Warrants

9 Months Ended

Sep. 30, 2020

Warrants and Rights Note Disclosure [Abstract]

WARRANTS

As part of the Company’s private placement financing and Mortgage on the Joliet, Illinois dispensary, the Company issued warrants to related parties, as well as

un-related

third parties, which allow the holders to purchase Subordinate Voting Shares at an exercise price determined at the time of issuance.

The following table summarizes the number warrants outstanding as of September 30, 2020 and December 31, 2019:


	Number of Shares				Weighted Average Exercise Price (C$)		Weighted Average Contractual Life		Number of Shares		Weighted Average Exercise Price (USD)		Weighted Average Contractual Life
	Liability Classified								Equity Classified
Balance as at December 31, 2019		2,406,811		C$		18.59		4.86		-	$	-		-
Additional Modification Warrants		84,924				14.03		5.00		-		-		-
Dispensary Mortgage Warrants		-				-		-		35,000		9.10		5.00
Warrants Exercised		(5,941	)			12.42		5.00		-		-		-

Balance as at September 30, 2020		2,485,794		C$		18.45		4.87		35,000	$	9.10		5.00

(a)

Additional Modification Warrants

As part of the November 9, 2019 modification of the Notes, the Company agreed to issue 84,924 additional warrants by May 22, 2020 to participating lenders in the event the Company decided to raise additional capital or to the original lenders involved in the May 22, 2019 private placement financing in the event the Company did not. On May 21, 2020, the Company issued the warrants to the original lenders involved in the private placement financing which allows the holder to purchase 84,924 Subordinate Voting Shares. The warrants are denominated in CAD. Upon issuance, the Company recorded an additional amount to debt discount with a corresponding amount to the warrant liability of $572,387,

which was measured at fair value using the following assumptions:


Significant Assumptions	May 21, 2020 (Date of Issuance)
Volatility		100	%
Remaining Term		5 years
Risk Free Rate		0.42	%

(b)

Dispensary Mortgage Warrants

On June 5, 2020, as part of the $1,814,000 promissory note, the Company issued warrants that allow the promissory noteholder to purchase 35,000 Subordinate Voting Shares. These warrants are denominated in USD, which is the Company’s functional currency. As such, upon issuance, the Company recorded an additional amount to debt discount with a corresponding amount to contributed surplus of $181,272 which was measured at fair value using a Black Scholes Options Pricing model. The Company did not incur any other material fees related to the promissory note.

(c)

Liability Classified Warrants Outstanding

The following table summarizes the fair value of the liability classified warrants at September 30, 2020 and December 31, 2019:


Warrant Liability	Strike Price		Warrants Outstanding		September 30, 2020		December 31, 2019
Bridge Financing Warrants	C$	22.90		218,964	$	1,065,000	$	1,385,400
Private Placement Financing Warrants	C$	19.39		1,822,771		13,457,000		12,189,169
Modification Warrants	C$	12.04		360,256		3,251,500		2,305,274
Additional Modification Warrants	C$	14.03		83,803		739,500		—

Totals				2,485,794	$	18,513,000	$	15,879,843

During the three and nine months ended September 30, 2020, the Company recorded a loss of $3,181,114 and a loss of $2,060,770, respectively, on the change in the fair value of the warrant liability within other income (expense) on the unaudited interim condensed consolidated statements of operations.

The following table summarizes the significant assumptions used in determining the fair value of the warrant liability as of each reporting date

ee Note 13 - Fair Value Measurements for additional details

)


Significant Assumptions	September 30, 2020		December 31, 2019
Volatility		85.36 % - 89.50 %		117.43 % - 123.64 %
Remaining Term		2.03 - 4.64 years		2.78 - 4.86 years
Risk Free Rate		0.25 % - 0.34 %		1.68% - 1.69 %

(e)

Equity Classified Warrants Outstanding

The following table summarizes the fair value of the equity classified warrants at September 30, 2020 and December 31, 2019:


Warrants Included in Contributed Surplus	Strike Price		Warrants Outstanding		September 30, 2020		December 31, 2019
Dispensary Mortgage Warrants	$	9.10		35,000	$	181,272	$	—

The following table summarizes the significant assumptions used in determining the fair value of the equity classified warrants as of each reporting date:


Significant Assumptions	September 30, 2020			December 31, 2019
Volatility		80	%		—
Remaining Term		5 years			—
Risk Free Rate		0.37	%		—