Fennec Pharmaceuticals Inc 10-Q for FY2022 Q3

Fennec Pharmaceuticals Inc. (FENC)

10-Q 2022-11-14 For: 2022-09-30

Added on April 06, 2026

About this 10-Q

Fennec Pharmaceuticals Inc filed this 10-Q on November 14, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).

Headline figures

Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Net loss: $8.09M; compared with a net loss of $4.19M a year earlier
Diluted EPS: -$0.31; compared with -$0.16 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 September 30, 2022 (Unaudited) and December 31, 2021	3

Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021	4

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2022 and 2021	5

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) for the Three and Nine Months Ended September 30, 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	18

Item 3. Quantitative and Qualitative Disclosures about Market Risk	23

Item 4. Controls and Procedures	24

PART II: OTHER INFORMATION	24

Item 1. Legal Proceedings	24

Item 1A. Risk Factors	26

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 3. Defaults Upon Senior Securities	27

Item 4. Mine Safety Disclosures	27

Item 5. Other Information	27

Item 6. Exhibits	28

Signatures	29


	September 30, 2022		December 31,
	(Unaudited)		2021

Assets
Current assets
Cash and cash equivalents	$	29,752	$	21,100
Prepaid expenses		278		1,034
Other current assets		123		253
Total current assets		30,153		22,387

Non-current assets
Deferred issuance cost, net of amortization		264		27
Total non-current assets		264		27
Total assets	$	30,417	$	22,414

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,533	$	777
Accrued liabilities		394		877
Total current liabilities		2,927		1,654

Long-term liabilities
Term loan		25,000		5,000
Debt discount		(312)		(12)
Total long-term liabilities		24,688		4,988
Total liabilities		27,615		6,642

Commitments and Contingencies (Note 6)

Stockholders’ equity:
Common stock, no par value; unlimited shares authorized; 26,238 shares issued and outstanding (2021 ‑ 26,014)		141,309		140,801
Additional paid-in capital		56,593		53,214
Accumulated deficit		(196,343)		(179,486)
Accumulated other comprehensive income		1,243		1,243
Total stockholders’ equity		2,802		15,772
Total liabilities and stockholders’ equity	$	30,417	$	22,414


	☒ 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				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2022		2021		2022		2021

Revenue	$	—	$	—	$	—	$	—

Operating expenses:
Research and development		846		1,242		3,414		4,458
General and administrative		7,053		2,931		13,040		8,558

Loss from operations		(7,899)		(4,173)		(16,454)		(13,016)

Other (expense)/income
Foreign currency transaction loss		(4)		(1)		(6)		(9)
Amortization expense		(64)		(8)		(79)		(8)
Unrealized (loss)/gain on securities		(27)		39		(126)		137
Interest income		24		13		42		41
Interest expense		(119)		(55)		(234)		(64)
Total other (expense)/income		(190)		(12)		(403)		97
Net loss	$	(8,089)	$	(4,185)	$	(16,857)	$	(12,919)

Basic net loss per common share	$	(0.31)	$	(0.16)	$	(0.65)	$	(0.50)
Diluted net loss per common share	$	(0.31)	$	(0.16)	$	(0.65)	$	(0.50)
Weighted-average number of common shares outstanding basic		26,108		26,007		26,105		26,004
Weighted-average number of common shares outstanding diluted		26,108		26,007		26,105		26,004


								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
Stock options issued to employees	—		—		1,008		—		—		1,008
Stock options issued to contractors	—		—		35		—		—		35
Stock option exercise	19		90		(44)		—		—		46
Restricted stock unit 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
Stock options issued to employees	—		—		1,853		—		—		1,853
Stock options issued to contractors	—		—		34		—		—		34
Warrants issued to creditor	—		—		441		—		—		441
Stock option exercise	151		387		(199)		—		—		188
Restricted stock unit release	20		—		(166)		—		—		(166)
Net loss	—		—		—		(8,089)		—		(8,089)
Balance at September 30, 2022	26,238	$	141,309	$	56,593	$	(196,343)	$	1,243	$	2,802

								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)	$	1,243	$	29,070
Stock options issued to employees	—		—		587		—		—		587
Stock options issued to contractors	—		—		9		—		—		9
Net loss	—		—		—		(4,733)		—		(4,733)
Balance at March 31, 2021	26,003	$	140,733	$	49,830	$	(166,873)	$	1,243	$	24,933
Stock options issued to employees	—		—		1,326		—		—		1,326
Stock option exercise	4		47		(24)		—		—		23
Net loss	—		—		—		(4,001)		—		(4,001)
Balance at June 30, 2021	26,007	$	140,780	$	51,132	$	(170,874)	$	1,243	$	22,281
Stock options issued to employees	—		—		917		—		—		917
Net loss	—		—		—		(4,185)		—		(4,185)
Balance at September 30, 2021	26,007	$	140,780	$	52,049	$	(175,059)	$	1,243	$	19,013


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator:
Net loss	$	(8,089)	$	(4,185)	$	(16,857)	$	(12,919)

Denominator:
Weighted-average common shares, basic		26,108		26,007		26,105		26,004
Dilutive effect of stock options		—		—		—		—
Dilutive effect of warrants		—		—		—		—
Incremental dilutive shares		—		—		—		—
Weighted-average common shares, diluted		26,108		26,007		26,105		26,004
Net loss per share, basic and diluted	$	(0.31)	$	(0.16)	$	(0.65)	$	(0.50)



	Common Shares
	Issuable Upon Exercise
	of Outstanding	Weighted-Average
Creditor Warrants	Warrants	Exercise Price
Outstanding December 31, 2021	39	$	6.80
Issued	—		—
Outstanding March 31, 2022	39	$	6.80
Issued	—		—
Outstanding June 30, 2022	39	$	6.80
Issued	111		8.11
Outstanding September 30, 2022	150	$	7.30


	Number of	Weighted-Average
US Denominated Options	Options (thousands)	Exercise Price
Outstanding at December 31, 2021	4,259	$	5.13
Granted	200		5.64
Exercised	(26)		0.58
Forfeited	(382)		6.13
Outstanding at March 31, 2022	4,051		5.34
Granted	305		5.71
Exercised	(19)		2.38
Outstanding at June 30, 2022	4,337		5.14
Granted	310		6.93
Exercised	(151)		1.25
Forfeited	(30)		5.59
Outstanding at September 30, 2022	4,466	$	5.33


		Valuation Assumptions
Black-Scholes Model Assumptions		September 30, 2022
Expected dividend		0.00%
Risk free rate		1.18 - 4.11%
Expected volatility		67 - 74%
Expected life		5 - 6.0 years


		Number of Restricted
US Denominated RSUs		Share Units (thousands)
Outstanding at December 31, 2021		219
Awarded		—
Forfeited		(88)
Outstanding at March 31, 2022		131
Awarded		—
Released		(8)
Outstanding at June 30, 2022		123
Awarded		—
Released		(20)
Outstanding at September 30, 2022		103


Years Ending December 31,		Amount
2022	$	—
2023		—
2024		—
2025		—
2026		—
2027		25,000
Total future payments		25,000
Less: unamortized debt discount		(312)
Total term loan, net of debt discount	$	24,688


Selected Cash Flow Data	Nine Months Ended September 30,
(dollars in thousands)	2022		2021
Net cash used in operating activities	$	(11,256)	$	(10,977)
Net cash provided by investing activities		—		—
Net cash provided by financing activities		19,908		4,968
Net cash flow	$	8,652	$	(6,009)


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 September 30, 2022 (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: November 14, 2022	By:	/s/ Rostislav Raykov
		Rostislav Raykov
		Chief Executive Officer
		(principal executive officer)

Date: November 14, 2022	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 September 30, 2022 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.


	Three Months Ended				Three Months Ended
In thousands of U.S. Dollars	September 30, 2022		%		September 30, 2021		%		Change
Revenue	$	—			$	—			$	—
Operating expenses:
Research and development		846	11	%		1,242	30	%		(396)
General and administration		7,053	89	%		2,931	70	%		4,122
Total operating expense		7,899	100	%		4,173	100	%		3,726
Loss from operations		(7,899)				(4,173)				(3,726)

Unrealized (loss)/gain on securities		(27)				39				(66)
Foreign currency transaction loss		(4)				(1)				(3)
Amortization expense		(64)				(8)				(56)
Interest expense		(119)				(55)				(64)
Interest income		24				13				11
Net loss	$	(8,089)			$	(4,185)			$	(3,904)


	As of		As of
Selected Asset and Liability Data (thousands):	September 30, 2022		December 31, 2021
Cash and equivalents	$	29,752	$	21,100
Other current assets		401		1,287
Current liabilities		2,927		1,654
Working capital ⁽¹⁾		27,226		20,733
⁽¹⁾ [Current assets – current liabilities]

Selected Equity:
Common stock and additional paid in capital		197,902		194,015
Accumulated deficit		(196,343)		(179,486)
Shareholders’ equity		2,802		15,772

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

	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.



		As of		As of
Selected Asset and Liability Data (thousands):		September 30, 2022		December 31, 2021
Cash and equivalents	$	29,752	$	21,100
Other current assets		401		1,287
Current liabilities		2,927		1,654
Working capital (1)	$	27,226	$	20,733
(1) [Current assets – current liabilities]

Selected Equity:
Common stock and additional paid in capital		197,902		194,015
Accumulated deficit		(196,343)		(179,486)
Shareholders’ equity		2,802		15,772