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, 2022


	☐ 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 þ 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, 2022 there were 26,039,444 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 as of March 31, 2022 (Unaudited) and December 31, 2021	3

Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2022 and 2021	4

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2022 and 2021	5

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) for the Three Months Ended March 31, 2022 and 2021	6

Notes to the Condensed Consolidated Financial Statements	7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3. Quantitative and Qualitative Disclosures about Market Risk	27

Item 4. Controls and Procedures	28

PART II: OTHER INFORMATION	28

Item 1. Legal Proceedings	28

Item 1A. Risk Factors	30

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 3. Defaults Upon Senior Securities	30

Item 4. Mine Safety Disclosures	30

Item 5. Other Information	30

Item 6. Exhibits	31

Signatures	32

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)


	March 31, 2022		December 31,
	(Unaudited)		2021

Assets
Current assets
Cash and cash equivalents	$	18,259	$	21,100
Prepaid expenses		715		1,034
Other current assets		154		253
Total current assets		19,128		22,387

Non-current assets
Deferred issuance cost, net of amortization		21		27
Total non-current assets		21		27
Total assets	$	19,149	$	22,414

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,224	$	777
Accrued liabilities		412		877
Current portion of long-term debt		500		—
Total current liabilities		2,136		1,654

Long-term liabilities
Term loan		4,500		5,000
Debt discount		(11)		(12)
Total long-term liabilities		4,489		4,988
Total liabilities		6,625		6,642

Commitments and Contingencies (Note 6)

Stockholders’ equity:
Common stock, no par value; unlimited shares authorized; 26,040 shares issued and outstanding (2021 ‑ 26,014)		140,832		140,801
Additional paid-in capital		53,631		53,214
Accumulated deficit		(183,182)		(179,486)
Accumulated other comprehensive income		1,243		1,243
Total stockholders’ equity		12,524		15,772
Total liabilities and stockholders’ equity	$	19,149	$	22,414

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 Operations

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

(Unaudited)


	Three Months Ended
	March 31,		March 31,
	2022		2021

Revenue	$	—	$	—

Operating expenses:
Research and development		1,437		2,416
General and administrative		2,109		2,507

Loss from operations		(3,546)		(4,923)

Other (expense)/income
Unrealized foreign exchange loss		(3)		(4)
Amortization expense		(7)		—
Unrealized (loss)/gain on securities		(91)		182
Interest income		9		16
Interest expense		(58)		(4)
Total other (expense)/income		(150)		190

Net loss	$	(3,696)	$	(4,733)

Basic net loss per common share	$	(0.14)	$	(0.18)
Diluted net loss per common share	$	(0.14)	$	(0.18)
Weighted-average number of common shares outstanding basic		26,019		26,003
Weighted-average number of common shares outstanding diluted		26,019		26,003

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,
	2022		2021

Cash flows (used in) provided by:
Operating activities:
Net loss	$	(3,696)	$	(4,733)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt access fees		6		—
Amortization of debt discount		1		—
Unrealized loss/(gain) on securities		91		(182)
Stock-based compensation - consultants		34		9
Stock-based compensation - employees		399		587
Changes in operating assets and liabilities:
Prepaid expenses		319		178
Other assets		8		3
Accounts payable		447		937
Accrued liabilities		(465)		(392)
Net cash used in operating activities		(2,856)		(3,593)

Financing activities:
Issuance of shares, options exercise		15		—
Net cash provided by financing activities		15		—

Decrease in cash and cash equivalents		(2,841)		(3,593)
Cash and cash equivalents - Beginning of period		21,100		30,344
Cash and cash equivalents - End of period	$	18,259	$	26,751

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

Three Months Ended March 31, 2022 and 2021

(U.S. dollars and shares in thousands)

(Unaudited)


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

Balance at December 31, 2021	26,014	$	140,801	$	53,214	$	(179,486)	$	1,243	$	15,772
Stock options issued to employees	—		—		399		—		—		399
Stock options issued to contractors	—		—		34		—		—		34
Stock option exercise	26		31		(16)		—		—		15
Net loss	—		—		—		(3,696)		—		(3,696)
Balance at March 31, 2022	26,040	$	140,832	$	53,631	$	(183,182)	$	1,243	$	12,524

								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Income		Equity
Balance at December 31, 2020	26,003	$	140,733	$	49,234	$	(162,140)	$

SEC Form 10-Q filed by Fennec Pharmaceuticals Inc.