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Share-based Payments | 6 Months Ended
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Jun. 30, 2020
Share-based Payment Arrangement [Abstract] |
Share-based Payments | Share-based Payments (a)Warrants The following is a summary of the changes in warrants during the six months ended June 30, 2020 and 2019:
| Weighted average exercise price (C$) |  | Number of warrants
Balance as of January 1, 2020 | $ | 0.26 |  |  | $ | 18,066,662 |
Balance as of June 30, 2020 | $ | 0.26 |  |  | $ | 18,066,662 |
Balance as of January 1, 2019 | $ | 0.26 |  |  | $ | 25,457,623 |
Exercise of warrants | 0.36 |  |  | (7,390,961) |
Balance as of June 30, 2019 | $ | 0.22 |  |  | $ | 18,066,662 |
As of June 30, 2020, the Company had outstanding warrants as follows. For a description of the Altria Warrant, see Note 11.
Grant Date |  | Expiry date |  | Weighted average exercise price (C$) |  | Number of warrants
October 8 – 28, 2015 |  | October 8 – 28, 2020 |  | $ | 0.31 |  |  | $ | 2,976,610 |
May 13 – 27, 2016 |  | May 13 – 27, 2021 |  | 0.25 |  |  | 15,090,052 |
As of June 30, 2020 |  |  |  | $ | 0.26 |  |  | $ | 18,066,662 |
(b)Stock options (i)Stock option plans The Company adopted an amended and restated stock option plan dated May 26, 2015 (the “2015 Stock Option Plan”) which was approved by shareholders of the Company at the annual general meeting of shareholders held on June 28, 2017. The 2015 Stock Option Plan allowed the Company’s Board of Directors (the “Board”) to award options to purchase shares to directors, officers, key employees and service providers of the Company. As of June 28, 2018, no further awards will be granted under the 2015 Stock Option Plan; however, shares may be purchased via option exercise by the holders of any outstanding options previously issued under the 2015 Stock Option Plan. As of June 30, 2020, options to purchase 10,486,569 Company common shares were outstanding under the 2015 Stock Option Plan. On June 28, 2018, the shareholders of the Company approved a stock option plan (the “2018 Stock Option Plan”), which replaced the 2015 Stock Option Plan. As of June 25, 2020, the date on which the 2020 Omnibus Plan (as defined below) was approved by the shareholders of the Company, no further awards will be granted under the 2018 Stock Option Plan; however, shares may be purchased via option exercise by the holders of any outstanding options previously issued under the 2018 Stock Option Plan. As of June 30, 2020, options to purchase 1,727,979 Company common shares were outstanding under the 2018 Stock Option Plan. On March 29, 2020, the Board adopted a new omnibus equity incentive plan (the “2020 Omnibus Plan”), which was approved by the shareholders of the Company at the annual and special meeting of shareholders held on June 25, 2020. The 2020 Omnibus Plan provides for grants of stock options, share appreciation rights, restricted shares, restricted share units and other share-based or cash-based awards, which are subject to terms as determined by the Compensation Committee of the Board, and awards may be granted to eligible employees, non-employee directors and consultants. As of June 30, 2020, no grants of options have been made under the 2020 Omnibus Plan. For the three and six months ended June 30, 2020, the total stock-based compensation expense associated with the stock option plans was $1,770 (June 30, 2019 – $2,647) and $3,500 (June 30, 2019 – $4,418), respectively. (ii) Summary of changes The following is a summary of the changes during the six months ended June 30, 2020 and 2019:
| Weighted average exercise price (C$) |  | Number of options |  | Weighted average remaining contractual term (years)
Balance as of January 1, 2020 | $ | 4.84 |  |  | 14,149,502 |  |  | 2.56
Exercise of options | 2.05 |  |  | (1,807,909) |  |  |
Cancellation, forfeiture and expiry of options | 15.78 |  |  | (127,045) |  |  |
Balance as of June 30, 2020 | $ | 5.13 |  |  | 12,214,548 |  |  | 2.05
Exercisable at June 30, 2020 | 3.42 |  |  | 8,688,645 |  |  | 1.78
Balance as of January 1, 2019 | $ | 2.99 |  |  | 12,902,995 |  |  | 3.35
Issuance of options | 20.81 |  |  | 1,315,787 |  |  |
Exercise of options | 3.76 |  |  | (227,342) |  |  |
Cancellation, forfeiture and expiry of options | 1.63 |  |  | (2,895) |  |  |
Balance as of June 30, 2019 | $ | 4.66 |  |  | 13,988,545 |  |  | 3.04
Exercisable as of June 30, 2019 | 2.40 |  | 6,580,238 |  |  | 2.69
(iii)Fair value of options issued The fair value of the options issued was determined using the Black-Scholes option pricing model, using the following inputs:
|  |  | For the six months ended June 30, 2019
Share price at grant date (per share) |  |  | C$20.65 - C$24.75
Exercise price (per option) |  |  | C$20.65 - C$24.75
Risk-free interest rate |  |  | 1.51% - 1.62%
Expected life of options (in years) |  |  | 5
