What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-03-30 compared with 2020-02-14 · 692 added, 958 removed, 230 unchanged (88% of the section changed)

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer’s Purchases

of Equity Securities

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer’s Purchases of Equity Securities

Our common shares currently trade in the U.S.

on the Nasdaq Capital Market under the trading symbol “FENC”

on the Nasdaq

Capital Market under the trading symbol “FENC”

and in Canada on the TSX under the trading symbol “FRX”.

Prior to September 13, 2017, our common shares traded in the U.S.

on the OTCQB Market under the trading symbol “FENCF”.

following table sets forth the quarterly high and low market closing prices, and average daily trading volume on the OTCQB, Nasdaq

Capital Market (as applicable), and the TSX, for the two most recent full fiscal years:

Capital Market/OTCQB

following table sets forth the quarterly high and low market closing prices, and average daily trading volume on the Nasdaq Capital

Market , and the TSX, for the two most recent full fiscal years:

Nasdaq Capital Market

Toronto Stock Exchange

(in Canadian dollars)

ended 12/31/19

ended 09/30/19

ended 06/30/19

ended 03/31/19

ended 12/31/18

ended 09/30/18

ended 06/30/18

ended 03/31/18

As of February 11, 2020, the last reported

sale on the TSX was CAD$9.55 per share and the last reported sale on the Nasdaq Capital Market was $7.17 per share.

Quarter ended 12/31/20

Quarter ended 09/30/20

Quarter ended 06/30/20

Quarter ended 03/31/20

Quarter ended 12/31/19

Quarter ended 09/30/19

Quarter ended 06/30/19

Quarter ended 03/31/19

As of March 29, 2021, the last reported sale on the TSX was CAD$7.80

per share and the last reported sale on the Nasdaq Capital Market was $6.21 per share.

Record Holders

As of February 11, 2020, there were approximately

As of March 29, 2020, there were approximately

38 shareholders of record of our common shares, one of which was Cede & Co., a nominee for Depository Trust Company, or DTC,

and one of which was The Canadian Depository for Securities Limited, or CDS.

All of our common shares held by brokerage firms,

banks and other financial institutions in the U.S.

or Canada as nominees for beneficial owners are considered to be held of record

by Cede & Co.

All of our common shares held by brokerage firms, banks

and other financial institutions in the U.S.

or Canada as nominees for beneficial owners are considered to be held of record by Cede &

in respect of brokerage firms, banks and other financial institutions located in Canada.

and CDS are each considered to be one shareholder of record.

and CDS are each

considered to be one shareholder of record.

Dividend Policy

We have never declared or paid cash dividends

on our common shares.

We currently expect to retain future earnings, if any, for use in the operation and expansion of business

and do not anticipate paying any cash dividends in the foreseeable future.

Material United States Federal and Canadian

Income Tax Consequences

We have never declared or paid cash dividends on our common

We currently expect to retain future earnings, if any, for use in the operation and expansion of business and do not

anticipate paying any cash dividends in the foreseeable future.

Material United States Federal and Canadian Income Tax Consequences

Material U.S.

Federal Income Tax

Considerations

The following is a general summary of certain

federal income tax considerations applicable to a U.S.

Holder (as defined below) arising from and relating to the acquisition,

ownership, and disposition of our common shares.

This summary is for general information purposes only and does not purport to

be a complete analysis or listing of all potential U.S.

federal income tax considerations that may apply to a U.S.

Holder arising

from and relating to the acquisition, ownership, and disposition of our common shares.

In addition, this summary does not take

into account the individual facts and circumstances of any particular U.S.

Holder that may affect the U.S.

Federal Income Tax Considerations

The following summary

describes the material U.S.

federal income tax consequences to U.S.

Holders (as defined below) of acquiring, owning, and disposing

of our common shares, subject to the qualifications set forth herein.

Tax Consequences Not Addressed

This summary does not

address all potential U.S.

federal income tax considerations that may be relevant to a particular U.S.

In addition, this

summary does not take into account the individual facts and circumstances that may affect the U.S.

federal income tax consequences

Holder, including, without limitation, specific tax consequences to a U.S.

Holder under an applicable income tax treaty.

Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S.

federal income tax advice with respect

This summary does not address the U.S.

to a particular U.S.

Holder, including specific tax consequences under an applicable income tax treaty.

Accordingly, this summary

is not intended to be, and should not be construed as, legal or U.S.

federal income tax advice with respect to any U.S.

This summary does not address any U.S.

federal alternative minimum, U.S.

federal estate and gift, U.S.

and local, and non-U.S.

tax consequences to U.S.

Holders of the acquisition, ownership, and disposition of our common shares.

addition, except as specifically set forth below, this summary does not discuss applicable tax reporting requirements.

Each prospective

Holder should consult its own tax advisors regarding the U.S.

federal, U.S.

federal alternative minimum, U.S.

federal estate

and gift, U.S.

state and local, or non-U.S.

tax considerations, and does not discuss tax reporting requirements that may be applicable to any particular U.S.

prospective investor should consult a professional tax advisor with respect to the U.S.

federal income, U.S.

alternative minimum,

federal estate and gift, U.S.

state and local, and non-U.S.

tax consequences relating to the acquisition, ownership and disposition of our common

No legal opinion from U.S.

legal counsel or

ruling from the IRS has been requested, or will be obtained, regarding the U.S.

federal income tax consequences of the acquisition,

ownership, and disposition of our common shares.

This summary is not binding on the IRS, and the IRS is not precluded from taking

a position that is different from, and contrary to, the positions taken in this summary.

In addition, because the authorities on

which this summary is based are subject to various interpretations, the IRS and the U.S.

courts could disagree with one or more

of the conclusions described in this summary.

This summary is based on the Code, Treasury

Regulations (whether final, temporary, or proposed), published rulings of the IRS, published administrative positions of the IRS,

the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September

26, 1980, as amended (the “Canada-U.S.

Tax Convention”), and U.S.

court decisions that are applicable, and, in each

case, as in effect and available, as of the date of this document.

Any of the authorities on which this summary is based could

be changed in a material and adverse manner at any time, and any such change could be applied retroactively.

This summary does

not discuss the potential effects, whether adverse or beneficial, of any proposed legislation.

tax consequences of acquiring, owning, and disposing of our common

This summary is based

upon the provisions of the United States Internal Revenue Code (the “Code”), the United States Treasury Regulations

(whether final, temporary, or proposed) promulgated thereunder, the Convention Between Canada and the United States of America

with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the “Canada-U.S.

Tax Convention”),

and administrative rulings and judicial decisions interpreting the Code and the United States Treasury Regulations, all as currently

in effect, and all subject to differing interpretations or change, possibly on a retroactive basis.

We have not sought, and will

not seek, a ruling from the IRS regarding any matter discussed herein, and no assurance can be given that the IRS would not assert,

or that a court would not sustain, a position that is different from, and contrary to, the positions taken in this summary.

summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation.

For purposes of this summary, the term “U.S.

2 unchanged sentences

federal income tax purposes:

an individual who is a citizen or resident

of the United States (as determined under U.S.

an individual who is a citizen or resident of the United States (as determined under U.S.

federal income tax rules);

a corporation (or other entity treated as

a corporation for U.S.

federal income tax purposes) created or organized in or under the laws of the United States or of any political

subdivision of the United States;

an estate, the income of which is subject

a corporation (or other entity treated as a corporation for U.S.

federal income tax purposes) created or organized in or under

the laws of the United States or of any political subdivision of the United States;

an estate, the income of which is subject to U.S.

federal income taxation regardless of its source;

a trust that (i) is subject to the primary

supervision of a court within the United States and the control of one or more U.S.

persons for all substantial decisions or (ii)

has a valid election in effect under applicable United States Treasury Regulations to be treated as a U.S.

a trust that (i) is subject to the primary supervision of a court within the United States and the control of one or more

persons for all substantial decisions or (ii) has a valid election in effect under applicable United States Treasury

Regulations to be treated as a U.S.

An individual may be a resident for U.S.

income tax purposes in any calendar year if the individual was present in the United States for at least 31 days in that calendar

year and for an aggregate of at least 183 days during the three-year period ending with the current calendar year.

of this calculation, all of the days present in the current year, one-third of the days present in the immediately preceding year,

and one-sixth of the days present in the second preceding year are counted.

federal income tax

purposes in any calendar year if the individual was present in the United States for at least 31 days in that calendar year and

for an aggregate of at least 183 days during the three-year period ending with the current calendar year.

For purposes of this

calculation, all of the days present in the current year, one-third of the days present in the immediately preceding year, and

one-sixth of the days present in the second preceding year are counted.

Residents are taxed for U.S.

4 unchanged sentences

Holder”

is a beneficial owner of our common shares that is not a U.S.

is a beneficial owner of common shares that is not a U.S.

Holder and is not a partnership for U.S.

federal income

tax purposes.

federal income tax purposes.

This summary does not address the U.S.

federal income tax consequences to non-U.S.

Holders of acquiring, owning,

and disposing of our common shares.

Each prospective investor should consult a professional tax advisor with respect to the U.S.

federal income, U.S.

Holders of acquiring, owning, and disposing

our common shares.

Each non-U.S.

Holder investor should consult a professional tax advisor with respect to the U.S.

federal income,

alternative minimum, U.S.

1 unchanged sentence

state and local, and non-U.S.

tax consequences of

acquiring, owning, and disposing of our common shares.

tax consequences of acquiring, owning,

and disposing of our common shares.

Holders Not Addressed

This summary does not address the U.S.

income tax considerations applicable U.S.

Holders that are subject to special provisions under the Code, including, but not limited

federal income tax considerations

applicable U.S.

Holders that are subject to special provisions under the Code, including, but not limited to, U.S.

Holders that:

are tax-exempt organizations, qualified retirement

plans, individual retirement accounts, or other tax-deferred accounts;

are financial institutions, underwriters,

insurance companies, real estate investment trusts, or regulated investment companies;

are broker-dealers, dealers, or traders in

securities or currencies that elect to apply a mark-to-market accounting method;

are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts;

are financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment companies;

are broker-dealers, dealers, or traders in securities or currencies that elect to apply a mark-to-market accounting method;

have a “functional currency”

other than the U.S.

own our common shares as part of a straddle,

hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position;

acquired our common shares in connection

with the exercise of employee stock options or otherwise as compensation for services;

hold our common shares other than as a capital

asset within the meaning of section 1221 of the Code (generally, property held for investment purposes);

own common shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement

involving more than one position;

acquired common shares in connection with the exercise of employee stock options or otherwise as compensation for services;

hold common shares other than as a capital asset within the meaning of section 1221 of the Code (generally, property held for

investment purposes);

are partnerships or other “pass-through”

entities for U.S.

federal income tax purposes (or investors in such partnerships or entities);

own, have owned, or will own (directly, indirectly,

or by attribution) 10% or more of the total combined voting power of the outstanding shares of your company;

expatriates or former long-term

residents of the United States;

have been, are, or will be residents or deemed

to be residents in Canada for purposes of the Income Tax Act (Canada) (the “Tax Act”);

use or hold, will use or hold, or that are

or will be deemed to use or hold our common shares in connection with carrying on a business in Canada;

are persons whose common shares constitute

“taxable Canadian property”

federal income tax purposes (or investors in such partnerships

or entities);

own, have owned, or will own (directly, indirectly, or by attribution) 10% or more of the total combined voting power of the

outstanding shares of your company;

expatriates who are former citizens or long-term residents of the United States;

have been, are, or will be residents or deemed to be residents in Canada for purposes of the Income Tax Act (Canada) (the “Tax

use or hold, will use or hold, or that are or will be deemed to use or hold common shares in connection with carrying on a

business in Canada;

are persons whose common shares constitute “taxable Canadian property”

under the Tax Act;

have a permanent establishment in Canada

for the purposes of the Canada-U.S.

have a permanent establishment in Canada for the purposes of the Canada-U.S.

