0001558370-22-008461 | 10-Q | XBRL Viewer | Fennec Pharmaceuticals INC

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Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2022	May 09, 2022
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2022
Document Transition Report	false
Entity File Number	001-32295
Entity Registrant Name	FENNEC PHARMACEUTICALS INC.
Entity Incorporation, State or Country Code	CA
Entity Tax Identification Number	20-0442384
Entity Address, Address Line One	PO Box 13628, 68 TW Alexander Drive
Entity Address, City or Town	Research Triangle Park
Entity Address, State or Province	NC
Entity Address, Postal Zip Code	27709
City Area Code	919
Local Phone Number	636-4530
Title of 12(b) Security	Common Shares, no par value
Trading Symbol	FENCF
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		26,039,444
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1
Entity Central Index Key	0001211583
Amendment Flag	false

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
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 amortization	21	27
Total non-current assets	21	27
Total assets	19,149	22,414
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

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Mar. 31, 2022	Dec. 31, 2021
Condensed Consolidated Balance Sheets
Common stock, no par value	$ 0	$ 0
Common stock, shares issued	26,040	26,014
Common stock, shares outstanding	26,040	26,014

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
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

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended		20 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022
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)	$ 17
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	$ 18,259

Condensed Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock Contractors	Common Stock Employees	Common Stock	Additional Paid-in Capital Contractors	Additional Paid-in Capital Employees	Additional Paid-in Capital	Accumulated Deficit Contractors	Accumulated Deficit Employees	Accumulated Deficit	Accumulated Other Comprehensive Income Contractors	Accumulated Other Comprehensive Income Employees	Accumulated Other Comprehensive Income	Contractors	Employees	Total
Balance at Dec. 31, 2020			$ 140,733			$ 49,234			$ (162,140)			$ 1,243			$ 29,070
Balance (in shares) at Dec. 31, 2020			26,003
Stock options issued	$ 0	$ 0		$ 9	$ 587		$ 0	$ 0		$ 0	$ 0		$ 9	$ 587
Net loss									(4,733)						(4,733)
Balance at Mar. 31, 2021			$ 140,733			49,830			(166,873)			1,243			24,933
Balance (in shares) at Mar. 31, 2021			26,003
Balance at Dec. 31, 2021			$ 140,801			53,214			(179,486)			1,243			15,772
Balance (in shares) at Dec. 31, 2021			26,014
Stock options issued	$ 0	$ 0		$ 34	$ 399		$ 0	$ 0		$ 0	$ 0		$ 34	$ 399
Exercise of stock options			$ 31			(16)									15
Exercise of stock options (in shares)			26
Net loss									(3,696)						(3,696)
Balance at Mar. 31, 2022			$ 140,832			$ 53,631			$ (183,182)			$ 1,243			$ 12,524
Balance (in shares) at Mar. 31, 2022			26,040

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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- Definition

Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

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+ Details

Nature of Business and Going Concern

3 Months Ended

Mar. 31, 2022

Nature of Business and Going Concern

Nature of Business and Going Concern

1. Nature of Business and Going Concern

Fennec Pharmaceuticals Inc., a British Columbia corporation (“Fennec,” ”the “Company,” “we,” “us,” or “our”), is a biopharmaceutical company focused on the development of PEDMARK^TM (a unique formulation of sodium thiosulfate) for the prevention of platinum-induced ototoxicity in pediatric cancer patients. We have four wholly-owned subsidiaries: Oxiquant, Inc. and Fennec Pharmaceuticals, Inc., both Delaware corporations, Cadherin Biomedical Inc., a Canadian company, and Fennec Pharmaceuticals (EU) Limited (“Fennec Limited”), an Ireland company. 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 (“U.S. 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, 2022, the Company incurred a loss from operations of $3,546. At March 31, 2022, the Company had an accumulated deficit of $183,182 and had experienced negative cash flows from operating activities during the three months ended March 31, 2022 in the amount of $2,856.

On February 1, 2019, the Company’s wholly owned subsidiary Fennec Pharmaceuticals, Inc, entered into a Loan and Security Agreement (the “Bridge Bank Loan and Security Agreement”) with Bridge Bank, a division of Western Alliance Bank, an Arizona corporation (“Bridge Bank”), pursuant to which Bridge Bank agreed to loan $12,500 to Fennec Pharmaceuticals, Inc., to be made available upon New Drug Application (“NDA”) approval of PEDMARK^TM by the U.S. Food and Drug Administration (“FDA”) no later than September 30, 2020. The Bridge Bank Loan and Security Agreement was amended on June 26, 2020 to increase the total potential amount of the loan to $18,000 and to extend the outside date to receive NDA approval of PEDMARK^TM to December 31, 2020. In connection with this facility, the Company issued Bridge Bank a warrant to purchase up to 39 of the Company’s common shares at an exercise price of $6.80 per share, with an exercise period of ten years from the date of issuance subject to certain early termination conditions. Under Accounting Standards Codification (“ASC”) 470-50, Modifications and Extinguishments, the amendment to the facility was considered a modification. As such, the Company had been amortizing the loan fee and the value of the warrant over the remainder of the loan term. Following receipt of the FDA’s Complete Response Letter (“CRL”) in August 2020, which identified deficiencies in the third-party manufacturing facility that manufactures PEDMARK^TM on the Company’s behalf, the Company decided to fully amortize the remaining portions of the loan fee and the value of the warrants. The warrant issued to Bridge Bank remains outstanding.

On June 24, 2021, the Company announced it had negotiated a second amendment to the Bridge Bank Loan and Security Agreement. This amendment provides Fennec with a $20,000 debt facility comprised of three term loans. Term Loan A consists of $5,000, which was funded upon closing. Term Loan B consists of $7,500 to be funded upon NDA approval of PEDMARK^TM (the “Approval Event”) in the U.S. Term Loan C consists of $7,500 to be funded upon the Company achieving consolidated trailing six-month revenues of $11 million on or before December 31, 2022. The interest-only period for the facility has the ability to be extended from 18 months to 24 months from the funding of Term Loan B, provided that Term Loan C is funded, and certain conditions are met.

On January 31, 2022, the Company announced a third amendment to the Bridge Bank Loan and Security Agreement. This amendment redefines certain definitions in the agreement. The term “Resubmission Event” is the resubmission by Fennec for final NDA approval from the U.S. Food and Drug Administration for PEDMARK on or before March 31, 2022. Fennec did achieve the Resubmission Event on March 24, 2022. The “Approval Event” is the receipt of the final NDA approval by Fennec from the U.S. Food and Drug Administration for PEDMARK^TM on or before September 30, 2022. The Company intends to use the proceeds from the loans to provide working capital for commercial readiness activities prior to NDA approval as well as commercialization activities for PEDMARK^TM, if approved by the FDA.