Expected annualized volatility |  |  | 80%
Expected dividend yield |  |  | —%
Weighted average Black-Scholes value at grant date (per option) |  |  | C$13.29 - C$15.91
Forfeiture rate |  |  | —%
No s tock options were granted under the 2018 Stock Option Plan or the 2020 Omnibus Plan during the six months ended June 30, 2020. During the six months ended June 30, 2019, the weighted average fair value per share at grant date of options was C$13.35. The expected life of the awards represents the period of time stock options are expected to be outstanding and is estimated considering vesting terms and employees’ and non-employees’ historical exercise and post-vesting employment termination behavior. Volatility was estimated by using the historical volatility of the Company, adjusted for the Company’s expectation of volatility going forward. The risk-free interest rate was based on the Bank of Canada government bonds with a remaining term equal to the expected life of the options at the grant date. (c)Restricted share units On May 11, 2020, the Company issued an aggregate of 279,277 restricted stock units (“RSUs”) to certain employees in connection with the 2020 Omnibus Plan. Each RSU entitles the holder to receive upon vesting one common share of the Company. The fair value of these RSUs has been determined based on the quoted market price of the applicable exchange on the date of issuance of C$7.52 per share on TSX or $5.42 per share on NASDAQ. The RSUs vest annually in equal installments over a three-year period following the grant date and have no performance requirements. On September 5, 2019, the Company issued an aggregate of 732,972 RSUs to certain employees in connection with the acquisition of four Redwood Holding Group, LLC subsidiaries (collectively, “Redwood”) and pursuant to Employment Inducement Award Plan. Each RSU entitles the holder to receive upon vesting one common share of the Company. The fair value of these RSUs has been determined based on the quoted market price on the date of issuance of C$15.34 per share. Under the terms of the corresponding RSU agreement, the RSUs vest on the third anniversary following the grant date and have no performance requirements. On July 20, 2020, the Company entered into separation agreements with Robert Rosenheck and another Redwood Wellness, LLC (“Redwood”) employee pursuant to which they resigned from their employment with Redwood. In connection with such separation agreements, the 732972 outstanding and unvested RSUs as of July 20, 2020 to which they were entitled were accelerated and vested as of July 20, 2020. Refer to Note 25 for further information. For the three and six months ended June 30, 2020, the Company recorded $776 and $1,482 (June 30, 2019 – $nil) in share-based compensation expense related to these RSUs, respectively. The following is a summary of the changes in RSUs from January 1, 2020 to June 30, 2020:
| Number of RSUs |  | Share-based reserve
Balance as of January 1, 2020 | 732,972 |  |  | $ | 889 |
Issuance of RSUs | 279,277 |  |  | — |
Vesting of issued RSUs | — |  |  | 1,482 |
Balance as of June 30, 2020 | 1,012,249 |  |  | $ | 2,371 |
No RSUs were granted or outstanding during the six months ended June 30, 2019. (d)Deferred share units On August 10, 2019, the Company established a cash-settled deferred share unit plan (“DSU Plan”) pursuant to which its non-executive directors receive deferred share units (“DSUs”). The DSU Plan is designed to promote a greater alignment of long-term interests between non-executive directors and shareholders. The number of DSUs granted under the DSU Plan (including fractional DSUs) is determined by dividing the amount of remuneration payable by the closing price as reported by the TSX on the trading day immediately preceding the day of grant. DSUs are payable at the time a non-executive director ceases to hold the office of director for any reason and are settled by a lump-sum cash payment, in accordance with the terms of the DSU Plan, based on the fair value of the DSUs at such time. The fair value of the cash payout is determined by multiplying the number of DSUs vested at the payout date by the closing price as reported by the TSX on the trading day immediately preceding the payout date. The fair value of the cash payout is determined at each reporting date based on the fair value of the Company’s common shares at the reporting date and is recorded within other liabilities. The following is a summary of the changes in DSUs from January 1, 2020 to June 30, 2020:
| Number of DSUs |  | Financial liability
Balance as of January 1, 2020 | 33,397 |  |  | $ | 255 |
Liabilities settled | (8,484) |  |  | (46) |
Loss (gain) on revaluation | — |  |  | (56) |
Balance as of June 30, 2020 | 24,913 |  |  | $ | 153 |
No DSUs were granted or outstanding during the six months ended June 30, 2019.

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