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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes For financial reporting purposes, income (loss) from continuing operations before income taxes includes the following components:
|  | Year ended December 31,
|  | 2020 |  | 2019 |  | 2018
Rest of World |  | $ | 12,679 |  |  | $ | 1,169,007 |  |  | $ | (20,923) |
United States |  | (85,952) |  |  | (3,070) |  |  | — |
Total |  | $ | (73,273) |  |  | $ | 1,165,937 |  |  | $ | (20,923) |
The loss before income taxes above excludes losses from discontinued operations of $650 for the year ended December 31, 2020 (December 31, 2019 – $363; December 31, 2018 – $894). Income tax expense consists of the following components:
|  | Year ended December 31,
|  | 2020 |  | 2019 |  | 2018
Current: |  |  |  |  |  |
Rest of World |  | $ | 1,024 |  |  | $ | — |  |  | $ | — |
United States |  | 323 |  |  | — |  |  | — |
Total |  | $ | 1,347 |  |  | $ | — |  |  | $ | — |
Deferred: |  |  |  |  |  |
Rest of world |  | $ | — |  |  | $ | — |  |  | $ | — |
United States |  | — |  |  | — |  |  | — |
Total |  | $ | — |  |  | $ | — |  |  | $ | — |
Included in accounts payable and other liabilities as of December 31, 2020 is $865 (December 31, 2019 – $nil; December 31, 2018 – $nil) related to current income tax expense above. Income tax differs from that computed using the combined Canadian federal and provincial statutory income tax rate of 26.5%. Reconciliation of the expected income tax to the effective tax rate in continuing operations is as follows:
|  | Year ended,
|  | 2020 |  | 2019 |  | 2018
Income (loss) before income taxes |  | $ | (73,273) |  |  | $ | 1,165,937 |  |  | $ | (20,923) |
Effective income tax rate |  | 26.5 | % |  | 26.5 | % |  | 26.5 | %
Expected income tax expense (benefit) |  | $ | (19,417) |  |  | $ | 308,973 |  |  | $ | (5,545) |
Non-taxable income |  | (711) |  |  | (2,156) |  |  | 14 |
Non-deductible share-based compensation |  | 2,498 |  |  | 2,839 |  |  | 2,466 |
Non-deductible expenses |  | 1,364 |  |  | 764 |  |  | — |
Non-deductible transaction costs |  | 3,146 |  |  | 1,523 |  |  | — |
Effect of provincial tax rate difference |  | (15) |  |  | (44) |  |  | (64) |
Effect of tax rates outside of Canada |  | (362) |  |  | 70 |  |  | — |
Fair value gain on financial liabilities |  | (34,250) |  |  | (338,409) |  |  | — |
Changes in valuation allowance |  | 48,227 |  |  | 25,808 |  |  | 3,437 |
Other |  | 867 |  |  | 632 |  |  | (308) |
Income tax expense (recovery), net |  | $ | 1,347 |  |  | $ | — |  |  | $ | — |
The valuation allowance recorded against the loss on discontinued operations is not reflected in the effective tax rate reconciliation presented above for continuing operations. The following table summarizes the significant components of the Company’s deferred tax assets and liabilities as of December 31, 2020 and December 31, 2019:
|  | As of |  |
|  | 2020 |  | 2019 |  |
Deferred assets: |  |  |  |  |  |
Tax loss carryforwards |  | $ | 67,476 |  |  | $ | 30,908 |  |  |
Interest expense carryforwards |  | 1,407 |  |  | — |  |  |
Deferred financing costs |  | 4,233 |  |  | 5,690 |  |  |
Share issuance cost |  | 1,573 |  |  | 2,217 |  |  |
Finance lease obligation |  | 1,953 |  |  | 1,491 |  |  |
Plant and equipment |  | 5,945 |  |  | 871 |  |  |
Investment |  | 307 |  |  | 395 |  |  |
Intangible asset |  | 4,218 |  |  | — |  |  |
Reserve |  | 1,858 |  |  | — |  |  |
Other |  | 570 |  |  | 482 |  |  |
Total deferred tax assets |  | 89,540 |  |  | 42,054 |  |  |
Less valuation allowance |  | (85,935) |  |  | (36,948) |  |  |
Net deferred tax assets |  | 3,605 |  |  | 5,106 |  |  |
Deferred tax liabilities: |  |  |  |  |  |
Inventory |  | — |  |  | (1,227) |  |  |
Plant and equipment |  | — |  |  | — |  |  |
Intangible assets |  | — |  |  | (2,126) |  |  |
Investment |  | — |  |  | — |  |  |
License |  | (1,662) |  |  | (293) |  |  |
Right-of-use assets |  | (1,943) |  |  | (1,460) |  |  |
Total deferred tax liabilities |  | (3,605) |  |  | (5,106) |  |  |
