FENNEC PHARMACEUTICALS INC. Income Taxes Disclosure

9. Income Taxes

We account for income taxes in accordance with ASC 740, Income Taxes. Our income tax expense (benefit) is based on income (loss) from continuing operations before income taxes and reflects current and deferred tax expense (benefit) attributable to U.S. federal, state, and foreign jurisdictions. We adopted ASU 2023-09, Improvements to Income Tax Disclosures, on January 1, 2025 on a prospective basis. The adoption did not have an impact on our consolidated financial position or results of operations but resulted in expanded income tax disclosures. The Company operates in U.S., Canadian and Ireland tax jurisdictions. Its income is subject to varying rates of tax and losses incurred in one jurisdiction cannot be used to offset income taxes payable in another. A reconciliation of the combined Canadian federal and provincial income tax rate with the Company’s effective tax rate is as follows (in thousands except for percentage rates):

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The Canadian statutory income tax rate of 26.5 percent is comprised of federal income tax at approximately 15.0 percent and provincial income tax at approximately 11.5 percent.

A reconciliation of the combined Canadian federal and provincial income tax rate to our effective tax rate for the year ended December 31, 2025 is as follows:

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⁽¹⁾ Represents the Canadian federal statutory income tax rate.​
⁽²⁾ Provincial taxes in Ontario comprised the majority of the tax effect in this category.

A reconciliation of the Canadian federal statutory income tax rates to our effective tax rate for the years ended December 31, 2024 is as follows:

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The primary temporary differences which gave rise to future income taxes (recovery) at December 31, 2025 and December 31, 2024:

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For 2025, cash paid for income taxes, net of refunds received, was $418, all of which related to foreign income taxes in the United States; we did not pay any federal, provincial, or other foreign income taxes during the year.

Tax Cuts and Jobs Act

On December 22, 2017, the then President of the United States signed into law an Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018 (commonly known as “the Tax Cuts and Jobs Act” (“TCJA”)), which introduced a comprehensive set of tax reforms. The Tax Cuts and Jobs Act significantly revises U.S. tax law by, among other provisions, lowering the Company’s corporate tax rate from 34% to 21% and eliminating or reducing certain income tax deductions.

In December 2017, in accordance with the SEC Staff Accounting Bulletin (“SAB”) 118– Income Tax Accounting Implications of the TCJA, the Company recorded tax effects on a provisional basis based on a reasonable estimate. The TCJA did not have a material impact on the Company's financial statements because its deferred temporary differences are fully offset by a valuation allowance and the Company does not have any offshore earnings from which to record the mandatory transition tax. During 2018, the Company completed its analysis under SAB 118 and no additional tax effects due to rate-remeasurement were required to be recorded.

There are no current income taxes owed, but the Norgine deal will cause the Company to be closer to using its historical tax losses. Once those losses are used up, the Company will owe income taxes. As of December 31, 2025, the Company

has unclaimed Scientific Research and Experimental Development ("SR&ED") expenditures, income tax loss carry-forwards and non-refundable investment tax credits. The unclaimed amounts and their expiry dates are as listed below:

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