Fennec Pharmaceuticals Inc 10-Q for FY2023 Q2

Fennec Pharmaceuticals Inc. (FENC)

10-Q 2023-08-07 For: 2023-06-30

Added on April 06, 2026

About this 10-Q

Fennec Pharmaceuticals Inc filed this 10-Q on August 7, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Net loss: $5.44M; compared with a net loss of $5.07M a year earlier
Diluted EPS: -$0.21; compared with -$0.19 a year earlier

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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)


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

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


	Page
PART I: FINANCIAL INFORMATION	3

Item 1. Condensed Consolidated Financial Statements	3

Condensed Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022	3

Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2023 and 2022	4

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) for the Three and Six Months Ended June 30, 2023, and 2022	5

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2023 and 2022	6
Notes to the Condensed Consolidated Financial Statements	7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3. Quantitative and Qualitative Disclosures About Market Risk	28

Item 4. Controls and Procedures	28

PART II: OTHER INFORMATION	28

Item 1. Legal Proceedings	28

Item 1A. Risk Factors	28

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3. Defaults Upon Senior Securities	29

Item 4. Mine Safety Disclosures	29

Item 5. Other Information	29

Item 6. Exhibits	29

Signatures	30


	June 30, 2023		December 31,
	(Unaudited)		2022

Assets
Current assets
Cash and cash equivalents	$	14,958	$	23,774
Accounts receivable, net		2,445		1,545
Prepaid expenses		457		770
Inventory		1,439		576
Other current assets		32		63
Total current assets		19,331		26,728

Non-current assets
Deferred issuance costs, net of amortization		106		211
Total non-current assets		106		211
Total assets	$	19,437	$	26,939

Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	3,005	$	2,390
Accrued liabilities		773		2,219
Total current liabilities		3,778		4,609

Long term liabilities
Term loan		25,000		25,000
PIK interest		707		260
Debt discount		(321)		(361)
Total long term liabilities		25,386		24,899
Total liabilities		29,164		29,508

Commitments and contingencies (Note 6)

Stockholders’ deficit:
Common stock, no par value; unlimited shares authorized; 26,509 shares issued and outstanding (2022 ‑26,361)		143,345		142,591
Additional paid-in capital		60,381		56,797
Accumulated deficit		(214,696)		(203,200)
Accumulated other comprehensive income		1,243		1,243
Total stockholders’ deficit		(9,727)		(2,569)
Total liabilities and holders’ deficit	$	19,437	$	26,939


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


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


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2023		2022		2023		2022

Revenue
PEDMARK product sales, net	$	3,325	$	—	$	5,002	$	—
Cost of products sold		(148)		—		(243)		—
Gross profit		3,177		—		4,759		—

Operating expenses:
Research and development		8		1,131		12		2,568
Selling and marketing		2,340		—		4,871		—
General and administrative		5,495		3,878		9,812		5,987

Total operating expenses		(7,843)		(5,009)		14,695		8,555
Loss from operations		(4,666)		(5,009)		(9,936)		(8,555)

Other (expense)/income
Unrealized foreign exchange gain/(loss)		5		1		14		(2)
Amortization expense		(73)		(8)		(145)		(15)
Unrealized loss on securities		—		(8)		(30)		(99)
Interest income		115		9		224		18
Interest expense		(825)		(57)		(1,623)		(115)
Total other expense		(778)		(63)		(1,560)		(213)
Net loss	$	(5,444)	$	(5,072)	$	(11,496)	$	(8,768)

Basic net loss per common share	$	(0.21)	$	(0.19)	$	(0.43)	$	(0.34)
Diluted net loss per common share	$	(0.21)	$	(0.19)	$	(0.43)	$	(0.34)
Weighted-average number of common shares outstanding basic		26,458		26,052		26,471		26,067
Weighted-average number of common shares outstanding diluted		26,458		26,052		26,471		26,067