The Company believes current funds, along with the funds from the Bridge Bank Loan and Security Agreement, provide sufficient funding for the Company to carry out its planned activities, including, if PEDMARK^TMis approved by the FDA, the commencement of commercialization efforts, for at least the next twelve months as it continues its strategic development of PEDMARK^TM.

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 or if there was a materially adverse event which affected the Company’s solvency.

Significant Accounting Policies

3 Months Ended

Mar. 31, 2022

Significant Accounting Policies

Significant Accounting Policies

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, 2021. 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, 2021. 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 U.S. GAAP requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the interim condensed consolidated financial statements and the reported amounts of expense during the reporting period. Actual results could differ from those estimates.

In the opinion of management, these unaudited interim condensed consolidated financial statements include all adjustments, which are normal and recurring in nature, necessary for the fair presentation of the Company’s financial position at March 31, 2022 and to state fairly the results for the periods presented. The most significant estimates utilized during the three months ended March 31, 2022 include estimates necessary to value grants of stock options to employees and various contractors, as disclosed in Note 4.

New accounting pronouncements

The Company did not adopt any new accounting pronouncements during the quarter ended March 31, 2022.

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. At March 31, 2022, the Company had $18,259 in cash, savings and money market accounts ($21,100 at December 31, 2021). At March 31, 2022, the Company held $131 in cash of which $39 (as presented in U.S. dollars) was in Canadian dollars ($34 at December 31, 2021 as presented in U.S. dollars). At March 31, 2022, the Company held $18,128 in money market investments. 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, 2022 and December 31, 2021 consist of cash and cash equivalents, accounts payable, accrued liabilities and current portion of long-term debt, the carrying values of which approximate fair value due to their relatively short time to maturity. 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. As the main purpose of the Company is research and development, the Company has chosen to avoid investments of a trading or speculative nature.

Revenue

The Company’s nominal historical revenue has been generated through sales of its intellectual property (“IP”). For the periods presented, there is no revenue. For periods when the Company has generated its revenue through one segment and the revenue recognized under each of the Company’s arrangements during those periods is described below. The terms of these agreements may contain multiple promised goods or services or optional goods and services, including licenses to product candidates, referred to as exclusive licenses, as well as research and development activities to be performed by the Company on behalf of the collaboration partner related to the licensed product candidates.

Revenue recognition

Revenue is recognized when control of the promised goods or services are transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or providing services. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

When determining whether the customer has obtained control of the goods or services, the Company considers the point at which the customer may benefit from the goods or services. For sale of IP, revenue is recognized upon grant or transfer of the IP, as the Company’s IP is considered functional in nature.

Performance obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s contracts may contain multiple performance obligations if a promise to transfer goods or services is separately identifiable from other promises in a contract and, therefore, is considered distinct. For contracts with multiple performance obligations, the Company determines the standalone selling price of each performance obligation and allocates the total transaction price using the relative selling price basis. The Company recognizes performance obligations based on their nature.

Significant payment terms

The Company’s revenue arrangements may include payments to the Company of one or more of the following: a non-refundable, upfront payment; milestone payments; and royalties on commercial sales of IP product candidates, if any. To date, the Company has received upfront payments and several milestone payments but has not received any license or option fees or earned royalty revenue as a result of product sales.

The Company estimates the amount of consideration to which it will be entitled in exchange for satisfying performance obligations. Based on the Company’s current contracts, variable consideration primarily exists in the following forms: development and regulatory milestones, royalties and sales-based milestones. The Company utilizes the “most likely amount” variable consideration method for estimating development and regulatory milestone consideration to include in the transaction price. The Company only includes an amount of variable consideration in the transaction price to the extent it is probable that a significant reversal in the cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The Company refers to this as the variable consideration constraint.

Due to the uncertainty associated with the occurrence of any underlying events which would trigger development and regulatory milestone consideration under its revenue arrangements, with the exception of certain initial conditions precedent milestones, the Company has concluded the variable consideration associated with all development and regulatory milestones to be fully constrained as of March 31, 2022, and therefore has not included such consideration in the transaction price for any of its revenue arrangements. The Company will reassess this conclusion at each subsequent reporting period and will only include amounts associated with regulatory or development milestones in the transaction price when, or if, the variable consideration is determined to be released from the constraint.

The Company adjusts the transaction price for the effects of the time value of money if the timing of payments agreed to by the parties to the contract, explicitly or implicitly, provides the Company or its customer with a significant benefit of financing the transfer of goods or services. In relation to the royalties from the sale of Eniluracil to Elion (described under “Revenue arrangements” below), the Company concluded that its licensing and collaboration arrangements do not contain a significant financing component because the payment structure of its agreements arise from reasons other than providing a significant benefit of financing.

Contract assets

The Company did not have any contract assets as of March 31, 2022 or December 31, 2021.

Contract liabilities

The Company did not have any contract liabilities as of March 31, 2022 or December 31, 2021.

Revenue arrangements

Elion

In May 2016, the Company sold Eniluracil to Elion Oncology, LLC (“Elion”). The agreement called for $40 in cash and 5% royalties to be paid to Fennec for any income derived from the sale of Eniluracil. The agreement was for the sale (not the license) of IP. In addition, the agreement did not call for any additional good or service beyond the transfer of IP and related assets (e.g. “all information and know-how”, documentation, etc.).

In August 2020, Elion entered into a license agreement with Processa Pharmaceuticals, Inc. (“Processa”). The license agreement called for equity and cash upon satisfying the Condition Precedent, along with development and regulatory milestone payments, sales milestone payments, and product royalties. The grant of the license was conditioned upon the

“Condition Precedent” which was defined as (i) Processa’s closing of a public offering by October 30, 2020 in which Processa raised at least $15,000 and (ii) Processa’s shares being listed on NASDAQ. Upon satisfying the Condition Precedent, which occurred in October 2020, Elion was entitled to receive $100 in cash and 825 in shares of Processa of which the Company is entitled to 5%. As a result, in January 2021, the Company received $5 in cash and 41 restricted shares of Processa common shares.

The agreement between Elion and Processa entitles Elion to the payments outlined in the table below. Fennec would be eligible to receive 5% of the following based on future milestone events:


Milestone Event	Milestone Payment
1st Year Anniversary of Effective Date		100 Restricted Shares
2nd Year Anniversary of Effective Date		100 Restricted Shares
1st Patient in Dose Confirmation Study		100 Restricted Shares
NDA Submission		300 Restricted Shares
1st FDA Approval in US	$	5,000
2nd FDA Approval in US	$	3,000
1st Regulatory Approval Outside US	$	2,000
2nd Regulatory Approval Outside US	$	2,000

Since the Condition Precedent was achieved, and only the passage of time must occur in order for the 1^st and 2^nd Year Anniversary payments to become due, the Company concluded the 1^st and 2^nd Year Anniversary milestone payments are also probable of coming to fruition and thus were included in the transaction price during the fourth quarter ended December 31, 2020 along with the aforementioned Condition Precedent payments.

