AURORA CANNABIS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended June 30, 2015
AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
Aurora Cannabis Inc. (formerly Prescient Mining Corp. (“Prescient”)) (the “Company” or “Aurora”) was
incorporated under the provisions of the Business Corporations Act (British Columbia). The Company is
listed for trading on the Canadian Securities Exchange (the “CSE”) under the symbol “ACB”.
Below are the addresses of the Company:
Head office and corporate: Suite 1500 - 1199 West Hastings Street, Vancouver, British Columbia V6E
Registered office:
Operations:
Production facility:
3T5
Suite 1500 – 1055 West Georgia Street, Vancouver, British Columbia V6E
4N7
14613 - 134 Avenue, Edmonton, Alberta T5L 4S9
4439 TWP Road 304, Cremona, Alberta T0M 0R0
This Management’s Discussion and Analysis (“MD&A”) reports on the operating results and financial
condition of the Company for the year ended June 30, 2015 and is prepared as of October •, 2015. The
MD&A should be read in conjunction with the Company’s audited consolidated financial statements for
the year ended June 30, 2015 and for the period from September 11, 2013 (date of incorporation) to June
30, 2014 (“Financial Statements”).
The MD&A and Financial Statements were prepared in accordance with the International Financial
Reporting Standards (the “IFRS”).
The accompanying Financial Statements include the accounts of the Company and its wholly-owned
subsidiaries, Aurora Marijuana Inc., Aurora Cannabis Enterprises Inc., 1769474 Alberta Ltd. and
Australis Capital Inc. All significant intercompany balances and transactions were eliminated on
consolidation.
All dollar amounts referred to in this MD&A are expressed in Canadian dollars except where indicated
otherwise.
The Company’s continuous disclosure documents including the Company’ Listing Statement with respect
to the acquisition of Aurora Marijuana Inc. dated December 9, 2014, are available on SEDAR at
www.sedar.com and CSE website at www.cnsx.ca.
FORWARD-LOOKING STATEMENTS
This MD&A may contain “forward-looking information” within the meaning of Canadian securities
legislation (“forward-looking statements”). These forward-looking statements are made as of the date of
this MD&A and Company does not intend, and does not assume any obligation, to update these forward-
looking statements, except as required under applicable securities legislation. Forward-looking statements
relate to future events or future performance and reflect Company management’s expectations or beliefs
regarding future events and include, but are not limited to, the Company and its operations, its projections
or estimates about its future business operations, its planned expansion activities, the adequacy of its
financial resources, future economic performance and the Company’s ability to become a leader in the
field of medical marijuana. In certain cases, forward-looking statements can be identified by the use of
words such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”,
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AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
“forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words
and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will
be taken”, “occur” or “be achieved” or the negative of these terms or comparable terminology. In this
document, certain forward-looking statements are identified by words including “may”, “future”,
“expected”, “intends” and “estimates”. By their very nature forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. Such factors include, but are not
limited to, the factors discussed in the section “Risk Factors” as well as those factors detailed from time to
time in the Company’s interim and annual financial statements and management’s discussion and analysis
of those statements, all of which are filed and available for review under the Company’s profile on
SEDAR at www.sedar.com and CSE website at www.cnsx.ca. Although the Company has attempted to
identify important factors that could cause actual actions, events or results to differ materially from those
described in forward-looking statements, there may be other factors that cause actions, events or results
not to be as anticipated, estimated or intended. The Company provides no assurance that forward-looking
statements will prove to be accurate, as actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking
statements.
Certain forward-looking statements in this MD&A include, but are not limited to, the Company’s
expansion plans in North America and the receipt from Health Canada of its sales and oil production
licenses.
BUSINESS OVERVIEW
Previously, the Company was engaged in the acquisition, exploration, and development of resource
properties. On December 9, 2014, the Company completed the acquisition of Aurora Marijuana Inc.
(“AMI”) pursuant to a Share Exchange Agreement dated September 9, 2014, whereby Prescient acquired
all of the issued and outstanding securities of AMI in consideration for securities of the Company. The
transaction constituted a reverse takeover (“RTO”) of Prescient by AMI. As part of the acquisition,
Prescient changed its name to Aurora Cannabis Inc. See note 3 to the Company’s audited consolidated
financial statements for the year ended June 30, 2015.
Aurora Cannabis Enterprises Inc. (“ACE”), a wholly-owned subsidiary of the Company, is an Alberta
company and a licensed producer of medical marijuana under the Marihuana for Medical Purposes
Regulations (“MMPR”) issued pursuant to the Controlled Drugs and Substances Act (Canada). on
February 19, 2015, ACE received its license to produce from Health Canada.
As of this date, the Company has completed the construction of its brand new purposeful-built, state-of-
the-art, expandable 55,200 square foot production facility (“Facility”), hired and assembled a team of
professionals and commenced its medical marijuana business operations. The Facility is an office and
plant production building of pharmaceutical production grade quality with hydroponic greenhouse high
pressure sodium lighting and nutrient delivery equipment which is capable of growing up to 8,000
kilograms of medical marijuana per year. It is located off Highway #22 and situated on approximately
154 acres of land in Mountain View County near Cremona, Alberta. It is nestled in the foothills of the
Rocky Mountains which allows for a never-ending supply of clean, pure, mountain-fed water, an ideal
location for security, tax benefits, shipping, farm credit eligibility and product growth.
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AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
The Facility cost approximately $10.2 million as of June 30, 2015. MNP LLP conducted a valuation of
the Company’s Facility in accordance with Canadian Uniform Standards of Professional Appraisal
Practice propagated by the Appraisal Institute of Canada and determined that as of March 1, 2015, the fair
market value of the Facility, which includes the land that has yet to be acquired, building, site
improvements, fixture and equipment, to be between $11.6 million to $12.6 million.
The Company’s current focus is to accelerate its business growth and expansion plans including
developing exclusive partnerships with North American cannabis companies, acquiring distressed
facilities that failed to obtain licenses, creating alliances throughout the cannabis space with doctors,
scientists, pharmacies, retail, etc., acquiring dispensary process and production licenses in the U.S. and
pursuing import and export contracts under the MMPR.
RECENT DEVELOPMENTS
Completion of Pre-License Assessments by Health Canada and Receipt of Production License for
Building Number 3
On September 25, 2015, Health Canada inspectors from the Regions and Programs Bureau (“RAPB”)
completed their latest assessments in response to the Company’s active section 29 license amendment
applications. The assessment visit commenced on September 22, 2015.
On the same day, Aurora received approval for its Building Number 3 Production license under the
MMPR. Aurora’s entire facility is now approved to produce dried medical cannabis.
Aurora anticipates receiving further news regarding the additional section 29 license amendment
applications including the Cannabis Oil Production License.
In anticipation of the receipt of the cannabis oil production license, Aurora has completed the construction
of two rooms dedicated to high-quality, pharmaceutical-grade cannabis extractions and has purchased the
equipment needed for this. Aurora anticipates the extraction license to be issued in the near term.
Additionally, Aurora has laid the groundwork for implementing two revolutionary, safe delivery
mechanisms for extracted cannabinoids and terpenes that prescribing physicians and patients will both
appreciate.
Closing of $2.7 Million Debt Financings
In September 2015, the Company closed aggregate debt financings of $2.7 million as follows:
1. Unsecured loan of $1,050,000 from companies controlled by Terry Booth and Steve Dobler, directors
and officers of the Company (“Related Party Loans”). These loans are unsecured and mature on the
later of: (i) the Company reporting two consecutive profitable quarters; and (ii) August 1, 2016. No
interest shall be paid on the loans until the Company reports a positive cash flow quarter and at such
time, the loan will bear interest at 4% per annum, compounded annually.
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AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
As of the date hereof, the Company owes approximately $6,895,000 to its directors and companies
controlled by directors and officers of the Company. The directors agreed to amend the terms of the
previous loans to have the same terms as above.
2. Aurora’s wholly-owned subsidiary, 1769474 Alberta Ltd. (“1769474”), entered into a secured
mortgage financing (the “Mortgage”) of $1,650,000 on its 55,200 square foot production facility on
approximately 154 acres of land located within Mountain View County, Cremona, Alberta
(“Mortgaged Property”).
The Mortgage has a term of six (6) months at a rate of 12% for the duration of the term, calculated
and compounded monthly, and is secured by a first mortgage on the Mortgaged Property and
corporate guarantees by the Company, the CEO of the Company and a company owned by the CEO
and the President of the Company. 1769474 shall pay $15,500 per month towards interest and 2.5%
brokerage fees on the principal amount of the loan.
Washington Project
The Company’s joint venture in Washington, Australis Holdings LLP, continues with the engineering and
design on the Bellingham project. The preliminary drawings have been received and are being reviewed.
Washington regulators announced plans to begin Phase 2 of their medical cannabis program including to
once again accept license applications on October 12, 2015, for the first time since 2012.
OTCQB Listing
On July 21, 2015, Aurora’s common shares commenced trading on the OTCQB under the symbol
ACBFF. Real-time quotes and market information on the Company are available at the OTC website.
Changes to the Board of Directors
Adam Szweras was appointment to the Board effective August 10, 2015. Mr. Szweras has practiced
corporate and securities law since 1996. In January, 2006, he founded Foundation Markets Inc., a
brokerage firm licensed as an exempt market dealer, and FMI Capital Advisory Inc., a merchant bank,
where he continues as chairman. In February, 2006, Mr. Szweras joined Fogler, Rubinoff LLP as a
partner where he continues to practise corporate and securities law. Mr. Szweras has an LLB from the
Osgoode Hall Law School at York University.
On August 10, 2015, Marc Levy resigned as a director of the Company.
Chuck Rifici was appointed to the Board effective September 1, 2015. Mr. Rifici is the co-founder and
former chief executive officer of Tweed Marijuana Inc. and currently a director of the Liberal Party of
Canada. Prior to Tweed, he served as chief financial officer of various technology firms such as Select
Start Studios (acquired by Shopify), TekSavvy Solutions Inc. and Cybersurf Corp. Mr. Rifici is a
chartered professional accountant. He obtained his MBA from Queen's University and a BASc in
computer engineering from the University of Ottawa.
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AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
Other Appointments
Neil Belot was appointed as the Company’s Chief Brand Officer (CBO). As CBO, Mr. Belot is
responsible for stewarding the Company's brand image, promise and client experience while creating new
business opportunities consistent with maintaining and raising the Aurora Standard. Mr. Belot has a BBA
from Acadia University in Wolfville, N.S., a finance-focused MBA from Dalhousie University in Halifax,
N.S., an international MBA exchange with Copenhagen Business School in Denmark, and a certificate in
energy derivatives, markets, instruments and hedging from the Oxford Princeton program. In joining
Aurora, Mr. Belot resigned his position as the inaugural executive director of the Canadian Medical
Cannabis Industry Association (CMCIA), the medical cannabis industry's trade association for licensed
producers (LPs) under the MMPR. In addition to leading CMCIA's advocacy work and lobbying efforts,
Mr. Belot also acted as the industry association's primary point of contact for the media, regulators,
patient organizations, partners and other key stakeholders. Previously, Mr. Belot served on the board of
directors for a patient-focused national charity called the Canadian Transverse Myelitis Association, was
a public servant in several ministries within the Ontario government and was the gas portfolio and energy
services manager with Housing Services Corp., managing one of North America's largest group energy
hedging, procurement and energy services programs.
Penny Sterling was appointed as Aurora's Quality Assurance Director. Ms. Sterling has over 20 years of
quality management and regulatory experience in the pharmaceutical industry, including Banner
Pharmacaps (Canada) Ltd. and Olds SoftGels Inc. Her strong regulatory background and knowledge of
Health Canada, Canadian Food Inspection Agency (CFIA), and Food and Drugs Act (FDA) standards
will ensure that Aurora adheres to the highest standards of safety and quality assurance to provide the
highest-quality medical cannabis products to patients.
RISK FACTORS
This section discusses factors relating to the business of Company that should be considered by both
existing and potential investors. The information in this section is intended to serve as an overview and
should not be considered comprehensive and the Company may face risks and uncertainties not discussed
in this section, or not currently known to us, or that we deem to be immaterial. All risks to the Company’s
business have the potential to influence its operations in a materially adverse manner.
Reliance on License
The ability of the Company to successfully grow, store and sell medical marijuana in Canada is dependent
on Aurora’s current production license from Health Canada (the “License”). The License is subject to
ongoing compliance and reporting requirements. Failure to comply with the requirements and terms of the
License or any failure to maintain the License or any failure to renew the License after its expiry date,
would have a material adverse impact on the business, financial condition and operating results of the
Company. Although the Company believes that it will meet the requirements of the MMPR for future
extensions or renewals of the License, there can be no assurance that Health Canada will extend or renew
the License or, if extended or renewed, that it will be extended or renewed on the same or similar terms.
Should Health Canada not extend or renew the License or should they renew the license on different
terms, the business, financial condition and operating results of the Company would be materially
adversely affected.
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AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
The Company currently has pending license applications with Health Canada and is awaiting the approval
and issuance of the license to sell dried marijuana and license to produce cannabis oil by health Canada
(the “Licenses”). Although the Company believes it will meet the requirements of MMPR for the
Licenses, there can be no guarantee that Health Canada will approve and grant the Licenses. Should
Health Canada not grant the Licenses, the business, financial condition and results of the operation of the
Company would be materially adversely affected.
Regulatory Risks
The activities of the Company are subject to regulation by governmental authorities, particularly Health
Canada. Achievement of the Company’s business objectives are contingent, in part, upon compliance
with regulatory requirements enacted by these governmental authorities and obtaining all regulatory
approvals, where necessary, for the sale of its products. The Company cannot predict the time required to
secure all appropriate regulatory approvals for its products, or the extent of testing and documentation that
may be required by governmental authorities. Any delays in obtaining, or failure to obtain regulatory
approvals would significantly delay the development of markets and products and could have a material
adverse effect on the Company’s business, results of operations and financial condition.