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

Balance at December 31, 2022	26,361	$	142,591	$	56,797	$	(203,200)	$	1,243	$	(2,569)
Stock-based compensation - employees	—		—		1,089		—		—		1,089
Stock option exercise	49		213		—		—		—		213
Restricted stock release	1		—		(20)		—		—		(20)
Net loss	—		—		—		(6,052)		—		(6,052)
Balance at March 31, 2023	26,411		142,804		57,866		(209,252)		1,243		(7,339)
Stock-based compensation - employees	—		—		2,543		—		—		2,543
Stock option exercise	95		541		—		—		—		541
Restricted stock release	3		—		(28)		—		—		(28)
Net loss	—		—		—		(5,444)		—		(5,444)
Balance at June 30, 2023	26,509	$	143,345	$	60,381	$	(214,696)	$	1,243	$	(9,727)


								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-based compensation - employees	—		—		399		—		—		399
Stock-based compensation - consultants	—		—		34		—		—		34
Stock option exercise	26		31		(16)		—		—		15
Restricted stock release	—		—		—		—		—		—
Net loss	—		—		—		(3,696)		—		(3,696)
Balance at March 31, 2022	26,040		140,832		53,631		(183,182)		1,243		12,524
Stock-based compensation - employees	—		—		1,008		—		—		1,008
Stock-based compensation - consultants	—		—		35		—		—		35
Stock option exercise	19		90		(44)		—		—		46
Restricted stock release	8		—		—		—		—		—
Net loss	—		—		—		(5,072)		—		(5,072)
Balance at June 30, 2022	26,067	$	140,922	$	54,630	$	(188,254)	$	1,243	$	8,541



	Chargebacks,		Rebates, Customer
	Discounts for		Fees/Credits
	Prompt pay and		and Co-Pay
In thousands	Other allowances		Assistance		Totals
Balance at December 31, 2022	$	71	$	163	$	234
Provision related to sales made in:
Current period		116		117		233
Prior periods		—		—		—
Payments and customer credits issued		(31)		(66)		(97)
Balance at March 31, 2023	$	156	$	214	$	370
Provision related to sales made in:
Current period		246		148		394
Prior periods		—		—		—
Payments and customer credits issued		(193)		(124)		(317)
Balance at June 30, 2023	$	209	$	238	$	447


	Six Months Ended June 30,
	2023	2022
Options to purchase common shares	4,887	4,337
Warrants to purchase common shares	150	39


	Number of	Weighted-Average
Options	Options (thousands)	Exercise Price $USD
Outstanding at December 31, 2022	4,539	$	5.13
Granted	580		8.12
Exercised	(49)		4.36
Forfeited	(38)		6.98
Outstanding at March 31, 2023	5,032		5.43
Granted	125		8.80
Exercised	(95)		5.60
Forfeited	(175)		7.51
Outstanding at June 30, 2023	4,887	$	5.77


		Valuation
		Assumptions
Black-Scholes Model Assumptions		June 30, 2023
Expected dividend		0.00%
Risk free rate		3.56 - 3.89%
Expected volatility		49 - 77%
Expected life		1.5 - 6.0 years


		Number of
		Restricted Share
RSUs Current Year		Units (thousands)
Outstanding at December 31, 2022		35
Awarded		264
Released		(1)
Outstanding at March 31, 2023		298
Awarded		98
Released		(3)
Forfeited		(17)
Outstanding at June 30, 2023		376


	Fair Value Measurement at June 30, 2023 and December 31, 2022
	(in thousands)
	Quoted Price in Active
	Market for Identical						Significant Other				Significant
	Instruments						Observable Inputs				Unobservable Inputs
	Level 1						Level 2				Level 3					Total
	2023				2022			2023		2022		2023		2022		2023		2022
Assets
Cash and cash equivalents	$	3,501	⁽¹⁾	$	307	⁽¹⁾	$	11,457	$	23,467	$	—	$	—	$	14,958	$	23,774
Processa common shares	$	25	⁽²⁾	$	56	⁽²⁾	$	—	$	—	$	—	$	—	$	25	$	56


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 June 30, 2023 (filed herewith).

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)


	Fennec Pharmaceuticals Inc.