The arrangement with Elion contains consideration that is variable based on the Processa’s achievement of the above referenced development and regulatory milestones. The next milestone payment the Company may be entitled to receive is 5 restricted shares for 1^st patient in Dose Confirmation Study and then another 15 restricted shares for the NDA submission. These are considered variable consideration that is fully constrained due to the uncertainty associated with the achievement of the development milestone. The considerations related to royalties (first and second FDA approval in U.S. and first and second regulatory approval outside U.S.) are also variable consideration that are fully constrained in accordance with the royalty recognition constraint. The variable consideration related to royalties will be recognized in the period the products are sold by Processa and the Company has a present right to payment.

The Company recognized $200 in revenue associated with the aforementioned cash and shares it became entitled to for the year ended December 31, 2020. Due to the one year lockup provision on the Processa shares, the Company deemed it reasonable to apply a liquidity discount of 20% to the valuation of the shares associated with the achievement of the Condition Precedent. Shares associated with the one- and two-year anniversary milestones had a 30% and 40% liquidity discount applied to their fair market valuations. Recognizing the passage of time, the Company adjusted its liquidity discount to the original shares of 0% and then 15% and 25% for the one- and two-year anniversary tranches.

Subsequent changes to the fair value of the underlying securities are recognized as unrealized gains or losses on marketable equity securities within the condensed consolidated statements of operations. During the quarter ended March 31, 2022, the Company reported $91 in unrealized loss on the fair value of the underlying Processa shares. Net loss over the life of the Processa shares was $17 at March 31, 2022.

Loss per Share

3 Months Ended

Mar. 31, 2022

Loss per Share

Loss per Share

3. Loss per Share

Earnings per common share is presented under two formats: basic earnings per common share and diluted earnings per common share. Basic earnings per common share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period, plus

the potentially dilutive impact of common stock equivalents (i.e. stock options and warrants). Dilutive common share equivalents consist of the incremental common shares issuable upon exercise of stock options and warrants. The following table sets forth the computation of basic and diluted net loss per share:


	Three Months Ended March 31,
	2022		2021
Numerator:
Net loss	$	(3,696)	$	(4,733)

Denominator:
Weighted-average common shares, basic		26,019		26,003
Dilutive effect of stock options		—		—
Dilutive effect of warrants		—		—
Incremental dilutive shares		—		—
Weighted-average common shares, diluted		26,019		26,003
Net loss per share, basic and diluted	$	(0.14)	$	(0.18)

The following outstanding options and warrants were excluded from the computation of basic and diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect:


	Three Months Ended March 31,
	2022	2021
Options to purchase common shares	4,051	2,952
Warrants to purchase common shares	39	39

Stockholders' Equity

3 Months Ended

Mar. 31, 2022

Stockholders' Equity

Stockholders' Equity

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, 2022 and 2021, there were no warrants issued or exercised. Outstanding warrants have a weighted average life of 6.85 years on March 31, 2022. The following tables detail the Company’s warrant activity for the three months ended March 31, 2022 and 2021, respectively:


	Common Shares
	Issuable Upon Exercise
	of Outstanding	Weighted-Average
Investor Warrants	Warrants	Exercise Price $USD
Outstanding December 31, 2021	39	6.80
Issued	—	—
Outstanding March 31, 2022	39	6.80

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 the current shares outstanding, a maximum of 6,510 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 contractor and employee expense from equity awards for the three month period ended March 31, 2022 and 2021.


	Three Months Ended March 31,
	2022		2021
Contractor options expense recognized	$	34	$	9
Employee options expense recognized		399		587
Total option expense recognized	$	433	$	596

Stock Option Activity

The following is a summary of option activity for the three months ended March 31, 2022, and 2021 for stock options denominated in U.S. dollars. Since August of 2020, there have been no Canadian denominated options outstanding.


	Number of	Weighted-Average
US Denominated Options	Options (thousands)	Exercise Price $USD
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

Of the 4,051 U.S. denominated options granted and outstanding at March 31, 2022, 2,769 are fully vested and exercisable.

The value of options issued was estimated using the Black-Scholes option pricing model using the assumptions in the table below. The expected volatility was determined using historical volatility of our stock based on the expected term of the award.


		Valuation Assumptions
Black-Scholes Model Assumptions		March 31, 2022
Expected dividend		0.00%
Risk free rate		2.15 - 2.61%
Expected volatility		74%
Expected life		6 years

Restricted Share Units Activity

The Plan allows for the issuance of restricted share units (“RSU’s”). The following is a summary of RSU activity for the three months ended March 31, 2022, for RSU’s denominated in U.S. dollars. Prior to June 2021, there was no activity

involving RSU’s. As of March 31, 2022, none of the awarded RSU’s are vested. During the quarter ended March 31, 2022, there were no RSU’s awarded and 88 were forfeited by terminated employees. All RSU’s vest over one to three 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

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

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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+ Details

Fair Value Measurements

3 Months Ended

Mar. 31, 2022

Fair Value Measurements

Fair Value Measurements

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.

Fair Value Measurement at March 31, 2022 and December 31, 2021

(in thousands)

Quoted Price in Active

Market for Identical

Significant Other

Significant

Instruments

Observable Inputs

Unobservable Inputs

Level 1

Level 2

Level 3

Total

2022

2021

2022

2021

2022

2021

2022

2021

Assets

Cash and cash equivalents

131

⁽¹⁾

18,128

21,018

—

18,259

21,100

Processa common shares

—

148

⁽²⁾

240

⁽²⁾

—

148

240

(1)	The Company held approximately $131 in cash as of March 31, 2022, of which approximately $39 was in Canadian funds (translated into U.S. dollars). As of December 31, 2021, the Company held approximately $82 in cash of which approximately $34 was in Canadian funds (translated into U.S. dollars).

