In June 2023, we received European Commission Marketing Authorization for PEDMARQSI ® .

Further, the decision included the receipt of a Pediatric Use Marketing Authorization (“PUMA”) in the European Union (“EU”) with up to 10 years of data and market protection.

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

In June 2023, we received European Commission Marketing Authorization for PEDMARQSI ® (known as PEDMARK ® in the U.S.) Further, the decision included the receipt of a PUMA in the EU with up to 8 years of data exclusivity plus 2 years of market protection.

In March 2024, the Company announced an exclusive licensing agreement with Norgine, which will commercialize PEDMARQSI ® in Europe, Australia and New Zealand.

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

Norgine is currently preparing for an EU launch of PEDMARQSI ® in the next several months.

In the U.S., we sell our product through an experienced field force and medical science liaisons who are helping to educate the medical communities and patients about cisplatin induced ototoxicity and our programs supporting patient access to PEDMARK.

Further, in the United States we have established Fennec HEARS™, a comprehensive single source program designed to connect PEDMARK patients to both patient financial and product access support.

The program offers assistance and resources, regardless of insurance type, that can address co-pays or lack of coverage when certain eligibility requirements are met.

Fennec HEARS™ also provides access to care coordinators that can answer insurance questions about coverage for PEDMARK and provide tips and resources for managing treatment.

Norgine announced the launch of Germany and the U.K.

in early 2025.

In the U.S., we sell PEDMARK ® through an experienced field force and medical science liaisons who are helping to educate the medical communities and patients about cisplatin induced ototoxicity and our programs supporting patient access to PEDMARK ® .

We received Orphan Drug Exclusivity for PEDMARK ® in January 2023, which provides seven years of market exclusivity from its FDA approval on September 20, 2022, until September 20, 2029.

We currently have six patents listed for

PEDMARK in the FDA’s Orange Book.

We currently have six patents listed for PEDMARK ® in the FDA Orange Book.

In September 2022, the USPTO issued Patent No.

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11,671,793 (“US ‘793 Patent”) that covers PEDMARK ® pharmaceutical formulation.

Further, additional issued patents included US 11,964,018 Patent (the “’US 018’ Patent) and US 11,992,530 Patent (the “US ’530 Patent”) and US 11,998,604 Patent (the “’604 Patent”) covering methods of using our PEDMARK product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer.

Further, additional issued patents included US 11,964,018 Patent (the “’US ‘018 Patent) and US 11,992,530 Patent (the “US ’530 Patent”) and US 11,998,604 Patent (the “US ’604 Patent”) covering methods of using our PEDMARK ® product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer.

The US ‘728, US ‘984 US ‘793, US ‘018, US’530 and US ’604 patents will expire in 2039.

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PEDMARK ® Product Overview

PEDMARK is the first and only therapy approved by the FDA indicated to reduce the risk of ototoxicity associated with cisplatin treatment in pediatric patients with localized, non-metastatic, solid tumors.

Further, PEDMARQSI ® , known as PEDMARK in the U.S., was granted marketing authorization by the European Commission in June 2023.

PEDMARK is a unique formulation of sodium thiosulfate in single-dose, ready-to-use vials for intravenous use in pediatric patients.

PEDMARK is also the only therapeutic agent with proven efficacy and safety data with an established dosing paradigm, across two open-label, randomized Phase 3 clinical studies, the Clinical Oncology Group (“COG”) Protocol ACCL0431 and SIOPEL 6.

and Europe, it is estimated that more than 10,000 children annually may receive platinum-based chemotherapy.

The incidence of ototoxicity depends upon the dose and duration of chemotherapy, and many of these children require lifelong hearing aids.

There is currently no established preventive agent for this hearing loss and only expensive, technically difficult, and sub-optimal cochlear (inner ear) implants have been shown to provide some benefit.

Infants and young children that suffer ototoxicity at critical stages of development lack speech language development and literacy, and older children and adolescents lack social-emotional development and educational achievement.

PEDMARK ® has been studied by co-operative groups in two Phase 3 clinical studies of survival and reduction of ototoxicity, COG ACCL0431 and SIOPEL 6.

Both studies have been completed.

