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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


	☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025


	☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from____ to ____

Commission File Number: 001-32295

FENNEC PHARMACEUTICALS INC.

(Exact Name of Registrant as Specified in Its Charter)


British Columbia, Canada	20-0442384
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

PO Box 13628, 68 TW Alexander Drive Research Triangle Park, North Carolina (Address of Principal Executive Offices)	27709 (Zip Code)

Registrant’s Telephone Number, Including Area Code: (919) 636-4530

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, no par value	FENC	Nasdaq Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

As of May 9, 2025, there were 27,618,743 common shares outstanding.

Table of Contents

TABLE OF CONTENTS


	Page
PART I: FINANCIAL INFORMATION	3

Item 1. Condensed Consolidated Financial Statements	3

Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2025 and December 31, 2024	3

Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2025, and 2024	4

Condensed Consolidated Statements of Stockholders' Equity/(Deficit) (Unaudited) for the Three Months Ended March 31, 2025 and 2024	5

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2025 and 2024	6

Notes to the Condensed Consolidated Financial Statements	7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3. Controls and Procedures	31

PART II: OTHER INFORMATION	32

Item 1. Legal Proceedings	32

Item 1A. Risk Factors	33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3. Defaults Upon Senior Securities	33

Item 4. Mine Safety Disclosures	33

Item 5. Other Information	33

Item 6. Exhibits	33

Signatures	35

Table of Contents

PART 1: FINANCIAL INFORMATION

Item 1. Financial Statements.

Fennec Pharmaceuticals Inc.

Condensed Consolidated Balance Sheets

(U.S. Dollars and shares in thousands)

(Unaudited)


	March 31, 2025		December 31, 2024

Assets
Current assets
Cash and cash equivalents	$	22,675	$	26,634
Accounts receivable, net		15,448		12,884
Prepaid expenses		2,444		3,080
Inventory		1,404		1,060
Other current assets		1,004		466
Total current assets		42,975		44,124

Non-current assets
Non-current accounts receivable, net		2,634		—
Other non-current assets, net of amortization		794		822
Total non-current assets		3,428		822
Total assets	$	46,403	$	44,946

Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	5,280	$	3,241
Accrued liabilities		2,843		3,428
Contract liability-current		248		248
Operating lease liability - current		—		2
Total current liabilities		8,371		6,919

Long-term liabilities
Term loan		18,206		18,206
PIK interest		1,271		1,271
Debt discount		(126)		(139)
Contract liability - long-term		24,561		24,561
Total long-term liabilities		43,912		43,899
Total liabilities		52,283		50,818

Commitments and contingencies (Note 6)

Stockholders’ deficit:
Common stock, no par value; unlimited shares authorized; 27,594 shares issued and outstanding (2024 ‑27,527)		145,979		145,608
Additional paid-in capital		67,744		66,958
Accumulated deficit		(220,846)		(219,681)
Accumulated other comprehensive income		1,243		1,243
Total stockholders’ deficit		(5,880)		(5,872)
Total liabilities and stockholders’ deficit	$	46,403	$	44,946

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

Table of Contents

Fennec Pharmaceuticals Inc.

Condensed Consolidated Statements of Operations

(U.S. Dollars and shares in thousands, except per share amounts)

(Unaudited)


	Three Months Ended
	March 31,		March 31,
	2025		2024

Revenue
PEDMARK product sales, net	$	8,751	$	7,419
Licensing revenue		—		17,958
Total revenue		8,751		25,377

Operating expenses:
Cost of product sales		373		550
Research and development		94		3
Selling and marketing		2,947		5,209
General and administrative		6,145		5,872

Total operating expenses		9,559		11,634
(Loss) / income from operations		(808)		13,743

Other (expense)/income
Unrealized foreign exchange gain/(loss)		13		(38)
Amortization expense		(13)		(20)
Unrealized loss on securities		(1)		(11)
Interest income		236		197
Interest expense		(592)		(1,034)
Total other expense		(357)		(906)

Net (loss) / income	$	(1,165)	$	12,837

Basic net (loss) / income per common share	$	(0.04)	$	0.47
Diluted net (loss) / income per common share	$	(0.04)	$	0.41
Weighted-average number of common shares outstanding basic		27,578		27,045
Weighted-average number of common shares outstanding diluted		27,578		31,091

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

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Fennec Pharmaceuticals Inc.

Condensed Consolidated Statements of Stockholders’ Equity / (Deficit)

Three Months Ended March 31, 2025 and 2024

(U.S. dollars and shares in thousands)

(Unaudited)


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Income		(Deficit)

Balance at December 31, 2024	27,527	$	145,608	$	66,958	$	(219,681)	$	1,243	$	(5,872)
Stock-based compensation - employees	—		—		798		—		—		798
Stock option exercise	55		371		—		—		—		371
Restricted stock release	12		—		(12)		—		—		(12)
Net loss	—		—		—		(1,165)		—		(1,165)
Balance at March 31, 2025	27,594	$	145,979	$	67,744	$	(220,846)	$	1,243	$	(5,880)

								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Income		(Deficit)/Equity
Balance at December 31, 2023	27,027	$	144,307	$	62,073	$	(219,245)	$	1,243	$	(11,622)
Stock-based compensation - employees	—		—		1,191		—		—		1,191
Stock option exercise	75		627		—		—		—		627
Restricted stock release	3		—		(19)		—		—		(19)
Net income	—		—		—		12,837		—		12,837
Balance at March 31, 2024	27,105	$	144,934	$	63,245	$	(206,408)	$	1,243	$	3,014

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

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Fennec Pharmaceuticals Inc.