(2)

The Company holds 41 unrestricted and 5 restricted common shares of Processa (NASDAQ:PCSA). The restriction on the 5 shares will expire on October 20, 2022. The Company expects to receive another 5 restricted common shares of Processa on October 20, 2022 and will become unrestricted one year after receipt. At October 30, 2020, Processa shares were trading at $4.11 per share. The Company originally applied a 20%, 30% and 40% liquidity discount to the shares and will mark to market at each balance sheet date. The Company will also adjust the liquidity discounts being applied to the share valuation to appropriately reflect the passage of time. Valuation of the shares at March 31, 2022 had a 0%, 15% and 25% liquidity discount applied to the 41, 5 and 5 share tranches, respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies

Commitments and Contingencies

6. Commitments and Contingencies

Oregon Health & Science University Agreement

On February 20, 2013, Fennec entered into an exclusive license agreement with Oregon Health & Science University (“OHSU”) for exclusive worldwide license rights to intellectual property directed to thiol-based compounds, including PEDMARK^TM, and their use in oncology (the “OHSU Agreement”). OHSU will receive certain milestone payments, royalty on net sales for licensed products and a royalty on any consideration received from sublicensing of the licensed technology.

On May 18, 2015, Fennec negotiated an amendment (“Amendment 1”) to the OHSU Agreement, which expands Fennec’s exclusive license to include the use of N-acetylcysteine as a standalone therapy and/or in combination with sodium thiosulfate for the prevention of ototoxicity induced by chemotherapeutic agents to treat cancers. Further, Amendment 1 adjusts select milestone payments in the OHSU Agreement including but not limited to the royalty rate on net sales for licensed products, royalty rate from sublicensing of the licensed technology and the fee payable upon the regulatory approval of a licensed product.

The term of the OHSU Agreement as amended by Amendment 1 expires on the date of the last to expire claim(s) covered in the patents licensed to Fennec or 8 years, whichever is later. In the event a licensed product obtains regulatory approval and is covered by the Orphan Drug Designation, the parties will in good faith amend the term of the agreement. Sodium thiosulfate is currently protected by methods of use patents that the Company exclusively licensed from OHSU that expire in the United States in 2038. The OHSU Agreement is terminable by either Fennec or OHSU in the event of a material breach of the agreement by either party after 45 days prior written notice. Fennec also has the right to terminate the OHSU Agreement at any time upon 60 days prior written notice and payment of all fees due to OHSU under the OHSU Agreement.

Securities Class Action Suit

Chapman v. Fennec Pharmaceuticals Inc. et al.

On September 3, 2020, plaintiff Jim Chapman filed a putative federal securities class action lawsuit against the Company, our Chief Executive Officer, Rostislav Raykov, and Chief Financial Officer, Robert Andrade, in the United States District Court for the Middle District of North Carolina, captioned Chapman v. Fennec Pharmaceuticals Inc. et al., Case No. 1:20-cv-00812. The complaint alleged that prior to our August 10, 2020 receipt of a CRL from the FDA concerning our NDA for PEDMARK^TM, defendants made materially false or misleading statements and failed to disclose material facts about our third-party PEDMARK^TM product manufacturing facility and the impact the facility would have on regulatory approval for PEDMARK^TM. On December 3, 2020, the court appointed a lead plaintiff to represent the putative class. On February 1, 2021, the lead plaintiff filed an amended complaint. The amended complaint added members of our Board of Directors as defendants, asserts a putative class period from December 20, 2018 through August 10, 2020, makes allegations similar to those in the original complaint, claims the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, and seeks an unspecified amount of compensatory damages and attorneys’ fees and costs.

On March 3, 2021, defendants filed a motion to dismiss the amended complaint. On April 2, 2021, plaintiff filed an opposition to the motion to dismiss. On April 16, 2021, defendants filed a reply in support of the motion to dismiss, and on December 16, 2021, the Magistrate Judge entered an order recommending that defendants’ motion to dismiss be granted in its entirety. On January 24, 2022, plaintiff filed objections to the Magistrate Judge’s recommendation, and defendants filed their response on February 3, 2022. On March 2, 2022, the U.S. District Court Judge adopted the Magistrate Judge’s order and recommendation and entered an order and judgment dismissing the amended complaint with prejudice.

On March 30, 2022, plaintiff filed a motion for post judgment relief, seeking leave to file a second amended complaint. In his proposed second amended complaint, plaintiff seeks to add allegations stemming from the receipt of a second CRL following our resubmission of our NDA for PEDMARK^TM, which we received on November 29, 2021, among other things. Defendants filed an opposition to plaintiff’s motion for post judgment relief on April 20, 2022. Plaintiff submitted a reply in support of his motion in early May 2022.

We believe that this lawsuit is without merit and intend to defend it vigorously. We cannot predict the outcome of this lawsuit. Failure by us to obtain a favorable resolution of the lawsuit could have a material adverse effect on our business, results of operations, and financial condition. We have not recorded a liability as of March 31, 2022, because we believe a potential loss is not probable or reasonably estimable given the nature of the proceedings and our success so far by obtaining a dismissal with prejudice of the amended complaint.

Fisher v. Fennec Pharmaceuticals Inc. et al.

On February 9, 2022, plaintiff Jeffrey D. Fisher filed a putative federal securities class action lawsuit against the Company and our CEO and CFO in the United States District Court for the Middle District of North Carolina, captioned Fisher v. Fennec Pharmaceuticals Inc. et al., Case No. 1:22-cv-00115. The complaint asserts a putative class period from May 28, 2021 through November 28, 2021, and alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 by making materially false and misleading statements or omissions regarding the status of our third-party PEDMARK^TM product manufacturing facility, the facility’s compliance with cGMP, and the impact its status and compliance would have on regulatory approval for PEDMARK^TM in the period leading up to the Company’s November 29, 2021 receipt of a CRL for a subsequent NDA for PEDMARK^TM. The complaint seeks an unspecified amount of damages and attorneys’ fees and costs. On April 11, 2022, plaintiff Jeffrey D. Fisher filed a motion to be appointed lead plaintiff and represent the putative class. In early May 2022, the Court appointed Fisher as lead plaintiff.

We believe that the lawsuit is without merit and intend to defend it vigorously. We cannot predict the outcome of this lawsuit. Failure by us to obtain a favorable resolution of the lawsuit could have a material adverse effect on our business, results of operations, and financial condition.

Hope Medical Enterprises, Inc.

On October 29, 2021, Hope Medical Enterprises, Inc. (“Hope”) filed two petitions for inter partes review (“IPR”) with the Patent Trial and Appeal Board (“PTAB”) of the USPTO. In its petitions, Hope seeks to invalidate our U.S. Patent No. 10,596,190 (“US ‘190”), which is exclusively in-licensed from Oregon Health & Science University (“OHSU”) and relates to a method of using our PEDMARK™ product, and our U.S. Patent No. 10,792,363 (“US ’363”), which relates to an anhydrous form of STS, which is the active pharmaceutical ingredient in our PEDMARK™ product. US ‘190 was issued on March 24, 2020. US ‘363 was issued on October 6, 2020.