The COG ACCL0431 protocol enrolled childhood cancers typically treated with intensive cisplatin therapy for localized and disseminated disease, including newly diagnosed hepatoblastoma, germ cell tumor, osteosarcoma, neuroblastoma, medulloblastoma, and other solid tumors.

The COG ACCL0431 protocol enrolled childhood cancer patients typically treated with intensive cisplatin therapy for localized and disseminated disease, including newly diagnosed hepatoblastoma, germ cell tumor, osteosarcoma, neuroblastoma, medulloblastoma, and other solid tumors.

SIOPEL 6 enrolled only hepatoblastoma patients with localized tumors.

Cisplatin Induced Ototoxicity

Cisplatin and other platinum compounds are essential chemotherapeutic agents for the treatment of many pediatric malignancies.

In the United States, PEDMARK® is the first and only therapy approved to mitigate the risk of ototoxicity associated with cisplatin in pediatric patients aged one month and older with localized, non-metastatic solid tumors.

Further, the National Comprehensive Cancer Network (NCCN) recommend the use of PEDMARK ® to reduce the risk of cisplatin-induced ototoxicity in patients with localized, non-metastatic solid tumors (category 2A) for Adolescent and Young Adult (AYA) Oncology.

As of January 2025, all medical compendia have incorporated Fennec’s clinical updates, and AHFS, the largest online platform for pharmacists, has updated its content to reflect and differentiate PEDMARK ® in accordance with its labeling.

PEDMARK ® is the first and only FDA- and EMA-approved agent designed to reduce the risk of cisplatin-induced hearing loss (CIO) in children with localized solid tumors.

The strategic imperatives driving the execution of PEDMARK ® ’s strategy include increasing awareness of unmet patient needs and emphasizing the importance of preventing CIO among oncologists.

A key goal is to establish PEDMARK ® as the standard of care (SOC) for all CIO prevention.

Additionally, efforts focus on expanding adoption beyond oncologists by ensuring healthcare providers (HCPs) gain confidence in and have positive experiences with PEDMARK ® .

Ensuring seamless access for advocacy groups, payers, and providers is also a priority, along with activating patients and caregivers through disease education to drive demand for PEDMARK ® .

Key activities supporting these objectives include an expanded sales team with a strong track record in both academic and community settings, partnerships with group purchasing organizations, and specialty pharmacy offerings such as home infusions, white bag delivery, and direct billing.

Furthermore, digital materials, a digital speaker bureau to engage pediatric oncologists, audiologists, nurses, and pharmacists, along with a patient access services hub and ongoing support from advocacy groups, are all integral components of the strategy.

and Europe, it is estimated that more than 10,000 pediatric may receive platinum-based chemotherapy on an annual basis.

The incidence of ototoxicity depends upon the dose and duration of chemotherapy, and many of these children require lifelong hearing aids.

PEDMARK® is the first and only therapy approved to mitigate the risk of ototoxicity associated with cisplatin, a form of platinum based chemotherapy, in pediatric patients aged one month and older with localized, non-metastatic solid tumors.

Beyond the use of PEDMARK, only expensive, technically difficult, and sub-optimal cochlear (inner ear) implants have been shown to provide some benefit.

pediatric oncology landscape includes approximately 200 targeted pediatric hospital centers, such as those within the Children's Oncology Group (COG), National Cancer Institute (NCI), and National Comprehensive Cancer Network (NCCN) institutions.

Around 80% of pediatric cancer patients receive treatment at these key centers.

The Adolescent and Young Adult (AYA) oncology patient is defined as an individual between the ages of 15 and 39 at the time of initial cancer diagnosis.

In the U.S., Fennec estimates that approximately 20,000 cisplatin chemotherapy patients are treated annually with the primary tumor types of thyroid cancer, breast cancer, germ cell cancer and testicular cancer.

Adolescent and Young Adult (AYA) oncology landscape is shaped by a combination of academic and community centers across the nation.

Academic institutions play a critical role in establishing the treatment framework, with 72 NCI-designated academic centers treating approximately 20% of AYA oncology patients.

In contrast, around 80% of patients are treated at 3,750 community centers throughout the country.

Cisplatin Induced Ototoxicity (“CIO”)

Cisplatin and other platinum compounds are essential chemotherapeutic agents for the treatment of many pediatric and adult malignancies.