Tax Convention.

Holders that are subject to special provisions

under the Code, including, but not limited to, U.S.

Holders described immediately above, should consult their own tax advisors

regarding the U.S.

Holders that are subject to special provisions under the

Code, including, but not limited to, U.S.

Holders described immediately above, should consult their own tax advisors regarding

federal income, U.S.

2 unchanged sentences

state and local, and non-U.S.

tax consequences of acquiring, owning, and disposing of our common shares.

consequences of acquiring, owning, and disposing of our common shares.

The following summary is not a substitute

for careful tax planning and advice.

Holders of our common shares are urged to consult their own tax advisors concerning the

federal income tax consequences of the issues discussed herein, in light of their particular circumstances, as well as any

considerations arising under the laws of any foreign, state, local, or other taxing jurisdiction.

General Rules Applicable to the Ownership

and Disposition of Common Shares

Holder that receives a distribution,

including a constructive distribution, with respect to a common share will be required to include the amount of such distribution

in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of

our current and accumulated “earnings and profits,”

as computed for U.S.

federal income tax purposes.

A dividend generally

will be taxed to a U.S.

Holder at ordinary income tax rates.

(See, however, the exception discussed below for individual and other

Holders of common shares are urged to consult their own tax advisors concerning the U.S.

federal income tax consequences of the issues discussed herein, in light of their particular circumstances, as well as any considerations

arising under the laws of any foreign, state, local, or other taxing jurisdiction.

General Rules Applicable to the Ownership and Disposition

of Common Shares

The following discussion describes the

general rules applicable to the ownership and disposition of the common shares but is subject in its entirety to the special

rules described below under the headings entitled “Tax Consequences if We Are a Passive Foreign Investment Company”

and “Tax Consequences if We are a Controlled Foreign Corporation.”

Distributions on Common Shares

The gross amount of any distribution (including

amounts, if any, withheld in respect of Canadian withholding tax) actually or constructively received by a U.S.

Holder with respect

to our common shares will be taxable to the U.S.

Holder as a dividend to the extent of our current or accumulated earnings and

profits as determined under U.S.

federal income tax principles.

Distributions to a U.S.

Holder in excess of earnings and profits

will be treated first as a return of capital that reduces a U.S.

Holder’s tax basis in such common shares (thereby increasing

the amount of gain or decreasing the amount of loss that a U.S.

Holder would recognize on a subsequent disposition of our common

shares), and then as gain from the sale or exchange of such common shares (see “Sale or Other Taxable Disposition of Our

Common Shares”).

The amount of any distribution of property other than cash will be the fair market value of that property

on the date of distribution.

In the event we make distributions to holders of common shares, we may or may not calculate our earnings

and profits under U.S.

federal income tax principles.

If we do not do so, any distribution may be required to be regarded as a

dividend, even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain.

of the dividend will generally be treated as foreign-source dividend income to U.S.

Non-corporate U.S.

Holders, which may allow such holders preferential rates when we have terminated PFIC status.) To the extent

that a distribution exceeds our current and accumulated “earnings and profits,”

such distribution will be treated,

first, as a tax-free return of capital to the extent of a U.S.

Holder’s tax basis in our common shares and thereafter as

gain from the sale or exchange of such common shares.

However, we may not maintain the calculations of our earnings and profits

in accordance with U.S.

federal income tax principles, and U.S.

Holders may have to assume that any distribution by us with respect

to our common shares will constitute ordinary dividend income.

Dividends received on our common shares by corporate U.S.

generally will not be eligible for the “dividends received deduction.”

Provided that (1) we are eligible for the benefits

of the Canada-U.S.

Tax Convention or (2) our common shares are readily tradable on a United States securities market (and certain

holding period and other conditions are satisfied), dividends paid by us to non-corporate U.S.

Holders, including individuals,

will be eligible for the preferential tax rates applicable to long-term capital gains for dividends unless we are classified as

a PFIC in the tax year of distribution or in the preceding tax year.

The dividend rules are complex, and each U.S.

Holder should

consult its own tax advisors regarding the application of such rules.

Upon the sale or other taxable disposition

of our common shares, subject to the PFIC rules below, a U.S.

Holder generally will recognize capital gain or loss in an amount

equal to the difference between the U.S.

dollar value of cash received plus the fair market value of any property received and

Holder’s tax basis in such common shares sold or otherwise disposed of.

Holder’s tax basis in our

common shares generally will be determined initially by the holder’s U.S.

dollar cost for our common shares (with adjustments

provided under the PFIC rules below).

Subject again to the PFIC rules, gain or loss recognized on such sale or other disposition

generally will be long-term capital gain or loss if, at the time of the sale or other disposition, our common shares have been

held for more than one year.

Preferential tax rates currently apply to

long-term capital gain of a U.S.

will generally be eligible for the preferential U.S.

federal rate on “qualified dividend income,”

provided that we

are a “qualified foreign corporation,”

the stock on which the dividend is paid is held for a minimum holding period,

and other requirements are satisfied.

A “qualified foreign corporation”

includes a foreign corporation that is not

a PFIC in the year of the distribution or in the prior taxable year and that is eligible for the benefits of an income tax treaty

with the United States that contains an exchange of information provision and has been determined by the United States Treasury

Department to be satisfactory for purposes of the legislation (such as the Canada-U.S.

Tax Convention).

Distributions to U.S.

Holders generally

will not be eligible for the “dividends received deduction”

generally allowed to U.S.

corporations in respect of dividends

received from other U.S.

corporations.

Sale or Other Taxable Disposition of

Our Common Shares

Upon the sale, exchange, or other taxable

disposition of our common shares, a U.S.

Holder generally will recognize gain or loss equal to the difference between the amount

realized upon the sale, exchange, or other disposition and such U.S.

Holder’s tax basis in such common shares sold or otherwise

holder receives Canadian dollars in the transaction, the amount realized will be the U.S.

of the Canadian dollars received, which is determined for cash basis taxpayers on the settlement date for the transaction and for

accrual basis taxpayers on the trade date (although accrual basis taxpayers can also elect the settlement date).

Holder’s

tax basis in common shares generally will be such holder’s U.S.

dollar cost for such common shares.

Gain or loss recognized

on such sale or other disposition generally will be long-term capital gain or loss if, at the time of the sale or other disposition,

the common shares have been held for more than one year.

Preferential tax rates currently apply

to long-term capital gain of a U.S.

Holder that is an individual, estate, or trust.

There are currently no preferential tax rates

for long-term capital gain of a U.S.

Holder that is a corporation.

Deductions for capital losses are subject to significant limitations

under the Code.

If we are determined to be a PFIC, any gain realized on our common shares could be ordinary income under the rules

discussed below.

PFIC Status of the Company

If we were to constitute a

“passive foreign investment company”

under the meaning of Section 1297 of the Code (a “PFIC”) for any

taxable year during a U.S.

Holder’s holding period, then certain potentially adverse rules may affect the U.S.

income tax consequences to a U.S.

Holder as a result of the acquisition, ownership and disposition of our common shares.

have not made the analysis necessary to determine whether or not we are currently a PFIC or whether we have ever been a

There can be no assurance that we are not, have never been or will not in the future be a PFIC.

of legal counsel or ruling from the IRS concerning our status as a PFIC has been obtained or is currently planned to be

The determination of whether any corporation was, or will be, a PFIC for a tax year depends, in part, on the

application of complex U.S.

federal income tax rules, which are subject to differing interpretations.

In addition, whether

any corporation will be a PFIC for any tax year depends on the assets and income of such corporation over the course of each

such tax year and, as a result, cannot be predicted with certainty as of the date of this Annual Report.

Accordingly, there

can be no assurance that the IRS will not challenge any determination made by us (or any of our subsidiaries) concerning our

PFIC status in any taxable year.

Holder should consult its own tax advisors regarding the PFIC status of us and our

subsidiaries.

In any taxable year in which we are classified

as a PFIC, a U.S.

Holder will be required to file an annual report with the IRS containing such information as Treasury Regulations

and/or other IRS guidance may require.

IRS Form 8621 is currently used for such filings.

In addition to penalties, a failure to

satisfy such reporting requirements may result in an extension of the time period during which the IRS can assess a tax.

should consult their own tax advisors regarding the requirements of filing such information returns under these rules, including

the requirement to file an IRS Form 8621 annually.

We generally will be a PFIC for a taxable

year if, for such year, (a) 75% or more of our gross income is passive income (the “PFIC income test”) or (b) 50% or

more of the value of our assets either produce passive income or are held for the production of passive income, based on the quarterly

average of the fair market value of such assets (the “PFIC asset test”).

“Gross income”

generally includes

all sales revenues less the cost of goods sold, plus income from investments and from incidental or outside operations or sources,

and “passive income”

generally includes, for example, dividends, interest, certain rents and royalties, certain gains

from the sale of stock and securities, and certain gains from commodities transactions.

Active business gains arising from the sale

of commodities generally are excluded from passive income if substantially all (85% or more) of a foreign corporation’s commodities

are stock in trade or inventory, depreciable property used in a trade or business, or supplies regularly used or consumed in the

ordinary course of its trade or business, and certain other requirements are satisfied.

For purposes of the PFIC income test and PFIC

asset test described above, if we own, directly or indirectly, 25% or more of the total value of the outstanding shares of another

corporation, we will be treated as if we (a) held a proportionate share of the assets of such other corporation and (b) received

directly a proportionate share of the income of such other corporation.

In addition, for purposes of the PFIC income test and PFIC

asset test described above, and assuming certain other requirements are met, “passive income”

does not include certain

interest, dividends, rents, or royalties that are received or accrued by us from certain “related persons”

in Section 954(d)(3) of the Code) also organized in Canada, to the extent such items are properly allocable to the income of such

related person that is neither passive income nor income connected with a U.S.

trade or business.