On January 11, 2022, our licensor OHSU filed a Request for Supplemental Examination of US ‘190 requesting the consideration by the Central Re-examination Unit (“CRU”) of the USPTO of certain prior art references, including references cited by Hope in its Petition for IPR that are relevant to the granted claim of the patent. On January 28, 2022, the CRU found that the cited references constitute a substantial new question of patentability and ordered an ex parte reexamination of the single US ‘190 claim of pursuant to 35 U.S.C. § 257. On March 11, 2022, the CRU issued a substantive Office Action. We filed a preliminary response to Hope’s Request for IPR of the ‘190 Patent in February 2022, requesting that the ‘190 IPR be denied on the basis that the CRU is already reviewing the relevant issues in the Supplemental Examination Proceeding and is further advanced than PTAB in its consideration. On May 9, the PTAB granted Hope Medical’s Petition to Institute the IPR against the ‘190 patent and a stayed the Supplemental Examination pending the result of the ‘190 IPR. We expect a decision in the ‘190 IPR in May 2023, which can be appealed by the losing party. Separately, the PTAB has until mid-May 2022 to decide whether to institute the ‘363 IPR.

In February and April 2022, the USPTO issued Notices of Allowance to Fennec for two additional patents that cover the PEDMARK^TM pharmaceutical formulation. We expect these two additional U.S. patents to issue in mid-2022 and will be listed in the FDA’s Orange Book on approval of PEDMARK^TM. These patents will expire in 2039, unless held invalid or unenforceable by a court or final jurisdiction.

We plan to vigorously defend our intellectual property rights related to PEDMARK™. However, we are unable to predict the outcome of Hope’s IPR petitions, or the Supplemental Examination, and an invalidation of one or both of the ‘190 and ‘363 patents may have a material adverse effect on our ability to protect our rights in PEDMARK™ beyond periods of

marketing exclusivity for PEDMARK^TM possible in the United States under Orphan Drug Designation and in Europe under European Market Exclusivity for Pediatric Use (“PUMA”). We obtained U.S. Orphan Drug Designation for the use of PEDMARK^TM in the prevention of platinum-induced ototoxicity in pediatric patients in 2004. We plan to pursue PUMA upon approval of the MAA, which would allow for 10 years of market exclusivity upon PUMA approval.

Executive Severance

In the event of his termination with us other than for cause, we will be obligated to pay Mr. Raykov a one-time severance payment equal to twelve months of salary ($458 as of March 31, 2022). In the event of his termination with us other than for cause, we will be obligated to pay Mr. Andrade a one-time severance payment equal to six months of salary ($166 as of March 31, 2022). In the event of her termination with us other than for cause, we would have been obligated to pay Ms. Goel a one-time severance payment equal to six months of salary ($192). Ms. Goel tendered her resignation in January of 2022. Ms. Goel’s resignation was voluntary and there is no severance owed.

Leases

We have an operating lease in Research Triangle Park, North Carolina utilizing 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 at 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 terminates on July 31, 2020, thereafter the lease may continue on a month-to-month basis with either party being able to terminate the agreement by providing one months’ advance written notice of termination.

COVID-19

Our operations may be affected by the ongoing COVID-19 pandemic. The ultimate disruption that may be caused by the outbreak is uncertain; however, it may result in a material adverse impact on our financial position, operations and cash flows. Possible effects may include, but are not limited to, disruption to our product launch which includes the ability of sales reps to communicate with oncologists, absenteeism in our labor workforce, unavailability of products and supplies used in operations, and a decline in value of our assets, including inventories, property and equipment, and marketable securities. COVID-19 has not had a material effect on our operations to date as we have historically had a workforce which works remotely, preparations for product launch have been under the assumption of a virtual launch, and product supplies have not been impacted.

Term Loans

3 Months Ended

Mar. 31, 2022

Term Loans

Term Loans

7. Term Loans

On June 24, 2021, the Company announced it had negotiated a second amendment to the Bridge Bank Loan and Security Agreement with Bridge Bank. This amendment provides Fennec with a $20,000 debt facility comprised of three term loans. Term Loan A consists of $5,000, which was funded upon closing. Term Loan B consists of $7,500 to be funded upon NDA approval of PEDMARK^TM in the U.S. Term Loan C consists of $7,500 million to be funded upon the occurrence the Company achieving consolidated trailing six-month revenues of $11,000 on or before December 31, 2022. The interest-only period for the facility has the ability to be extended from 18 months to 24 months from the funding of Term Loan B, provided that Term Loan C is funded, and certain conditions are met. The Company intends to use the proceeds from the loans to provide working capital for commercial readiness activities prior to NDA approval as well as commercialization activities for PEDMARK^TM, if approved by the FDA.

On June 24, 2021, the Company drew $5,000 from Term Loan A. Term Loan A matures on July 1, 2025. Payments are for interest only through December 31, 2022. The Company shall make equal monthly payments of principal, together

with applicable interest, following the interest only period until the maturity date. Interest shall accrue on the outstanding balance at a rate of 1% above prime as published by the Wall Street Journal on the first day of each month. The Company is obligated to maintain a cash balance greater or equal to three times its monthly cash burn as calculated on the last date of the immediately preceding month. If Company fails to maintain the aforementioned cash balance, the bank can call the full amount of loan outstanding.

Collateral for Term Loan A, B and C shall not include any copyrights, patents, trademarks, servicemarks and applications

therefor, now owned or hereafter acquired, or any claims for damages by way of any past, present, and future infringement

of any of the foregoing (collectively, the “Intellectual Property”); provided, however, that the Collateral shall include all accounts and general intangibles that consist of rights to payment and proceeds from the sale, licensing or disposition of all or any part, or rights in the foregoing (the “Rights to Payment”). Notwithstanding the foregoing, if a judicial authority

(including a U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary to have a security interest in the Rights to Payment, then the Collateral shall automatically, and effective as of the Effective Date, include the Intellectual Property to the extent necessary to permit perfection of Bank’s security interest in the Rights to Payment.

Aggregate annual payments due on Term Loan A as of March 31, 2022 are as follows (in thousands):


Years Ending December 31,		Amount
2022	$	—
2023		2,000
2024		2,000
2025		1,000
Total future payments		5,000
Less: unamortized debt discount		(11)
Total term loan, net of debt discount	$	4,989

In the event of default or change of control, all unpaid principal and all accrued and unpaid interest amounts (if any) become immediately due and payable including the prepayment fee. Events of default include, but are not limited to, a payment default, failure to achieve Approval Event before September 30, 2022, a material adverse change, and insolvency. The Bridge Bank facility is secured by all of the Company’s assets, including all capital stock held by the Company.