Unfortunately, platinum-based therapies can cause ototoxicity, or hearing loss, which is permanent, irreversible, and particularly harmful to the survivors of pediatric cancer.

The incidence of ototoxicity depends upon the dose and duration of chemotherapy, and many of these children require lifelong hearing aids or cochlear implants, which can be helpful for some, but do not reverse the hearing loss and can be costly over time.

The incidence of ototoxicity depends upon the dose and duration of chemotherapy, and many of these patients require lifelong hearing aids or cochlear implants, which can be helpful for some, but do not reverse the hearing loss and can be costly over time.

Infants and young children that are affected by ototoxicity at critical stages of development lack speech and language development and literacy, and older children and adolescents often lack social-emotional development and educational achievement.

It is estimated that greater than 50% of pediatric patients may suffer permanent hearing loss as a result of CIO and approximately 40-80% of adult patients may suffer permanent hearing loss as a result of CIO.

European Commission Marketing Authorization

PEDMARQSI ® (PEDMARK ® brand name in Europe.) received European Commission Marketing Authorization in June 2023 and received U.K.

approval in October 2023.

As previously noted, in March 2024, we entered into an agreement with Norgine, a leading European specialist pharmaceutical company.

This is an exclusive licensing agreement under which Norgine will commercialize PEDMARQSI ® in Europe, Australia and New Zealand.

PEDMARQSI ® is the first and only approved therapy in the EU and U.K.

for the prevention of ototoxicity (hearing loss) induced by cisplatin chemotherapy in patients 1 month to < 18 years of age with localized, non-metastatic solid tumors.

Most recently, in December 2024, PEDMARQSI received positive final draft guidance from the National Institute for Health and Care Excellence (NICE).

Further, in early 2025, Norgine announced the launch of PEDMARQSI in Germany.

In addition, the U.S.

and other countries have recently imposed, and may continue to impose, new tariffs.

While pharmaceuticals are largely exempt from the recently imposed U.S.

tariffs, such exemptions may be terminated or may not apply to any future tariffs.

Additionally, pharmaceuticals are not exempt from certain tariffs recently imposed outside of the U.S.

We continue to evaluate the impacts of tariffs on our business and results of operations.

Based on current information, we do not believe the impact of tariffs on our business, financial condition or results of operations will be material.

Results of Operations

Three months ended September 30, 2024 versus three months ended September 30, 2023:

Three months ended March 31, 2025 versus three months ended March 31, 2024:

Three Months Ended

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In thousands of U.S.

September 30, 2024

September 30, 2023

Product sales, net

Operating expenses:

Cost of product sales

Research and development

Selling and marketing

General and administration

Total operating expense

Loss from operations

Unrealized loss on securities

Amortization expense

Interest expense

Unrealized foreign exchange (loss)/gain

Interest income

● We reported net product sales for the three-month period ended September 30, 2024 of $6,974 and gross profit of $5,617 compared to net product sales of $6,515 and gross profit of $6,184 in the comparable period in 2023.

● Research and development expenses increased by $85 for the three months ended September 30, 2024, compared to the same period in 2023.

Our research and development activities for this period consisted of costs associated with investigator initiated clinical trials.

During the same period in 2023 and prior to approval of PEDMARK , manufacturing costs pertaining to PEDMARK were expensed to R&D expense in the period incurred, and following approval are reflected in inventory.

● Selling and marketing expenses were $4,601 for the three months ended September 30, 2024 compared to $3,384 for the comparable three month period in 2023.

Selling and marketing expenses include remuneration of our sales and marketing employees, dollars spent on marketing campaigns (sponsorships, trade shows, presentations, etc.), and any activities to support marketing and sales activities.

The increase is largely related to increased payroll and additional marketing expenses in the comparable period as we focused on expanding our outreach to community oncology centers and the adolescent and young adult (AYA) population.

● General and administrative expenses increased by $2,316 compared to the same period in 2023, as a result of an increase in select expenses such as salaries, equity renumeration and intellectual property litigation expenses compared to the same period in 2023.

● Interest expense increased $169 compared to the same period in 2023.