Condensed Consolidated Statements of Cash Flows

(U.S. Dollars in thousands)

(Unaudited)


	Three Months Ended
	March 31,		March 31,
	2025		2024

Cash flows (used in)/provided by:
Operating activities:
Net (loss) / income	$	(1,165)	$	12,837
Adjustments to reconcile net (loss)/income to net cash (used in)/provided by operating activities:
Allowance for credit losses		79		—
Amortization of Norgine asset		26		723
Amortization of debt discount		13		16
Amortization of debt access fees		—		4
Unrealized loss on securities		1		11
PIK interest		—		398
Stock-based compensation - employees		798		1,191
Changes in operating assets and liabilities:
Accounts receivable		(5,277)		(1,460)
Prepaid expenses		636		(1,913)
Inventory		(344)		92
Other current assets		(537)		(133)
Accounts payable		2,039		1,426
Accrued liabilities		(585)		609
Contract liability - current		(2)		25,246
Net cash (used in) / provided by operating activities		(4,318)		39,047

Financing activities:
Issuance of shares, options exercise		371		627
Cash paid for taxes on restricted share release		(12)		(19)
Deferred issuance costs		—		(1,740)
Net cash provided by / (used in ) financing activities		359		(1,132)

(Decrease) / increase in cash and cash equivalents		(3,959)		37,915
Cash and cash equivalents - Beginning of period		26,634		13,269
Cash and cash equivalents - End of period	$	22,675	$	51,184

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

Table of Contents

Fennec Pharmaceuticals Inc.

Notes to the Consolidated Financial Statements

(U.S. dollars and shares in thousands, except per share information)

1. Nature of Business and Liquidity

Fennec Pharmaceuticals Inc., a corporation existing under the laws of British Columbia (“Fennec,” “the Company,” “we,” “us,” or “our”) was originally formed as a British Columbia corporation under the name Adherex Technologies Inc. and subsequently changed its name on September 3, 2014. Fennec, together with its wholly owned subsidiaries Oxiquant, Inc. and Fennec Pharmaceuticals, Inc., both Delaware corporations, Cadherin Biomedical Inc., a Canadian corporation, and Fennec Pharmaceuticals (EU) Limited, an Ireland company (“Fennec Limited”), collectively referred to herein as the “Company,” is a biopharmaceutical company with one FDA approved product developed to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors. With the exception of Fennec Pharmaceuticals, Inc., all subsidiaries are inactive.

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

During the three months ended March 31, 2025, the Company experienced a net loss from operations of $808. On March 31, 2025, it had an accumulated deficit of $220,846 and had experienced negative cash flows from operating activities in the amount of $4,318 for the period ended March 31, 2025.

On August 1, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”) with Petrichor Opportunities Fund I LP (the “Petrichor”) in connection with the issuance of up to $45,000 of senior secured floating rate convertible notes (the “Notes”), issuable in multiple tranches (the “Note Financing”). The notes are due in August 2027. On August 19, 2022, the Company closed on the initial tranche of $5,000 (the “First Closing Note”) which has an Initial Conversion Price equal to $8.11 per share, which was calculated based on a 20% premium of the 5-day volume weighted average price of the Company’s common shares as traded on the Nasdaq Capital Market (the “VWAP”) immediately prior to the announcement of the SPA. In connection with the first closing, the Company repaid in full its secured indebtedness with Bridge Bank in the amount of $5,000.

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

A commitment fee of 2.0% of the Notes was payable under the SPA. Half of such fee was paid by the issuance on the first closing of warrants to purchase 55,498 Fennec common shares (“First Closing Warrant”) and half was payable in cash or warrants of 55,498 Fennec common shares (“Second Closing Warrant”), at our election, on the second closing. The warrants are exercisable at a price per share of $8.11 and have a term of five years from the date of the grant. The Company elected to have all the commitment fee of the Notes payable in warrants.

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

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

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Amendment”) with Petrichor, which, among other things, extend the period that the Company could draw the remaining $15,000 under the SPA from December 31, 2023, to December 31, 2024. The ability to draw the remaining $15,000 under the SPA expired on December 31, 2024.

On December 18, 2024, the Company entered into a Waiver and Redemption Agreement (the “Redemption Agreement”) with Petrichor, pursuant to which the Company repurchased and redeemed Notes in an aggregate principal amount of $13,000 (consisting of approximately $11,800 of original principal balance and approximately $1,271 in Payment-in-kind (“PIK”) interest) (collectively, the “Note Redemptions”).

As a result of the Note Redemptions, the First and Third Closing Notes were repurchased and redeemed in full, and, as of March 31, 2025, there remains outstanding Second Closing Notes in the aggregate principal amount (inclusive of PIK interest) of approximately $19,477.

In March of 2024, the Company announced that it had secured an exclusive licensing agreement with Norgine Pharma UK Limited (“Norgine”) to commercialize PEDMARQSI^®, which is the branded name for PEDMARK^® outside of the U.S., in Europe, Australia and New Zealand. The deal provided the Company with approximately $43,000 up front, with the potential of approximately another $230,000 in future royalties and milestone payments.

The Company believes current funds, which include funds from the upfront payment from Norgine, provide sufficient funding for the Company to carry out its planned activities, including the continuation of commercialization efforts of PEDMARK^®, for at least the next twelve months.

These financial statements do not reflect the potentially material adjustments in the carrying values of assets and liabilities, the reported expenses, and the balance sheet classifications used, that would be necessary if the going concern assumption were not appropriate.

2. Significant Accounting Policies

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 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. These unaudited interim condensed consolidated financial statements have been prepared in U.S. dollars. All amounts presented are in thousands except for per share amounts.

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. Actual results could differ from those estimates.