Under certain attribution rules, if we are

Holders will generally be deemed to own their proportionate share of our direct or indirect equity interest in any

company that is also a PFIC (a ‘‘Subsidiary PFIC’’), and will generally be subject to U.S.

federal income

tax on their proportionate share of (a) any “excess distributions,”

as described below, on the stock of a Subsidiary

PFIC and (b) a disposition or deemed disposition of the stock of a Subsidiary PFIC by us or another Subsidiary PFIC, both as if

Holders directly held the shares of such Subsidiary PFIC.

In addition, U.S.

Holders may be subject to U.S.

federal income

tax on any indirect gain realized on the stock of a Subsidiary PFIC on the sale or disposition of our common shares.

Holders should be aware that they could be subject to tax under the PFIC rules even if no distributions are received on our

common shares and no redemptions or other dispositions of our common shares are made.

Default PFIC Rules Under Section

1291 of the Code

If we are a PFIC for any tax year during which

Holder owns our common shares, the U.S.

federal income tax consequences to such U.S.

Holder of the acquisition, ownership,

and disposition of our common shares will depend on whether and when such U.S.

Holder makes an election to treat us and each Subsidiary

PFIC, if any, as a “qualified electing fund”

or “QEF”

under Section 1295 of the Code (a “QEF Election”)

or makes a mark-to-market election under Section 1296 of the Code (a “Mark-to-Market Election”).

does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a “Non-Electing U.S.

Holder.”

A Non-Electing U.S.

Holder will be subject

to the rules of Section 1291 of the Code (described below) with respect to (a) any gain recognized on the sale or other taxable

disposition of our common shares and (b) any “excess distribution”

received on our common shares.

A distribution generally

will be an “excess distribution”

to the extent that such distribution (together with all other distributions received

in the current tax year) exceeds 125% of the average distributions received during the three preceding tax years (or during a U.S.

Holder’s holding period for our common shares, if shorter).

Under Section 1291 of the Code, any gain

recognized on the sale or other taxable disposition of our common shares (including an indirect disposition of the stock of

any Subsidiary PFIC), and any “excess distribution”

received on our common shares or deemed received with respect

to the stock of a Subsidiary PFIC, must be ratably allocated to each day in a Non-Electing U.S.

Holder’s holding period

for the respective common shares.

The amount of any such gain or excess distribution allocated to the tax year of disposition

or distribution of the excess distribution, or allocated to years before the entity became a PFIC, if any, would be taxed as

ordinary income at the rates applicable for such year (and not eligible for certain preferred rates).

The amounts allocated

to any other tax year would be subject to U.S.

federal income tax at the highest tax rate applicable to ordinary income in

each such year.

In addition, an interest charge would be imposed on the tax liability for each such year, calculated as if

such tax liability had been due in each such year.

A Non-Electing U.S.

Holder that is not a corporation must treat any such

interest paid as “personal interest,”

which is not deductible.

If we are a PFIC for any tax year during which

a Non-Electing U.S.

Holder holds our common shares, we will continue to be treated as a PFIC with respect to such Non-Electing

Holder, regardless of whether we cease to be a PFIC in one or more subsequent tax years.

A Non-Electing U.S.

Holder may terminate

this deemed PFIC status by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed

above), but not loss, as if such common shares were sold on the last day of the last tax year for which we were a PFIC.

Holder that makes a timely and effective

QEF Election for the tax year in which the holding period of our common shares begins generally will not be subject to the rules

of Section 1291 of the Code discussed above with respect to such common shares.

Holder that makes such a QEF Election will

be subject to U.S.

federal income tax on such U.S.

Holder’s pro rata share (based on its ownership of our common shares)

of (a) the net capital gain of the Company, which will be taxed as long-term capital gain to such U.S.

Holder, and (b) the ordinary

earnings of the Company, which will be taxed as ordinary income to such U.S.

Generally, “net capital gain”

is the excess of (a) net long-term capital gain over (b) net short-term capital loss, and “ordinary earnings”

excess of (a) “earnings and profits”

over (b) net capital gain.

Holder that makes a QEF Election will be subject

federal income tax on such amounts for each tax year in which the Company is a PFIC, regardless of whether such amounts

are actually distributed by us to such U.S.

However, for any tax year in which we are a PFIC and has no net income or gain,

Holders that have made a QEF Election would not have any income inclusions as a result of the QEF Election.

that made a QEF Election has an income inclusion, such a U.S.

Holder may, subject to certain limitations, elect to defer payment

of current U.S.

federal income tax on such amounts, subject to an interest charge.

Holder is not a corporation, any

such interest paid will be treated as “personal interest,”

which is not deductible.

Holder that makes a timely and effective

QEF Election with respect to the Company generally (a) may receive a tax-free distribution from the Company to the extent that

such distribution represents “earnings and profits”

of the Company that were previously included in income by the U.S.

Holder because of such QEF Election and (b) will adjust such U.S.

Holder’s tax basis in our common shares to reflect the

amount included in income or allowed as a tax-free distribution because of such QEF Election.

Holder that makes a QEF Election

generally will recognize capital gain or loss on the sale or other taxable disposition of our common shares.

Holder may make a timely QEF Election

by filing the appropriate QEF Election documents (currently IRS Form 8621) at the time such U.S.

Holder files a U.S.

federal income

tax return for such year.

Holder does not make a timely QEF Election for the first year in the U.S.

Holder’s holding

period in which we are a PFIC, the U.S.

Holder may still be able to make an effective QEF Election in a subsequent year if such

Holder meets certain requirements and makes a “purging”

election to recognize gain (which will be taxed under

the rules of Section 1291 of the Code discussed above) as if such common shares were sold for their fair market value on the day

the QEF Election is effective.

Holder makes a QEF Election but does not make a “purging”

election to recognize

gain as discussed in the preceding sentence, then such U.S.

Holder shall be subject to the QEF Election rules and shall continue

to be subject to tax under the rules of Section 1291 discussed above with respect to our common shares.

Holder owns PFIC

stock indirectly through another PFIC, separate QEF Elections must be made for the PFIC in which the U.S.

Holder is a direct shareholder

and the Subsidiary PFIC for the QEF rules to apply to both PFICs.

A QEF Election will apply to the tax year

for which such QEF Election is timely made and to all subsequent tax years, unless such QEF Election is invalidated or terminated

or the IRS consents to revocation of such QEF Election.

Holder makes a QEF Election and, in a subsequent tax year, we

cease to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those tax years in which

we are not a PFIC.

Accordingly, if we become a PFIC in another subsequent tax year, the QEF Election will be effective and the

Holder will be subject to the QEF rules described above during any subsequent tax year in which we qualify as a PFIC.

(a) will make available to U.S.

upon their written request, information as to our status as a PFIC, and (b) for each taxable year in which we are a PFIC, provide

Holder, upon written request, such information and documentation that a U.S.

Holder making a QEF Election with respect

to the Company is reasonably required to obtain for U.S.

federal income tax purposes.

We may elect to provide such information

on our website.

However, U.S.

Holders should be aware that we cannot assure that we will provide any such information relating

to any Subsidiary PFIC.

Because we may own shares in one or more Subsidiary PFICs at any time, U.S.

Holders will continue to be

subject to the rules discussed above with respect to the taxation of gains and excess distributions with respect to any Subsidiary

PFIC for which the U.S.

Holders do not obtain the required information.

Holder should consult its own tax advisors regarding

the requirements for, and procedure for making, a QEF Election with respect to the Company and any Subsidiary PFIC.

Holder makes a QEF Election by attaching

a completed IRS Form 8621, including a PFIC Annual Information Statement, to a timely filed United States federal income tax return.

However, if we do not provide the required information with regard to the Company or any of our Subsidiary PFICs, U.S.

may not be able to make a QEF Election for such entity and, unless they make the Mark-to-Market Election discussed in the next

section, will continue to be subject to the rules of Section 1291 of the Code discussed above that apply to Non-Electing U.S.

with respect to the taxation of gains and excess distributions.

Mark-to-Market Election

Holder may make a Mark-to-Market Election

only if our common shares are marketable stock.

Our common shares generally will be “marketable stock”

if our common

shares are regularly traded on (a) a national securities exchange that is registered with the Securities and Exchange Commission,

(b) the national market system established pursuant to section 11A of the Exchange Act, or (c) a foreign securities exchange

that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such

foreign exchange has trading volume, listing, financial disclosure, and surveillance requirements, and meets other requirements

and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange, ensure

that such requirements are actually enforced and (ii) the rules of such foreign exchange effectively promote active trading of

listed stocks.

If such stock is traded on such a qualified exchange or other market, such stock generally will be “regularly

traded”

for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days

during each calendar quarter.

We expect that our common shares will meet the definition of “marketable stock,”

there can be no assurance of this, especially as regards the required trading frequency.

Holder that makes a Mark-to-Market

Election for any taxable year with respect to our common shares, it generally will not be subject to the rules of Section 1291

of the Code discussed above with respect to such common shares for such taxable year.

However, if a U.S.

Holder does not make a

Mark-to-Market Election beginning in the first tax year of such U.S.

Holder’s holding period for which we are a PFIC and

Holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to dispositions

of, and certain distributions on, our common shares.

Holder that makes a Mark-to-Market

Election will include in ordinary income, for each tax year in which we are a PFIC, an amount equal to the excess, if any, of (a)

the fair market value of our common shares, as of the close of such tax year over (b) such U.S.

Holder’s adjusted tax basis

in such common shares.

Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the

excess, if any, of (a) such U.S.

Holder’s adjusted tax basis in our common shares, over (b) the fair market value of such

common shares (but only to the extent of the net amount of previously included income as a result of the Mark-to-Market Election

for prior tax years).

Holder that makes a Mark-to-Market

Election generally also will adjust its tax basis in our common shares to reflect the amount included in gross income or allowed

as a deduction because of such Mark-to-Market Election.

Upon a sale or other taxable disposition of our common shares, a U.S.

that makes a Mark-to-Market Election will recognize ordinary income or ordinary loss.

Any such ordinary loss, however, is limited

to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior tax

years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior tax years.

Losses that exceed

this limitation are subject to the rules generally applicable to losses provided in the Code and Treasury Regulations, with the

result that they will be capital losses for most U.S.

Holder makes a Mark-to-Market Election

by attaching a completed IRS Form 8621 to a timely filed United States federal income tax return.

A Mark-to-Market Election applies

to the tax year in which such Mark-to-Market Election is made and to each subsequent tax year, unless our common shares cease to

be “marketable stock”

or the IRS consents to revocation of such election.

Holder should consult its own tax

advisors regarding the requirements for, and procedure for making, a Mark-to-Market Election.

Although a U.S.

Holder may be eligible to

make a Mark-to-Market Election with respect to our common shares, no such election may be made with respect to the stock of any

Subsidiary PFIC that a U.S.

Holder is treated as owning, because such stock is not marketable.

Hence, the Mark-to-Market Election

will not be effective to avoid the application of the default rules of Section 1291 of the Code described above with respect to

deemed dispositions of Subsidiary PFIC stock or excess distributions from a Subsidiary PFIC to its shareholder.