This increase is associated with higher debt levels as compared with the same period in 2023.

● Additionally, we hold shares of Processa Pharmaceuticals, Inc.

(“Processa”) (NASDAQ:

PCSA) which are marked to market each balance sheet date and unrealized gains or losses are recognized at that time.

The value of the Processa shares held by us decreased for the three month period ended September 30, 2024, as compared with the same period in 2023.

Other losses were driven mainly by unrealized losses related to our foreign currency transactions.

We have vendors that transact in Euros, Great British Pounds and Canadian Dollars.

● Amortization expense is also a non-cash expense and relates to amortization of the deferred issuance costs of the loan facilities with Petrichor.

Amortization expense decreased by $51 for the three months ended September 30, 2023, compared to the same period in 2023.

Interest income increased by $414 for the three months ended September 30, 2024, compared to the same period in 2023.

This increase in interest income was primarily driven by a higher cash balance and higher interest rates for the three months ended September 30, 2024, compared to the same period in 2023.

Nine months ended September 30, 2024, versus nine months ended September 30, 2023:

Nine Months Ended

In thousands of U.S.

September 30, 2024

September 30, 2023

Product sales, net

March 31, 2025

March 31, 2024

PEDMARK product sales, net

Licensing revenue

Total Net revenue

Total revenue

Operating expenses:

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Total operating expense

Loss from operations

(Loss) / income from operations

Unrealized loss on securities

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Interest expense

Unrealized foreign exchange (loss)/gain

Unrealized foreign exchange loss

Interest income

● We recorded net product sales of $21,655 and $17,958 in licensing revenue related to the Norgine transaction for the nine-month period ended September 30, 2024, compared to $11,517 in net product sales and no licensing revenue for the same period in 2023.

Net (loss) / income from operations

● The Company recorded net product sales of $8,751 in the first quarter of 2025 compared to $7,419 in 2024 as the Company increased market penetration and access for PEDMARK and as the Company expanded its focus to the adolescent and young adult (AYA) population.

Further, the Company recorded $17,958 in licensing revenue related to the Norgine transaction in 2024.

● Research and development expense increased by $91 for the three-month period ended March 31, 2025, as compared to the same period in 2024.

Our research and development activities for this period consisted of costs associated with investigator initiated clinical trials and the global named patient program.

● Selling and marketing expenses include distribution costs, logistics, shipping and insurance, advertising, wages commissions and out-of-pocket expenses.

We recorded $14,482 in selling and marketing expenses for the nine-month period ended September 30, 2024, compared to $8,255 for the same period in 2023.

● There was a $5,240 increase in general and administrative expenses for the nine-months ended September 30, 2024, compared to same period in 2023.

There was an increase in consulting and professional costs compared to same period in 2023 which is largely attributable to increased European pre-commercialization related expenses and expenses associated with the Norgine transaction and intellectual property expenses related to ongoing litigation.

● The value of the Processa shares held by us declined by $14 for nine-months ended September 30, 2024.

The shares declined in value by $43 during same period in 2023.

We acquired the Processa shares on October 30, 2020.

The Processa shares are marked to market at each balance sheet date with the resulting change in value being booked as an unrealized gain or loss.

● Amortization expense decreased by $153 for nine-months ended September 30, 2024, over the same period in 2023.

● Interest expenses increased by $624 for the nine-month ended September 30, 2024 compared to the same period in 2023.

The increase was driven mainly by higher average debt balances and higher interest rates on long-term debt.

● Interest income increased by $957 for the nine-months ended September 30, 2024, as compared to the same period in 2023, due to higher cash balances and higher rates on money market accounts for the comparable periods.

We recorded $2,947 in selling and marketing expenses for the three-month period ended March 31, 2025, as compared to $5,209 for 2024.

The decrease is largely related to the elimination of European pre commercial activities in 2024 which were completed after the Norgine transaction.

● There was a $273 increase in general and administrative expenses for the three-month period ended March 31, 2025 compared to 2024.

There was an increase in consulting and professional costs compared to the same period in 2024 which is largely attributable to intellectual property expenses related to ongoing litigation.

● The value of our Processa shares declined by $1 for the three-month period ended March 31, 2025.

For the same period in 2024, there was a loss of $11.