Debt issuance costs amounting to $55 securing access to Term Loans A, B and C were paid in cash to Bridge Bank on June 24, 2021. This amount was capitalized and is being amortized over the access period of the Term Loans. Upon drawing Term Loan A, the Company recorded a debt discount of $14, reducing the capitalized amount by the same amount. The debt discount is being amortized over the life of Term Loan A.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI http://asc.fasb.org/topic&trid=2208564

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (h)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1I
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1I
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(c))
-URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (g)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1E
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495348-112611

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1I
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (i)
-URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

+ Details

Subsequent Events

3 Months Ended

Mar. 31, 2022

Subsequent Events

Subsequent Events

8. Subsequent Events

Prescription Drug User Fee Act (“PDUFA”) Date Announced

On April 27, 2022, Fennec announced the FDA had set a PDUFA date of September 23, 2022.

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2022

Significant Accounting Policies

Basis of presentation

Use of estimates

New accounting pronouncements

The Company did not adopt any new accounting pronouncements during the quarter ended March 31, 2022.

Cash and Cash Equivalents

Cash and cash equivalents

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

Revenue

Revenue

Revenue recognition

Performance obligations

Significant payment terms

Contract assets

The Company did not have any contract assets as of March 31, 2022 or December 31, 2021.

Contract liabilities

The Company did not have any contract liabilities as of March 31, 2022 or December 31, 2021.

Revenue arrangements

Elion

The agreement between Elion and Processa entitles Elion to the payments outlined in the table below. Fennec would be eligible to receive 5% of the following based on future milestone events:


Milestone Event	Milestone Payment
1st Year Anniversary of Effective Date		100 Restricted Shares
2nd Year Anniversary of Effective Date		100 Restricted Shares
1st Patient in Dose Confirmation Study		100 Restricted Shares
NDA Submission		300 Restricted Shares
1st FDA Approval in US	$	5,000
2nd FDA Approval in US	$	3,000
1st Regulatory Approval Outside US	$	2,000
2nd Regulatory Approval Outside US	$	2,000

Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2022

Significant Accounting Policies

Schedule of future milestone payments


Milestone Event	Milestone Payment
1st Year Anniversary of Effective Date		100 Restricted Shares
2nd Year Anniversary of Effective Date		100 Restricted Shares
1st Patient in Dose Confirmation Study		100 Restricted Shares
NDA Submission		300 Restricted Shares
1st FDA Approval in US	$	5,000
2nd FDA Approval in US	$	3,000
1st Regulatory Approval Outside US	$	2,000
2nd Regulatory Approval Outside US	$	2,000

Loss per Share (Tables)

3 Months Ended

Mar. 31, 2022

Loss per Share

Schedule of Earnings Per Share, Basic and Diluted

The following table sets forth the computation of basic and diluted net loss per share:


	Three Months Ended March 31,
	2022		2021
Numerator:
Net loss	$	(3,696)	$	(4,733)

Denominator:
Weighted-average common shares, basic		26,019		26,003
Dilutive effect of stock options		—		—
Dilutive effect of warrants		—		—
Incremental dilutive shares		—		—
Weighted-average common shares, diluted		26,019		26,003
Net loss per share, basic and diluted	$	(0.14)	$	(0.18)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share


	Three Months Ended March 31,
	2022	2021
Options to purchase common shares	4,051	2,952
Warrants to purchase common shares	39	39

Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2022

Stockholders' Equity

Schedule of Warrants Outstanding to Purchase Common Stock

The following tables detail the Company’s warrant activity for the three months ended March 31, 2022 and 2021, respectively:


	Common Shares
	Issuable Upon Exercise
	of Outstanding	Weighted-Average
Investor Warrants	Warrants	Exercise Price $USD
Outstanding December 31, 2021	39	6.80
Issued	—	—
Outstanding March 31, 2022	39	6.80

Schedule of Share Based Compensation, Stock Options Expense Recognized

The table below outlines recognized contractor and employee expense from equity awards for the three month period ended March 31, 2022 and 2021.


	Three Months Ended March 31,
	2022		2021
Contractor options expense recognized	$	34	$	9
Employee options expense recognized		399		587
Total option expense recognized	$	433	$	596

Schedule of Share- Based Compensation Stock Options Activity


	Number of	Weighted-Average
US Denominated Options	Options (thousands)	Exercise Price $USD
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

Fair values of options granted using weighted average assumptions


		Valuation Assumptions
Black-Scholes Model Assumptions		March 31, 2022
Expected dividend		0.00%
Risk free rate		2.15 - 2.61%
Expected volatility		74%
Expected life		6 years

Schedule of Restricted Share Units Activity


		Number of Restricted
US Denominated RSUs		Share Units (thousands)
Outstanding at December 31, 2021		219
Awarded		—
Forfeited		(88)
Outstanding at March 31, 2022		131

Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2022

Fair Value Measurements

Schedule of Assets/Liabilities Measured at Fair Value on Recurring Basis

Fair Value Measurement at March 31, 2022 and December 31, 2021

(in thousands)

Quoted Price in Active

Market for Identical

Significant Other

Significant

Instruments

Observable Inputs

Unobservable Inputs

Level 1

Level 2

Level 3

Total

2022

2021

2022

2021

2022

2021

2022

2021

Assets

Cash and cash equivalents

131

⁽¹⁾

18,128

21,018

—

18,259

21,100

Processa common shares

—

148

⁽²⁾

240

⁽²⁾

—

148

240

(1)	The Company held approximately $131 in cash as of March 31, 2022, of which approximately $39 was in Canadian funds (translated into U.S. dollars). As of December 31, 2021, the Company held approximately $82 in cash of which approximately $34 was in Canadian funds (translated into U.S. dollars).