Other PRIC and Related Rules

Under Section 1291(f) of the Code, the IRS

has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S.

Holder that had not made a timely

QEF Election or Mark-to-Market Election to recognize gain (but not loss) upon certain transfers of our common shares that would

otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations).

However, the specific U.S.

income tax consequences to a U.S.

Holder may vary based on the manner in which our common shares are transferred.

Certain additional adverse rules may apply

with respect to a U.S.

Holder if we are a PFIC, regardless of whether such U.S.

Holder makes a QEF Election.

For example, under

Section 1298(b)(6) of the Code, a U.S.

Holder that uses our common shares as security for a loan will, except as may be provided

in Treasury Regulations, be treated as having made a taxable disposition of such common shares.

Special rules also apply to the amount of

foreign tax credit that a U.S.

Holder may claim on a distribution from a PFIC.

Subject to such special rules, foreign taxes paid

with respect to any distribution in respect of stock in a PFIC are generally eligible for the foreign tax credit.

The rules relating

to distributions by a PFIC and their eligibility for the foreign tax credit are complicated, and each U.S.

Holder should consult

with its own tax advisors regarding the availability of the foreign tax credit with respect to distributions by a PFIC.

Holders of our common shares or U.S.

Holders that are treated as constructively owning our common shares, each owning 10 percent or more of our equity by vote (“10-percent

Shareholders”) own in total more than 50 percent of such equity by either vote or value, we will be treated as a controlled

foreign corporation (“CFC”).

For our taxable year ending December 31, 2019 and subsequent years, and for taxable years

Holders ending with or within such years, the test for a 10-percent Shareholder will be whether the holder owns 10 percent

of our equity by vote or value (i.e., not only by vote).

If we are a CFC, a 10-percent Shareholder would be treated, subject to

certain exceptions, as receiving a deemed dividend at the end of each taxable year of the Company in an amount equal to its pro

rata share of the Company’s “subpart F income.”

Among other items, and subject to certain exceptions, “subpart

F income”

includes dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities,

and certain gains from commodities transactions.

Thus, it is likely that, if we were treated as a CFC, some of our income would

be subpart F income.

If, for any period, we were treated as a CFC and a U.S.

Holder were treated as a 10-percent Shareholder therein,

we would not be treated as a PFIC with respect to such U.S.

Holder for such period.

The PFIC and CFC rules are complex, and each

Holder should consult with its own tax advisors regarding the PFIC and CFC rules and how they may affect the U.S.

income tax consequences of the acquisition, ownership, and disposition of our common shares.

Additional Considerations

Additional Tax on Passive Income

for long-term capital gain of a corporate U.S.

Deductions for capital losses are subject to significant limitations under

The gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes.

Additional Medicare Tax on Net Investment

Holders that are individuals,

estates or trusts (other than trusts that are exempt from tax) will be subject to a 3.8% tax on all or a portion of their “net

investment income,”

which includes dividends on our common shares and net gains from the disposition of our common shares.

Further, excess distributions treated as dividends, gains treated as excess distributions under the PFIC rules discussed above,

and mark-to-market inclusions and deductions are all included in the calculation of net investment income.

Treasury Regulations provide, subject to the

election described in the following paragraph, that solely for purposes of this additional tax, distributions of previously taxed

income will be treated as dividends and included in net investment income subject to the additional 3.8% tax.

Additionally, to

determine the amount of any capital gain from the sale or other taxable disposition of our common shares that will be subject to

the additional tax on net investment income, a U.S.

Holder who has made a QEF Election will be required to recalculate its basis

in our common shares excluding QEF basis adjustments.

Alternatively, a U.S.

Holder may make an election

which will be effective with respect to all interests in a PFIC for which a QEF Election has been made and which is held in that

year or acquired in future years.

Under this election, a U.S.

Holder pays the additional 3.8% tax on QEF income inclusions and

on gains calculated after giving effect to related tax basis adjustments.

Holders that are individuals, estates or trusts

should consult their own tax advisors regarding the applicability of this tax to any of their income or gains in respect of our

common shares.

estates, or trusts (other than trusts that are exempt from tax) are subject to a tax of 3.8% on “net investment income”

(or undistributed “net investment income,”

in the case of estates and trusts) for each taxable year, with such tax

applying to the lesser of such income or the excess of such person’s adjusted gross income (with certain adjustments) over

a specified amount.

Net investment income includes dividends on the common shares and net gains from the disposition of the common

Holders that are individuals, estates,

or trusts should consult their own tax advisors regarding the applicability of this tax to any of their income or gains in respect

of the common shares.

Receipt of Foreign Currency

The amount of any distribution paid to a U.S.

Holder in foreign currency, or on the sale, exchange or other taxable disposition of our common shares, generally will be equal

dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of whether

such foreign currency is converted into U.S.

amount of any distribution paid to a U.S.

Holder in foreign currency, or on the sale, exchange, or other taxable disposition of

common shares, generally will be equal to the U.S.

dollar value of such foreign currency based on the exchange rate applicable

on the date of receipt (regardless of whether such foreign currency is converted into U.S.

dollars at that time).

Holder will have a basis in the foreign currency equal

foreign currency received is not converted into U.S.

dollars on the date of receipt, a U.S.

Holder will have a tax basis in the

foreign currency equal to its U.S.

dollar value on the date of receipt.

Holder who converts or otherwise disposes of the foreign currency after

the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally

Holder who converts or otherwise disposes of the

foreign currency after the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary

income or loss, and generally will be U.S.

source income or loss for foreign tax credit purposes.

Different rules apply to U.S.

Holders who use the accrual method

of tax accounting.

Different rules apply to

Holders who use the accrual method of tax accounting.

Holder should consult its own U.S.

tax advisors regarding the U.S.

federal income tax consequences

of receiving, owning, and disposing of foreign currency.

tax advisors regarding

federal income tax consequences of receiving, owning, and disposing of foreign currency.

Foreign Tax Credit

Subject to the PFIC rules discussed above,

Holder that pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on our common

shares generally will be entitled, at the election of such U.S.

Holder, to receive either a deduction or a credit for such Canadian

Subject to the PFIC rules discussed below, a U.S.

that pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on the common shares generally

will be entitled, at the election of such U.S.

Holder, to receive either a deduction or a credit for such Canadian income tax paid.

Generally, a credit will reduce a U.S.

Holder’s U.S.

federal income tax liability on a dollar-for-dollar basis,

whereas a deduction will reduce a U.S.

federal income tax liability on a dollar-for-dollar basis, whereas a

deduction will reduce a U.S.

Holder’s income that is subject to U.S.

federal income tax.

This election is made

on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S.

Holder during

Complex limitations apply to the foreign tax

credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S.

This election is made on a year-by-year

basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S.

Holder during a year.

Complex limitations apply to the foreign tax credit, including

the general limitation that the credit cannot exceed the proportionate share of a U.S.

Holder’s U.S.

income tax liability that such U.S.

federal income tax liability

that such U.S.

Holder’s “foreign source”

taxable income bears to such U.S.

Holder’s

worldwide taxable income.

Holder’s worldwide taxable income.

In applying this limitation, a U.S.

Holder’s various items of income and deduction must be classified,

under complex rules, as either “foreign source”

Holder’s various items of income and deduction must be classified, under complex rules,

as either “foreign source”

or “U.S.

source.”

Generally, dividends paid on our common

shares should be treated as foreign source for this purpose, and gains recognized on the sale of our common shares by a U.S.

should be treated as U.S.

source for this purpose, except as otherwise provided in an applicable income tax treaty, and if an election

is properly made under the Code.

However, the amount of a distribution with respect to our common shares that is treated as a “dividend”

Generally, dividends paid by a foreign corporation (including

constructive dividends) should be treated as foreign source for this purpose, and gains recognized on the sale of stock of a foreign

corporation by a U.S.

Holder should be treated as U.S.

source for this purpose, except as otherwise provided in an applicable income

tax treaty, and if an election is properly made under the Code.

However, the amount of a distribution with respect to the common

shares that is treated as a “dividend”

may be lower for U.S.

federal income tax purposes than it is for Canadian federal income tax purposes, resulting in a reduced foreign

tax credit allowance to a U.S.

In addition, this limitation is calculated separately with respect to specific categories

federal income tax purposes than it is for Canadian federal

income tax purposes, resulting in a reduced foreign tax credit allowance to a U.S.

In addition, this limitation is calculated

separately with respect to specific categories of income.

The foreign tax credit rules are complex, and each U.S.

Holder should consult its own U.S.

tax advisors regarding the

foreign tax credit rules.

Backup Withholding and Information Reporting

Holder that is an individual (and,

to the extent provided in future regulations, an entity), may be subject to certain reporting obligations with respect to our common

shares if the aggregate value of these and certain other “specified foreign financial assets”

exceeds $50,000.

this disclosure is made by filing Form 8938 with the IRS.

Significant penalties can apply if a U.S.

Holder is required to make

this disclosure and fail to do so.

In addition, a U.S.

Holder should consider the possible obligation to file online a FinCEN Form

114—Foreign Bank and Financial Accounts Report, as a result of holding our common shares in certain accounts.

urged to consult their U.S.

tax advisors with respect to these and other reporting requirements that may apply to their acquisition

of our common shares.

Payments made within the U.S., or by a U.S.

payor or U.S.

middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of, our common shares

will generally be subject to information reporting and backup withholding tax, at the rate of 28%, if a U.S.

Holder (a) fails to

furnish such U.S.

Holder’s correct U.S.

taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect

taxpayer identification number, (c) is notified by the IRS that such U.S.

Holder has previously failed to report properly

items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S.

Holder has furnished

its correct U.S.

taxpayer identification number and that the IRS has not notified such U.S.

Holder that it is subject to backup

withholding tax.

However, certain exempt persons generally are excluded from these information reporting and backup withholding

Holder should

consult its own U.S.

tax advisors regarding the foreign tax credit rules.

Information Reporting and Backup Withholding

federal income tax law, certain

categories of U.S.

Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation.

For example, certain U.S.

Holders who hold certain “specified foreign financial assets”

that exceed certain thresholds

are required to report information relating to such assets.

The definition of “specified foreign financial assets”

generally includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts

maintained by a financial institution, any stock or security issued by a non-U.S.

person, any financial instrument or contract

held for investment that has an issuer or counterparty other than a U.S.

person, and any interest in a foreign entity.

may be subject to these reporting requirements unless their common shares are held in an account at certain financial institutions.

Significant penalties may apply for failure to satisfy applicable reporting obligations.

Distributions paid with respect to common

shares and proceeds from a sale, exchange, or redemption of common shares made within the United States or through certain U.S.-related

financial intermediaries may be subject to information reporting to the IRS and possible U.S.

backup withholding (at a rate of

Backup withholding will not apply, however, to a U.S.

Holder who furnishes a correct U.S.

taxpayer identification number

and makes any other required certification on IRS Form W-9 or that is a corporation or other entity that is otherwise exempt

from backup withholding.