Change in Laws, Regulations and Guidelines
The Company’s business will be subject to particular laws, regulations, and guidelines. The production
and distribution of medical marijuana is a highly regulated field, and although the Company intends to
comply with all laws and regulations, there is no guarantee that the governing laws and regulations will
not change which will be outside of the Company’s control. On March 21, 2014, the Federal Court of
Canada issued an order allowing certain individuals to continue under their MMAR licenses, thereby
affecting the repeal of the MMAR. As of the date of this MD&A, the Government of Canada has decided
to appeal the order; however, it is unclear what a final ruling on this issue may be, and how it may affect
the Company’s business. It is possible that a ruling in favour of the original order could allow persons
who had a license under the MMAR to opt out of the new MMPR regime, thereby decreasing the size of
the market for the Company’s business, and potentially materially and adversely affecting the Company’s
business, its results of operations and financial condition.
On June 11, 2015, the Supreme Court of Canada issued a decision with respect to the MMAR, affirming
that for those persons entitled to possess dried cannabis, it was unconstitutional to restrict possession of
non-dried forms of cannabis. The impact of this decision on the operations of the Company remains
unclear, and any regulatory response by the government is uncertain at this time.
On July 8, 2015, following the June 11, 2015 Supreme Court ruling described above, Health Canada
issued certain exemptions under the Controlled Drugs and Substances Act (Canada) (“CDSA”), which
includes a Section 56 Class Exemption for Licensed Producers under the MMPR to conduct activities
with cannabis (the “Section 56 Exemption”), which permits Licensed Producers to apply for a
supplemental license to produce and sell cannabis oil and fresh marijuana buds and leaves, in addition to
dried marijuana (this does not permit Licensed Producers to sell plant material that can be used to
propagate marijuana). The Company has already submitted an application for a supplemental license,
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AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
which may or may not be granted. If granted, the Company will be required to meet the conditions set out
in the Section 56 Exemption with respect to production practices, testing, and product specifications.
On October 19, 2015, a new federal government was elected and one of its campaign promises was to
legalize and regulate marijuana. It is uncertain as to when and how such law will be enacted through
legislation.
While the impact of all of the above changes is uncertain and is dependent on which laws, regulations or
guidelines are changed and on the outcome of any such court actions, it is not expected that any such
changes would have an effect on the Company’s operations that are materially different than the effect on
similar-sized companies in the industry.
Limited Operating History and No Assurance of Profitability
Aurora was incorporated in 2013 and as of this date, has entered the production stage but not the sales and
distribution stage. The Company will be subject to all of the business risks and uncertainties associated
with any early-staged enterprise, including under-capitalization and the risks that it will be unable to
successfully produce medical marijuana, or establish a market for its products and services, achieve its
growth objectives, and/or ultimately become profitable. There can be no assurance that consumer demand
for the products will be as anticipated, or that the Company will become profitable.
Unfavourable Publicity or Consumer Perception
The success of the medical marijuana industry may be significantly influenced by the public’s perception
of marijuana’s medicinal applications. Medical marijuana is a controversial topic, and there is no
guarantee that future scientific research, publicity, regulations, medical opinion and public opinion
relating to medical marijuana will be favourable. The medical marijuana industry is an early-stage
business that is constantly evolving with no guarantee of viability. The market for medical marijuana is
uncertain, and any adverse or negative publicity, scientific research, limiting regulations, medical opinion
and public opinion relating to the consumption of medical marijuana may have a material adverse effect
on our operational results, consumer base and financial results.
Competition
The market for the Company’s product does appear to be sizeable and Health Canada has only issued a
limited number of licenses under the MMPR to produce and sell medical marijuana. As of this date, there
are approximately 26 licensed producers in Canada. As a result, the Company expects significant
competition from other companies due to the recent nature of the MMPR regime. A large number of
companies appear to be applying for production licenses, some of which may have significantly greater
financial, technical, marketing and other resources, may be able to devote greater resources to the
development, promotion, sale and support of their products and services, and may have more extensive
customer bases and broader customer relationships.
Should the size of the medical marijuana market increase as projected, the demand for product will
increase as well, and in order for the Company to be competitive it will need to invest significantly in
research and development, marketing, production expansion, new client identification, and client support.
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AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
If the Company is not successful in achieving sufficient resources to invest in these areas, the Company’s
ability to compete in the market may be adversely affected, which could materially and adversely affect
the Company’s business, its financial condition and operations.
Uninsured or Uninsurable Risk
The Company may become subject to liability for risks against which it cannot insure or against which
the Company may elect not to insure due to the high cost of insurance premiums or other factors. The
payment of any such liabilities would reduce the funds available for the Company’s usual business
activities. Payment of liabilities for which the Company does not carry insurance may have a material
adverse effect on the Company’s financial position and operations.
Key Personnel
The Company’s success will depend on its directors’ and officers’ ability to develop the Company
business and manage its operations, and on the Company ability to attract and retain key quality assurance,
scientific, sales, public relations and marketing staff or consultants once operations begin. The loss of any
key person or the inability to find and retain new key persons could have a material adverse effect on the
Company’s business. Competition for qualified technical, sales and marketing staff, as well as officers
and directors can be intense and no assurance can be provided that the Company will be able to attract or
retain key personnel in the future, which may adversely impact the Company’s operations.
Conflicts of Interest
Certain of the Company directors and officers are also directors and operators in other companies.
Situations may arise in connection with potential acquisitions or opportunities where the other interests of
these directors and officers conflict with or diverge from the Company interests. In accordance with the
BCBCA, directors who have a material interest in any person who is a party to a material contract or a
proposed material contract are required, subject to certain exceptions, to disclose that interest and
generally abstain from voting on any resolution to approve the contract.
In addition, the directors and the officers are required to act honestly and in good faith with a view to its
best interests. However, in conflict of interest situations, the Company’s directors and officers may owe
the same duty to another company and will need to balance their competing interests with their duties to
the Company. Circumstances (including with respect to future corporate opportunities) may arise that
may be resolved in a manner that is unfavourable to the Company.
Agricultural Operations
Since the Company’s business will revolve mainly around the growth of medical marijuana, an
agricultural product, the risks inherent with agricultural businesses will apply. Such risks may include
disease and insect pests, among others. Although the Company expects to grow its product in a climate
controlled, monitored, indoor location, there is not guarantee that changes in outside weather and climate
will not adversely affect production. Further, any rise in energy costs may have a material adverse effect
on the Company’s ability to produce medical marijuana.
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AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
Transportation Disruptions
As a business revolving mainly around the growth of an agricultural product, the ability to obtain speedy,
cost-effective and efficient transport services will be essential to the prolonged operations of the
Company’s business. Should such transportation become unavailable for prolonged periods of time, there
may be a material adverse effect on the Company’s business, financial situation, and operations.
Fluctuating Prices of Raw Materials
The Company revenues, if any, are expected to be in large part derived from the production, sale and
distribution of marijuana. The price of production, sale and distribution of marijuana will fluctuate widely
due to the how young the marijuana industry is and is affected by numerous factors beyond the
Company’s control including international, economic and political trends, expectations of inflation,
currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative
activities and increased production due to new production and distribution developments and improved
production and distribution methods. The effect of these factors on the price of product produced by the
Company and, therefore, the economic viability of any of the Company’s business, cannot accurately be
predicted.
Environmental and Employee Health and Safety Regulations
The Company’s operations are subject to environmental and safety laws and regulations concerning,
among other things, emissions and discharges to water, air and land; the handling and disposal of
hazardous and non-hazardous materials and wastes, and employee health and safety. The Company will
incur ongoing costs and obligations related to compliance with environmental and employee health and
safety matters. Failure to obtain an Environmental Compliance Approval or otherwise comply with
environmental and safety laws and regulations may result in additional costs for corrective measures,
penalties or in restrictions on our manufacturing operations. In addition, changes in environmental,
employee health and safety or other laws, more vigorous enforcement thereof or other unanticipated
events could require extensive changes to the Company’s operations or give rise to material liabilities,
which could have a material adverse effect on the business, results of operations and financial condition
of the Company.
Intellectual Property
The success of the Company’s business depends in part on its ability to protect its ideas and technology.
Aurora has no patented technology or trademarked business methods at this time nor has it applied to
register any patents. AMI has applied to register the trademark “Aurora” and the application has
proceeded to advertisement. AMI hopes to receive an approval notice from the Canadian Intellectual
Property Office shortly.
Even if the Company moves to protect its technology with trademarks, patents, copyrights or by other
means, Aurora is not assured that competitors will not develop similar technology, business methods or
that Aurora will be able to exercise its legal rights. Other countries may not protect intellectual property
rights to the same standards as does Canada. Actions taken to protect or preserve intellectual property
rights may require significant financial and other resources such that said actions have a meaningfully
impact our ability to successfully grow our business.
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AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
Political and Economic Instability
The Company may be affected by possible political or economic instability. The risks include, but are not
limited to, terrorism, military repression, extreme fluctuations in currency exchange rates and high rates
of inflation. Changes in medicine and agriculture development or investment policies or shifts in political
attitude in certain countries may adversely affect the Company’s business. Operations may be affected in
varying degrees by government regulations with respect to restrictions on production, distribution, price
controls, export controls, income taxes, expropriation of property, maintenance of assets, environmental
legislation, land use, land claims of local people and water use. The effect of these factors cannot be
accurately predicted.
Liquidity and Future Financing
The Company is in the development and early operations stage and has not generated any revenues. The
Company will likely operate at a loss until its business becomes established and therefore may require
additional financing in order to fund future operations and expansion plans. The Company’s ability to
secure any required financing to sustain its operations will depend in part upon prevailing capital market
conditions, as well as the Company’s business success. There can be no assurance that the Company will
be successful in its efforts to secure any additional financing or additional financing on terms satisfactory
to the Company’s management. If additional financing is raised by issuing Company shares, control may
change and shareholders may suffer additional dilution. If adequate funds are not available, or are not
available on acceptable terms, the Company may be required to scale back its business plan or cease
operating.
Speculative Nature of Investment
An investment in the Company common shares carries a high degree of risk and should be considered as a
speculative investment by purchasers. The Company has no history of earnings, limited cash reserves, a
limited operating history, has not paid dividends, and is unlikely to pay dividends in the immediate or
near future. The Company is in the development and planning phases of its business and has not started
commercialization of its products and services. The Company’s operations are not yet sufficiently
established such that the Company can mitigate the risks associated with the Company planned activities.
Market Risk for Securities
The market price for the common shares of the Company could be subject to wide fluctuations. Factors
such as commodity prices, government regulation, interest rates, share price movements of peer
companies and competitors, as well as overall market movements, may have a significant impact on the
market price of the Company. The stock market has from time to time experienced extreme price and
volume fluctuations, which have often been unrelated to the operating performance of particular
companies.
Global Economy Risk
An economic downturn of global capital markets has been shown to make the raising of capital by equity
or debt financing more difficult. The Company will be dependent upon the capital markets to raise
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AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
additional financing in the future, while it establishes a user base for its products. As such, the Company
is subject to liquidity risks in meeting its development and future operating cost requirements in instances
where cash positions are unable to be maintained or appropriate financing is unavailable. These factors
may impact the Company’s ability to raise equity or obtain loans and other credit facilities in the future
and on terms favorable to the Company and its management. If uncertain market conditions persist, the
Company’s ability to raise capital could be jeopardized, which could have an adverse impact on the
Company’s operations and the trading price of the Company’s shares on the CSE.
Dividend Risk
The Company has not paid dividends in the past and does not anticipate paying dividends in the near
future. The Company expects to retain its earnings to finance further growth and, when appropriate, retire
debt.
Share Price Volatility
The Company’s shares are listed for trading on the CSE. As such, external factors outside of the
Company’s control such as actual or anticipated fluctuations of quarterly operating results, changes in the
economic performance or market valuations of companies in the industry in which the Company operates
and sentiments toward the medical marijuana sector stocks may have a significant impact on the market
price of the Company’s shares.
Global stock markets, including the CSE, have from time-to-time experienced extreme price and volume
fluctuations that have often been unrelated to the operations of particular companies. Accordingly, the
market price of the common shares may decline even if the Company’s operating results, underlying asset
values or prospects have not changed. Additionally, these factors, as well as other related factors, may
cause decreases in asset values that are deemed to be other than temporary, which may result in
impairment losses. There can be no assurance that continuing fluctuations in price and volume will not
occur. If such increased levels of volatility and market turmoil continue, the Company’s operations could
be adversely impacted and the trading price of the common shares may be materially adversely affected.
Significant Ownership Interest of Management and Directors
The Company’s management, directors, co-founders and employees own a substantial number of the
outstanding common shares (on a fully diluted basis). As a group, these individuals could exercise
substantial control or influence over matters requiring shareholder approval, such as election of directors,
approval of transactions, determination of significant corporate actions and changes to share structure. In
addition, these shareholders could delay or prevent a change in control of the Company that could
otherwise be beneficial to the Company’s shareholders. Until further rounds of financing are completed,
other shareholders may be limited in their ability to exercise control over important corporate decisions.
Costs of Being a Publicly-Traded Company
As the Company has publicly-traded securities, the Company will incur significant legal, accounting and
filing fees. Securities legislation and the rules and policies of the CSE require listed companies to, among
other things, adopt corporate governance and related practices, and to continuously prepare and disclose
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AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
material compliance costs.
SELECTED ANNUAL INFORMATION
The following selected financial data with respect to the Company’s financial condition and results of
operations has been derived from the audited consolidated financial statements of the Company for the
years ended June 30, 2015 and 2014, prepared in accordance with IFRS. The selected financial data
should be read in conjunction with those consolidated financial statements and the notes thereto.