● Amortization expense decreased $7 for the three-month period ended March 31, 2025 as compared to the same period in 2024.

● Interest expense decreased by $442 for the three-month period ended March 31, 2025 compared to the same period in 2024.

The decrease was driven mainly by lower debt balance on long-term debt due to Company’s debt paydown of $13,000 in December 2024.

● Interest income increased in the three-month period ended March 31, 2025 as compared to the same period in 2024 by $39, due to higher average cash balances and higher rates on money market accounts for the comparable periods.

Liquidity and Capital Resources

Selected Asset and Liability Data (thousands):

September 30, 2024

March 31, 2025

December 31, 2024

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Stockholders’ (deficit)

Cash and cash equivalents were $40,320 as of September 30, 2024, and $13,269 at December 31, 2023.

The increase in cash and cash equivalents between September 30, 2024 and December 31, 2023 is the result of cash outlays for operating expenses related to the promotion of our product, small amounts of research and development and general and administrative expenses, which were offset by cash inflows of $43,200 from Norgine licensing deal, cash collections on product sales of $8,923 and cash inflows of $1,131 from various option exercises.

There was an increase of $4,056 other current assets between September 30, 2024, and December 31, 2023, and a decrease in current liabilities of $118.

The overall result was an increase in working capital of $31,225.

The following table illustrates a summary of cash flows data for the nine-month periods of September 30, 2024 and 2023:

● There was a $3,959 net decrease in cash and cash equivalents between March 31, 2025, and December 31, 2024.

The net decrease was primarily the result of seasonally higher cash operating expenses in the first quarter and the timing of working capital collections.

● The increase in other current assets of $5,444 between March 31, 2025, and December 31, 2024, primarily relates to an increase in accounts receivable.

● Current liabilities at March 31, 2025 increased $2,163 million compared to December 31, 2024.

● Working capital decreased by $678 between March 31, 2025, and December 31, 2024.

The following table illustrates a summary of cash flows data for the three-month periods of March 31, 2025 and 2024:

Selected Cash Flow Data

Nine Months Ended September 30,

Three Months Ended

(dollars and shares in thousands)

Net cash provided by / (used in) operating activities

March 31, 2025

March 31, 2024

Net cash (used in) / provided by operating activities

Net cash provided by investing activities

Net cash (used in) / provided by financing activities

Net cash provided by / (used in) financing activities

Net cash flow

Net cash provided by operating activities for the nine-month period ended September 30, 2024 and 2023, primarily reflected a net income of $1,549 and a net loss of $13,363 million respectively.

The nine-month income was adjusted for the add back of non-cash items consisting of $5,893 and $5,434, respectively, in stock-based compensation expense, amortization of debt access fee of $774 and $166, respectively, and addition of PIK interest of $1,104 and 677, respectively, for the nine months ended September 30, 2024, and 2023.

For the nine months ended September 30, 2024 there was an increase in other current assets of $3,455 and $3,636 during the same period in 2023.

For the nine months ended September 30, 2024, there was a net increase in current liabilities of $24,457 and a net decrease of $41 during the same period in 2023.

Nine-month cash flows provided by operating activities were $28,454 million and net cash flows used in operating activities were $12,283, respectively, for the periods ended September 30, 2024 and 2023.

Net cash flows used in financing activities for the nine months ended September 30, 2024, were $1,403 and net cash provided were $908, respectively.

Net cash flows from the nine-month period ended September 30, 2024, and 2023, were positive $27,051, and negative $11,375, respectively.

The net cash used in operating activities for the three-month period ended March 31, 2025 was approximately $4,318 as compared to $39,047 net cash provided by operating activities during the same period in 2024.

There was a increase in net loss of $14,713 in the three-month period ended March 31, 2025, as compared to the same period in 2024.

The comparable decrease in net cash flow is primarily a result of the proceeds received from the Norgine transaction.

We continue to pursue various strategic alternatives including collaborations with other pharmaceutical and biotechnology companies.