Holder should consult its own tax advisors regarding the application of the U.S.

reporting and backup withholding rules.

Backup withholding is not an additional tax.

Any amounts withheld under the U.S.

backup withholding tax rules will be allowed

as a credit against a U.S.

Holder’s U.S.

federal income tax liability, if any, or will be refunded, if such U.S.

Holder furnishes

required information to the IRS in a timely manner.

The discussion of reporting requirements set

forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S.

Amounts withheld as backup withholding may

be credited against a holder’s U.S.

federal income tax liability, and such holder may obtain a refund of any excess amounts

withheld under the backup withholding rules by filing an appropriate claim for refund with the IRS and furnishing any required

information in a timely manner.

The discussion of reporting requirements

set forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S.

A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess

a tax and, under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting

Holder should consult its own tax advisors regarding the information reporting and backup withholding rules.

THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE

A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO U.S.

HOLDERS WITH RESPECT TO THE ACQUISITION, OWNERSHIP, AND DISPOSITION

Holders should consult with their own tax advisors regarding their reporting obligations, if any, as a result

of their acquisition, ownership, or disposition of our common shares.

Tax Consequences if We are a Passive

Foreign Investment Company

A foreign corporation generally will be

treated as a PFIC if, after applying certain “look-through”

rules, either (i) 75% or more of its gross income

is passive income or (ii) 50% or more of the average value of its assets is attributable to assets that produce or are held

to produce passive income.

Passive income for this purpose generally includes dividends, interest, rents, royalties and gains from

securities and commodities transactions.

The look-through rules require a foreign corporation that owns at least 25% by value

of the stock of another corporation to treat a proportionate amount of assets and income as held or received directly by the foreign

We have not made the analysis necessary

to determine whether or not we are currently a PFIC or whether we have ever been a PFIC.

There can be no assurance that we are

not, have never been or will not in the future be a PFIC.

If we were to be treated as a PFIC, any gain recognized by a U.S.

upon the sale (or certain other dispositions) of our common shares (or the receipt of certain distributions) generally would be

treated as ordinary income, and a U.S.

shareholder may be required, in certain circumstances, to pay an interest charge together

with tax calculated at maximum rates on certain “excess distributions,”

including any gain on the sale or certain dispositions

of our common shares.

HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR

OWN PARTICULAR CIRCUMSTANCES.

Material Canadian Federal Income

Tax Considerations

In order to avoid this tax consequence, a U.S.

shareholder (i) may be permitted to make a “qualified

electing fund”

election, in which case, in lieu of such treatment, such shareholder would be required to include in its taxable

income certain undistributed amounts of our income or (ii) may elect to mark-to-market our common shares and recognize ordinary

income (or possible ordinary loss) each year with respect to such investment and on the sale or other disposition of the common

Additionally, if we are deemed to be a PFIC, a U.S.

shareholder who acquires our common shares from a decedent will be

denied the normally available step-up in tax basis to fair market value for the common shares at the date of the death and instead

will have a tax basis equal to the decedent’s tax basis if lower than fair market value.

Neither we nor our advisors have

the duty to or will undertake to inform U.S.

shareholders of changes in circumstances that would cause us to become a PFIC.

shareholders should consult their own tax advisors regarding the application of the PFIC rules including eligibility for and

the manner and advisability of making certain elections in the event we are determined to be a PFIC at any point in time.

to take the action necessary for a U.S.

shareholder to make a “qualified electing fund”

election in the event we are

Further, excess distributions treated as

dividends, gains treated as excess distributions and mark-to-market inclusions and deductions, all under the PFIC rules discussed

above, are all included in the calculation of net investment income for purposes of the 3.8% tax described above under the subheading

entitled “Additional Medicare Tax on Net Investment Income”.

United States Treasury Regulations provide, subject to

the election described in the following paragraph, that solely for purposes of this additional tax, distributions of previously

taxed income will be treated as dividends and included in net investment income subject to the additional 3.8% tax.

Additionally,

to determine the amount of any capital gain from the sale or other taxable disposition of common shares that will be subject to

the additional tax on net investment income, a U.S.

Holder who has made a “qualified electing fund”

election will be

required to recalculate its basis in the common shares excluding basis adjustments resulting from the “qualified electing

Alternatively, a U.S.

Holder may make an election which will be effective with respect to all interests in

a PFIC for which a “qualified electing fund”

election has been made and which is held in that year or acquired in future

Under this election, a U.S.

Holder pays the additional 3.8% tax on income inclusions resulting from the “qualified

electing fund”

election and on gains calculated after giving effect to related tax basis adjustments.

Tax Consequences if We are a Controlled

Foreign Corporation

A foreign corporation will be treated as

a “controlled foreign corporation”

(“CFC”) for U.S.

federal income tax purposes if, on any day during the

taxable year of such foreign corporation, more than 50% of the equity interests in such corporation, measured by reference to the

combined voting power or value of the equity of the corporation, is owned directly or by application of the attribution and constructive

ownership rules of Sections 958(a) and 958(b) of the Code by United States Shareholders.

For this purpose, a “United

States Shareholder”

is any United States person that possesses directly, or by application of the attribution and constructive

ownership rules of Sections 958(a) and 958(b) of the Code, 10% or more of the combined voting power of all classes

of equity in such corporation or 10% or more of the total value of shares of all classes in such corporation.

If a foreign corporation

is a CFC on any day during any taxable year, each United States Shareholder of our Company who owns, directly or indirectly, our

common shares on the last day of the taxable year on which we are a CFC will be required to include in its gross income for United

States federal income tax purposes its pro rata share of our “Subpart F income,”

even if the Subpart F income is not

Subpart F income generally includes passive income but also includes certain related party sales, manufacturing and

services income.

In addition to the inclusion of “Subpart

F income”

of a CFC in the gross income of a United States Shareholder, there may be exposure to an additional tax under the

recently enacted Global Intangible Low Tax Income regime (“GILTI”).

Specifically, the GILTI rules impose an annual

minimum tax on U.S.

Holders of their share of GILTI income generated through CFCs.

This GILTI income very generally equals a CFC’s

income over a 10% return on the CFCs tangible depreciable trade or business assets.

The GILTI tax is 10.5% (until 2026 and 13.12%

for tax years after) on U.S.

Holders who are C corporations, as they are entitled to a 50% deduction (37.5% after 2025) of the

GILTI income as well as a reduced foreign tax credit on foreign taxes paid on the GILTI income.

Holders who are individuals,

estates or trusts may pay substantially more tax on GILTI income, as they are subject to ordinary tax rates (ranging from 10% to

37% plus the net investment income tax of 3.8%).

Holders are not entitled to a deduction on GILTI income or a reduced

foreign tax credit.

There is, however, an election available to such U.S.

Holders to mitigate the tax impact.

If we are a CFC, the PFIC rules set

forth above, even if we are otherwise considered to be a PFIC, will not be applicable.

United States persons who might, directly,

indirectly or constructively, acquire 10% or more of our common shares, and therefore might be a United States Shareholder, should

consider the possible application of the CFC rules and GILTI rules and consult a tax advisor with respect to such matters.

Material Canadian Federal Income Tax Considerations

Non-Residents of Canada

The following portion of the summary is generally

applicable to a U.S.

Holder who, for the purposes of the Tax Act, is not resident in Canada, holds our common shares as capital

property and does not hold our common shares in connection with any business carried on in Canada.

Special rules, which are not

discussed in this summary, may apply to a U.S.

Holder that is an insurer that carries on an insurance business in Canada and elsewhere.

The following portion of the summary is generally applicable

Special rules, which are not discussed in this summary, may apply to a U.S.

Holder that is an insurer that carries

on an insurance business in Canada and elsewhere.

Disposition of Common Shares

Upon the disposition by a U.S.

Holder of our

common shares, the U.S.

Holder will not be subject to tax under the Tax Act in respect of any capital gain realized unless the

common shares disposed of constitute “taxable Canadian property”

Holder of common shares in our

Company, the U.S.

Holder will not be subject to tax under the Tax Act in respect of any capital gain realized unless the common

shares disposed of constitutes “taxable Canadian property”

Holder and the U.S.

Holder is not entitled

to relief under an applicable tax treaty or convention.

Our common shares will generally not constitute “taxable Canadian

property”

Holder is not entitled to

relief under an applicable tax treaty or convention.

Common shares will generally not constitute “taxable Canadian property”

Holder unless at any time in the preceding 60 months both of the following statements were true:

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in which the U.S.

Holder or a person in (i) directly or indirectly holds membership interests, held shares and/or rights to acquire

shares representing 25% or more of the issued shares of any class of our capital stock;

and (b) more than 50% of the fair market

value of our common stock was derived directly or indirectly from one or any combination of (i) real or immovable property situated

in Canada, (ii) Canadian resource properties, (iii) timber resource properties, and (iv) options in respect of, or interests in,

or for civil law rights in, property described in any of (i) to (iii).

Holders whose common shares constitute

“taxable Canadian property”

Holder or a person in (a) directly or indirectly hold membership interests, held shares and/or rights to

acquire shares representing 25% or more of the issued shares of any class of our capital stock;

and (b) more than 50% of the

fair market value of our common stock was derived directly or indirectly from one or any combination of (i) real or immovable

property situated in Canada, (ii) Canadian resource properties, (iii) timber resource properties, and (iv) options

in respect of, or interests in, or for civil law rights in, property described in any of (i) to (iii).

Holders whose common shares constitute “taxable Canadian

property”

should consult their own tax advisors for advice having regard to their particular circumstances.

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at a rate of 25% of the gross amount of the dividends, subject to reduction by any applicable tax convention.

Under the Canada-U.S.

Tax Convention, the rate of withholding tax on dividends generally applicable to U.S.

Holders who beneficially own the dividends

is reduced to 15%.

Under the tax convention

between Canada and the United States (the “Tax Treaty”), the rate of withholding tax on dividends generally applicable

Holders who beneficially own the dividends is reduced to 15%.

In the case of U.S.

Holders that are corporations that beneficially own at least 10% of our voting shares, the

rate of withholding tax on dividends generally is reduced to 5%.

So-called “fiscally transparent”

entities, such as

United States limited liability companies, or LLCs, are not entitled to rely on the terms of the Canada-U.S.

Tax Convention, however

a member of such entity will be considered to have received the dividend directly and to benefit from the reduced rates under the

Tax Convention, where the member is considered under U.S.

taxation law to have derived the dividend through that entity

and by reason of the entity being a fiscally transparent entity, the treatment of the dividend is the same as its treatment would

be if the amount had been derived directly by the member.

Holders that are corporations that beneficially

own at least 10% of our voting shares, the rate of withholding tax on dividends generally is reduced to 5%.