(2)

Term Loans (Tables)

3 Months Ended

Mar. 31, 2022

Term Loans

Schedule of aggregate annual payments

Aggregate annual payments due on Term Loan A as of March 31, 2022 are as follows (in thousands):


Years Ending December 31,		Amount
2022	$	—
2023		2,000
2024		2,000
2025		1,000
Total future payments		5,000
Less: unamortized debt discount		(11)
Total term loan, net of debt discount	$	4,989

Nature of Business and Going Concern - Additional Information (Details) $ / shares in Units, shares in Thousands, $ in Thousands			3 Months Ended
	Jun. 24, 2021 USD ($) loan	Feb. 01, 2019 USD ($) $ / shares shares	Mar. 31, 2022 USD ($) subsidiary $ / shares	Mar. 31, 2021 USD ($)	Dec. 31, 2021 USD ($) $ / shares	Jun. 26, 2020 USD ($)
Going Concern [Line Items]
Number of wholly owned subsidiaries \| subsidiary			4
Loss from operations			$ (3,546)	$ (4,923)
Accumulated deficit			(183,182)		$ (179,486)
Cash flows from operating activities			$ (2,856)	$ (3,593)
Warrants exercise price \| $ / shares			$ 6.80		$ 6.80
Bridge Bank Term Loan
Going Concern [Line Items]
Debt amount	$ 20,000
Number of loans \| loan	3
Bridge Bank Term Loan \| Minimum
Going Concern [Line Items]
Interest only period	18 months
Bridge Bank Term Loan \| Maximum
Going Concern [Line Items]
Interest only period	24 months
Term Loan A
Going Concern [Line Items]
Debt amount	$ 5,000
Term Loan B
Going Concern [Line Items]
Debt amount	7,500
Term Loan C
Going Concern [Line Items]
Debt amount	$ 7,500
Revenue achievement trailing period	6 months
Revenue threshold amount for loan to be funded	$ 11,000
Bridge Bank \| Loan And Security Agreement \| Term Loan A
Going Concern [Line Items]
Line of credit facility, borrowing capacity		$ 12,500				$ 18,000
Warrants issued \| shares		39
Warrants exercise price \| $ / shares		$ 6.80
Warrants exercise term		10 years

Significant Accounting Policies - Additional Information (Details) $ / shares in Units, shares in Thousands, $ in Thousands, $ in Thousands	1 Months Ended		3 Months Ended		20 Months Ended
	Aug. 31, 2020 USD ($)	May 31, 2016 USD ($)	Mar. 31, 2022 USD ($) $ / shares shares	Mar. 31, 2021 USD ($)	Mar. 31, 2022 USD ($) $ / shares shares	Mar. 31, 2022 CAD ($) shares	Dec. 31, 2021 USD ($) $ / shares shares	Dec. 31, 2021 CAD ($) shares
Summary Of Significant Accounting Policies [Line Items]
Money market investments			$ 18,259		$ 18,259		$ 21,100
Cash			131		131	$ 39		$ 34
FDIC insured amount			$ 250		$ 250
Warrants exercise price \| $ / shares			$ 6.80		$ 6.80		$ 6.80
Class of Warrant or Right, Outstanding \| shares			39		39	39	39	39
Percentage of royalties	5.00%		5.00%
Debt Securities, Unrealized Gain (Loss)			$ (91)	$ 182	$ (17)
Money Market Funds
Summary Of Significant Accounting Policies [Line Items]
Money market investments			$ 18,128		$ 18,128
Elion
Summary Of Significant Accounting Policies [Line Items]
Cash	$ 100
Eniluracil \| Elion
Summary Of Significant Accounting Policies [Line Items]
Cash proceeds from sale of Eniluracil		$ 40
Percentage of royalties		5.00%

Significant Accounting Policies - Revenue recognition (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended	12 Months Ended
	Jan. 31, 2021	Aug. 31, 2020	Mar. 31, 2022	Dec. 31, 2020
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Percentage of royalties		5.00%	5.00%
Revenues				$ 200
Liquidity discount (as a percent)			20.00%
1st Year Anniversary of Effective Date
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Milestone payment			$ 100
Liquidity discount (as a percent)			30.00%
2nd Year Anniversary of Effective Date
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Milestone payment			$ 100
Liquidity discount (as a percent)			40.00%
1st Patient in Dose Confirmation Study
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Milestone payment			$ 100
NDA Submission
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Milestone payment			300
1st FDA Approval in US
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Milestone payment			5,000
2nd FDA Approval in US
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Milestone payment			3,000
1st Regulatory Approval Outside US
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Milestone payment			2,000
2nd Regulatory Approval Outside US
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Milestone payment			2,000
Restricted shares \| 1st Patient in Dose Confirmation Study
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Milestone payment			5
Restricted shares \| NDA Submission
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Milestone payment			$ 15
Processa Pharmaceuticals, Inc
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Minimum proceeds from public offering		$ 15,000
Shares to be issued under agreement		825,000	41,000
Processa Pharmaceuticals, Inc \| Restricted shares
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Upfront payment	$ 5
Shares to be issued under agreement			5,000
Processa Pharmaceuticals, Inc \| License agreement \| Restricted shares
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Shares to be issued under agreement	41
Lockup period			1 year
Adjusted liquidity discount (as a percent)			0.00%
Processa Pharmaceuticals, Inc \| License agreement \| Restricted shares \| 1st Year Anniversary of Effective Date
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Adjusted liquidity discount (as a percent)			15.00%
Processa Pharmaceuticals, Inc \| License agreement \| Restricted shares \| 2nd Year Anniversary of Effective Date
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Adjusted liquidity discount (as a percent)			25.00%

Loss per Share - Computation of Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Numerator:
Net loss	$ (3,696)	$ (4,733)
Denominator:
Weighted-average common shares, basic	26,019	26,003
Incremental dilutive shares		0
Weighted-average common shares, dilutive	26,019	26,003
Basic net loss per common share	$ (0.14)	$ (0.18)
Diluted net loss per common share	$ (0.14)	$ (0.18)
Warrants
Denominator:
Dilutive effect of stock options		0
Employee Options
Denominator:
Dilutive effect of stock options		0

Loss per Share - Outstanding Options and Warrants (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Employee Options
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	4,051	2,952
Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	39	39

Stockholders' Equity - Warrants to Purchase Common Stock (Details) - $ / shares shares in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Stockholders' Equity
Outstanding and exercisable at the beginning	39
Exercised	0	0
Issued	0	0
Outstanding and exercisable at the end	39
Weighted-Average Outstanding, beginning	$ 6.80
Issued	0
Weighted-Average Outstanding, end	$ 6.80

Stockholders' Equity - Recognized Contractor and Employee Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Recognized Employee Expense [Line Items]
Stock or Unit Option Plan Expense	$ 433	$ 596
Contractor Option [Member]
Recognized Employee Expense [Line Items]
Stock or Unit Option Plan Expense	34	9
Employee Options
Recognized Employee Expense [Line Items]
Stock or Unit Option Plan Expense	$ 399	$ 587

Stockholders' Equity - Summary of Option Activity (Details) - Stock Option In Us Dollars [Member] shares in Thousands	3 Months Ended
	Mar. 31, 2022 $ / shares shares
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Number of Options Outstanding at Beginning \| shares	4,259
Number of Options Granted \| shares	200
Number of Options Exercised \| shares	(26)
Number of Options Forfeited \| shares	(382)
Number of Options Outstanding at Ending \| shares	4,051
Weighted-average Exercise Price outstanding at Beginning \| $ / shares	$ 5.13
Weighted-average Exercise Price Granted \| $ / shares	5.64
Weighted-average Exercise Price Exercised \| $ / shares	0.58
Weighted-average Exercise Price Forfeited \| $ / shares	6.13
Weighted-average Exercise Price Outstanding at Ending \| $ / shares	$ 5.34