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our ability to enter into collaborations that provide us with up-front payments, milestones or other payments;

results of our research and development activities;

progress or lack of progress in our preclinical studies or clinical trials;

unfavorable toxicology in our clinical programs;

our drug substance requirements to support clinical programs;

unfavorable toxicology in our clinical programs, our drug substance requirements to support clinical programs;

change in the focus, direction, or costs of our research and development programs;

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the potential need to develop, acquire or license new technologies and products;

our business development activities;

development activities;

new regulatory requirements implemented by regulatory authorities;

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Outstanding Share Information

Our outstanding share data as of September 30, 2024 and December 31, 2023 was as follows (in thousands):

September 30,

Our outstanding share data as of March 31, 2025 and December 31, 2024 was as follows (in thousands):

Outstanding Share Type

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We invest excess cash and cash equivalents in high credit quality investments held by financial institutions in accordance with our investment policy designed to protect the principal investment.

At September 30, 2024, we had approximately $3,049 in our cash accounts and $37,271 in savings and money market accounts.

As of March 31, 2025, we had approximately $1,618 in our cash accounts and $21,057 in savings and money market accounts.

While we have never experienced any loss or write down of our money market investments since our inception, the amounts we hold in money market accounts are substantially above the $250 amount insured by the FDIC and may lose value.

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Contractual Obligations and Commitments

None, other than the OHSU Agreement, lease agreements, and severance amounts described in notes to our condensed consolidated financial statements contained elsewhere in this Quarterly Report.

None, other than the lease agreements, and severance amounts described in notes to our condensed consolidated financial statements contained elsewhere in this Quarterly Report.

Critical Accounting Policies and Estimates

A summary of our critical accounting policies and use of estimates are presented in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” of our Annual Report.

There have been no material changes to our critical accounting policies and use of estimates during the nine months ended September 30, 2024.

There have been no material changes to our critical accounting policies and use of estimates during the three months ended March 31, 2025.

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.

However, because of the short time to the expected receipt of accounts receivable, the Company believes that the carrying value, net of excepted losses, approximates fair value and therefore, relies more on historical and current analysis of its trade receivables.

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 is consistent based on the life sciences industry.

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.

Revenue Recognition

Under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, we recognizes revenue when our customers obtain control of promised goods or services, in an amount that reflects the consideration which we determine we expect to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps:

(i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) we satisfy our performance obligation(s).

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

Under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, the Company recognizes revenue when its customers obtain control of promised goods or services, in an amount that reflects the consideration which the Company determines it expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

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

License Agreements

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

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

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

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

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

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

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

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

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

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

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

performance obligations under the contract are satisfied.

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

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

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

Stock-based Compensation

6 unchanged sentences

We also used historical data to estimate forfeiture experience.

In valuing options granted in the fiscal years ended September 30, 2024, we used the following weighted average assumptions:

In valuing options granted in the three-month period ended March 31, 2025, we used the following weighted average assumptions:

Valuation Assumptions

Black-Scholes Model Assumptions

September 30, 2024

March 31, 2025

Expected dividend

2 unchanged sentences

Expected life

1.5 - 6.0 years

Common shares and warrants

1 unchanged sentence

Warrants are recorded at relative fair value and are deducted from the proceeds of common shares and recorded on the consolidated statements of shareholders’ equity (deficit) as additional paid-in capital.

Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Newly Adopted and Recent Accounting Pronouncements

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

2023-09, “Income Taxes (Topic 740):

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

This guidance will be effective for 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.

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.

Controls and Procedures .

(a) Evaluation of Disclosure Controls and Procedures .

The Company’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of March 31, 2025.

The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports the Company files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosures.

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

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

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

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

Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2025, the Company's disclosure controls and procedures were effective.

Management's Report on Internal Control over Financial Reporting

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

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

Based on that evaluation, the Company’s management has concluded that, as of March 31, 2025, our internal controls over financial reporting were effective.

Changes in Internal Control over Financial Reporting

There were no changes to the Company’s internal control over financial reporting during the fourth quarter of 2024 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitation on the Effectiveness of Internal Controls

The effectiveness of any system of internal control over financial reporting is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely.

Accordingly, any system of internal control over financial reporting can only provide reasonable, not absolute, assurances.

In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure that such improvements will be sufficient to provide us with effective internal control over financial reporting.

OTHER INFORMATION

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 2. Management’s Discussion and Analysis