Net deferred tax liability |  | $ | — |  |  | $ | — |  |  |
The realization of deferred tax assets is dependent on the Company’s generating sufficient taxable income in the years that the temporary differences become deductible. A valuation allowance has been provided for the deferred tax assets that the Company determined did not meet the more-likely-than-not recognition threshold under U.S. GAAP. As of December 31, 2020, the Company had net operating losses in Canada, the U.S., and Israel available to offset future years’ taxable income of approximately $177,651, $62,851, and $14,042, respectively. As of December 31, 2019, the Company had net operating losses in Canada, the U.S., and Israel available to offset future years’ taxable income of approximately $92,773, $14,374, and $8,763, respectively. The net operating losses in Canada will begin to expire, for purposes of carryforward, in fiscal year 2032. The net operating losses in the U.S. can be carried forward indefinitely for federal purposes. The net operating losses in Israel can be carried forward indefinitely. Utilization of the net operating loss carryforwards may be subject to limitations under the tax laws applicable in each tax jurisdiction due to ownership changes that could occur in the future. These ownership changes could limit the amount of net operating loss carryforwards and other deferred tax assets that can be utilized to offset future taxable income and tax expense. Specifically, if Altria exercises its warrant the Company would recognize a change in control event and certain Canadian net operating loss carryforwards may be limited. Due to the existence of the valuation allowance, limitations created by ownership changes, if any, will not impact the Company’s effective tax rate. The Company files federal income tax returns in Canada, Israel and the U.S. The Company has open tax years with the taxation jurisdictions. These open years contain certain matters that could be subject to differing interpretations of applicable tax laws and regulations and tax treaties, as they relate to the amount, timing, or inclusion of revenue and expense.
Jurisdiction |  | Open Years
Canada |  | 2016 – 2020
United States |  | 2018 – 2020
Israel |  | 2019 – 2020
The following table outlines the movements in the valuation allowance:
| Balance at beginning of year |  | Change due to foreign exchange |  | Increase |  | Balance at end of year
Year ended December 31, 2020 | $ | (36,948) |  |  | $ | (693) |  |  | $ | (48,294) |  |  | $ | (85,935) |
Year ended December 31, 2019 | (7,931) |  |  | (998) |  |  | (28,019) |  |  | (36,948) |
As of December 31, 2020 and December 31, 2019, the Company recorded a valuation allowance of $85,935 and $36,948, respectively. The valuation allowance increased by $48,294 and $28,019 during the years ended December 31, 2020 and December 31, 2019, respectively. The increase in the valuation allowance during the years ended December 31, 2020 and December 31, 2019 was primarily due to an increase in net operating loss carryforwards, the utilization of which did not meet the more-likely-than-not recognition threshold. Accounting guidance clarifies the accounting for uncertain tax positions and prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Additionally, the authoritative guidance addresses the de-recognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. Only tax positions that meet the more-likely-than-not recognition threshold may be recognized. There were no identified unrecognized tax benefits as of December 31, 2020 or December 31, 2019. The Company considers all earnings and profits of its subsidiaries outside Canada to be indefinitely reinvested. As of December 31, 2020 and December 31, 2019, the amount of undistributed earnings upon which income taxes have not been provided is immaterial to these consolidated financial statements.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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