So-called “fiscally

transparent”

entities, such as United States limited liability companies, or LLCs, are not entitled to rely on the terms

of the Tax Treaty, however a member of such entity will be considered to have received the dividend directly and to benefit from

the reduced rates under the Tax Treaty, where the member is considered under U.S.

taxation law to have derived the dividend through

that entity and by reason of the entity being a fiscally transparent entity, the treatment of the dividend is the same as its treatment

would be if the amount had been derived directly by the member.

Members of such entities are regarded as holding their proportionate

share of our common shares held by the entity for the purposes of the Canada-U.S.

Tax Convention.

As discussed above under “Dividend

Policy,”

we have never declared or paid cash dividends on our common shares and do not anticipate paying any cash dividends

in the foreseeable future.

share of our common shares held by the entity for the purposes of the Tax Treaty.

Selected Financial Data

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CAUTIONARY STATEMENT

The discussion below contains forward-looking

statements regarding our financial condition and our results of operations that are based upon our annual consolidated financial

statements, which have been prepared in accordance with generally accepted accounting principles within the United States, or U.S.

GAAP, and applicable U.S.

Securities and Exchange Commission, or SEC, regulations for financial information.

The preparation

of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets,

liabilities, income and expenses, and related disclosure of contingent assets and liabilities.

We evaluate our estimates on

an ongoing basis.

Our estimates are based on historical experience and on various other assumptions that we believe to be

The following

is our only product candidate in the clinical stage of development:

PEDMARK TM (sodium thiosulfate

(STS) anhydrous injection) –has announced results of two Phase 3 clinical trials for the prevention of cisplatin induced

hearing loss, or ototoxicity in children including the pivotal Phase 3 study SIOPEL 6 , “A Multicentre Open Label Randomised

Phase 3 Trial of the Efficacy of Sodium Thiosulfate in Reducing Ototoxicity in Patients Receiving Cisplatin Chemotherapy for

Standard Risk Hepatoblastoma,”

and the proof of concept Phase 3 study “A Randomized Phase 3 Study of Sodium

Thiosulfate for the Prevention of Cisplatin-Induced Ototoxicity in Children”.

following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated

financial statements and related notes appearing at the end of this Annual Report.

Some of the information contained in this discussion

and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our

business, includes forward looking statements that involve risks and uncertainties.

As a result of many factors, including those

factors set forth in the “Risk Factors”

section of this Annual Report, our actual results could differ materially from

the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Our only product

candidate in the clinical stage of development is PEDMARK TM (sodium thiosulfate (STS) anhydrous injection).

announced results of two Phase 3 clinical trials for the prevention of cisplatin induced hearing loss, or ototoxicity in children

including the pivotal Phase 3 study SIOPEL 6 , “A Multicentre Open Label Randomised Phase 3 Trial of the Efficacy of

Sodium Thiosulfate in Reducing Ototoxicity in Patients Receiving Cisplatin Chemotherapy for Standard Risk Hepatoblastoma,”

and the proof of concept Phase 3 study “A Randomized Phase 3 Study of Sodium Thiosulfate for the Prevention of

Cisplatin-Induced Ototoxicity in Children”.

We have announced

results of two Phase 3 clinical trials for the prevention of cisplatin induced hearing loss, or ototoxicity in children including

the pivotal Phase 3 study SIOPEL 6 , “A Multicentre Open Label Randomised Phase 3 Trial of the Efficacy of Sodium Thiosulfate

in Reducing Ototoxicity in Patients Receiving Cisplatin Chemotherapy for Standard Risk Hepatoblastoma,”

and the proof of

concept Phase 3 study “A Randomized Phase 3 Study of Sodium Thiosulfate for the Prevention of Cisplatin-Induced

Ototoxicity in Children”.

We continue to focus our resources on the

development of PEDMARK TM .

We have licensed from OHSU intellectual property

rights for the use of PEDMARK TM as a chemoprotectant and are developing PEDMARK TM as a protectant against

the hearing loss often caused by platinum-based anti-cancer agents in children.

Preclinical and clinical studies conducted by OHSU

and others have indicated that PEDMARK TM can effectively reduce the incidence of hearing loss caused by platinum-based

We have licensed from OHSU intellectual

property rights for the use of PEDMARK TM as a chemoprotectant and are developing PEDMARK TM as a protectant

against the hearing loss often caused by platinum-based anti-cancer agents in children.

Preclinical and clinical studies conducted

by OHSU and others have indicated that PEDMARK TM can effectively reduce the incidence of hearing loss caused by platinum-based

anti-cancer agents.

We have received Orphan Drug Designation in the United States for the use of PEDMARK TM in the prevention

of platinum-induced ototoxicity in pediatric patients.

Hearing loss among children receiving platinum-based

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the dose and duration of chemotherapy, and many of these children require lifelong hearing aids.

There is currently no established

preventive agent for this hearing loss and only expensive, technically difficult and sub-optimal cochlear (inner ear) implants

have been shown to provide some benefit.

In addition, adults undergoing chemotherapy for several common malignancies, including

ovarian cancer, testicular cancer, and particularly head and neck cancer and brain cancer, often receive intensive platinum-based

therapy and may experience severe, irreversible hearing loss, particularly in the high frequencies.

and Europe, it is

estimated annually that over 10,000 children may receive platinum-based chemotherapy.

The incidence of ototoxicity depends

upon the dose and duration of chemotherapy, and many of these children require lifelong hearing aids.

There is currently no established

preventive agent for this hearing loss and only expensive, technically difficult and sub-optimal cochlear (inner ear) implants

have been shown to provide some benefit.

Infants and young children that suffer ototoxicity at critical stages of development lack

speech language development and literacy, and older children and adolescents lack social-emotional development and educational

PEDMARK has been studied by cooperative

groups in two Phase 3 clinical studies of survival and reduction of ototoxicity, The Clinical Oncology Group Protocol ACCL0431

and SIOPEL 6.

Both studies have been completed.

The COG ACCL0431 protocol enrolled one of five childhood cancers typically treated

with intensive cisplatin therapy for localized and disseminated disease, including newly diagnosed hepatoblastoma, germ cell tumor,

osteosarcoma, neuroblastoma, and medulloblastoma.

SIOPEL 6 enrolled only hepatoblastoma patients with localized tumors.

In July 2018, the Pediatric Committee

(PDCO) of the European Medicines Agency (EMA) accepted our pediatric investigation plan (PIP) for Sodium Thiosulfate for

Infusion for the condition of the prevention of platinum-induced ototoxic hearing loss.

An accepted PIP is a prerequisite for

filing a full Marketing Authorization Application (MAA) for a new medicinal product in Europe.

The indication targeted by the

Company’s PIP is for the prevention of platinum-induced ototoxic hearing loss for standard risk hepatoblastoma (SR-HB).

Additional tumor types within the proposed MAA indication will be subject to the Committee for Medicinal Products for Human

Use (CHMP) assessment at the time of the MAA.

No deferred clinical studies were required in the positive opinion given by

The Company was also advised that Sodium Thiosulfate for Infusion is eligible for submission of an application for a

Pediatric Use Marketing Authorization (PUMA).

Therefore, this PIP decision allows Fennec to proceed with the submission of a

PUMA in the European Union (EU) with incentives of automatic access to the centralized procedure and up to 10 years of data

and market protection.

The PUMA is a dedicated MA for new products of medicines previously authorized and no longer under

data or marketing protection, covering the indication and appropriate formulation for medicines developed exclusively for use

in the pediatric population.

In February 2020, Fennec announced that it has submitted a MAA for the prevention of ototoxicity

induced by cisplatin chemotherapy in patients 1 month to < 18 years of age with localized, non-metastatic, solid tumors.

The Company is targeting potential commercial launch of Sodium Thiosulfate for Infusion, if approved, in the first half of

We initiated our rolling FDA New Drug Application

(“NDA”) for PEDMARKTM (tradename for Sodium Thiosulfate for Infusion in the US) for the prevention of ototoxicity induced

by cisplatin chemotherapy in patients 1 month to < 18 years of age with localized, non-metastatic, solid tumors in December

Fennec announced that it has completed its rolling submission of the NDA in February 2020.

The Company is targeting a potential

commercial launch of PEDMARKTM, if approved, in the second half of 2020.

In March 2018, PEDMARKTM received Breakthrough Therapy

and Fast Track designations from the FDA.

Further, PEDMARKTM has received Orphan Drug Designation in the US in this setting.

We have not received and do not expect to

have significant revenues from our product candidate until we are either able to sell our product candidate after obtaining applicable

regulatory approvals or we establish collaborations that provide us with up-front payments, licensing fees, milestone payments,

royalties or other revenue.

We generated a net loss of $12.8 million for the year ended December 31, 2019.

We generated a net loss

of approximately $9.9 million for the year ended December 31, 2018 and had a non-cash gain on the change in derivative liability

of $0.2 million.

In addition, adults undergoing

chemotherapy for several common malignancies, including ovarian cancer, testicular cancer, and particularly head and neck cancer

and brain cancer, often receive intensive platinum-based therapy and may experience severe, irreversible hearing loss, particularly

in the high frequencies.

We estimate in the U.S.

and Europe that

annually over 10,000 children with solid tumors are treated with platinum agents.

The vast majority of these newly diagnosed

tumors are localized and classified as low to intermediate risk in nature.

These localized cancers may have overall survival rates

of greater than 80%, further emphasizing the importance of quality of life after treatment.

The incidence of hearing loss in these

children depends upon the dose and duration of chemotherapy, and many of these children require lifelong hearing aids.

currently no established preventive agent for this hearing loss and only expensive, technically difficult and sub-optimal cochlear

(inner ear) implants have been shown to provide some benefit.

Infants and young children at critical stages of development lack

speech language development and literacy, and older children and adolescents lack speech language development and literacy, and

older children and adolescents lack social-emotional development and educational achievement.

In March 2018, PEDMARK TM

received Breakthrough Therapy and Fast Track designations from the FDA.

Further, PEDMARK TM has received Orphan Drug

Designation in the U.S.

in this setting.

We initiated our rolling New Drug Application

(“NDA”) for PEDMARK TM for the prevention of ototoxicity induced by cisplatin chemotherapy patients 1 month to <

18 years of age with localized, non-metastatic, solid tumors with the FDA in December 2018.

We announced that we had submitted full

completion of the NDA in February 2020.

On April 13, 2020, we announced that the FDA had accepted for filing and granted Priority

Review for our NDA.

The FDA set a Prescription Drug Fee Act (“PDUFA”) target action date of August 10, 2020 for the completion

of the FDA’s review.

On August 10, 2020, we announced that we received a CRL from the FDA regarding our NDA for PEDMARK TM ,

which identified deficiencies in the third-party manufacturing facility that manufactures PEDMARK TM on our behalf.

no clinical safety or efficacy issues were identified during the review and there is no requirement for further clinical data.

fourth quarter of 2020, we engaged in a Type A meeting with the FDA concerning the CRL that we believe was constructive and collaborative.

We are working closely with our third-party drug manufacturer and the FDA to fully address the CRL, and we plan to resubmit our NDA for

PEDMARK TM in the second quarter of 2021.