Date: August 7, 2023	By:	/s/ Rostislav Raykov
		Rostislav Raykov
		Chief Executive Officer
		(principal executive officer)

Date: August 7, 2023	By:	/s/ Robert Andrade
		Robert Andrade
		Chief Financial Officer
		(principal financial and chief accounting officer)


1.	I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2023 of Fennec Pharmaceuticals Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the unaudited interim condensed consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
		(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its condensed subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
		(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
		(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
		(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	By:	/s/ Rostislav Raykov
		Rostislav Raykov
		Chief Executive Officer


Years Ending December 31,		Amount
2023	$	—
2024		—
2025		—
2026		—
2027		25,000
Payment in kind interest		707
Total future payments		25,707
Less: unamortized debt discount		(321)
Total term loan, net of debt discount	$	25,386


	Three Months Ended				Three Months Ended
In thousands of U.S. Dollars	June 30, 2023		%		June 30, 2022		%		Change
PEDMARK product sales, net		3,325				—				3,325
Cost of product sales		(148)	5	%		—	—	%		(148)
Gross profit	$	3,177			$	—			$	3,177
Operating expenses:
Research and development		8	—	%		1,131	23	%		(1,123)
Selling and marketing		2,340	30	%		—	—	%		2,340
General and administration		5,495	70	%		3,878	77	%		1,617
Total operating expense		7,843	100	%		5,009	100	%		2,834
Loss from operations		(4,666)				(5,009)				343
Unrealized loss on securities		—				(8)				8
Amortization expense		(73)				(8)				(65)
Interest expense		(825)				(57)				(768)
Unrealized foreign exchange loss		5				1				4
Interest income		115				9				106
Net loss	$	(5,444)			$	(5,072)			$	(372)


	As of		As of
Selected Asset and Liability Data (thousands):	June 30, 2023		December 31, 2022
Cash and equivalents	$	14,958	$	23,774
Other current assets		4,373		2,954
Current liabilities		(3,778)		(4,608)
Working capital ⁽¹⁾		15,553		22,120
⁽¹⁾ [Current assets – current liabilities]

Selected Equity:
Common stock and additional paid in capital		203,726		199,388
Accumulated deficit		(214,696)		(203,200)
Stockholders’ deficit		(9,727)		(2,569)


Selected Cash Flow Data	Six Months Ended June 30,
(dollars and shares in thousands)	2023		2022
Net cash used in operating activities	$	(9,523)	$	(6,246)
Net cash provided by investing activities		—		—
Net cash provided by financing activities		707		61
Net cash flow	$	(8,816)	$	(6,185)


	June 30,	December 31,
Outstanding Share Type	2023	2022	Change
Common shares	26,509	26,361	148
Warrants	150	150	—
Stock options	4,887	4,539	348
Total	31,546	31,050	496

	1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
	2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


	Unaudited		Audited
	June 30,		December 31,
	2023		2022

Assets

Current assets
Cash and cash equivalents	$	14,958	$	23,774
Accounts receivable, net		2,445		1,545
Prepaid expenses		457		770
Inventory		1,439		576
Other current assets		32		63
Total current assets		19,331		26,728

Non-current assets
Deferred issuance cost, net amortization		106		211
Total non-current assets		106		211
Total assets	$	19,437	$	26,939

Liabilities and shareholders’ (deficit) equity

Current liabilities:
Accounts payable	$	3,005	$	2,390
Accrued liabilities		773		2,219
Total current liabilities		3,778		4,609

Long term liabilities
Term loan		25,000		25,000
PIK interest		707		260
Debt discount		(321)		(361)
Total long term liabilities		25,386		24,899
Total liabilities		29,164		29,508

Shareholders’(deficit) equity:
Common stock, no par value; unlimited shares authorized; 26,411 shares issued and outstanding (2022 ‑26,361)		143,345		142,591
Additional paid-in capital		60,381		56,797
Accumulated deficit		(214,696)		(203,200)
Accumulated other comprehensive income		1,243		1,243
Total shareholders’ (deficit) equity		(9,727)		(2,569)
Total liabilities and shareholders’ (deficit) equity	$	19,437	$	26,939


Working capital	Fiscal Period Ended
Selected Asset and Liability Data:		June 30, 2023		December 31, 2022
(U.S. Dollars in thousands)
Cash and equivalents	$	14,958	$	23,774
Other current assets		4,373		2,954
Current liabilities		(3,778)		(4,608)
Working capital	$	15,553	$	22,120


Selected Equity:
Common stock and additional paid in capital		203,726		199,388
Accumulated deficit		(214,696)		(203,200)
Shareholders’ (deficit) equity		(9,727)		(2,569)