Interest and other income
Net loss and comprehensive loss
Loss per share
Total assets
Total long term liabilities
Cash dividends declared per share
2015
$
27,639
(9,518,369)
(0.12)
13,562,622
2,292,008
-
2014
$
-
(1,823,535)
(0.11)
5,491,867
-
-
Included in net loss and comprehensive loss for fiscal 2015 were RTO listing costs of $5,060,932 which
consisted of the estimated fair value of the consideration paid of $6,192,077 (being 53,334,000 notional
common shares of AMI at $0.116 per share), the fair value of finder’s shares of $348,300 (being
3,000,000 common shares at $0.116 per share), the fair value of performance shares of $2,322,000 (being
20,000,000 performance shares at $0.116 per share) and the estimated fair value of 11,250,000 warrants
exchanged of $509,759 less the net assets acquired of $4,425,090 and cash transaction costs of $113,886,
with respect to the reverse takeover of Aurora Marijuana Inc. In addition, the Company recorded share-
based payments of $872,587 for stock options granted and vested in fiscal 2015.
Summary of Quarterly Results
The following table presents selected financial information from continuing operations for the most recent
eight quarters:
Quarter ended
June 30, 2015
March 31, 2015
December 31, 2014
September 30, 2014
June 30, 2014
March 31, 2014
December 31, 2013
September 30, 2013
Finance &
Other Income
Income (Loss)
Earnings (Loss)
per share
$
(560,335)
(759,586)
(7,273,291)
(925,157)
(1,515,300)
(97,593)
(210,642)
-
$
(0.01)
(0.01)
(0.09)
(0.01)
(0.10)
-
(0.01)
-
$
9,139
18,500
-
-
-
-
-
-
12
AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
The increase in net loss each quarter was a result of increased expenditures incurred by the Company in
managing the construction of its Facility, hiring of employees for its medical cannabis operations,
marketing and product development. During the quarter ended December 31, 2014, the Company
recorded listing costs of $5,060,932 with respect to the reverse takeover of Aurora Marijuana Inc.
RESULTS OF OPERATIONS
During the year ended June 30, 2015, the Company reported a net loss of $9,518,369 as compared to a net
loss of $1,823,535 during the year ended June 30, 2014. The increase in net loss of $7,694,834 mainly
resulted from the Company’s RTO listing expense of $5,060,932. In addition, there were increases in
depreciation of $304,796, general and administration of $1,439,222, marketing and promotion expense of
$814,963, share-base payments of $872,587 and finance costs of $325,608.
General and administration (“G&A”) expenses were $1,735,602 for the year ended June 30, 2015
compared to $296,380 for the period from September 11, 2013 (date of incorporation) to June 30, 2014.
The increase was primarily attributable to hiring of additional management and staff for operations,
additional support required to sustain the growing requirements of the Company and its subsidiaries and
increased corporate activities as the Company went public.
Marketing and promotion amounted to $1,021,807 for the year ended June 30, 2015 compared to
$206,844 for the period from September 11, 2013 (date of incorporation) to June 30, 2014. The increase
was a result of hiring of sales and marketing personnel, marketing costs related to the building of the
Company’s brand and other marketing programs and initiatives.
Depreciation of property, plant and equipment increased to $304,796 for the year ended June 30, 2015
from $Nil for the period from September 11, 2013 (date of incorporation) to June 30, 2014. The property,
plant and equipment only became available for use during the third quarter as the Company commenced
its operations.
Finance and other costs were $325,608 for the year ended June 30, 2015 compared to $Nil for the period
from September 11, 2013 (date of incorporation) to June 30, 2014. The amount relates to interest on new
loans as well as interest accretion on convertible loans. The outstanding loans in the prior period bore no
interest.
During the year ended June 30, 2015, the Company recorded share-based payments of $872,587 for stock
options and warrants granted and vested during the period. No share-based payments were recorded in the
previous period.
During the year ended June 30, 2015, the Company completed the reverse takeover of AMI and recorded
a RTO listing expense of $5,060,932. This amount reflected the estimated fair value of the consideration
paid of $6,192,077 for the acquisition (being 53,334,000 notional common shares of AMI at $0.116 per
share) less the net assets of Prescient of $4,425,090 plus other transaction costs incurred in the RTO
which consisted of 20,000,000 performance shares issued at a value of $2,322,000, 3,000,000 common
shares for finders’ fees at a value of $348,300, revaluation of warrants exchanged of $509,759 and
aggregate legal and audit fees of $113,886. During the period from September 11, 2013 (date of
13
AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
incorporation) to June 30, 2014, the Company recorded compensation expense of $1,021,156 related to
the acquisition of ACE (formerly 1755517 Alberta Ltd.).
LIQUIDITY AND CAPITAL RESOURCES
As of this date, the Company has not started generating revenues from operations and has financed its
operations and met its capital requirements primarily through equity and debt financings.
The Company’s objectives when managing its liquidity and capital resources are to generate sufficient
cash to fund the Company’s operating and working capital requirements. The Company reported working
capital deficit of $6,341,209 at June 30, 2015 as compared to working capital deficit of $2,471,362 at
June 30, 2014, representing a decrease in working capital by $3,869,847.
Net cash and cash equivalents on hand decreased by $600,914 from $916,767 as at June 30, 2014 to
$315,853 as at June 30, 2015. The decrease in cash was mainly attributable to cash used for operating
activities of $3,324,178, cash outflows for investing activities of $7,835,298 offset by cash inflows from
financing activities of $10,558,562.
Operating Activities
For the year ended June 30, 2015, cash flow used for operating activities was $3,324,178 compared to
$965,106 for the year ended June 30, 2014. The increase in cash flow used for operating activities of
$2,359,072 was primarily due to increases in general and administration expenditures and marketing and
promotion.
Investing Activities
For the year end ended June 30, 2015, the Company had net cash outflows relating to investing activities
of $7,835,298 as compared to $2,421,522 for the year ended June 30, 2014. Investing activities during the
current period included $7,049,736 invested in the building and $478,226 invested in equipment.
Financing Activities
Net cash flows provided by financing activities for the year ended June 30, 2015 were $10,558,562
compared to $4,303,395 for period from September 11, 2013 (date of incorporation) to June 30, 2014.
During the year ended June 30, 2015, the Company received $4,266,335 from short term and loan term
loans, $2,750,000 from convertible loans, $57,883 from exercise of options and $116,600 from exercise
of warrants, assumed pre-RTO loans from Prescient of $5,010,000 offset by note receivable of $1,680,506
and financing fees paid of $54,000.
As of the date of this MD&A, financing for the Company’s operations is also potentially available
through the exercise of share purchase warrants, RTO replacement warrants and vested stock options (See
“Summary of Outstanding Share Data”). However, there can be no assurance that any of these
outstanding convertible securities will be exercised, particularly if the trading price of the common shares
on the Exchange does not exceed, by an material amount and for a reasonable period, the exercise price of
such convertible securities at some time prior to their expiry dates.
14
AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
The Company needs to raise additional capital to fund its operations, development and expansion plans
for the next twelve months. Although the Company has previously been successful in raising the funds
required for its operations, there can be no assurance that the Company will have sufficient financing to
meet its capital requirements or that additional financing will be available on terms acceptable to the
Company in the future.
Liquidity and Capital Resource Measures
The Company’s major capital expenditures in 2016 will consist of the purchase of additional Facility
equipment that will increase the Company’s production efficiencies.
Loans and Credit Facilities
Type of loan
Short term
Unsecured term loan
Secured demand loan
Unsecured loans from related
parties (2)
Unsecured advances from a related
party
Notes payable
Interest
per annum
Maturity
2015
$
8%
19.8%
June 27, 2015
Jan. 4, 2016
421,715
974,827
8%
April 1, 2016
2,549,316
2014
$
-
-
-
-
8%
-
-
841,530
-
845,725
1,000,000
4,787,388
1,845,725
Long term
Unsecured loans from related
parties
See (1)
below
See (1) below
2,018,000
Convertible loans
Convertible loan – secured short term (3)
Convertible loan – secured short term (3)
Convertible loan – unsecured long term (4)
8%
8%
-
Nov. 24, 2015
Dec. 1, 2015
Aug. 29, 2019
1,033,397
257,795
274,008
-
-
-
-
(1) The loans are unsecured and mature on the later of: (i) the Company reporting two consecutive
profitable quarters; and (ii) August 1, 2016. No interest shall be paid on the loans until the
Company reports a positive cash flow quarter and at such time, the loans will bear interest at 4%
per annum, compounded annually.
(2) Subsequent to the June 30, 2015, the terms of these loans were amended to have the same terms as
the loans in (1) above.
(3) Convertible into common shares of the Company at a price of $1.01 per share.
(4) Convertible into common shares of the Company at a price of $0.125 per share.
15
AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
Subsequent to March 31, 2015, the Company secured the following loans:
-
-
$1,550,000 mortgage facility (See item (a) of Subsequent Events).
$982,000 unsecured related party loans (See item (b) of Subsequent Events).
Other Contractual Obligations
As of June 30, 2015, the Company had the following commitments:
Contractual Obligation
Operating lease (1)
Office lease (2)
Total
$
262,500
701,438
1-3 years
$
180,000
432,252
After
3 years
$
82,500
269,186
(1) The Company’s subsidiary entered into an operating lease on lands located in Cremona, Alberta (the
“Lands”) for monthly rent payments of $5,000. The lease expires on November 14, 2019, with an
option to extend for an additional five-year term. The Company has the option to purchase the lands
during the additional five-year term.
(2) The Company is committed to future minimum annual lease payments with respect to its office
premises located in Vancouver, British Columbia, expiring January 31, 2020 and June 30, 2020.
SUBSEQUENT EVENTS
The following events occurred subsequent to June 30, 2015:
(a) 1769474 entered into a mortgage financing (the “Mortgage”) of $1,550,000 on its production facility
on approximately 154 acres of land located in Cremona, Alberta (“Mortgaged Property”). The
Mortgage has a term of six (6) months at a rate of 12% for the duration of the term, calculated and
compounded monthly, and is secured by a first mortgage on the Mortgaged Property and corporate
guarantees by the Company, CEO of the Company and a company owned by the CEO and the
President of the Company. 1769474 shall pay $15,500 per month towards interest and 2.5%
brokerage fees on the principal amount of the loan.
(b) The Company received a loan of $982,000 from a company controlled by the President of the
Company. The loan is unsecured and matures on the later of: (i) the Company reporting two
consecutive profitable quarters; and (ii) August 1, 2016. No interest shall be paid on the loan until the
Company reports a positive cash flow quarter and at such time, the loans will bear interest at 4% per
annum, compounded annually.
(c) An aggregate of 1,760,000 common shares were issued on the exercise of 1,760,000 options for gross
proceeds of $9,600. Non-cash compensation charges of $1,358,518 were reclassified from reserves to
share capital on the exercise of these options.
16
AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
(d) An aggregate of 321,000 common shares were issued on the exercise of 321,000 warrants for gross
proceeds of $32,100.
(e) The following stock options were granted to to directors, officers, employees and consultants of the
Company:
Exercise Price
$
0.30
0.30
0.295
0.30
0.285
0.30
0.30
0.32
0.34
Options
#
350,000
910,000
250,000
350,000
150,000
200,000
150,000
250,000
250,000
2,860,000
Expiry Date
August 10, 2020
August 14, 2020
August 26, 2020
September 1, 2020
September 1, 2018
September 8, 2018
September 8, 2018
September 21, 2020
October 9, 2016
OFF-BALANCE SHEET ARRANGEMENTS
As at the date of this MD&A, the Company had no material off-balance sheet arrangements that have, or
are reasonably likely to have, a current or future effect on the financial performance or financial condition
of the Company.
TRANSACTION WITH RELATED PARTIES
The Company has entered into certain transactions with related parties during the year ended June 30,
2015. A description of the related party transactions is as follows:
Name and Relationship to
Company
Transaction
For the period from
September 11, 2013
(date of
incorporation) to
June 30, 2014
$
Year ended June 30,
2015
$
W.L. Macdonald Law
Corporation,
a company controlled by
an officer of the Company
Delcon Industries Ltd,
a company controlled by a
key management of the
Company
RTO listing expense and
legal fees
71,120
-
Consulting fees
150,000
108,594
17
AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
Evolve Concrete,
a company controlled by a
key management of the
Company
Max Pinsky Personal Law
Corp., a company
controlled by a former
officer of the Company
Inspire Consulting
Services Ltd., a company
controlled by an officer of
the Company
Jason Dyck, a director of
the Company
Consulting fees
150,000
108,593
Legal fees
539
Management fees
16,200
Director’s fees
1,500
-
-
-
In addition to the above, $1,554,545 (for the period from September 11, 2013 (date of incorporation) to
June 30, 2014 - $598,546) was advanced to the Company by companies controlled by directors and
offices of the Company through payment of startup expenditures and working capital needs. The resultant
related party balances are disclosed in Note 14(c) to the Company’s audited consolidated financial
statements for the year ended June 30, 2015.
Included in prepaid expenses is a rent deposit of $1,500 (2014 - $nil) paid to a company having a director
in common.
Included in accounts payable and accrued liabilities were the following:
(a) $59,946 (2014 - $37,601) payable to companies controlled by directors and officers of the
Company.
(b) $17,717 (2014 - $nil) payable to directors of the Company.
Included in convertible notes was $274,008 (2014 - $nil) payable to a company controlled by a director
and officer of the Company.
An aggregate of $5,408,846 (2014 - $nil) in short and long term loans were payable to companies
controlled by directors and officers of the Company.
CRITICAL ACCOUNTING ESTIMATES
The preparation of the Company’s consolidated financial statements in conformity with IFRS requires
management to make judgments, estimates, and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The estimates and associated assumptions are
based on historical experience and other factors that are considered to be relevant. Actual results may
differ from these estimates.
18
AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised, if the revision affects only that
period, or in the period of the revision and future periods, if the revision affects both current and future
periods.
Significant judgments, estimates and assumptions that have the most significant effect on the amounts
recognized in the financial statements are described below.
(a) Going concern
Determining if the Company has the ability to continue as a going concern is dependent on its ability to
achieve profitable operations. Certain judgments are made when determining if the Company will achieve
profitable operation. Further disclosure is included in Note 1 to the Company’s consolidated financial
statements for the year ended June 30, 2015.
(b) Estimated useful lives and depreciation of property, plant and equipment
Depreciation of property, plant and equipment is dependent upon estimates of useful lives which are
determined through the exercise of judgment. The assessment of any impairment of these assets is
dependent upon estimates of recoverable amounts that take into account factors such as economic and
market conditions and the useful lives of assets.
(c) Convertible instruments
Convertible notes are compound financial instruments which are accounted for separately by their
components: a financial liability and an equity instrument. The financial liability, which represents the
obligation to pay coupon interest on the convertible notes in the future, is initially measured at its fair
value and subsequently measured at amortized cost. The residual amount is accounted for as an equity
instrument at issuance.
The identification of convertible notes components is based on interpretations of the substance of the
contractual arrangement and therefore requires judgment from management. The separation of the
components affects the initial recognition of the convertible debenture at issuance and the subsequent
recognition of interest on the liability component. The determination of the fair value of the liability is
also based on a number of assumptions, including contractual future cash flows, discount rates and the
presence of any derivative financial instruments
(d) Share-Based Payments
The Company uses the Black-Scholes option pricing model to determine the fair value of stock options
and warrants. In estimating fair value, management is required to make certain assumptions and estimates
such as the expected life of options, volatility of the Company’s future share price, risk free rate, future
dividend yields and estimated forfeitures at the initial grant date. Changes in assumptions used to estimate
fair value could result in materially different results.
(e) Deferred Tax Assets
19
AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
Deferred tax assets, including those arising from tax loss carry-forwards, require management to assess
the likelihood that the Company will generate sufficient taxable earnings in future periods in order to
utilize recognized deferred tax assets. Assumptions about the generation of future taxable profits depend
on management’s estimates of future cash flows. In addition, future changes in tax laws could limit the
ability of the Company to obtain tax deductions in future periods. To the extent that future cash flows and
taxable income differ significantly from estimates, the ability of the Company to realize the net deferred
tax assets recorded at the reporting date could be impacted.
NEW ACCOUNTING PRONOUNCEMENTS
There were no new standards effective July 1, 2014 that had an impact on the Company’s
consolidated financial statements. The following IFRS standards have been recently issued by
the IASB. Pronouncements that are not applicable or where it has been determined do not have a
significant impact to the Company have been excluded herein.
IFRS 7 Financial instruments: Disclosure
IFRS 7 Financial instruments: Disclosure, was amended to require additional disclosures on transition
from IAS 39 to IFRS 9. IFRS 7 is effective on adoption of IFRS 9, which is effective for annual periods
commencing on or after January 1, 2018.
IFRS 9 Financial instruments
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which reflects all phases
of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and
Measurement and all previous versions of IFRS 9. The standard introduces new requirements for
classification and measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods
beginning on or after 1 January 2018, with early application permitted.
IFRS 10 Consolidated Financial Statements
The main consequence of the amendments is that a full gain or loss is recognized when a transaction
involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when
a transaction involves assets that do not constitute a business, even if the assets are housed in a subsidiary.
Upon adoption, the amendments may impact the Company in respect of future sale or contribution of
assets with its joint venture. The amendments are effective for transactions occurring in annual periods
beginning on or after January 1, 2016.
IFRS 15 Revenue from contracts with Customers
The IASB replaced IAS 18, Revenue, in its entirety with IFRS 15, Revenue from contracts with
Customers. The standard contains a single model that applies to contracts with customers and two
approaches to recognizing revenue: at a point in time or over time. The model features a contract-based
five-step analysis of transactions to determine whether, how much and when revenue is recognized. New
estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of
revenue recognized. IFRS 15 is effective for annual periods beginning on January 1, 2017.
20
AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
IAS 16 Property, Plant and Equipment and IAS 41 Agriculture
IAS 16 and IAS 41 were amended to bring bearer plants, which are used solely to grow produce, into the
scope of IAS 16 so that they are accounted for as property, plant and equipment and allow entities to
measure bearer plants at accumulated cost up until the point of production and subsequently apply either
the cost model or revaluation model.
It introduces a definition of ‘bearer plants’ as a living plant that is used in the production or supply of
agricultural produce that is expected to bear produce for more than one period and has a remote likelihood
of being sold as agricultural produce, except for incidental scrap sales.
The scope sections of both standards are amended to clarify that biological assets except for bearer plants
are accounted for under IAS 41 while bearer plants are accounted for under IAS 16. The amendments also
clarify that produce growing on bearer plants continues to be accounted for under IAS 41.
The amendments are effective for annual periods beginning on or after 1 January 2016, with earlier
application permitted.
FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
(f) Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, subscription receivable,
accounts payable and accrued liabilities, loan payable, convertible loans and advances from a related
party. The carrying values of these financial instruments approximate their fair values because of
their short term nature and/or the existence of market related interest rates on the instruments.
IFRS requires disclosures about the inputs to fair value measurements, including their classification
within a hierarchy that prioritizes the inputs to fair value measurement. The three levels of hierarchy
are:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly
or indirectly; and
Level 3 – Inputs for the asset or liability that are not based on observable market data.
The Company has no financial instrument assets or liabilities recorded in the statements of financial
position at fair value at June 30, 2015 and 2014 at fair value.
Fair value
as at June 30,
2015
Basis of measurement Financial instruments
$315,853
Carrying value
Loans and receivables
Financial Assets
Cash and cash equivalents
Financial Liabilities
21
AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
Accounts payable
$1,323,224
Carrying value
Short term loans
$4,787,388
Carrying value
Long term loans
$2,018,000
Carrying value
Other financial
liabilities
Other financial
liabilities
Other financial
liabilities
Convertible loans (1)
$1,565,200
Fair value / Carrying
value
Other financial
liabilities
(1) The fair value of the convertible loan includes both the debt and equity components.
There have been no transfers between fair value levels during the year.
(f) Financial Instruments Risk
The Company is exposed in varying degrees to a variety of financial instrument related to risks. The
Board approves and monitors the risk management processes:
(i) Credit Risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument
fails to meet its contractual obligations. The Company is subject to credit risk on the cash
balances at the bank and interest receivable. Management considers that risks related to credit
are minimal.
(ii) Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations
associated with financial liabilities. As at June 30, 2015, the Company had cash and cash
equivalents of $315,853 and working capital deficiency of $6,500,116. The Company manages
liquidity risk through the management of its capital structure. The Company’s approach to
managing liquidity is to ensure that it will have sufficient liquidity to settle obligations and
liabilities when due.
The Company is dependent on the availability of credit from its suppliers and its ability to
generate sufficient funds from equity and debt financings to meet current and future obligations.
There can be no assurance that such financing will be available on terms acceptable to the
Company. See note 1 to the Company’s consolidated financial statements for the year end June
30, 2015.
(iii) Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. Cash and cash equivalents bear interest at
market rates. The Company’s short-term loans and convertible loans are either non-interest
bearing or have fixed rates of interest and these do not expose the Company to interest rates risk.
22
AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
CAPITAL MANAGEMENT
The Company’s objectives when managing capital are to ensure that there are adequate capital resources
to safeguard the Company’s ability to continue as a going concern and maintain adequate levels of funds
to support its operations and development such that it can continue to provide returns to shareholders and
benefits for other stakeholders.
The capital structure of the Company consists of items included in shareholders’ equity and debt, net of
cash and cash equivalents. The Company manages its capital structure and makes adjustments to it in
light of changes in economic conditions and the risk characteristics of the Company’s underlying assets.
In order to maintain or adjust its capital structure, the Company may issue new shares or seek debt
financing to ensure that there is sufficient working capital to meet its short-term business requirements.
There were no changes in the Company’s approach to capital management during the year ended June 30,
2015.
The Company is not subject to externally imposed capital requirements.
SUMMARY OF OUTSTANDING SHARE DATA
As at the date of this MD&A, the Company had the following common shares and options outstanding:
(a) Authorized
Unlimited number of common shares without par value.
(b) Issued and fully paid
As at October 30, 2015, there were 124,803,138 common shares issued and outstanding.
(c) Stock options and charitable options outstanding as at October 30, 2015:
Options
Exercise Price
Expiry Date
#
800,000
144,000(1)
150,000
450,000
250,000
350,000
885,000
350,000
200,000
150,000
250,000
$
0.001
0.15
0.285
0.295
0.295
0.30
0.30
0.30
0.30
0.30
0.32
December 1, 2019
October 29, 2017
September 1, 2018
June 2, 2020
August 26, 2020
August 10, 2020
August 14, 2020
September 1, 2020
September 8, 2018
September 8, 2018
September 21, 2020
23
Exercisable
#
-
144,000
-
450,000
-
-
-
-
-
-
125,000
AURORA CANNABIS INC.
Management’s Discussion & Analysis
For the year ended June 30, 2015
150,000
250,000
300,000
350,000
200,000
100,000
5,329,000
0.34
0.34
0.39
0.40
0.42
0.425
May 23, 2020
October 9, 2016
March 16, 2020
March 10, 2019
January 19, 2020
February 27, 2020
12,500
-
175,000
-
99,999
33,332
1,039,831
(1) These options were granted to two charitable organizations.
(d) Warrants outstanding as at October 30, 2015:
Warrants
Exercise Price
Expiry Date
#
9,000,000
19,000
224,000
10,200,000
19,443,000
$
0.02
0.10
0.10
0.50
December 9, 2019
June 27, 2016
July 15, 2016
December 9, 2017
24
AURORA CANNABIS INC.
Consolidated Financial Statements
For the year ended June 30, 2015
and for the period from September 11, 2013 (date of incorporation)
to June 30, 2014
(In Canadian Dollars)
Management's Responsibility
To the Shareholders of Aurora Cannabis Inc.:
Management is responsible for the preparation and presentation of the accompanying consolidated financial statements, including
responsibility for significant accounting judgments and estimates in accordance with International Financial Reporting Standards and
ensuring that all information in the annual report is consistent with the statements. This responsibility includes selecting appropriate
accounting principles and methods, and making decisions affecting the measurement of transactions in which objective judgment is
required.
In discharging its responsibilities for the integrity and fairness of the consolidated financial statements, management designs and
maintains the necessary accounting systems and related internal controls to provide reasonable assurance that transactions are
authorized, assets are safeguarded and financial records are properly maintained to provide reliable information for the preparation of
consolidated financial statements.
The Board of Directors and Audit Committee are composed primarily of Directors who are neither management nor employees of the
Company. The Board is responsible for overseeing management in the performance of its financial reporting responsibilities, and for
approving the financial information included in the annual report. The Board fulfils these responsibilities by reviewing the financial
information prepared by management and discussing relevant matters with management and external auditors. The Committee is also
responsible for recommending the appointment of the Company's external auditors.
MNP LLP, an independent firm of Chartered Professional Accountants, is appointed by the shareholders to audit the consolidated
financial statements and report directly to them; their report follows. The external auditors have full and free access to, and meet
periodically and separately with, both the Committee and management to discuss their audit findings.
October 30, 2015
signed "Terry Booth"
signed "John Bean"
Terry Booth, Chief Executive Officer
John Bean, Chief Financial Officer
Independent Auditors’ Report
To the Shareholders of Aurora Cannabis Inc.:
We have audited the accompanying consolidated financial statements of Aurora Cannabis Inc. and its subsidiaries, which comprise the
consolidated statements of financial position as at June 30, 2015 and June 30, 2014, and the consolidated statements of
comprehensive loss, changes in equity and cash flows for the periods then ended, and a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in
accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement
of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Aurora Cannabis Inc.
and its subsidiaries as at June 30, 2015 and June 30, 2014 and their financial performance and their cash flows for the periods then
ended in accordance with International Financial Reporting Standards.
Emphasis of Matter
Without modifying our opinion, we draw attention to Note 1 to the financial statements which describes that the Company has prepared
these consolidated financial statements on the basis applicable for a going concern. The Company has yet to attain commercial
operations and has incurred significant losses which, along with other matters as set forth in Note 1, indicates the existence of a material
uncertainty that may cast doubt about the Company's ability to continue as a going concern.
Edmonton, Alberta
October 30, 2015
Chartered Accountants
10104 - 103 Avenue NW, Suite 400, Edmonton, Alberta, T5J 0H8, Phone: (780) 451-4406, 1 (800) 661-7778
AURORA CANNABIS INC.
Consolidated Statements of Financial Position
June 30, 2015 and 2014
(In Canadian Dollars)
Assets
Current
Cash and cash equivalents
GST recoverable
Shares subscription receivable
Biological assets
Prepaid expenses and deposits
Property, plant and equipment
Note receivable
Investment in a joint venture
Receivable from a shareholder
Notes
5
14(c)
6
7
7
Liabilities
Current
Accounts payable and accrued liabilities
Short term loans
Convertible notes
14(c)
8(a) - 8(d), 14(c)
9(b)
Convertible notes
Long term loans
Shareholders’ equity
Share capital
Reserves
Deficit
9(a), 14(c)
8(f), 14(c)
10
2015
$
2014
$
315,853
628,247
-
25,409
91,086
1,060,595
10,785,521
1,680,506
-
-
13,526,622
1,323,224
4,787,388
1,291,192
7,401,804
274,008
2,018,000
9,693,812
11,432,977
3,741,737
(11,341,904)
3,832,810
13,526,622
916,767
244,523
90,000
-
-
1,251,290
4,238,047
-
-
2,530
5,491,867
1,876,927
1,845,725
-
3,722,652
-
-
3,722,652
3,368,640
224,110
(1,823,535)
1,769,215
5,491,867
Nature of Operations and Going Concern (Note 1)
Subsequent Events (Notes 8(c), 8(f), 9(a) and 20)
The accompanying notes are an integral part of these consolidated financial statements.
AURORA CANNABIS INC.
Consolidated Statements of Comprehensive Loss
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
Expenses:
General and administration
Marketing and promotion
Research and development
Depreciation
Share-based payments
Loss from operations
Other income (expenses)
Interest and other income
Finance and other costs
RTO listing and compensation expense
13
3, 4 & 10(e)
Notes
June 30, 2015
$
11 & 14(a)
12
6
10(d)(e)
1,735,602
1,021,807
432,384
304,796
872,587
For the period from
September 11, 2013
(date of
incorporation) to
June 30, 2014
$
296,380
206,844
256,605
-
-
(4,367,176)
(759,829)
27,639
(325,608)
(5,060,932)
(5,358,901)
-
-
(1,063,706)
(1,063,706)
(9,726,077)
(1,823,535)
Loss before income tax
Deferred tax recovery
18
207,708
-
Net loss and comprehensive loss for the period
(9,518,369)
(1,823,535)
Net loss per share, basic and diluted
(0.12)
(0.11)
Weighted average number of shares outstanding
Basic and diluted
76,936,375
16,145,973
The accompanying notes are an integral part of these consolidated financial statements.
AURORA CANNABIS INC.
Consolidated Statements of Changes in Equity
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
Share Capital
Notes
Common Shares
#
Comprehensive loss for the period
Class A shares issued at incorporation
Class B shares issued at incorporation
Cancellation of Class A shares
Cancellation of Class B shares
Issuance of Class E shares
Issuance of Class F shares
Issuance of Class D shares
Class C shares issued for cash
Class A agent’s warrants issued
Fair value of Class C warrants issued
Balance, June 30, 2014
Comprehensive loss for the year
Shares of Prescient on RTO
Eliminate shares of AMI
Shares issued to shareholders of AMI
RTO finders’ fees
Revaluation of warrants on RTO
Equity component of convertible loans
Deferred tax on convertible notes
Conversion of notes
Shares issued for services
Exercise of stock options
Exercise of warrants
Share-based payments
Balance, June 30, 2015
10(b)(vii)
10(b)(vii)
10(b)(vii)
10(b)(vii)
4, 10(b)(viii)
10(b)(vi)
3
3
3
3
3, 10(e)
9
9
9
10(b)
10(b)(iii)
10(b)(iv)
-
360,000
360,000
(360,000)
(360,000)
25,800,000
25,800,000
8,000,000
20,400,000
-
-
80,000,000
-
42,000,471
(80,000,000)
60,000,000
3,000,000
-
-
-
8,072,000
30,000
2,725,667
2,966,000
-
The accompanying notes are an integral part of these consolidated financial statements.
Amount
$
-
100
100
(100)
(100)
100
100
1,000,000
2,550,000
-
(181,560)
3,368,640
-
-
-
6,192,077
348,300
-
-
-
934,426
12,600
243,499
333,435
-
Obligation to
issue shares
$
-
-
-
-
-
-
-
-
-
-
-
Share-based
Payments
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,322,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(185,616)
-
566,969
Reserves
Warrants
$
Convertible
Notes
$
-
-
-
-
-
-
-
-
-
42,550
181,560
224,110
-
-
-
-
-
509,759
-
-
-
-
-
(216,835)
305,618
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
798,878
(207,708)
(375,438)
-
-
-
-
Total
$
-
-
-
-
-
-
-
-
-
42,550
181,560
224,110
-
-
-
2,322,000
-
509,759
798,878
(207,708)
(375,438)
-
(185,616)
(216,835)
872,587
Deficit
$
(1,823,535)
-
-
-
-
-
-
-
-
-
-
(1,823,535)
(9,518,369)
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
(1,823,535)
100
100
(100)
(100)
100
100
1,000,000
2,550,000
42,550
-
1,769,215
(9,518,369)
-
-
8,514,077
348,300
509,759
798,878
(207,708)
558,988
12,600
57,883
116,600
872,587
118,794,138
11,432,977
2,322,000
381,353
822,652
215,732
3,741,737
(11,341,904)
3,832,810
AURORA CANNABIS INC.
Consolidated Statements of Cash Flows
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollar)
Cash was provided by (used in)
Operating activities
Net loss for the period
Adjustments for non-cash items
Depreciation
Non-cash consulting fees
Deferred tax recovery
Share-based payments
Accrued interest
Accretion expense
Loss on investment
RTO listing and compensation expense
Changes in non-cash working capital accounts
GST recoverable
Biological assets
Prepaid expenses and deposits
Accounts payable and accrued liabilities
Investing activities
Bank indebtedness assumed on RTO of Prescient (Note 3)
Purchase of property, plant and equipment
Financing activities
Short term loans
Convertible notes
Long term loans
Pre RTO loans from Prescient
Financing fees
Shares issued for cash
Note and other receivables
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
For the period from
September 11, 2013
(date of
incorporation) to
June 30, 2014
$
June 30, 2015
$
(9,518,369)
(1,823,535)
304,796
12,600
(207,708)
872,587
175,043
113,724
2,347
4,947,046
(368,659)
(25,409)
(37,540)
405,364
(3,324,178)
(1,686)
(7,833,612)
(7,835,298)
2,248,335
2,750,000
2,018,000
5,010,000
(54,000)
266,733
(1,680,506)
10,558,562
(600,914)
916,767
315,853
-
-
-
1,063,706
-
-
-
-
(244,523)
-
-
39,246
(965,106)
-
(2,421,522)
(2,421,522)
1,845,725
-
-
-
-
2,460,200
(2,530)
4,303,395
916,767
-
916,767
Supplementary information:
Property, plant and equipment in accounts payables and accrued
liabilities
834,530
1,816,525
The accompanying notes are an integral part of these consolidated financial statements.
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
1. Nature of Operations and Going Concern
Aurora Cannabis Inc. (formerly Prescient Mining Corp. (“Prescient”)) (the “Company” or “Aurora”)
was incorporated under the laws of the Business Corporations Act (British Columbia). The Company’s
shares are traded on the Canadian Securities Exchange (the “Exchange”) under the symbol “ACB.”
The head office and principal address of the Company are located at Suite 1500 – 1199 West Hastings
Street, Vancouver, BC, Canada, V6E 3T5. The Company’s registered and records office address is
located at 1055 West Georgia Street, Vancouver, BC V6E 3P3.
The Company was engaged in the acquisition, exploration, and development of resource properties. On
December 9, 2014, the Company completed the acquisition of Aurora Marijuana Inc. (“AMI”) pursuant
to a Share Exchange Agreement dated September 9, 2014, whereby Prescient acquired all of the issued
and outstanding securities of AMI in consideration for securities of the Company. The transaction
constituted a reverse acquisition of Prescient by AMI (Note 3). As part of the acquisition, Prescient
changed its name to Aurora Cannabis Inc.
Aurora Cannabis Enterprises Inc., a wholly owned subsidiary of the Company, is a licensed producer
of medical marijuana under the Marihuana for Medical Purposes Regulations (“MMPR”) issued
pursuant to the Controlled Drugs and Substances Act (Canada).
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards on a going concern basis which assumes that the Company will continue to operate
for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal
course of business.
The Company had financed its working capital requirements primarily through equity financings,
convertible loans and third party and related party loans. The Company’s ability to continue as a going
concern is dependent upon its ability to commence profitable operations, generate funds therefrom and
raise additional financing in order to meet current and future obligations. While the Company has been
successful in raising financing in the past, there is no assurance that it will be able to obtain additional
financing or that such financing will be available on reasonable terms. These conditions combined with
the accumulated losses to date indicate the existence of a material uncertainty that may cast doubt on
the Company’s ability to continue as a going concern.
These consolidated financial statements do not include any adjustments to the amounts and
classification of assets and liabilities that might be necessary should the Company be unable to continue
as a going concern.
1
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
2. Significant Accounting Policies
(a) Basis of presentation
The consolidated financial statements of the Company have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB) and interpretations of the IFRS Interpretations Committee (“IFRIC”) in
effect for the year ended June 30, 2015.
These consolidated financial statements were approved and authorized for issue by the Board of
Directors of the Company on October 30, 2015.
(b) Basis of consolidation
These consolidated financial statements include the accounts of the Company and its wholly-owned
subsidiaries, Aurora Marijuana Inc. (“AMI”), Aurora Cannabis Enterprises Inc. (“ACE”), 1769474
Alberta Ltd. (“1769474”) and Australis Capital Inc. (“ACI”). All significant intercompany balances
and transactions were eliminated on consolidation.
(c) Basis of measurement
The consolidated financial statements have been prepared on a historical cost basis except for
certain financial instruments which were measured at fair value.
(d) Functional and presentation of foreign currency
The consolidated financial statements are presented in Canadian dollars unless otherwise noted.
The presentation currency and functional currency of the Company and its subsidiaries is the
Canadian dollar.
(e) Foreign currency translation
Foreign currency transactions are translated into Canadian dollars at exchange rates in effect on the
date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the
consolidated statement of financial position date are translated to Canadian dollars at the foreign
exchange rate applicable at that date. Realized and unrealized exchange gains and losses are
recognized in the consolidated statements of comprehensive loss.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate at the date of the transaction.
(f) Cash and cash equivalents
Cash and cash equivalents include cash deposits in financial institutions and other deposits that are
readily convertible into cash.
2
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
2. Significant Accounting Policies (Continued)
(g) Biological assets
The Company measures biological assets consisting of medical cannabis plants at fair value less
cost to sell up to the point of harvest, which becomes the basis for the cost of finished goods
inventories after harvest.
Gains or losses arising from the changes in fair value less cost to sell during the year are included
in the results of operations for the related year.
(h) Inventory
Inventories of harvested finished goods and packing materials are initially valued at cost and
subsequently at the lower of cost and net realizable value. Inventories of harvested cannabis are
transferred from biological assets at their fair value less costs to sell at harvest which becomes the
deemed cost. Any subsequent post harvest costs are capitalized to inventory to the extent that the
cost is less than net realizable value. Net realizable value is determined as the estimated selling
price in the ordinary course of business less the estimated costs of completion and the estimated
costs necessary to make the sale. Cost is determined using the average cost basis. Products for
resale and supplies and consumables are valued at cost.
The Company reviews inventory for obsolete, redundant and slow moving goods and any such
inventory are written-down to net realizable value.
(i) Property, plant and equipment
Property, plant and equipment is measured at cost less accumulated depreciation and impairment
losses.
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets, except
in the year of acquisition, when half of the rate is used as follows:
Computer software and equipment
Production equipment
Furniture and fixtures
Building and building improvements
3 years
2 - 4 years
5 years
10 - 50 years
An asset’s residual value, useful life and depreciation method are reviewed at each financial year-
end and adjusted if appropriate.
Gains and losses on disposal of an item are determined by comparing the proceeds from disposal
with the carrying amount of the item and are recognized in profit or loss.
3
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
2. Significant Accounting Policies (Continued)
(j) Investment in joint ventures
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the arrangement. Investments in a joint venture are accounted for
using the equity method and are initially recognized at cost. The entire carrying amount of the
investment is tested for impairment annually.
(k) Impairment of non-financial assets
The carrying amount of the Company’s non-financial assets is reviewed at each financial reporting
date to determine whether there is any indication of impairment. If such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.
An impairment loss is recognized when the carrying amount of an asset or its cash generating unit
(“CGU”) exceeds its recoverable amount. Impairment losses are recognized in profit and loss for
the period.
The recoverable amount of an asset or CGU is the greater of it’s fair value less cost to sell and value
in use. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects the current market assessments of the time value of
money and the risks specific to the asset. For an asset that does not generate cash inflows largely
independent of those from other assets, the recoverable amount is determined for the cash-
generating unit to which the asset belongs.
An impairment loss is only reversed if there is an indication that the impairment loss may no longer
exist and there has been a change in the estimates used to determine the recoverable amount,
however, not to an amount higher than the carrying amount that would have been determined had
no impairment loss been recognized in previous years.
Assets that have an indefinite useful life are not subject to depreciation and are tested annually for
impairment.
(l) Share capital
Transaction costs directly attributable to the issuance of common shares are recognized as a
deduction from equity. The proceeds from the exercise of stock options or warrants together with
amounts previously recorded in reserves over the vesting periods are recorded as share capital.
Share capital issued for non-monetary consideration is recorded at an amount based on fair market
value of the shares on the date of issue.
4
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
2. Significant Accounting Policies (Continued)
(m) Share-based payments
The Company has an employee stock option plan. Equity-settled share-based payments to
employees are measured at the fair value of the stock options at the grant date and recognized in
expense over the vesting periods.
Share-based payments to non-employees are measured at the fair value of goods or services
received or the fair value of the equity instruments issued, if it is determined the fair value of the
goods or services cannot be reliably measured, and are recorded at the date the goods or services
are received. The corresponding amount is recorded to the share-based payment reserve.
The fair value of options is determined using the Black–Scholes option pricing model which
incorporates all market vesting conditions. The number of options expected to vest is reviewed
and adjusted at the end of each reporting period such that the amount recognized for services
received as consideration for the equity instruments granted shall be based on the number of equity
instruments that eventually vest. Amounts recorded for forfeited or expired unexercised options
are transferred to deficit in the year of forfeiture or expiry.
Upon the exercise of stock options, consideration received on the exercise of these equity
instruments is recorded as share capital and the related share-based payment reserve is transferred
to share capital.
(n) Loss per share
The Company calculates basic loss per share using the weighted average number of common shares
outstanding during the year. Diluted loss per share is the same as basic loss per share, as the
issuance of shares on the exercise of stock options and share purchase warrants is anti-dilutive.
(o) Revenue recognition
Revenue is recognized at the fair value consideration received or receivable. Revenue from the sale
of goods is recognized when the Company has transferred the significant risks and rewards of
ownership to the buyer and it is probable that the Company will receive the previously agreed upon
payment. Significant risks and rewards are generally considered to be transferred when the
Company has shipped the product to customers.
(p) Research and development
Research costs are expensed as incurred. Development expenditures are capitalized only if
development costs can be measured reliably, the product or process is technically and commercially
feasible, future economic benefits are probable and the Company intends to and has sufficient
resources to complete the development to use or sell the asset. To date, no development costs have
been capitalized.
5
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
2. Significant Accounting Policies (Continued)
(q) Taxes
Tax expense recognized in profit or loss comprises the sum of current and deferred taxes not
recognized in other comprehensive income or directly in equity.
(i) Current tax
Current tax assets and/or liabilities comprise those claims from, or obligations to, fiscal
authorities relating to the current or prior reporting periods that are unpaid at the reporting
date. Current tax is payable on taxable profit, which differs from profit or loss in the financial
statements. Calculation of current tax is based on tax rates and tax laws that have been enacted
or substantively enacted by the end of the reporting period.
(ii) Deferred tax
Deferred taxes are calculated using the liability method on temporary differences between the
carrying amounts of assets and liabilities and their tax bases. Deferred tax assets and liabilities
are calculated, without discounting, at tax rates that are expected to apply to their respective
period of realization, provided they are enacted or substantively enacted by the end of the
reporting period. Deferred tax liabilities are always provided for in full.
Deferred tax assets are recognized to the extent that it is probable that they will be able to be
utilized against future taxable income. Deferred tax assets and liabilities are offset only when
the Company has a right and intention to offset current tax assets and liabilities from the same
taxation authority.
Changes in deferred tax assets or liabilities are recognized as a component of tax income or
expense in profit or loss, except where they relate to items that are recognized in other
comprehensive income or directly in equity, in which case the related deferred tax is also
recognized in other comprehensive income or equity, respectively.
(r) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument to another entity. Financial assets and financial liabilities are
recognized on the statements of financial position at the time the Company becomes a party to the
contractual provisions of the financial instrument.
6
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
2. Significant Accounting Policies (Continued)
(r) Financial instruments (continued)
Financial instruments are initially measured at fair value. Measurement in subsequent periods is
dependent on the classification of the financial instrument. The Company classifies its financial
instruments in the following categories: at fair value through profit or loss, loans and receivables,
held-to-maturity, available-for-sale, and other financial liabilities.
(i)
Financial assets
a) Financial assets and liabilities at fair value through profit or loss
Financial assets and liabilities at fair value through profit or loss are either ‘held-for-
trading’ or designated at fair value through profit or loss. They are initially and
subsequently recorded at fair value and changes in fair value are recognized in profit or
loss for the period.
The Company does not have any financial assets and liabilities at fair value through
profit or loss.
b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. Such assets are recognized initially
at fair value and subsequently on an amortized cost basis using the effective interest
method, less any impairment losses. They are included in current assets, except for
maturities greater than 12 months after the end of the reporting period, which are
classified as non-current assets.
The Company has designated its cash and cash equivalents, shares subscription
receivable and note receivable as loans and receivables.
c) Held-to-maturity
Held-to-maturity investments are non-derivative financial assets that have fixed
maturities and fixed or determinable payments, and it is the Company’s intention to hold
these investments to maturity. They are initially recorded at fair value and subsequently
measured at amortized cost.
The Company does not have any held-to-maturity financial assets.
7
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
2. Significant Accounting Policies (Continued)
(r) Financial instruments (continued)
(i)
Financial assets (continued)
d) Available-for-sale
Available-for-sale financial assets are non-derivative financial assets that are designated
as available-for-sale or are not classified in any other financial asset categories. They are
initially and subsequently measured at fair value and the changes in fair value, other than
impairment losses are recognized in other comprehensive income (loss) and presented in
the fair value reserve in shareholders’ equity. When the financial assets are sold or an
impairment write-down is required, losses accumulated in the fair value reserve recognized
in shareholders’ equity are included in profit or loss.
The Company does not have any available-for-sale financial assets.
(ii) Financial liabilities
All financial liabilities are recognized initially at fair value plus any directly attributable
transaction costs on the date at which the Company becomes a party to the contractual
provisions of the instrument. Subsequent to initial recognition, the Company’s financial
liabilities are measured at amortized cost using the effective interest method. The Company
derecognizes a financial liability when its contractual obligations are discharged, cancelled,
or expired.
The Company’s non-derivative financial liabilities include its accounts payable and accrued
liabilities and loans payable, which are designated as other liabilities.
(iii) Compound financial instruments
The liability component of a compound financial instrument is recognized initially at the fair
value of a similar liability that does not have an equity conversion option. The equity
component is recognized initially as the difference between the fair value of the compound
financial instrument as a whole and the fair value of the liability component. Any directly
attributable transaction costs are allocated to the liability and equity components in
proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument
is measured at amortized cost using the effective interest method. The equity component of
a compound financial instrument is not remeasured subsequent to initial recognition.
Interest and losses and gains relating to the financial liability are recognized in profit or loss.
On conversion, the financial liability is reclassified to equity; no gain or loss is recognized
on conversion.
8
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
2. Significant Accounting Policies (Continued)
(r) Financial instruments (continued)
(iv)
Impairment of financial assets
A financial asset not carried at fair value through profit or loss is reviewed at each reporting
date to determine whether there is any indication of impairment. A financial asset is impaired
if objective evidence indicates that a loss event has occurred after the initial recognition of
the asset, and that the loss event had a negative effect on the estimated future cash flows of
that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortized cost is calculated
as the difference between its carrying amount and the present value of the estimated future
cash flows discounted at the assets' original effective interest rate. Losses are recognized in
profit or loss with a corresponding reduction in the financial asset, or, in the case of amounts
receivable, are reflected in an allowance account against receivables. When a subsequent
event causes the amount of impairment loss to decrease, the decrease in impairment loss is
reversed through profit or loss.
(s) Significant accounting judgments, estimates and assumptions
The preparation of the Company’s consolidated financial statements in conformity with IFRS
requires management to make judgments, estimates, and assumptions about the carrying amounts
of assets and liabilities that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other factors that are considered to
be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimate is revised, if the revision
affects only that period, or in the period of the revision and future periods, if the revision affects
both current and future periods.
Significant judgments, estimates and assumptions that have the most significant effect on the
amounts recognized in the financial statements are described below.
(i) Going concern
Determining if the Company has the ability to continue as a going concern is dependent on
its ability to achieve profitable operations. Certain judgments are made when determining if
the Company will achieve profitable operation. Further disclosure is included in Note 1.
9
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
2. Significant Accounting Policies (Continued)
(s) Significant accounting judgments, estimates and assumptions (continued)
(ii) Estimated useful lives and depreciation of property, plant and equipment
Depreciation of property, plant and equipment is dependent upon estimates of useful lives
which are determined through the exercise of judgment. The assessment of any impairment
of these assets is dependent upon estimates of recoverable amounts that take into account
factors such as economic and market conditions and the useful lives of assets.
(iii) Convertible instruments
Convertible notes are compound financial instruments which are accounted for separately by
their components: a financial liability and an equity instrument. The financial liability, which
represents the obligation to pay coupon interest on the convertible notes in the future, is
initially measured at its fair value and subsequently measured at amortized cost. The residual
amount is accounted for as an equity instrument at issuance.
The identification of convertible notes components is based on interpretations of the
substance of the contractual arrangement and therefore requires judgment from management.
The separation of the components affects the initial recognition of the convertible debenture
at issuance and the subsequent recognition of interest on the liability component. The
determination of the fair value of the liability is also based on a number of assumptions,
including contractual future cash flows, discount rates and the presence of any derivative
financial instruments.
(iv) Share-based payments
The Company uses the Black-Scholes option pricing model to determine the fair value of
stock options and warrants. In estimating fair value, management is required to make certain
assumptions and estimates such as the expected life of options, volatility of the Company’s
future share price, risk free rate, future dividend yields and estimated forfeitures at the initial
grant date. Changes in assumptions used to estimate fair value could result in materially
different results.
(v) Deferred tax assets
Deferred tax assets, including those arising from tax loss carry-forwards, require
management to assess the likelihood that the Company will generate sufficient taxable
earnings in future periods in order to utilize recognized deferred tax assets. Assumptions
about the generation of future taxable profits depend on management’s estimates of future
cash flows. In addition, future changes in tax laws could limit the ability of the Company to
obtain tax deductions in future periods. To the extent that future cash flows and taxable
income differ significantly from estimates, the ability of the Company to realize the net
deferred tax assets recorded at the reporting date could be impacted.
10
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
2. Significant Accounting Policies (Continued)
(t) Recent accounting pronouncements
There were no new standards effective July 1, 2014 that had an impact on the Company’s
consolidated financial statements. The following IFRS standards have been recently issued by the
IASB. The Company is assessing the impact of these new standards on future consolidated
financial statements. Pronouncements that are not applicable or where it has been determined do
not have a significant impact to the Company have been excluded herein.
(i)
IFRS 7 Financial instruments: Disclosure
IFRS 7 Financial instruments: Disclosure, was amended to require additional disclosures on
transition from IAS 39 to IFRS 9. IFRS 7 is effective on adoption of IFRS 9, which is
effective for annual periods commencing on or after January 1, 2018.
(ii)
IFRS 9, Financial Instruments
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments, which
reflects all phases of the financial instruments project and replaces IAS 39 Financial
Instruments: Recognition and Measurement and all previous versions of IFRS 9. The
standard introduces new requirements for classification and measurement, impairment, and
hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January
2018, with early application permitted.
(iii)
IFRS 10 Consolidated Financial Statements
The main consequence of the amendments is that a full gain or loss is recognized when a
transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or
loss is recognized when a transaction involves assets that do not constitute a business, even
if the assets are housed in a subsidiary. Upon adoption, the amendments may impact the
Company in respect of future sale or contribution of assets with its joint venture. The
amendments are effective for transactions occurring in annual periods beginning on or after
January 1, 2016.
(iv)
IFRS 15 Revenue from contracts with Customers
The IASB replaced IAS 18, Revenue, in its entirety with IFRS 15, Revenue from contracts
with Customers. The standard contains a single model that applies to contracts with
customers and two approaches to recognizing revenue: at a point in time or over time. The
model features a contract-based five-step analysis of transactions to determine whether, how
much and when revenue is recognized. New estimates and judgmental thresholds have been
introduced, which may affect the amount and/or timing of revenue recognized. IFRS 15 is
effective for annual periods beginning on January 1, 2018.
11
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
2. Significant Accounting Policies (Continued)
(t) Recent accounting pronouncements (continued)
(v)
IAS 16 Property, Plant and Equipment and IAS 41 Agriculture
IAS 16 and IAS 41 were amended to bring bearer plants, which are used solely to grow
produce, into the scope of IAS 16 so that they are accounted for as property, plant and
equipment and allow entities to measure bearer plants at accumulated cost up until the point
of production and subsequently apply either the cost model or revaluation model.
It introduces a definition of ‘bearer plants’ as a living plant that is used in the production or
supply of agricultural produce that is expected to bear produce for more than one period and
has a remote likelihood of being sold as agricultural produce, except for incidental scrap
sales.
The scope sections of both standards are amended to clarify that biological assets except for
bearer plants are accounted for under IAS 41 while bearer plants are accounted for under
IAS 16. The amendments also clarify that produce growing on bearer plants continues to be
accounted for under IAS 41.
The amendments are effective for annual periods beginning on or after 1 January 2016, with
earlier application permitted.
3. Reverse Take-Over (“RTO”)
On December 9, 2014, Prescient acquired all of the issued and outstanding securities of AMI by way
of a Share Exchange Agreement dated September 9, 2014, as amended by agreements on September
10, 2014 and October 30, 2014 (the “Agreement”), in exchange for the following securities of the
Company:
(a) Issuance of the following securities of the Company to AMI shareholders and warrant and option
holders:
(i)
60,000,000 common shares(1) (2) of the Company (Note 10(c));
(ii) An aggregate of 21,450,000 warrants (“RTO replacement warrants”) as follows: (Note 10(e))
(cid:120) 11,250,000 warrants(1) (2) at $0.02 per share expiring December 9, 2019; and
(cid:120) 10,200,000 warrants(2) at $0.50 per share expiring December 9, 2017.
(iii) 4,000,000 options(1) (“RTO replacement options) at a price of $0.001 per share expiring
December 1, 2019. These options vest as to 1,600,000 on December 21, 2014, 1,600,000 on
June 21, 2015 and 800,000 on December 21, 2015. (Note 10(d))
12
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
3. Reverse Take-Over (“RTO”) (Continued)
(b) Issuance of the following performance shares and warrants:
(i)
20,000,000 common shares(1) (2) shall be issued on completion of performance milestones
(Note 10(f)); and
(ii) 3,750,000 warrants(1) (2) at $0.02 per share for a term of 5 years shall be issued on completion
of funding milestones. On April 21, 2015, these warrants were cancelled as the funding
milestones were not met (Note 10(f)).
(1) Subject to escrow. (Note 10(c))
(2) Subject to Right of First Refusal (ROFR) whereby if the holder of the securities receives an offer
from a third party to purchase all or any of the securities, the Company or its nominees or assignees
shall have the right to acquire such securities of the Company.
The Company issued 3,000,000 common shares as finders’ fees with respect to the acquisition. (Note
10(b)(ii))
In conjunction with the transaction, Prescient carried out various equity and debt financings of
approximately $6,000,000 to fund the construction of AMI’s medical marijuana production facility.
(Notes 8(a), 9(b) and 10(b))
On closing of the RTO, the shareholders of AMI held approximately 57% of the issued and outstanding
shares of the Company. As a result, the shareholders of AMI controlled the Company and the
acquisition constituted a reverse take-over of Prescient by AMI. AMI’s assets, liabilities and operations
since incorporation were included in these consolidated financial statements at their historical carrying
values. The results of operations of Prescient from the date of acquisition of December 9, 2014 were
included in these consolidated financial statements.
Since Prescient did not meet the definition of a business under IFRS 3, Business Combinations (“IFRS
3”), the acquisition was accounted for as the purchase of Prescient’s assets by AMI. The consideration
paid was determined as equity settled share-based payment under IFRS 2, Share-based Payments
(“IFRS 2”), at the fair value of the equity of AMI retained by the shareholders of Prescient based on
the fair value of the AMI’s common shares on the date of closing of the RTO.
For RTO accounting purposes, the percentage ownership of the shareholders of Prescient in the
combined entity on completion of the RTO was 40% (being 42,000,471 of the total 105,000,471 issued
and outstanding shares of the Company on closing of the RTO). As a result, the notional number of
shares AMI would have to issue to transfer 40% of the Company to Prescient shareholders would be
53,334,000. Based on the share price of the private placement closed by AMI prior to the RTO of
$0.116 per share, the consideration received by the shareholders of Prescient amounted to $6,192,077.
The 20,000,000 performance shares issuable to the shareholders of AMI have been recognized as part
of RTO listing expense and obligation to issue shares reserves at the fair value of AMI shares.
13
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
3. Reverse Take-Over (“RTO”) (Continued)
The 11,250,000 RTO replacement warrants exercisable at $0.02 were issued to consultants and
therefore were revalued at the time of the RTO. The estimated fair value in excess of the fair value
estimated at the grant date was then allocated between the RTO listing expense and post RTO share-
based payments expense based on the relative proportions of the vesting period.
RTO replacement options were similarly revalued at the time of the RTO, however the estimated fair
value varied insignificantly from the grant date estimated fair value and therefore had no impact on the
RTO listing expense.
The terms of the 10,200,000 RTO replacement warrants, exercisable at $0.50 were subscribed for by
shareholders in conjunction with a private placement in the prior period, were not modified as a result
of the RTO, therefore no revaluation was required.
The Company recorded a listing expense of $5,060,932 in the consolidated statement of comprehensive
loss, the details of which are as follows:
Fair value of consideration:
53,334,000 notional common shares of AMI @ $0.116 per share
Estimated fair value of net assets of Prescient acquired by AMI
Other transaction costs:
20,000,000 performance shares @ $0.116 per share
Revaluation of warrants exchanged
3,000,000 common shares for finder’s fees
Transaction costs (legal, audit and filing fees)
RTO listing expense
$
6,192,077
(4,425,090)
1,746,987
2,322,000
509,759
348,300
113,886
5,060,932
The net assets of Prescient were included at their fair value of $4,425,090 (equal to the carrying value
of the assets) were allocated as follows:
Goods and services taxes recoverable
Share subscription receivable
Prepaid expenses
Advances to Aurora
Equipment
Bank indebtedness
Accounts payable and accrued liabilities
Loan payable
Estimated fair value of net assets acquired
14
$
15,065
2,250
53,546
6,010,000
653
(1,686)
(2,108)
(1,652,630)
4,425,090
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
4. Acquisition of Aurora Cannabis Enterprises Inc. (formerly 1755517 Alberta Ltd.) (“ACE”)
On May 1, 2014, AMI acquired 100% of the issued and outstanding shares of ACE in exchange for
8,000,000 Class D common shares of AMI (the "Transaction").
ACE did not meet the definition of a business under IFRS 3 and, therefore, the Transaction was
accounted for as the purchase of the net assets of ACE by AMI through the issuance of its shares in
accordance with IFRS 2.
As the consideration paid by AMI to acquire ACE was ultimately to individuals providing services
similar to employees, the Transaction was measured at the fair value of the equity instruments given
up and not the value of net assets received in accordance with IFRS 2. The 8,000,000 Class D common
shares issued had a fair value of $1,000,000. As the individuals are not party to a long-term contractual
arrangement with AMI and ACE does not own resources meeting the definition of intangible assets per
IAS 38, any excess of consideration paid over net assets received is considered a current period
compensation expense.
At May 1, 2014, ACE had a net deficit of $21,156, creating a net compensation expense of $1,021,156
as a result of this transaction.
5. Biological Assets
As at June 30, 2015, the Company’s biological assets which consisted of medical cannabis plants were
recorded at cost and no change in the fair value of biological assets was recognized as the Company
has not received its license to sell under the MMPR.
The Company commenced the process of growing medical cannabis in April, 2015. All of the plants
are to be harvested as agricultural produce.
15
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
6. Property, Plant and Equipment
Cost:
Balance, July 1, 2013
Additions
Balance, June 30, 2014
Additions
Balance, June 30, 2015
Building &
Improvements
$
-
4,201,324 (1)
4,201,324
6,067,741
10,269,065
Accumulated depreciation:
Balance, July 1, 2013
Depreciation
Balance, June 30, 2014
Depreciation
Balance, June 30, 2015
-
-
-
201,366
201,366
Production &
Other
Equipment
$
Computer
Software &
Equipment
$
-
-
-
478,226
478,226
-
-
-
58,808
58,808
-
36,723(1)
36,723
306,303
343,026
-
-
-
44,622
44,622
Total
$
-
4,238,047
4,238,047
6,852,270
11,090,317
-
-
-
304,796
304,796
Net Book Value:
June 30, 2014
June 30, 2015
4,201,324
10,067,699
-
419,418
36,723
298,404
4,238,047
10,785,521
(1) As at June 30, 2014, these assets were not available for use and no provision for depreciation was
recorded.
16
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
7. Investment in a Joint Venture
On April 7, 2015, ACI entered into a Limited Liability Partnership Agreement with AJR Builders
Group LLC and formed Australis Holdings LLP (“AHL”), a Washington Limited Liability Partnership.
Each of ACI and AJR holds a 50% interest in AHL.
AHL purchased two parcels of land totaling approximately 24.5 acres (the “Property”) in Whatcom
county, Washington for USD$2,300,000 to construct a new marijuana production and processing
facility.
Pursuant to a promissory note dated April 10, 2015, the Company through ACI loaned CAD$1,644,831
to AHL to fund the purchase of the Property. The note bears interest at a rate of 5% per annum and
matures on October 31, 2017. In the event of a default, interest will be charged at 12% per annum. The
note is secured by a first mortgage on one parcel of the Property and a second mortgage on the other
title as well as a general security agreement granting ACI security over all present and after acquired
property of AHL.
The following table summarizes the financial information of AHL:
(a) Statement of Financial Position:
June 30, 2015
US$
10,692
500
11,192
2,300,000
2,311,192
24,956
2,317,375
(31,139)
2,311,192
32,139
Cash and cash equivalents
Other current assets
Total current assets
Property, plant and equipment
Total assets (100%)
Total current liabilities
Long term loans
Total equity
Total liabilities and equity (100%)
(b) Statement of Loss and Comprehensive Loss:
Net loss and comprehensive loss (100%)
17
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
8. Short and Long Term Loans
Type of Loan
Short term
Unsecured term loan
Secured demand loan
Unsecured loans from related
parties
Unsecured advances from a
related party
Notes payable
(a)
(b)
(c)
(d)
(e)
8%
-
8%
Interest per
Annum
Maturity
2015
$
2014
$
8%
19.8%
Jun 27, 2015
Jan 4, 2016
421,715
974,827
Apr 1, 2016
2,549,316
-
-
-
-
Apr 30, 2018
841,530
-
845,725
1,000,000
4,787,388
1,845,725
Long term
Unsecured loans from related
parties
(f) See below
See below
2,018,000
-
(a) The Company entered into a loan agreement dated June 27, 2014 with an arm’s length party (the
“Lender”) in the principal amount of $500,000. In consideration for the loan, the Company issued
714,000 common shares to the Lender at a fair value of $99,960. During the year ended June 30,
2015, the Company made a partial principal payment of $100,000 (prior to the RTO) and paid or
accrued $34,983 in interest on this loan.
The Company is currently negotiating for an extension to the loan, however, there is no guarantee
that a deferral will be provided.
(b) Pursuant to a loan agreement dated April 4, 2015, the Company obtained a $1,000,000 secured
demand loan, payable on the earlier of demand or nine months from the date of the loan agreement.
Interest is compounded and payable monthly and the principal amount is due at the end of the term.
Default interest rate will be at 24% per annum. The loan is secured by the assets of the Company
and its subsidiaries pursuant to general security agreements, a leasehold mortgage on land leased
by 1769474, and corporate guarantees by the Company's subsidiaries.
The Company paid a facility fee of $40,000, being 4% of the principal amount of the loan, legal
fees of $6,500 and due diligence fees of $7,500. In addition, the Company pays a monitoring fee
of $2,500 per month to the lender. During the year ended June 30, 2015, the Company paid or
accrued interest of $47,300 and monitoring fees of $5,000 on this loan.
The proceeds from this loan were advanced to AHL through ACI by way of a promissory note
dated April 10, 2015. (Note 7)
18
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
8. Short and Long Term Loans (Continued)
(c) The Company signed promissory notes with companies controlled by the CEO and the President
of the Company dated April 1, 2015, to convert $2,500,000 of the advances from a related party
(Note 8(d)). Interest is compounded annually and principal and accrued interests are due on
demand on or before maturity. During the year ended June 30, 2015, the Company accrued $49,316
in interest on this loan.
Subsequent to June 30, 2015, the terms of these promissory notes were amended to have the same
terms as the loans in note 8(e) below.
(d) Advances from a related party are owing to a company controlled by the CEO and the President of
the Company. The advances are unsecured, non-interest bearing and have no fixed terms of
repayment. (Note 8(c))
(e) Pursuant to a loan agreement dated June 19, 2014, as amended, AMI obtained a $1,000,000 secured
loan from Prescient. The loan bears interest at 8% per annum, matures on April 30, 2018 and is
secured by a general security agreement. The loan was eliminated on consolidation subsequent to
the RTO.
(f) The Company received aggregate loans of $2,018,000 from companies controlled by the CEO and
the President of the Company. The loans are unsecured and mature on the later of: (i) the Company
reporting two consecutive profitable quarters; and (ii) August 1, 2016. No interest shall be paid on
the loans until the Company reports a positive cash flow quarter and at such time, the loans will
bear interest at 4% per annum, compounded annually.
Subsequent to June 30, 2015, an additional loan of $982,000 was received from a company
controlled by the President of the Company having the same terms as above.
9. Convertible Notes
(a) On August 29, 2014, the Company issued unsecured, non-interest bearing convertible notes for
aggregate proceeds of $1,500,000 (the “Notes1”) to companies controlled by the CEO and the
President of the Company as settlement of the advances outlined in Note 8(d). The Notes1 have a
term of five years maturing August 29, 2019. The lenders may, at their option, convert all or any
portion of the outstanding amount of the Notes1 into common shares of the Company at a price of
$0.125 per share.
During the year ended June 30, 2015, the lenders assigned an aggregate of $1,009,000 of the Notes1
(the “Assigned Notes”) to arm’s length parties and the Company issued an aggregate of 8,072,000
common shares on the conversion of the Assigned Notes. $375,438 was reclassified from reserves
to share capital on the conversion of these notes.
Subsequent to June 30, 2015, the lenders assigned $491,000 of the Notes1 and 3,928,000 common
shares were issued on conversion of the Assigned Notes.
19
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
9. Convertible Notes (Continued)
(b) On November 24, 2014 and December 1, 2014, the Company issued secured convertible notes for
$1,000,000 and $250,000, respectively (the “Notes2”). The Notes2 have a term of one year and
bear interest at a rate of 8% per annum, payable on conversion or maturity. The lenders may, at
their option, convert all or any part of the outstanding amount of the Notes2 into common shares
of the Company at a price of $1.01 per share. Subject to the approval of the Exchange, the Company
may reduce the conversion price of the Notes2.
The liability component of the Notes1 and Notes2 was valued using Company specific interest rates
assuming no conversion features existed. The debt component is accreted to its fair value over the term
to maturity as a non-cash interest charge and the equity component is presented in convertible notes
reserve as a separate component of shareholders’ equity.
Balance, June 30, 2014
Issued
Equity portion
Conversion
Accretion
Accrued interest
Balance, June 30, 2015
10. Share Capital and Reserves
(a) Authorized
Long Term
(a)
$
-
1,500,000
(754,235)
(558,989)
87,232
-
Short Term
(b)
$
-
1,250,000
(44,643)
-
26,492
59,343
274,008
1,291,192
The Company is authorized to issue an unlimited number of common voting shares without par
value.
(b) Issued and outstanding
At June 30, 2015, there were 118,794,138 issued and fully paid common shares (2014 –
80,000,000).
(i) On January 22, 2015, the Company issued 30,000 common shares at a fair value of $12,600
for consulting services.
(ii) On December 9, 2014, the Company acquired all of the issued and outstanding shares of AMI
for 60,000,000 common shares of the Company. The Company issued 3,000,000 common
shares at a value of $348,300 for finder’s fees with respect to this transaction. (Note 3)
20
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
10. Share Capital and Reserves (Continued)
(b) Issued and outstanding (continued)
(iii) During the year ended June 30, 2015, 2,725,667 stock options were exercised for gross
proceeds of $57,883. Non-cash compensation charges of $185,616 were reclassified from
reserves to share capital on the exercise of these options.
(iv) During the year ended June 30, 2015, 2,966,000 warrants were exercised for gross proceeds
of $116,600. Non-cash compensation charges of $216,835 were reclassified from reserves to
share capital on the exercise of these warrants.
(v) During the year ended June 30, 2015, an aggregate of 8,072,000 common shares were issued
on the conversion of $1,009,000 of the convertible notes. (Note 9(a))
(vi) On May 30, 2014, AMI issued 20,400,000 common share units consisting of one Class C
common share and one-half warrant to purchase a Class C common share for $0.50 for a
period of three years for consideration of $0.125 per unit. At June 30, 2014, proceeds for
720,000 common share units ($90,000) remain receivable from the subscriber. During the
year ended June 30, 2015, the Company received the full amount of the proceeds.
(vii) On May 1, 2014, the Class A and B shareholders of AMI entered into share exchange
agreements pursuant to Section 86 of the Income Tax Act (Canada) whereby the 360,000
Class A and 360,000 Class B shares outstanding were exchanged for 25,800,000 Class E and
25,800,000 Class F shares.
(viii) On May 1, 2014, AMI entered into rollover agreements pursuant to Subsection 85(1) of the
Act with the shareholders of ACE. AMI issued 8,000,000 Class D shares in consideration of
acquiring all the outstanding shares of ACE. (Note 4)
(c) Escrow securities
Pursuant to an escrow agreement dated September 18, 2014, 60,000,000 common shares of the
Company were deposited into escrow with respect to the RTO (Note 3). In addition, warrants to
purchase up to 15,000,000 common shares of the Company at $0.02 per share expiring December
9, 2019 and stock options to acquire up to 4,000,000 common shares of the Company at a price of
$0.001 per share expiring December 1, 2019 are also subject to the escrow agreement.