In August 2018, the Pediatric Committee

(“PDCO”) of the European Medicines Agency (“EMA”) accepted our pediatric investigation plan (PIP) for sodium

thiosulfate with the trade name Pedmarqsi for the condition of the prevention of platinum-induced hearing loss.

An accepted PIP

is a prerequisite for filing a Marketing Authorization Application (“MAA”) for any new medicinal product in Europe.

indication targeted by our PIP is for the prevention of platinum-induced ototoxic hearing loss for standard risk hepatoblastoma

Additional tumor types of the proposed indication will be subject to the Committee for Medicinal Products for Human Use

(“CHMP”) assessment at the time of the MAA.

No deferred clinical studies were required in the positive opinion given

We were also advised that sodium thiosulfate (tradename to be determined) is eligible for submission of an application

for a Pediatric Use Marketing Authorization (“PUMA”).

A PUMA is a dedicated marketing authorization covering the indication

and appropriate formulation for medicines developed exclusively for use in the pediatric population and provides data and market

protection up to 10 years.

Therefore, this decision allows us to proceed with the submission of a PUMA in the European Union (EU)

with incentives of automatic access to the centralized procedure and up to 10 years of data and market protection.

In February 2020,

we announced that we had submitted a MAA for the prevention of ototoxicity induced by cisplatin chemotherapy patients 1 month to

< 18 years of age with localized, non-metastatic, solid tumors.

have not received and do not expect to have significant revenues from our product candidate until we are either able to sell our

product candidate after obtaining applicable regulatory approvals or we establish collaborations that provide us with up-front

payments, licensing fees, milestone payments, royalties or other revenue.

We generated a net loss of $18.1 million for the year

ended December 31, 2020.

We generated a net loss of approximately $12.8 million for the year ended December 31,

As of December 31, 2020, our accumulated deficit was approximately $162.1 million.

Our projections of our capital requirements are

subject to substantial uncertainty.

More capital than we anticipated may be required thereafter.

To finance our continuing

operations, we may need to raise substantial additional funds through either the sale of additional equity, the issuance of debt,

the establishment of collaborations that provide us with funding, the out-license or sale of certain aspects of our intellectual

subject to substantial uncertainty, and more capital than we currently anticipate may be required thereafter.

To finance our

continuing operations, we may need to raise substantial additional funds through either the sale of additional equity, the issuance

of debt, the establishment of collaborations that provide us with funding, the out-license or sale of certain aspects of our intellectual

property portfolio or from other sources.

13 unchanged sentences

fees, consulting fees, insurance and other administrative matters associated in support of our drug development programs.

On February 1, 2019,

Fennec entered into a Loan and Security Agreement with Bridge Bank, a division of Western Alliance Bank, an Arizona corporation,

pursuant to which the Bank agreed to loan $12.5 million to the Company, to be made available if we receive NDA approval of PEDMARK TM

On May 5, 2020, we announced the completion

of an underwritten public offering of 4,800,000 of our common shares at a public offering price of $6.25 per share.

we issued an additional 660,204 common shares in connection with the partial exercise of the underwriters’

over-allotment

The approximate total gross proceeds from the offering were $34,100 ($32,189 net of commissions, fees and issue costs).

On February 1, 2019, our wholly owned

subsidiary Fennec Pharmaceuticals, Inc.

entered into a Loan and Security Agreement (the “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 $12.5 million to Fennec Pharmaceuticals, Inc., to be made available upon NDA approval of PEDMARK TM

by no later than September 30, 2020.

The proceeds from the loan will be used for working capital purposes and to fund general business

requirements in accordance with the terms of the Loan and Security Agreement.

Interest under the Term Loans shall bear interest,

on the outstanding daily balance thereof, at a floating per annum rate equal to the Effective Interest Rate (as defined in the

Loan and Security Agreement) which is equal to the sum of the Prime Rate published in the Wall Street Journal (currently 4.75%)

plus one percent (1.00%).

The debt facility is to have interest-only monthly payments due for the first eighteen months from the

funding date and then monthly principal and interest payments are due through the remainder of the term which has a maturity date

of October 1, 2023.

In connection with the facility, Fennec granted Bridge Bank a warrant to purchase up to 39,130 common shares

at an exercise price of $6.80 per common share, for a term of ten years from the date of issuance, subject to early termination

under certain conditions.

The Loan and Security Agreement was amended on June 26, 2020 to increase the total

potential amount of the loan to $18 million and to extend the outside date for us to receive NDA approval of PEDMARK TM

to December 31, 2020.

In connection with this facility, we issued the Bridge Bank a warrant to purchase up to 39,000 of our

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, we had been amortizing the loan fee and the value of the

warrant over the remainder of the loan term.

Following the receipt of the FDA’s CRL in August 2020, we decided to fully

amortize the remaining portions of the loan fee and the value of the warrants.

The Loan and Security Agreement expired on December 31,

2020 as a result of us not obtaining NDA approval of PEDMARK TM by that date, with no amounts advanced under the facility

prior to its termination.

We believe that the funds raised in our

May 2020 public offering provides us sufficient funding to carry-out our planned activities, including potential NDA approval

and the commencement of commercialization efforts, for at least the next twelve months as we continue our strategic development

of PEDMARK TM .

Results of Operations

Fiscal 2020 versus Fiscal 2019

Fiscal Year Ended

In thousands of U.S.

December 31, 2020

December 31, 2019

Operating expenses:

and development

and administration

operating expense

Derivative income/(loss)

Research and development

General and administration

Total operating expense

Loss from operations

Amortization expense

income and other, net

income (loss)

Research and development expense increased

by $0.6 million in fiscal 2019 as compared to fiscal 2018, primarily due to drug manufacturing activities related to the preparation

for registration batches and additional regulatory activities in preparation for the submission of our new drug application to

each of the FDA and EMA.

The $2.0 million increase in general and

administrative expenses is attributed to a small rise in compensation to officers, directors and key contract employees in fiscal

2019 as compared to fiscal 2018.

Shareholders passed a motion to increase the exercise period of all outstanding option contracts

to a total of ten years in 2019.

This added $1.3 million in G&A in non-cash compensation over the prior year.

Sales and marketing

expenses increased by $0.4 million over the prior year as we began to focus efforts to commercialize PEDMARK TM .

We incurred approximately $0.25 million in executive search services as we continue to build a commercial team.

All of our derivative instruments were exercised

or expired during fiscal 2018.

Amortization expense relates to the Bridge

Bank loan facility as the loan origination fees were capitalized in fiscal 2019.

Interest income decreased in fiscal 2019

as compared to 2018, due to a lower average balance in savings and money market accounts for the comparable periods.

Unrealized gain on securities

Interest income and other, net

Revenues reported represent royalties related to Elion deal with Processa Pharmaceuticals, Inc.

Fennec received $0.005 million in cash and 41,250 in restricted shares of Processa Pharmaceuticals, Inc.

and development expense decreased by $0.5 million in fiscal 2020 as compared to fiscal 2019,

primarily due to the shift from research and development to pre-commercialization efforts

for PEDMARK TM which took place in the first nine months of 2020.

The $5.5 million increase in general and administrative expenses is

attributed to the increase in pre-commercialization expenses.

Further there was a small rise in compensation to officers, directors and

key contract employees in fiscal 2020 as compared to fiscal 2019.

Amortization expense relates to the Bridge Bank loan facility as the loan origination fees were

capitalized in fiscal 2019 and 2020.

After receiving the CRL from the FDA in August 2020, management decided to amortize the

remaining amounts associated with the loan facility.

The facility expired on December 31, 2020.

Interest income decreased in fiscal 2020 as compared to 2019, due to lower interest rates on money

market accounts for the comparable periods.

There was an unrealized gain of $0.1 million on the Processa shares between the date acquired,

October 30, 2020, and December 31, 2020.

Going forward, the Processa shares will be marked to market at each balance

The resulting change in value will result in an unrealized gain or loss.

Quarterly Information

The following table presents selected consolidated

financial data for each of the last eight quarters through December 31, 2019, as prepared under U.S.

GAAP (dollars in thousands,

except per share information).

Net (Loss)/Income for the Period

Basic Net (Loss)/Income per Common Share

Diluted Net (Loss)/Income per Common Share

financial data for each of the last eight quarters through December 31, 2020, as prepared under generally accepted accounting

principles within the United States, or U.S.

GAAP (dollars in thousands, except per share information).

Net (Loss)/Income for the

Basic Net (Loss)/Income per

Diluted Net (Loss)/Income per

March 31, 2019

9 unchanged sentences

Quarter Ended

thousands of U.S.

In thousands of U.S.

December 31, 2020

December 31, 2019

Operating expenses:

2 unchanged sentences

Total operating expense

Loss from operations

Unrealized gain on securities

Interest income

1 unchanged sentence

Other(loss)/income, net

We reported a net loss from operations of

$3.6 million for the three months ended December 31, 2019, compared to a net loss from operations of $3.0 million for the same

period in 2018.

Research and development expenses totaled $1.1 million for the three months ended December 31, 2019, as compared

to a $1.7 million in the same period in 2018 as largely most cost associated with the production of registration batches was incurred

in the first three quarters of 2019.

General and administrative expenses increased by $1.1 million in the three months ended December

31, 2019, as compared to the same period in 2018.

The increase arises from our commercialization activities for PEDMARK TM

as we execute on our plan to be ready to bring product to market co-incidentally with FDA approval, expected to occur later in

There were also increases in compensation expenses in fiscal 2019 as we hired a Chief Commercial Officer in September 2019.

Revenues reported represent royalties

related to Elion deal with Processa Pharmaceuticals, Inc.

Fennec received $0.005 million in cash and 41,250 in

restricted shares of Processa Pharmaceuticals, Inc.

We reported a loss from operations of $3.3 million for the three

months ended December 31, 2020, compared to a loss from operations of $3.7 million for the same period in 2019.

and development expenses totaled $1.2 million for the three months ended December 31, 2020, which was the same for the

same period in 2019.

General and administrative expenses decreased by $0.2 million in the three months ended

December 31, 2020, as compared to the same period in 2019.

The decrease arises from our reduced pre-commercialization

activities for PEDMARK TM as we focus on preparing to resubmit our NDA application to the FDA.

unrealized gain of $0.1 million on the Processa shares between the date acquired, October 30, 2020, and

December 31, 2020.

Going forward, the Processa shares will be marked to market at each balance sheet date.

The resulting

change in value will result in an unrealized gain or loss.

Selected Asset and Liability Data (thousands):

6 unchanged sentences

current liabilities]

Selected Asset and Liability Data (thousands):

December 31, 2019

December 31, 2018

Selected Equity:

3 unchanged sentences

Liquidity and Capital Resources

There was a $9.1 million decrease in cash

and cash equivalents between December 31, 2019 and December 31, 2018.

During the period ended December 31, 2019, cash for operations

was used mainly in regulatory and manufacturing activities and our general and administrative expenses.