Stockholders' Equity - Additional Information (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2021	Aug. 31, 2020
Stockholders Equity Note [Line Items]
Common stock, no par value	$ 0	$ 0
Proceeds from issuance of stock options	$ 15
Equity Incentive Plan
Stockholders Equity Note [Line Items]
Shares issuable under Stock Option Plan, as percent of shares outstanding	25.00%
Vesting period	3 years
Expiration term	10 years
Stock Option In Canadian Dollars [Member]
Stockholders Equity Note [Line Items]
Options outstanding			0
Stock Option In Us Dollars [Member]
Stockholders Equity Note [Line Items]
Options outstanding	4,051	4,259
Exercise of options (in shares)	26
Number of stock options forfeited (in shares)	382
Number of Options Granted	200
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Number	2,769
U.S.dollars [Member]
Stockholders Equity Note [Line Items]
Class Or Warrant Or Right Outstanding Weighted Average Remaining Contractual Terms	6 years 10 months 6 days
Maximum \| Equity Incentive Plan
Stockholders Equity Note [Line Items]
Shares issuable under Stock Option Plan	6,510

Stockholders' Equity - Black Scholes Option Pricing Model (Details)	3 Months Ended
	Mar. 31, 2022
Expected dividend	0.00%
Expected volatility	74.00%
Expected life	6 years
Minimum
Risk free rate	2.15%
Maximum
Risk free rate	2.61%

Stockholders Equity - Restricted Share Units Activity (Details) - Equity Incentive Plan - shares shares in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
US Denominated RSU's
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vested	0
US Denominated RSU's
Outstanding at beginning of period	219	219
Awarded	0
Forfeited	(88)	(88)
Outstanding at end of period	131
US Denominated RSU's \| Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year
US Denominated RSU's \| Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years

Fair Value Measurements - Assets/Liabilities Measured at Fair Value (Details) - USD ($) $ / shares in Units, $ in Thousands			1 Months Ended		3 Months Ended
	Oct. 22, 2022	Dec. 31, 2020	Jan. 31, 2021	Aug. 31, 2020	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2021	Oct. 30, 2020
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Cash and cash equivalents					$ 18,259			$ 21,100
Processa common shares					$ 148			240
Share price									$ 4.11
Liquidity discount (as a percent)					20.00%
6 month interval
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Shares to be issued under agreement					41,000
Liquidity discount (as a percent)		20.00%			0.00%
9 month interval
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Shares to be issued under agreement					5,000
Liquidity discount (as a percent)					15.00%		30.00%
12 month interval
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Shares to be issued under agreement					5,000
Liquidity discount (as a percent)					25.00%	40.00%
Quoted Price in Active Markets for Identical Instruments Level 1 [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Cash and cash equivalents					$ 131			82
Significant Other Observable Inputs Level 2 [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Cash and cash equivalents					18,128			21,018
Processa common shares					$ 148			$ 240
Processa Pharmaceuticals, Inc
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Shares to be issued under agreement				825,000	41,000
Processa Pharmaceuticals, Inc \| Restricted shares
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Shares to be issued under agreement					5,000
License agreement \| Processa Pharmaceuticals, Inc \| Restricted shares
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Shares to be issued under agreement			41
License agreement \| Processa Pharmaceuticals, Inc \| Restricted shares \| 12 month interval
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Number of year after which shares will become unrestricted					1 year
License agreement \| Processa Pharmaceuticals, Inc \| Forecast [Member] \| Restricted shares
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Shares to be issued under agreement	5,000
Number of restricted shares expected to expire	5,000

Fair Value Measurements - Additional Information (Details) $ in Thousands, $ in Thousands	Mar. 31, 2022 USD ($)	Mar. 31, 2022 CAD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CAD ($)
Fair Value Assets and Liabilities Measured On Recurring Basis [Line Items]
Cash	$ 131	$ 39		$ 34
Quoted Price in Active Markets for Identical Instruments Level 1 [Member]
Fair Value Assets and Liabilities Measured On Recurring Basis [Line Items]
Cash	$ 131	$ 39	$ 82	$ 34

Commitments and Contingencies (Details) - USD ($)		1 Months Ended
Commitments and Contingencies (Details) - USD ($)	Jan. 23, 2020	Sep. 30, 2021	Mar. 31, 2022	Jan. 24, 2020
Rent expense	$ 1,000	$ 400
Security deposit				$ 2,000
Rostislav Raykov [Member]
Severance Costs Payable In Case Of Termination Other Than For Cause			$ 458,000
Robert Andrade [Member]
Severance Costs Payable In Case Of Termination Other Than For Cause			166,000
Goel [Member]
Severance Costs Payable In Case Of Termination Other Than For Cause			$ 192,000

Term Loans (Details) $ in Thousands	Jun. 24, 2021 USD ($) loan
Bridge Bank Term Loan
Term Loans.
Debt amount	$ 20,000
Number of loans \| loan	3
Bridge Bank Term Loan \| Minimum
Term Loans.
Interest only period	18 months
Bridge Bank Term Loan \| Maximum
Term Loans.
Interest only period	24 months
Term Loan A
Term Loans.
Debt amount	$ 5,000
Amount drawn	$ 5,000
Cash balance to be maintained multiplier	3
Term Loan A \| Prime Rate
Term Loans.
Basis above prime rate	1.00%
Term Loan B
Term Loans.
Debt amount	$ 7,500
Term Loan C
Term Loans.
Debt amount	$ 7,500
Revenue achievement trailing period	6 months
Revenue threshold amount for loan to be funded	$ 11,000

Term Loans - Aggregate annual payments due on Term Loan (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021	Jun. 24, 2021
Aggregate annual payments due on Term Loan
Less: unamortized debt discount	$ (11)	$ (12)
Term Loan A
Aggregate annual payments due on Term Loan
2023	2,000
2024	2,000
2025	1,000
Total future payments	5,000
Less: unamortized debt discount	(11)		$ (14)
Total term Loan	$ 4,989

- Definition

Amount, after unamortized (discount) premium and debt issuance costs, of long-term debt. Includes, but not limited to, notes payable, bonds payable, debentures, mortgage loans and commercial paper. Excludes capital lease obligations.

+ References + Details

Term Loans - Additional Information (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021	Jun. 24, 2021
Term Loans.
Debt discount	$ 11	$ 12
Term Loan A
Term Loans.
Debt issuance costs			$ 55
Debt discount	$ 11		$ 14