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Credit Losses

To determine the provision for credit losses for accounts receivable, the Company has disaggregated its accounts receivable by class of customer, as the Company determined that risk profile of its customers may vary based on certain characteristics such as credit history, past payment history and geography. Each class of customer component is analyzed for estimated credit losses individually. In doing so, the Company establishes a customer profile, based on the previous collections of accounts receivable by the age of such receivables, and evaluates the current and forecasted financial position of its customers, as available. Further, the Company considers macroeconomic factors and the status of the life sciences industry to estimate if there are current expected credit losses within its trade receivables based on the trends and the Company’s expectation of the future status of such economic and industry-specific factors. Also, specific allowance amounts are established based on review of outstanding invoices to record the appropriate provision for customers that have a higher probability of default.

Segment and Geographic Information

Operating segments are defined as components of an enterprise engaging in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment and employees support only one operating segment which is the production and commercialization of PEDMARK^®.

Stock-Based Compensation

Under the Company’s stock-based compensation programs, the Company periodically grants stock options and restricted stock to employees, directors and consultants. The Company also issues shares under an employee stock purchase plan. The fair value of each award is recognized in the Company’s statements of operations over the requisite service period for such award.

The Company uses the Black-Scholes option pricing model to value stock option awards without market conditions, which requires the Company to make certain assumptions regarding the expected volatility of its common stock price, the expected term of the option grants, the risk-free interest rate and the dividend yield with respect to its common stock. The Company calculates volatility using its historical stock price data. Due to the lack of the Company’s own historical data, the Company elected to use the “simplified” method for “plain vanilla” options to estimate the expected term of the Company’s stock option grants. Under this approach, the weighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option. The risk-free interest rate used for each grant is based on the United States Treasury yield curve in effect at the time of grant for instruments with a similar expected life. The Company utilizes a dividend yield of zero based on the fact that the Company has never paid cash dividends and, at present, has no intention to pay cash dividends.

Inventory

Inventories are valued under a standard costing methodology on a first-in, first-out basis and are stated at the lower of cost or net realizable value. The Company capitalizes inventory costs related to products to be sold in the ordinary course of business. The Company makes a determination of capitalizing inventory costs for a product based on, among other factors, status of regulatory approval, information regarding safety, efficacy and expectations relating to commercial sales and recoverability of costs. Capitalized costs of inventories mainly include third party manufacturing, logistics and distribution costs. The Company assesses recoverability of inventory each reporting period to determine any write down to net realizable value resulting from excess or obsolete inventories.

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Revenue Recognition

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: (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) the Company satisfies its performance obligation(s). 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 our product. Such agreements may include the transfer of intellectual property rights in the form of licenses. Payments made by the customers may include non-refundable upfront fees, payments based upon the achievement of defined milestones, and royalties on sales of product.

If a license to the Company's intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes the transaction price allocated to the license as revenue upon 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 us reflects their standalone selling prices do not provide the customer with a material right and, therefore, are not considered performance obligations. If optional future services are priced in a manner which provides the customer with a significant or incremental discount, they are material rights, and are accounted for as separate performance obligations.

Contingent milestones at contract inception are estimated at the amount which is not probable of a material reversal and included in the transaction price using the most likely amount method. Milestone payments that are not within the Company's control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received and therefore the variable consideration is constrained. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each reporting period, the Company re-evaluates the probability of achieving development or sales-based milestone payments that may not be subject to a material reversal and, if necessary, adjust the estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license and other revenue, as well as earnings, in the period of adjustment.

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

Net Product Revenue

On September 20, 2022, the FDA approved PEDMARK^® in the United States to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors. PEDMARK^® became commercially available on October 17, 2022. PEDMARK^® is the Company’s first commercial product. These specialty distributors subsequently resell the Company’s products to health care providers and patients. In addition to distribution agreements with Customers, the Company enters into arrangements with health care providers and payors that provide for government-mandated and/or privately- negotiated rebates, chargebacks and discounts with respect to the purchase of the Company’s products. Revenues from product sales are recognized when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the customer.

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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. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of its contracts. The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenues and earnings in the period such variances become known.

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: Chargebacks are discounts that occur when contracted customers purchase directly from a specialty distributor. Contracted customers, which currently consist of Public Health Service institutions and Federal government entities purchasing via the Federal Supply Schedule, generally purchase the product at a discounted price. The specialty distributor, in turn, charges back to the Company the difference between the price initially paid by the specialty distributor and the discounted price paid to the specialty distributor by its contracted customer. The allowance for chargebacks is based on actual chargebacks received and an estimate of sales by the specialty distributor to its contracted customers.

Discounts for Prompt Payment: The Customers receive a discount of for prompt payment which may range from 0.5% to 2.0%. The Company expects its customers will earn 100% of their prompt payment discounts and, therefore, the Company deducts the full amount of these discounts from total product sales when revenues are recognized.

Rebates: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program and other government programs. Rebate amounts owed after the final dispensing of the product to a benefit plan participant are based upon contractual agreements or legal requirements with public sector benefit providers, such as Medicaid. 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. 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. If actual future rebates vary from estimates, the Company may need to adjust its accruals, which would affect net product revenues in the period of adjustment.

Co-payment Assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance. The Company accrues a liability for co-payment assistance based on actual program participation and estimates of program redemption using Customer data provided by the third party that administers the copay program.

Other Customer Credits: 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.

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Distribution and Other Fees: We pay distribution and other fees to certain customers in connection with the sales of our products. We record distribution and other fees paid to our customers as a reduction of revenue, unless the payment is for a distinct good or service from the customer and we can reasonably estimate the fair value of the goods or services received. If both conditions are met, we record the consideration paid to the customer as an operating expense. These costs are typically known at the time of sale, resulting in minimal adjustments subsequent to the period of sale.

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


		Three Months Ended
		March 31,		March 31,
In thousands		2025		2024
Product revenues:
Gross product revenues	$	10,812	$	9,556
Discounts and allowances		(2,061)		(2,137)
Net product revenues	$	8,751	$	7,419

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:



		Chargebacks,		Rebates, Customer
		Discounts for		Fees/Credits
		Prompt pay and		and Co-Pay
In thousands		Other allowances		Assistance		Totals
Balance at December 31, 2024	$	276	$	707	$	983
Provision related to sales made in:
Current period		418		224		642
Prior periods		—		—		—
Payments and customer credits issued		(328)		(61)		(389)
Balance at March 31, 2025	$	366	$	870	$	1,236

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

Trade Receivables

The Company records gross trade receivables at the time of product sale to its customers, both specialty and other select global distributors. Trade accounts receivable are recorded at the invoiced amount and are typically non-interest bearing. Amounts estimated for the associated chargebacks, cash discounts for prompt payment and any allowances for credit losses are booked as a reserve against accounts receivable and reduction of revenue. The Company determines its allowance methodology by pooling receivable balances at the customer level. The Company considers various factors, including loss history, individual credit risk associated with each customer, and the current and future condition of the general economy. These credit risk factors are monitored on a quarterly basis and updated as necessary. To the extent that any individual debtor is identified whose credit quality has deteriorated, the Company establishes allowances based on the individual risk characteristics of such a customer. For Customers that are large specialty distributors, the Company considered the risk of potential credit losses to be low. Sales to other select global distributors have the potential for losses. The Company evaluates the risk of credit losses on sales on an individual basis using the above-mentioned criteria.

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Accounts receivable that are expected to be received past 12 months are recorded as non-current accounts receivable. The Company has determined any financing component of non-current receivables to be immaterial. The Company had a balance in allowance for credit losses of $3,882 as of March 31, 2025.

Cost of Products Sold

Cost of products sold is related to the Company's product revenues for PEDMARK^® and consists primarily of product production costs associated with finished goods inventory. Cost of products sold also consists of shipping and other third-party logistics and distribution costs for the Company’s product. As of March 31, 2025, the Company capitalized approximately $1,404 of costs as inventory on the condensed consolidated balance sheet. Of the items capitalized, $665 was capitalized as work in process and raw materials, and $1,256 was capitalized as finished goods. There was a reserve against finished goods valuation for inventory which the Company believes will expire before it is sold in the amount of $517.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments with original maturities at the date of purchase of three months or less.

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

The Company’s investment policy is to manage investments to achieve, in the order of importance, the financial objectives of preservation of principal, liquidity and return on investment. Investments, when made, are made in U.S. or Canadian bank securities, commercial paper of U.S. or Canadian industrial companies, utilities, financial institutions and consumer loan companies, and securities of foreign banks provided the obligations are guaranteed or carry ratings appropriate to the policy. Securities must have a minimum Dun & Bradstreet rating of A for bonds or R1 low for commercial paper.

The policy risks are primarily the opportunity cost of the conservative nature of the allowable investments. The Company has chosen to avoid investments of a trading or speculative nature to preserve cash.

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.

Research and Development Costs and Investment Tax Credits

Research costs, including employee compensation, laboratory fees, lab supplies, and research and testing performed under contract by third parties, are expensed as incurred. Development costs, including drug substance costs, clinical study expenses and regulatory expenses are expensed as incurred.

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Investment tax credits, which are earned as a result of qualifying research and development expenditures, are recognized when the expenditures are made and their realization is reasonably assured. They are applied to reduce related capital costs and research and development expenses in the year recognized.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to credit risk primarily consist of cash and cash equivalents, and accounts receivable. The Company maintains deposits in highly-rated, federally-insured financial institutions in excess of federally insured limits. The Company’s investment strategy is focused on capital preservation. The Company invests in instruments that meet the high credit quality standards outlined in the Company’s investment policy. This policy also limits the amount of credit exposure to any one issue or type of instrument.

The Company’s trade receivables includes amounts billed to Customers for product sales of PEDMARK^®. In the U.S., the customers are a limited group of specialty distributors, and accordingly, the Company considers the risk of potential credit losses to be low. The Company also sells to a select group of global distributors. These global distributors are established companies and although the Company regards credit losses with these distributors to be low, it does recognize the potential for credit losses with this group.

Income Taxes

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. The Company has deferred tax assets, which are subject to periodic recoverability assessments. 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.

The provisions of the Financial Accounting Standards Board (“FASB”) ASC 740-10, Uncertainty in Income Taxes, address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position.

Foreign Currency Transactions

The U.S. dollar is the functional currency for the Company’s consolidated operations. All gains and losses from currency transactions are included in results of operations.

Loss Per Share

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

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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.

3. Loss per Share

Income/(loss) per common share is presented under two formats: basic income/(loss) per common share and diluted income/(loss) per common share. Basic income/(loss) per common share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted income/(loss) per common share is computed by dividing net income/(loss) by the weighted average number of common shares outstanding during the period, plus the potentially dilutive impact of common shares equivalents (e.g. convertible debt, stock options and warrants). Dilutive common share equivalents consist of the incremental common shares issuable upon exercise of convertible debt, 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,
	2025		2024
Numerator:
Net (loss) / income	$	(1,165)	$	12,837

Denominator:
Weighted-average common shares, basic		27,578		27,045
Dilutive effect of stock options		—		3,005
Dilutive effect of restricted share units		—		214
Dilutive effect of warrants		—		34
Dilutive effect of convertible debt		—		793
Incremental dilutive shares		—		4,046
Weighted-average common shares, diluted		27,578		31,091
Net (loss) / income per share basic	$	(0.04)	$	0.47
Net (loss) / income per share diluted	$	(0.04)	$	0.41

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,
	2025	2024
Options to purchase common shares	5,857	1,762
Convertible debt to purchase common shares	3,761	2,968
Restricted share units to purchase common shares	589	—
Warrants to purchase common shares	150	116

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4. Stockholders’ Equity

Authorized Capital Stock

The Company’s authorized capital stock consists of an unlimited number of common shares, no par value per share.

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:


	Common Shares
	Issuable Upon Exercise
	of Outstanding		Weighted-Average
Investor Warrants	Warrants		Exercise Price
Outstanding December 31, 2024	150	$	7.71
Issued	—		—
Outstanding March 31, 2025	150	$	7.71

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,
	2025		2024
Employee equity expense recognized	$	798	$	1,191
Total equity expense recognized	$	798	$	1,191

Stock Option Activity

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


	Number of	Weighted-Average
	Options (thousands)	Exercise Price
Outstanding at December 31, 2024	5,855	$	6.22
Granted	180		6.50
Exercised	(55)		5.00
Forfeited	(123)		6.94
Outstanding at March 31, 2025	5,857	$	6.22

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

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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
Expected dividend	-	%
Risk free rate	4.05	%
Expected volatility	159	%
Expected life	6	years

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. 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)
Outstanding at December 31, 2024		324
Awarded		283
Released		(13)
Forfeited		(5)
Outstanding at March 31, 2025		589

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

5. Fair Value Measurements

The Company has adopted ASC 820 the Fair Value Measurements and Disclosure Topic of the FASB. 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 Topic requires that financial assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: 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. During

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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)
		Quoted Price in Active
		Market for Identical				Significant Other						Significant
		Instruments				Observable Inputs						Unobservable Inputs
		Level 1				Level 2						Level 3				Total
		2025		2024			2025		2024			2025		2024		2025		2024
Assets
Cash and cash equivalents	$	1,618	⁽¹⁾	$	1,314	⁽¹⁾	$	21,057	$	49,870	$	-	$	-	$	22,675	$	51,184
Processa common shares	$	1	⁽²⁾	$	4	⁽²⁾	$	-	$	-	$	-	$	-	$	1	$	4

(1)

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. dollars). 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. dollars).

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

6. Commitments and Contingencies

Litigation

CIPLA Litigation

On December 1, 2022, we received a letter dated November 30, 2022, notifying us that CIPLA Ltd. and CIPLA USA (“CIPLA”) submitted to the FDA an ANDA (ANDA No. 218028) for a generic version of PEDMARK^® (sodium thiosulfate solution) that contained Paragraph IV Certifications on two of our patents covering PEDMARK^®: the OHSU licensed ‘190 Patent, expiration date January 2038; and our US 11,291,728 Patent (the “’728 Patent”), expiration date July 2039. On January 6, 2023, we received a letter dated January 5, 2023, notifying us that CIPLA submitted to the FDA a Paragraph IV Certification on our newly issued US 11,510,984 Patent (the “’984 Patent”). These patents are listed in FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the Orange Book, for PEDMARK^®. The certifications allege these patents are invalid or will not be infringed by the manufacture, use, or sale of CIPLA’s sodium thiosulfate solution.

Under the Food, Drug, and Cosmetic Act, as amended by the Drug Price Competition and Patent Term Restoration Act of 1984, as amended, after receipt of a valid Paragraph IV notice, the Company may bring a patent infringement suit in a federal district court against CIPLA within 45 days from the receipt of the Notice Letter and if such a suit is commenced within the 45-day period, the Company is entitled to a 30 month stay on the FDA’s ability to give final approval to any proposed products that reference PEDMARK. In addition to the 30-month stay, because we have received Orphan Drug Exclusivity, the FDA may not approve CIPLA’s ANDA for at least 7 years from PEDMARK’s FDA approval date of September 20, 2022, which is September 20, 2029.

On January 10, 2023, we filed suit against the CIPLA entities in the United States District Court for the District of New Jersey (Case No. 2:23-cv-00123), for infringement of the US ‘190 Patent, the US ‘728 Patent, and the US ‘984 Patent. On April 20, 2023, we filed an Amended Complaint to assert infringement of the US ‘728 Patent and the US ‘984 Patent. On April 4, 2023, we were granted US 11,617,793 Patent (the “US ‘793 Patent”) covering the formulation of the PEDMARK product, which was listed in the Orange Book on or around April 17, 2023, and has an expiration date of July 2039. On May 11, 2023, we received written notice of CIPLA’s Paragraph IV Certification as to the US ‘793 Patent, which was dated May 10, 2023, along with an enclosed statement of alleged factual and legal bases for stating that the US ‘793 Patent is invalid, unenforceable, and/or will not be infringed by CIPLA’s ANDA Product. On July 27, 2023, we filed a Second 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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On April 23, 2024, we were granted US 11,964,018 Patent (the “US ‘018 Patent) covering a method of using our PEDMARK product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer, which was listed in the Orange Book on or around May 8, 2024, and has an expiration date of July 2039. On May 28, 2024, we were granted US 11,992,530 Patent (the “US ‘530 Patent”) covering a method of using our PEDMARK product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer, which was listed in the Orange Book on or around June 20, 2024, and has an expiration date of July 2039. On June 4, 2024, we were granted US 11,998,604 Patent (the “US ‘604 Patent”) covering a method of using our PEDMARK product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer, which was listed in the Orange Book on or around June 24, 2024, and has an expiration date of July 2039.

On June 13, 2024, we filed a Motion for Leave to File a Third Amended Complaint to focus the ANDA litigation against CIPLA on the US ‘018 Patent and the US ‘793 Patent only. The non-asserted patents remain listed in the Orange Book. On July 22, 2024, CIPLA filed a response indicating that they do not oppose our Motion for Leave to File a Third Amended Complaint. On July 30, 2024, the court granted us leave to file the Third Amended Complaint, which we filed on September 16, 2024.

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

The suit is ongoing.

Executive Severance

In the event of termination of Mr. Hackman's (Chief Executive Officer) employment with the Company other than for cause, the Company will be obligated to pay him a one-time severance payment equal to twelve months of salary (currently $559). In the event of termination of Mr. Andrade’s (Chief Financial Officer) employment with the Company other than for cause, the Company will be obligated to pay him a one-time severance payment equal to nine months of salary which is equivalent to $344. Further, certain other Executive Employment Agreements generally provide that if employment is terminated without “Cause” (as defined in the applicable Executive Employment Agreement) and other conditions are satisfied, then such executive officer shall receive as severance an amount equal to their then current base salary for a period of nine (9) months, less standard withholdings for tax and social security purposes.

Leases

The Company has an operating lease in Research Triangle Park, North Carolina utilizing a small space within a commercial building. The operating lease has payments of $0.4 per month with no scheduled increases. This operating lease is terminable with 30 days’ notice and has no penalties or contingent payments due.

On January 23, 2020, the Company entered into an Office Service Agreement (the “Office Service Agreement”) with Regus to lease office space in Hoboken, New Jersey. Per the terms of the Office Service Agreement, the monthly rent payments are $1. The Company was required to pay a security deposit of $2, which is the equivalent to two months of rent. The Office Service Agreement commenced on January 27, 2020, and terminated on July 31, 2020, thereafter the lease has been continuing on a month-to-month basis with either party being able to terminate the agreement by providing one months’ advance written notice of termination.

On August 1, 2023, the Company entered into a second Office Service Agreement (the “Second Office Service Agreement”) with Regus to lease office space in Dublin, Ireland. Per the terms of the Second Office Service Agreement, the monthly rent payments are $2. The Company was required to pay a security deposit of $5, which is the equivalent of two months rent. The Second Office Service Agreement commenced on August 1, 2023 and terminated on January 31, 2025, thereafter the lease may continue on a month-to-month basis with either party being able to terminate the agreement by providing one month’s advance written notice of termination. This lease was terminated.

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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

In May 2021, the Company established the Fennec Pharmaceuticals, Inc. 401(k) Plan (the “401(k) Plan”) for its employees, which is designed to be qualified under Section 401(k) of the Internal Revenue Code of 1986. 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.

7. Term Loans

On August 1, 2022, the Company entered into the SPA with the Petrichor in connection with the issuance of up to $45,000 of Notes, issuable in multiple tranches. On August 19, 2022, the Company closed on the initial tranche of $5,000, which has an Initial Conversion Price equal to $8.11 per share, which was calculated based on a 20% premium of the 5-day VWAP immediately prior to the announcement of the SPA. In connection with the first closing, the Company repaid in full its secured indebtedness with Bridge Bank in the amount of $5,000. The Notes become due on the maturity date, which is August 19, 2027.

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

A commitment fee of 2.0% of the Notes was payable under the SPA. Half of such fee was paid by the issuance on the first closing of warrants to purchase 55,498 Fennec common shares and half was payable in cash or warrants of 55,498 Fennec common shares, at our election, on the second closing. The warrants are exercisable at a price per share of $8.11 and have a term of five years from the date of the grant. The Company elected to have all the commitment fee of the Notes payable in warrants.

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

Also on December 4, 2023, the Company entered into the SPA Amendment with the Petrichor, which, among other things, extended the period that the Company could draw the remaining $15,000 under the SPA from December 31, 2023, to December 31, 2024. The ability for subsequent draws expired on December 31, 2024.

On December 18, 2024, the Company entered into the Redemption Agreement with Petrichor, pursuant to which the Company repurchased and redeemed Notes in an aggregate principal amount of $13,000 (consisting of approximately $11,800 of original principal balance and approximately $1,271 in PIK interest).

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

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quarter (“Interest Date”). PIK interest will commence on funding date and accrue at a rate of 3.5% per annum. PIK interest stopped accruing on August 24, 2024. All accrued PIK interest remained outstanding and was payable on each Interest Date and added to the outstanding principal amount. The Company has accrued $1,271 in PIK interest and has classified the PIK interest in long-term liabilities.

The SPA notes are convertible into fully paid, non-assessable share of common shares at any point after their issuance dates and before the maturity date. Any amount of the SPA notes may be converted into common shares so long as it does not create partial shares. The conversion rate is determined by dividing the conversion amount by the conversion price. Provisions of the PSA create legal, valid and enforceable liens on, and security interests in, all of the Company’s and each of its subsidiaries’ assets.

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


Years Ending December 31,		Amount
2025		—
2026		—
2027		18,206
Payment in kind interest		1,271
Total future payments		19,477
Less: unamortized debt discount		(126)
Total term loan, net of debt discount	$	19,351

In the event of default or change of control, all unpaid principal and all accrued and unpaid interest amounts (if any) under the SPA notes become immediately due and payable. Events of default include, but are not limited to, a payment default, a material adverse change, and insolvency. The SPA facility is secured by all of the Company’s assets, including all capital stock held by the Company.

Debt issuance costs of $175 were paid in cash for legal fees and to the Investor in 2022 and warrants valued at $441 were granted the Investor to secure access to the SPA. These amounts were capitalized and are being amortized over the access period of the SPA. Upon drawing tranche 1 and tranche 2, the Company recorded a debt discount of $314, which was based on a pro-rata allocation of the issue costs to secure the SPA, reducing the capitalized amount by the same amount. The debt discount is being amortized over the life of the SPA. The debt discount was fully expensed when the Company redeemed $13,000 of principle amount in December 2024.

8. License Agreement

License Agreement with Norgine Pharma UK Limited

On March 17, 2024, the Company announced that, through its wholly-owned subsidiary, Fennec Pharmaceuticals, Inc. entered into a License and Supply Agreement (the “Agreement”) with Norgine, pursuant to which Norgine is granted an exclusive license to commercialize the Company’s product PEDMARQSI® (known as PEDMARK® in the United States) for all human indications in the European Economic Area, Switzerland, the United Kingdom, Australia and New Zealand (collectively, the “Territory”). On July 26, 2024, Norgine and Fennec amended the Agreement. The amended Agreement maintains all principal payment terms with the primary addition of Norgine assuming responsibility for packaging and labeling of PEDMARQSI^®.

Pursuant to the terms of the Agreement, Fennec shall receive the following payments from Norgine: (i) an upfront payment in the amount of €40 million or approximately $43.2 million, which was paid to Fennec on March 15, 2024, (ii) up to €210 million (or approximately $230 million) upon the achievement of certain regulatory and commercial milestones, and (iii) tiered royalty payments based on net sales of PEDMARQSI® in the Territory, which royalty payment range from mid-teen percent to mid-twenty percent based on the aggregate net sales of PEDMARQSI® in the Territory. The tiered royalty payments are subject to material reduction if an alternative or generic version of PEDMARQSI® becomes available in any respective country or jurisdiction within the Territory.

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Subject to customary rights of each party to earlier terminate the Agreement, the term of the Agreement continues for the longer of: (i) March 15, 2034, or (ii) with respect to any particular country in the Territory, (a) the expiration of regulatory market exclusivity for PEDMARQSI® in such country, or (b) the last-to-expire of all patents for PEDMARQSI® in such country. The term of the Agreement shall be automatically renewed for additional three-year periods unless either party provides the other party written notice of its intent not to renew the Agreement at least one year prior to the applicable termination date of the Agreement.

The Company evaluated the Norgine License Agreement under ASC 606 and concluded that Norgine represents a customer in the transaction. There were two performance obligations: A license of functional IP and a material right for future supply. The Company will allocate the transaction price, including currently unrecognized variable consideration, to the two performance obligations based on estimated standalone selling price, which was estimated using projected cash flows. The initial transaction price consisted of the non-refundable upfront payment, a portion of which was allocated to and recognized as License Revenue in the first quarter of 2024 as the requirements for revenue recognition under ASC 606 were met. The portion of the transaction price associated with the material right is deferred and reflected as deferred revenue in the condensed consolidated balance sheets. Deferred revenue associated with the material right is recognized as contract liabilities under the supply arrangement are made. The remaining forms of consideration are variable because they are dependent on the achievement of sales-based or other milestones. The Company evaluated the constraint on variable consideration and concluded that the milestone payments are dependent on regulatory approvals and actions of third parties, and thus are highly susceptible to factors outside the Company’s influence. Therefore, at contract inception, the milestones are not included in the transaction price as it is not probable that a significant reversal of revenue would not occur. Sales-based milestones will be recognized as revenue or deferred as part of the material right in the period when the related sales threshold is met. All other milestones will be recognized as revenue or deferred as part of the material right immediately in the period the underlying milestone is achieved. Any consideration related to sales-based royalties will be recognized as revenue or deferred as part of the material right when the related sales occur. For the three months ended March 31, 2025, the Company did not recognize any milestone or royalty revenue payments to from the Norgine sales of PEDMARQSI^® pursuant to the Agreement.

In conjunction with entering into the Agreement, the Company paid approximately $1,700 in incremental costs, which were capitalized and recorded within Other non-current assets. The Company amortizes the asset over the period of expected benefit using a systematic basis that reflects the pattern of transfer to Norgine. A portion that represents the license was recognized immediately and is recorded within selling and marketing expense in the consolidated statements of operations. As of March 31, 2025, $794 in incremental cost was capitalized.

9. Segment Reporting

Fennec’s chief operating decision maker is the senior executive team that includes the chief executive officer and chief financial officer. The chief operating decision maker uses net loss to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into the single segment or any other part of the entity, such as for acquisitions or to pay dividends.

The accounting policies of the operating segment are the same as those described in Note 2, Significant Accounting Policies. The chief operating decision maker evaluates the performance of the operating segment and allocates resources based on net loss that also is reported on the consolidated income statement as net loss. The measure of the operating segment assets is reported on the consolidated balance sheet as total assets.

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The chief operating decision maker uses net loss to monitor budget versus actual results and to analyze cash flows in assessing performance of the segment and allocating resources. The significant expenses are presented in the Company’s Statements of Operations.

10. Subsequent Events

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

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Caution Concerning Forward-Looking Statements

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 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. Forward-looking statements can be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. 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 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.

Overview

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.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^® (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 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^®.

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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 Orange Book. In September 2022, the USPTO issued Patent No. 11,291,728 (the “US ‘728 Patent”), in December 2022, the USPTO issued Patent No. 11,510,984 (“US ‘984 Patent”) and in April 2023, the USPTO issued Patent No. 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 “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. We are also pursuing additional patent applications in both the U.S. and internationally for PEDMARK^®.

PEDMARK^® Product Overview

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 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.

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.

In the U.S. 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. 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.

The U.S. 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.

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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.

The U.S. 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 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.

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Results of Operations

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


		Three Months Ended				Three Months Ended
In thousands of U.S. Dollars		March 31, 2025		%		March 31, 2024		%		Change
PEDMARK product sales, net	$		8,751		$		7,419		$		1,332
Licensing revenue			—				17,958				(17,958)
Total revenue			8,751				25,377				(16,626)

Operating expenses:
Cost of product sales			373	4			550	5			(177)
Research and development			94	1	%		3	0	%		91
Selling and marketing			2,947	31	%		5,209	45	%		(2,262)
General and administration			6,145	64	%		5,872	50	%		273
Total operating expense			9,559	100	%		11,634	100	%		(2,075)
(Loss) / income from operations			(808)				13,743				(14,551)

Unrealized loss on securities			(1)				(11)				10
Amortization expense			(13)				(20)				7
Interest expense			(592)				(1,034)				442
Unrealized foreign exchange loss			13				(38)				51
Interest income			236				197				39
Net (loss) / income from operations		$	(1,165)			$	12,837			$	(14,002)

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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.

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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.

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

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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.

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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.

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

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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.

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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


	As at		As at
Selected Asset and Liability Data (thousands):	March 31, 2025		December 31, 2024
Cash and equivalents	$	22,675	$	26,634
Other current assets		20,300		17,490
Current liabilities		8,371		6,919
Working capital ⁽¹⁾		34,604		37,205
⁽¹⁾ [Current assets – current liabilities]

Selected Equity:
Common stock and additional paid in capital		213,723		212,566
Accumulated deficit		(220,846)		(219,681)
Stockholders’ (deficit)		(5,880)		(5,872)

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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.

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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.

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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	Three Months Ended		Three Months Ended
(dollars and shares in thousands)	March 31, 2025		March 31, 2024
Net cash (used in) / provided by operating activities	$	(4,318)	$	39,047
Net cash provided by investing activities		—		—
Net cash provided by / (used in) financing activities		359		(1,132)
Net cash flow	$	(3,959)	$	37,915

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. Our projections of further capital requirements are subject to substantial uncertainty. Our working capital requirements may fluctuate in future periods depending upon numerous factors, including: our ability to obtain additional financial resources; 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; change in the focus, direction, or costs of our research and development programs; headcount expense; the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our patent claims; competitive and technological advances; the potential need to develop, acquire or license new technologies and products; our business

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development activities; new regulatory requirements implemented by regulatory authorities; the timing and outcome of any regulatory review process; and commercialization activities, if any.

Outstanding Share Information

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


	March 31,	December 31,
Outstanding Share Type	2025	2024	Change
Common shares	27,594	27,527	67
Warrants	150	150	—
RSUs	589	324	265
Stock options	5,857	5,855	2
Total	34,190	33,856	334

Financial Instruments

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. 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.

Our investment policy is to manage investments to achieve, in the order of importance, the financial objectives of preservation of principal, liquidity and return on investment. Investments may be made in U.S. or Canadian obligations and bank securities, commercial paper of U.S. or Canadian industrial companies, utilities, financial institutions and consumer loan companies, and securities of foreign banks provided the obligations are guaranteed or carry ratings appropriate to the policy. Securities must have a minimum Dun & Bradstreet rating of A for bonds or R1 low for commercial paper. The policy also provides for investment limits on concentrations of securities by issuer and maximum-weighted average time to maturity of twelve months. This policy applies to all of our financial resources. The policy risks are primarily the opportunity cost of the conservative nature of the allowable investments. Until we are cash flow positive from operations, we have chosen to avoid investments of a trading or speculative nature.

We classify fixed income investments with original maturities at the date of purchase greater than three months which mature at or less than twelve months as current. We carry investments at their fair value with unrealized gains and losses included in other comprehensive income (loss); however, we have not held any instruments that were classified as short-term investments during the periods presented in this Quarterly Report.

Off-Balance Sheet Arrangements

Since our inception, we have not had any material off-balance sheet arrangements.

Contractual Obligations and Commitments

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 three months ended March 31, 2025.

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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

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.

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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.

Stock-based Compensation

The calculation of the fair values of our stock-based compensation plans requires estimates that require management’s judgments. Under ASC 718, the fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model. The valuation models require assumptions and estimates to determine expected volatility, expected life, expected dividends and expected risk-free interest rates. The expected volatility was determined using historical volatility of our stock based on the contractual life of the award. The risk-free interest rate assumption was based on the yield on zero-coupon U.S. Treasury strips at the award grant date. We also used historical data to estimate forfeiture experience. 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	March 31, 2025
Expected dividend	-	%
Risk free rate	4.05	%
Expected volatility	159	%
Expected life	6	years

Common shares and warrants

Common shares are recorded as the net proceeds received on issuance after deducting all share issuance costs and the relative fair value of investor warrants. 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.

Newly Adopted and Recent Accounting Pronouncements

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Item 3. 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.

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings

CIPLA Litigation

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The suit is ongoing.

Item 1A. Risk Factors.

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”), includes a detailed discussion of our risk factors under the heading “PART I, Item 1A – Risk Factors.” You should carefully consider the risk factors discussed in our Annual Report, as well as other information in this Quarterly Report. Any of these risks could cause our business, financial condition, results of operations and future growth prospects to suffer. We are not aware of any material changes from the risk factors previously disclosed.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Insider Trading Arrangements and Policies

During the quarter ended March 31, 2025, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulations S-K.

Press Release

On May 13, 2025, we issued a press release announcing our financial results for the quarter ended March 31, 2025. A copy of the news release is attached to this Quarterly Report as Exhibit 99.1. The press release is being furnished and shall not be deemed to be filed for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, unless such subsequent filing specifically references the press release.

Item 6. Exhibits


Exhibit No.		Description

31.1		Certification of Chief Executive Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of Chief Financial Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1		Certification of Chief Executive Officer and Chief Financial Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

99.1		Press Release for Quarter Ended March 31, 2024 (filed herewith).

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101.INS*		Inline XBRL Instance Document

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

1. In accordance with Item 601(b)(10)(iv) of Regulation S-K, certain provisions and terms of this exhibit have been redacted. Fennec will provide an unredacted copy of the exhibit on a supplemental basis to the SEC or its staff upon request.

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SIGNATURES

Pursuant to requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Fennec Pharmaceuticals Inc.

Date: May 14, 2025	By:	/s/ Jeffrey Hackman
		Jeffrey Hackman
		Chief Executive Officer
		(principal executive officer)

Date: May 14, 2025	By:	/s/ Robert Andrade
		Robert Andrade
		Chief Financial Officer
		(principal financial and chief accounting officer)

FENNEC PHARMACEUTICALS INC. 10-Q