The increase in other current assets between

December 31, 2019 and December 31, 2018 primarily relates to an increase in the prepaid amount for Director and Officer insurance

premiums and prepaid conference expenses.

Current liabilities at December 31, 2019

increased from December 31, 2018 primarily due to an increase in accounts payable associated with our commercialization and manufacturing

activities for the production of PEDMARK TM and related regulatory expenses at year-end 2019.

Working capital decreased between December

31, 2019 and December 31, 2018 by $9.7 million.

The decrease was a result of cash used in operations offset by $0.3 million

interest income and the capitalization of $0.3 million loan origination expenses.

Cash outflows related to the regulatory and commercial

development of PEDMARK TM and general and administrative expenses.

We expect increased cash outflows as we prepare regulatory

submission and commercial preparation to launch PEDMARK TM .

There was a $16.7 million increase in cash and cash equivalents between December 31, 2020

and December 31, 2019.

The net increase was the result of our May 2020 public offering of common shares, which raised

net proceeds of $32.0 million, as well as $0.5 million from various stock option exercises, offset by cash used for operating activities.

During the period ended December 31, 2020, cash for operations was used mainly on the pre-commercialization activities of

PEDMARK TM and regulatory submission activities relating to the NDA.

The increase in other current assets between December 31, 2020 and December 31, 2019

primarily relates to the value of the Processa shares and an increase in the prepaid amount for Director and Officer insurance

premiums and costs associated with our at the market offering agreement, which was disclosed on October 20, 2020.

Current liabilities at December 31, 2020 increased $0.076 million compared to December 31, 2019 primarily due to a minor rise in accounts payable associated with our commercialization and manufacturing activities for the production of PEDMARK TM and related regulatory expenses at year-end 2020.

Working capital increased between December 31, 2020 and December 31, 2019 by $17.5 million.

increase was a result of cash used in operations offset by $32.0 million from our May 2020 public offering of common shares,

$0.5 million from stock option exercises and $0.1 million in interest income.

Cash outflows related to the regulatory and pre-commercial

development activities of PEDMARK TM and general and administrative expenses.

Selected Cash Flow Data

4 unchanged sentences

Net cash provided from investing activities

Net cash provided from financing activities

Net cash provided by financing activities

Net cash flow

1 unchanged sentence

for the year ended December 31, 2020 was approximately $15.6 million as compared to $9.1 million in 2019.

This increase relates

to the regulatory and commercial development of PEDMARK TM .

We continue to pursue various strategic alternatives

including collaborations with other pharmaceutical and biotechnology companies.

Our projections of further capital requirements

are subject to substantial uncertainty.

Our working capital requirements may fluctuate in future periods depending upon numerous

factors, including:

This increase

relates to the commercial development of PEDMARK TM , preparation for product launch and regulatory activities.

Net financing

activities provided approximately $32.0 million from a public offering in May of 2020, and approximately $0.5 million from

the exercise of stock options.

We continue to pursue various strategic

alternatives including collaborations with other pharmaceutical and biotechnology companies.

Our projections of further capital

requirements are subject to substantial uncertainty.

Our working capital requirements may fluctuate in future periods depending

upon numerous factors, including:

our ability to obtain additional financial resources;

our ability to enter into collaborations that provide

us with up-front payments, milestones or other payments;

our ability to enter into collaborations

that provide us with up-front payments, milestones or other payments;

results of our research and development activities;

progress or lack of

progress in our preclinical studies or clinical trials;

unfavorable toxicology in our clinical programs, our drug substance requirements

to support clinical programs;

or lack of progress in our preclinical studies or clinical trials;

unfavorable toxicology in our clinical programs, our drug substance

requirements to support clinical programs;

change in the focus, direction, or costs of our research and development programs;

headcount expense;

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our patent claims;

competitive and technological

and technological advances;

the potential need to develop, acquire or license new technologies and products;

our business development activities;

our business development

new regulatory requirements implemented by regulatory authorities;

the timing and outcome of any regulatory review process;

commercialization activities, if any.

the timing and outcome of any regulatory review

and commercialization activities, if any.

We had cash and cash equivalents of approximately

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expenditure requirements as our business is currently conducted for at least the next 12 months.

As of the date of this

filing, we have secured the availability of an additional $12.5 million of debt financing which will be funded if we receive FDA

approval of PEDMARK TM by no later than September 30, 2020.

Financial Instruments

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the principal investment.

At December 31, 2019, we had approximately $0.4 million in our cash accounts and $13.3 million in

savings and money market accounts.

We have never experienced any loss or write down of our money market investments since

our inception.

Our 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 may be made in U.S.

or Canadian obligations and bank securities, commercial paper of

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 also provides for

investment limits on concentrations of securities by issuer and maximum-weighted average time to maturity of twelve

At December 31, 2020, we had approximately $0.7 million in our cash accounts and $29.6 million

in savings and money market accounts.

While we have never experienced any loss or write down of our money market investments

since our inception, the amounts we hold in money market accounts are substantially above the $250,000 amount insured by the FDIC

and may lose value.

Our 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.

may be made in U.S.

or Canadian obligations and 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 also provides for investment limits on concentrations of securities by issuer and

maximum-weighted average time to maturity of twelve months.

This policy applies to all of our financial resources.

The policy risks are primarily the opportunity cost

of the conservative nature of the allowable investments.

As our main purpose is research and development, we have chosen

to avoid investments of a trading or speculative nature.

policy risks are primarily the opportunity cost of the conservative nature of the allowable investments.

As our main purpose

is research and development, we have chosen to avoid investments of a trading or speculative nature.

We classify investments with original maturities

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Off-Balance Sheet Arrangements

Since our inception, we have not had any material

off-balance sheet arrangements.

Since our inception, we have not had any

material off-balance sheet arrangements.

Contractual Obligations and Commitments

Critical Accounting Policies and Estimates

The preparation of financial statements in

conformity with U.S.

The preparation of financial statements

in conformity with U.S.

GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and

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Actual results could differ from these estimates.

An accounting policy is considered to be critical

if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate

is made, and if different estimates reasonably could have been used, or changes in the accounting estimates that are reasonably

likely to occur periodically, could materially impact the financial statements.

The following description of critical accounting

policies, judgments and estimates should be read in conjunction with our December 31, 2019 consolidated financial statements.

An accounting policy is considered to be

critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time

the estimate is made, and if different estimates reasonably could have been used, or changes in the accounting estimates that are

reasonably likely to occur periodically, could materially impact the financial statements.

The following description of critical

accounting policies, judgments and estimates should be read in conjunction with our December 31, 2020 consolidated financial

Stock-based Compensation

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Common shares and warrants

Common shares are recorded as the net proceeds

received on issuance after deducting all share issuance costs and the relative fair value of investor warrants.

recorded at relative fair value and are deducted from the proceeds of common shares and recorded on the consolidated statements

of stockholders’

Common shares are recorded as the net proceeds received on issuance

after deducting all share issuance costs and the relative fair value of investor warrants.

Warrants are recorded at relative

fair value and are deducted from the proceeds of common shares and recorded on the consolidated statements of shareholders’

equity as additional paid-in capital.

Derivative Instruments

The Company applies ASC Topic 815-40,

"Derivatives and Hedging"

(ASC 815-40).

One of the conclusions reached under ASC 815-40 was that an

equity-linked financial instrument would not be considered indexed to the entity's own stock if the strike price is

denominated in a currency other than the issuer's functional currency.

The conclusion reached under ASC 815-40 clarified the

accounting treatment for these and certain other financial instruments.

ASC 815-40 specifies that a contract will not be

treated as a derivative if it meets the following conditions:

(a) indexed to our own stock;

and (b) classified in

stockholders' equity in our statement of financial position.

Our options issued to consultants and denominated in Canadian

dollars were not considered to be indexed to our own stock because the exercise price is denominated in Canadian dollars and

our functional currency is United States dollars.

Therefore, these options were treated as derivative financial instruments

and recorded at their fair value as a liability.

All other outstanding convertible instruments are considered to be indexed

to our stock, because their exercise price is denominated in the same currency as our functional currency, and are included

in stockholders' equity.

During the year ended

December 31, 2018, there were exercises of options to purchase 19 shares of our common shares, which were classified as derivative

This resulted in gross proceeds of $26 and a non-cash gain on the extinguishment of the remaining derivative liability

The fair value of these options was estimated using the Black-Scholes option-pricing model and is summarized below.

Gain/(Loss) on Derivative

Instrument December 31,

Derivative Options

Options (various expiration dates)

Outstanding Share Information

Our outstanding comparative share data at

December 31, 2019 and December 31, 2018 is as follows (in thousands):

Our outstanding comparative share data at December 31,

2020 and December 31, 2019 is as follows (in thousands):

Outstanding Share Type

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Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.

2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures.

The ASU is effective for

us on January 1, 2020, and interim periods within that fiscal year.

Early adoption is permitted.

Certain disclosures in ASU 2018-13

would need to be applied on a retrospective basis and others on a prospective basis.

The Company concluded after evaluation that

ASU 2018-13 will have no significant effect on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases

The new guidance requires the recognition of lease liabilities, representing future minimum lease payments,

on a discounted basis, and corresponding right-of-use assets on a balance sheet for most leases, along with requirements

for enhanced disclosures to give financial statement users the ability to assess the amount, timing and uncertainty of cash flows

arising from leasing arrangements.

In July 2018, the FASB issued ASU 2018-10 and 2018-11 which permit application of the new guidance

at the beginning of the year of adoption, recognizing a cumulative-effect adjustment to the opening balance of retained earnings

in the period of adoption, in addition to the method of applying the new guidance retrospectively to each prior reporting period

The ASU was effective for us on January 1, 2019.

We concluded the impact of this guidance is negligible on our consolidated

financial statements, given we have no material leases.

ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures.

The Company adopted

this ASU on January 1, 2020.

Certain disclosures in ASU 2018-13 would need to be applied on a retrospective basis and others

on a prospective basis.

We concluded after evaluation that ASU 2018-13 has no significant effect on our consolidated financial

In January 2021, the FASB issued ASU

2021-01, Reference Rate Reform (Topic 848).

In this ASU, the FASB refines the scope of Topic 848 to clarify that certain

optional expedients and exceptions therein for contract modifications and hedge accounting apply to contracts that are affected

by the discounting transition.

Specifically, modifications related to reference rate reform would not be considered an event that

requires reassessment of previous accounting conclusions.

The ASU also amends the expedients and exceptions in Topic 848 to capture

the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected

by the discounting transition.

The amendments in the ASU are effective immediately for all entities.

Entities may choose to apply

the amendments retrospectively as of any date from the beginning of an interim period that includes or is subsequent to March 12,

2020, or prospectively to new modifications from any date within an interim period that includes or is subsequent to January 7,

2021, up to the date that financial statements are available to be issued.

The Company chose to apply amendments prospectively

and concluded after evaluation that ASU 2021-01 has no significant effect on our consolidated financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity