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Item 1. Financial Statements

2025-08-14 compared with 2025-05-14 · 158 added, 121 removed, 473 unchanged (37% of the section changed)

3 unchanged sentences

Dollars and shares in thousands)

March 31, 2025

June 30, 2025

December 31, 2024

36 unchanged sentences

Three Months Ended

Six Months Ended

PEDMARK product sales, net

23 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

Three Months Ended March 31, 2025 and 2024

Three and Six Months Ended June 30, 2025, and 2024

dollars and shares in thousands)

1 unchanged sentence

Stockholders’

Equity (deficit)

Balance at December 31, 2024

Stock-based compensation - employees

Stock-based compensation

Stock option exercise

1 unchanged sentence

Balance at March 31, 2025

Stock-based compensation

Stock option exercise

Restricted stock release

Balance at June 30, 2025

Comprehensive

Stockholders’

(Deficit)/Equity

Equity (deficit)

Balance at December 31, 2023

Stock-based compensation - employees

Stock-based compensation

Stock option exercise

1 unchanged sentence

Balance at March 31, 2024

Stock-based compensation

Stock option exercise

Restricted stock release

Balance at June 30, 2024

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

2 unchanged sentences

Dollars in thousands)

Three Months Ended

Cash flows (used in)/provided by:

Six Months Ended

Cash flows provided by (used in):

Operating activities:

4 unchanged sentences

Amortization of debt discount

Amortization of debt access fees

Unrealized loss on securities

Stock-based compensation - employees

Stock-based compensation

Changes in operating assets and liabilities:

14 unchanged sentences

Cash and cash equivalents - End of period

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

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

Fennec Pharmaceuticals Inc.

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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.

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 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.

During the three and six-month period ended June 30, 2025, the Company experienced a net loss from operations of $( 2,732 ) and $( 3,540 ), respectively.

On June 30, 2025, it had an accumulated deficit of $ 223,998 , and had experienced negative cash flows from operating activities in the amount of $( 8,004 ) for the six-month period ended June 30, 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”).

8 unchanged sentences

On December 4, 2023, the Company closed a third tranche under the SPA in the amount of $ 5,000 (the “Third Closing Note”), which has an Initial Conversion Price equal to $ 7.89 per share, which was calculated based on a 20 % premium of the 5-day VWAP immediately prior to September 20, 2022, which was the date the Company obtained FDA approval of PEDMARK ® .

Also on December 4, 2023, the Company entered into a First Amendment to the Securities Purchase Agreement (the “SPA

Amendment”) with 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.

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 .

As a result of the Note Redemptions, the First and Third Closing Notes were repurchased and redeemed in full, and, as of June 30, 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.

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Basis of Presentation

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 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, 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 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.

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.

Actual results could differ from those estimates.

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

In May 2025, the Board of Directors approved a performance-based unit, or PSU, grant whereby vesting depends on certain revenue performance milestones over the next year.

The Company estimates the likelihood of achievement of performance milestones for all PSU awards at the end of each reporting period.

To the extent those awards or portions thereof are considered probable of being achieved, such awards or portions thereof are expensed over the performance period.

As of June 30, 2025, the Company deems the achievement of a portion of the performance milestones to be probable.

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

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License Agreements

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

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.

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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 us 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 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.

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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

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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.

Amongst the Company’s customers are distributors which subsequently resell the Company’s products to health care providers and patients.

In addition to distribution agreements, 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.

Product Sales Discounts and Allowances

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.

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 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.

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.

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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 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.

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.

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 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 condensed consolidated statements of operations.

Distribution and Other Fees:

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

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

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

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.

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

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

The following table summarizes net product revenues for PEDMARK earned during the three and six months ended June 30, 2025, and 2024, respectively:

Three Months Ended

Six Months Ended

Product revenues:

2 unchanged sentences

Net product revenues

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

For the three and six months ended June 30, 2025, the Company had five and four distributors that each represented more than 10% of net sales, respectively.

The activities and ending allowance balances for each significant category of discounts and allowances for PEDMARK (which constitute variable consideration) for the six months ended June 30, 2025, were as follows:

Rebates, Returns, Customer

Discounts for

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Balance at March 31, 2025

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

Provision related to sales made in:

Current period

Prior periods

Payments and customer credits issued

Balance at June 30, 2025

Trade Receivables

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

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

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

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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.

The Company had a balance in allowance for credit losses of $ 4,306 as of June 30, 2025.

Cost of Products Sold

1 unchanged sentence

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 .

As of June 30, 2025, the Company capitalized approximately $ 2,201 of costs as inventory on the condensed consolidated balance sheet.

Of the items capitalized, $ 943 was capitalized as raw materials, $ 593 was capitalized as work in process, $ 665 was capitalized into finished goods.

Cash and Cash Equivalents

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

As of 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.

At June 30, 2025, the Company had $ 18,705 in cash, savings and money market accounts ($ 26,634 at December 31, 2024).

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 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.

Financial instruments recognized on the balance sheets at June 30, 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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Common Shares and Warrants

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.

As of June 30, 2025, 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 2.55 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 low, 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 remote, it does recognize the potential for credit losses with this group.

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

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

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

As of June 30, 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 results of operations.

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

Loss Per Share

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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.

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.

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, 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.

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net (loss) / income

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Weighted-average common shares, diluted

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,

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:

Diluted Earnings Per Share

Three Months Ended June 30,

Six Months Ended June 30,

Options to purchase common shares

1 unchanged sentence

Restricted share units to purchase common shares

Performance share units to purchase common shares

Warrants to purchase common shares

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Warrants to Purchase Common Stock

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:

During the three and six months ended June 30, 2025, and 2024, there were no warrants issued or exercised .

Outstanding warrants have a weighted average life of 2.55 years on June 30, 2025.

The following tables detail the Company’s warrant activity for the three and six months ended June 30, 2025, and 2024, respectively:

Common Shares

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Outstanding March 31, 2025

Outstanding June 30, 2025

Equity Incentive Plan

The Compensation Committee of the Board of Directors administers the Company’s equity incentive plan (the “Plan”).

The Compensation Committee designates eligible participants to be included under the Plan and approves the number of equity instruments to be granted from time to time under the Plan.

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 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.

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

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

dollar grants.

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

The Company maintains an equity incentive plan (the “Plan”), which is administered by the Compensation Committee of the Board of Directors.

The Plan provides for the issuance of stock options, restricted share units (“RSUs”), and other equity-based awards to employees, directors, officers, and consultants of the Company.

The Compensation Committee is responsible for determining eligible participants and approving individual award grants under the Plan.

On April 24, 2025, the Company’s Board of Directors approved an amendment to the Plan to:

(i) increase the number of common shares available for issuance under the Plan (excluding common shares issued prior to the date of the meeting pursuant to the exercise of options and vesting of RSUs) to 8,500 common shares, representing approximately 30.8 % of the total issued and outstanding common shares as of the date of the circular;

and (ii) include provisions for an employee stock purchase program.

The amendment was subsequently approved by the Company’s shareholders on June 3, 2025.

Prior to this amendment, the maximum number of equity instruments issuable under the Plan, together with the Company’s prior stock option plan, was limited to 25 % of the Company’s issued and outstanding common shares.

Based on the then-current outstanding share count, this equated to a maximum of 6,825 common shares available for issuance.

All stock options granted under the Plan have an exercise price equal to the fair value of the Company’s common shares on the date of grant.

Options generally vest over a period of up to three years and are exercisable for a period of up to ten years from the grant date.

Awards under the Plan may be denominated in either U.S.

or Canadian dollars.

The Company recognizes stock-based compensation expense for all share-based awards granted to employees and non-employees based on the fair value of the awards on the grant date.

The following table summarizes stock-based compensation expense related to equity awards:

Three Months Ended

Six Months Ended

Stock-based expense recognized

Total option expense recognized

Stock Option Activity

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

The following is a summary of option activity for the three and six months ended June 30, 2025.

Weighted-Average

Options (thousands)

Exercise Price

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Outstanding at March 31, 2025

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

Outstanding at June 30, 2025

Of the 6,078 options granted and outstanding at June 30, 2025, 4,433 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

March 31, 2025

June 30, 2025

Expected dividend

1 unchanged sentence

Expected volatility

71.04 - 161.67

Expected life

Performance-Based Units

In May 2025, the Board of Directors approved a performance-based unit, or PSU, grant whereby vesting depends on certain revenue performance milestones over the next year.

The Company estimates the likelihood of achievement of performance milestones for all PSU awards at the end of each reporting period.

To the extent those awards or portions

thereof are considered probable of being achieved, such awards or portions thereof are expensed over the performance period.

As of June 30, 2025, the Company deems the achievement of a portion of the performance milestones to be probable.

The following table summarizes PSU activity under the 2020 Plan during the six months ended June 30, 2025:

Weighted-Average

Grant Date Fair Value

Unvested balance at January 1, 2025

Unvested balance at June 30, 2025

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 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.

The following is a summary of RSU activity for the three and six months ended June 30, 2025 and 2024.

During the three and six months ended June 30, 2025, there were 13 and 102 RSUs released from restriction, respectively.

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

Share Units (thousands)

Restricted Share

RSUs Current Periods

Outstanding at December 31, 2024

Outstanding at March 31, 2025

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

Outstanding at June 30, 2025

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

Fair Value Measurements

1 unchanged sentence

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 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.

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.

used to determine fair values.

The Topic requires that financial assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

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Unobservable inputs that are not corroborated by market data.

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)

Fair Value Measurement at June 30, 2025 and December 31, 2024

Quoted Price in Active

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Processa common shares

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.

The Company held approximately $ 1,984 in cash accounts as of June 30, 2025, of which approximately $ 442 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) .

The Company holds 51 unrestricted common shares of Processa Pharmaceuticals, Inc.

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

Commitments and Contingencies

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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.

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.

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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.

On May 27, 2025, we were granted US 12,311,026 (the “US ‘026 Patent”) covering a method of using pharmaceutical compositions comprising sodium thiosulfate and specific stabilizers to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer.

The US ‘026 Patent has an expiration date of July 2039.

On May 27, 2025, we filed suit against the CIPLA entities in the United States District Court for the District of New Jersey (Case No.

2:25-cv-05709), for infringement of the US ‘026 Patent based on the Cipla entities’ ANDA filing.

Subsequently, we filed a Motion to Consolidate Case No.

2:25-cv-05709 and Case No.

2:23-cv-00123.

On July 14, 2025, the court granted the Motion to Consolidate Case No.

2:25-cv-05709 with Case No.

2:23-cv-00123.

On July 14, 2025, the court issued its Order on Claim Construction on two claim terms in dispute, adopting our proposed constructions for both.

The suit is ongoing.

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

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

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

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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.

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

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

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

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

As of June 30, 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.

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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”).

Cash interest on outstanding principal shall accrue at a rate of prime, plus 4.5 % per annum, from the date of funding ( 12 % at June 30, 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.

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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):

Aggregate annual payments due on the SPA as of June 30, 2025, are as follows (in thousands):

Years Ending December 31,

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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

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

(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.

(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.

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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 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.

For the six months ended June 30, 2025, the Company did not recognize any milestone payments from Norgine sales of PEDMARQSI ® pursuant to the Agreement.

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

1 unchanged sentence

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.

As of June 30, 2025, $ 768 in incremental cost was capitalized.

Segment Reporting

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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