Under the escrow agreement, 10% of the escrowed common shares were released from escrow on
December 9, 2014, the date of closing of the RTO, and 15% are to be released every six months
thereafter over a period of thirty-six months. The common shares to be issued and deposited in
escrow on the exercise of warrants and options will be subject to the same schedule of release.
21
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
10. Share Capital and Reserves (Continued)
(c) Escrow securities (Continued)
A summary of the status of the escrowed securities outstanding follows:
Shares
#
Stock Options
#
-
60,000,000
-
3,850,000
(16,562,500)
42,287,500
-
4,000,000
-
(1,600,000)
-
2,400,000
Warrants
#
-
15,000,000
(3,750,000)
(2,250,000)
-
9,000,000
Balance, June 30, 2014
Issued
Cancelled
Issued/Exercised
Released
Balance, June 30, 2015
(d) Stock options
The Company has an incentive stock option plan, which provides that the Board of Directors of the
Company may from time to time, in its discretion, and in accordance with the Exchange
requirements, grant to directors, officers, employees and consultants, non-transferable options to
purchase common shares, provided that the number of common shares reserved for issuance will
not exceed 10% of the issued and outstanding common shares of the Company.
A summary of the status of the options outstanding follows:
Balance, June 30, 2014
Prescient options outstanding at RTO
Granted
RTO replacement options (Note 3(a)(iii)
Exercised
Forfeited
Balance, June 30, 2015
Stock
Options
#
-
1,528,000
2,800,000
4,000,000
(2,725,667)
(1,098,333)
4,504,000
Weighted
Average
Exercise Price
$
-
0.05
0.63
0.001
0.02
0.92
0.17
1
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
10. Share Capital and Reserves (Continued)
(d) Stock options (continued)
The following table summarizes the stock options outstanding as at June 30, 2015:
Exercise Price Options Outstanding
#
2,400,000
50,000
25,000
85,000
144,000 (i)
450,000
150,000
300,000
350,000
200,000
100,000
250,000
4,504,000
$
0.001
0.05 (ii)
0.05 (ii)
0.05 (ii)
0.15
0.295
0.34
0.39
0.40
0.42
0.425
0.70
Expiry Date
December 1, 2019
April 1, 2020
May 31, 2021
March 19, 2024
October 29, 2017
June 2, 2020
May 23, 2020
March 16, 2020
March 10, 2019
January 19, 2020
February 27, 2020
September 2, 2019
Options Exercisable
#
1,600,000
50,000
25,000
85,000
144,000
450,000
-
75,000
-
33,333
16,666
187,500
2,666,499
(i) These stock options were granted to two charitable organizations.
(ii) During the year ended June 30, 2014, the exercise price of these stock options was reduced to
$0.05 per share. These options had original exercise prices of between $0.10 and $0.15 per share.
During the year ended June 30, 2015, the Company recognized aggregate share-based payments of
$566,969 (For the period from September 11, 2013 (date of incorporation) to June 30, 2014 - $Nil)
for all stock options granted and vested during the period, of which $415,098 relates to the RTO
replacement options.
The fair value of stock options used to calculate share-based payments has been estimated using
the Black-Scholes option pricing model using the following weighted average assumptions:
For the period from
September 11,
2013 (date of
incorporation) to
June 30, 2014
-
-
-
-
-
2015
0.92%
0%
80.0%
1.79 years
5%
Risk-Free Annual Interest Rate
Expected Annual Dividend Yield
Expected Stock Price Volatility
Expected Life of Options and Warrants
Forfeiture rate
2
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
10. Share Capital and Reserves (Continued)
(d) Stock options (continued)
The weighted average fair value of stock options granted during the year ended June 30, 2015 was
$0.65 (For the period from September 11, 2013 (date of incorporation) to June 30, 2014 - $Nil) per
option.
As at June 30, 2015, stock options outstanding have a weighted average remaining contractual life
of 4.48 years.
(e) Share purchase warrants
Each whole warrant entitles the holder to purchase one common share of the Company. A summary
of the status of the warrants outstanding follows:
Balance, June 30, 2013
Class A warrants issued (1)
Warrants issued to class C shareholders (2)
Balance, June 30, 2014
Prescient warrants outstanding at RTO
AMI warrants cancelled (Note 3) (1) (2)
RTO replacement warrants (Note 3(a)(ii)) (1) (2)
Exercised
Balance, June 30, 2015
Warrants
#
-
15,000,000
10,200,000
25,200,000
1,530,000
(25,200,000)
21,450,000
(2,966,000)
20,014,000
Weighted average
exercise price
$
-
0.02
0.50
0.21
0.25
0.21
0.25
0.04
0.28
(1) These warrants were initially issued by AMI for consulting services; exercisable for a period
of five years from issuance to purchase one Class A share of AMI at a price of $0.02 per
share. The Class A warrants vest at the time at which AMI achieves certain performance
milestones, estimated to be one year from the date of issuance. The grant date fair value of
these warrants was estimated as $0.0043 per warrant based on the following assumptions:
Volatility rate - 70%; Risk-free interest rate - 1.67%; Dividend yield rate - 0.00%; Weighted
average life - 5 years.
Of the aggregate fair value for the Class A warrants of $64,658, $42,550 was recognized as
compensation expense in the period from September 5, 2013 (date of incorporation) to June
30, 2014.
3
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
10. Share Capital and Reserves (Continued)
(e) Share purchase warrants (continued)
Effective December 9, 2014, these warrants were cancelled and the Company issued
11,250,000 RTO replacement warrants exercisable at $0.02 per share (Note 3(a)(ii)). The
warrants were revalued at $0.10 per warrant based on the following assumptions: Volatility
rate - 80%; Risk-free interest rate - 1.01%; Dividend yield rate - 0.00%; Weighted average
remaining life - 1 year. The aggregate incremental estimated fair value of $1,019,519 was
allocated $509,759 to the RTO listing expense and $509,759 to be recognized over the
remaining estimated vesting period. During the year ended June 30, 2015, $305,618 of
share-based payments expense was recognized related to these warrants.
(2) These warrants were exercisable for a period of three years from issuance to purchase one
Class C share of AMI at a price of $0.50 per share. The fair value of these warrants at grant
date was estimated as $0.0178 per warrant based on the following assumptions: Volatility
rate - 70%; Risk-free interest rate - 1.52%; Dividend yield rate - 0.00%; Weighted average
life - 3 years.
The aggregate fair value of the Class C warrants of $181,560 was fully recognized in equity
as at June 30, 2014.
Effective December 9, 2014, these warrants were cancelled and the Company issued RTO
replacement warrants of 10,200,000 at $0.50 per share (Note 3(a)(ii)).. As the terms of these
warrants were not modified, they were not revalued at the time of the RTO.
The following table summarizes the warrants outstanding as at June 30, 2015:
Exercise Price
$
0.02
0.10
0.10
0.50
1.01
Warrants
#
9,000,000
173,000
391,000
10,200,000
250,000
20,014,000
Expiry Date
December 9, 2019
June 27, 2016
July 15, 2016
December 9, 2017
September 18, 2015
As at June 30, 2015, share purchase warrants outstanding have a weighted average remaining
contractual life of 3.28 years.
4
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
10. Share Capital and Reserves (Continued)
(f) Performance shares and warrants
Pursuant to the RTO, the Company is obligated to issue the following conditional performance
shares and warrants: (Note 3(b))
(i) 20,000,000 common shares shall be issued to the former AMI shareholders upon achievement
of performance milestones, being the Company’s receipt of production and sales licenses and
registration of at least 2,000 patients under the licenses. The fair value of these shares was
included in RTO listing expense. (Note 3)
(ii) 3,750,000 five-year term warrants exercisable at $0.02 per share issued upon completion of
funding milestones. On April 21, 2015, these performance warrants were cancelled as the
funding milestones were not met.
11. General and Administration
For the period
from September
11, 2013 (date of
incorporation) to
June 30, 2014
$
-
11,599
-
16,418
59,646
83,651
-
-
-
15,166
109,900
296,380
June 30, 2015
$
67,282
27,026
17,700
178,779
330,802
359,257
174,180
9,048
22,868
51,448
497,212
1,735,602
Consulting fees
Insurance
Management fees
Office and administration
Professional fees
Production costs
Rent and utilities
Regulatory fees
Transfer agent and shareholder communication
Travel and entertainment
Wages and benefits
5
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
12. Marketing and Promotion
Advertising and promotion
Consulting fees
Travel and entertainment
Wages and benefits
13. Finance and Other Costs
Financing fees
Accretion expense
Loss on investment
Interest expense
Bank charges
For the period
from September
11, 2013 (date of
incorporation) to
June 30, 2014
$
81,561
69,549
51,628
4,106
206,844
For the period
from September
11, 2013 (date of
incorporation) to
June 30, 2014
$
-
-
-
-
-
-
June 30, 2015
$
368,813
196,723
323,452
132,819
1,021,807
June 30, 2015
$
29,527
113,723
2,347
177,412
2,599
325,608
6
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
14. Related Party Transactions
(a) Related party transactions
The Company incurred the following transactions with companies having directors and officers in
common:
Consulting fees paid to directors of ACE
RTO listing expense paid or accrued to a company
controlled by an officer of the Company
Professional and other fees paid or accrued to a director
and an officer of the Company
For the period
from September
11, 2013 (date of
incorporation) to
June 30, 2014
$
217,187
-
-
217,187
June 30, 2015
$
300,000
71,120
2,039
373,159
In addition to the above, $1,554,545 (for the period from September 11, 2013 (date of
incorporation) to June 30, 2014 - $598,546) was advanced to the Company by companies controlled
by directors and officers of the Company through payment of startup expenditures and working
capital needs. The resultant related party balances are included in Note 14(c).
(b) Compensation of key management personnel
The Company’s key management personnel have authority and responsibility for planning,
directing and controlling the activities of the Company and consist of its management directors,
Chief Executive Officer and Chief Financial Officer.
Management fees
Share-based payments (i)
For the period
from September
11, 2013 (date of
incorporation) to
June 30, 2014
$
-
-
-
June 30, 2015
$
16,200
60,829
77,029
(i) Share-based payments are the fair value of options granted and vested to key management
personnel under the Company’s stock option plan (Note 10(d)).
7
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
14. Related Party Transactions (Continued)
(c) Related party balances
The following related party amounts are included in (i) accounts payable and accrued liabilities,
(ii) prepaid expenses and deposits, (iii) convertible notes, (iv) short term loans and (v) long term
loans:
(i) Companies controlled by directors and officers of the
Company (i)
(i) Directors of the Company (i)
(ii) A company having a director in common
(iii) A company controlled by a director and officer of the
Company (Note 9(a))
(iv) Companies controlled by directors and officers of the
Company (Note 8(c))
(iv) A company controlled by directors of officers of the
Company (Note 8(d)) (i)
(v) Companies controlled by directors and officers of the
Company (Note 8(f))
2015
$
59,946
17,717
1,500
274,008
2,549,316
841,530
2,018,000
2014
$
37,601
-
-
-
-
-
-
(i) The amounts are unsecured, non-interest bearing and have no specific repayments term.
8
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
15. Leases and Other Commitments
The Company entered into the following office and operating leases:
(a) 1769474 has an operating lease on lands located in Cremona, Alberta (the “Lands”) for monthly
rent payments of $5,000. The lease expires on November 14, 2019, with an option to extend for an
additional five-year term. The Company has the option to purchase the Lands during the additional
term.
(b) The Company is committed under lease agreements with respect to two office premises located in
Vancouver, British Columbia, expiring January 31, 2020 and June 30, 2020, respectively, as
follows:
2016
2017
2018
2019
2020
$
142,704
144,084
145,464
146,844
122,342
701,438
16. Financial Instruments and Risk Management
(a) Fair value of financial instruments
The Company’s financial instruments consist of cash and cash equivalents, shares subscription
receivable, note receivable, accounts payable and accrued liabilities, short term loans, convertible
notes and long term loans. The carrying values of these financial instruments approximate their
fair values as at June 30, 2015.
Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects
the significance of the inputs to fair value measurements. The three levels of hierarchy are:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly
or indirectly; and
Level 3 – Inputs for the asset or liability that are not based on observable market data.
9
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
16. Financial Instruments and Risk Management (Continued)
(a) Fair value of financial instruments (continued)
Fair Value as at
June 30, 2015
Basis of Measurement Financial Instruments
315,853
Carrying value
Loans and receivables
Financial Assets
Cash and cash equivalents
Financial Liabilities
Accounts payable
1,323,224
Carrying value
Short term loans
4,787,388
Carrying value
Long term loans
2,018,000
Carrying value
Convertible notes (1)
1,565,200
Fair value / Carrying
value
Other financial
liabilities
Other financial
liabilities
Other financial
liabilities
Other financial
liabilities
(1) The fair value of the convertible loan includes both the debt and equity components.
There have been no transfers between fair value levels during the year.
(b) Financial instruments risk
The Company is exposed in varying degrees to a variety of financial instrument related to risks.
The Board approves and monitors the risk management processes:
(i) Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument
fails to meet its contractual obligations. The Company is subject to credit risk on the cash
balances at the bank and interest receivable. Management considers that risks related to credit
are minimal.
(ii) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations
associated with financial liabilities. The Company manages liquidity risk through the
management of its capital structure. The Company’s approach to managing liquidity is to
ensure that it will have sufficient liquidity to settle obligations and liabilities when due.
10
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
16. Financial Instruments and Risk Management (Continued)
(b) Financial instruments risk (continued)
(ii) Liquidity risk (continued)
The Company is dependent on the availability of credit from its suppliers and its ability to
generate sufficient funds from equity and debt financings to meet current and future
obligations. There can be no assurance that such financing will be available on terms
acceptable to the Company. See note 1. Maturities of liabilities are as follows:
Total
$
<1 year 1 – 3 years 3 -5 years
$
$
$
Accounts payable and accrued liabilities
Loans
Convertible notes
1,323,224
6,805,388
1,565,200
9,693,812
1,323,224
4,787,388
1,291,192
7,401,804
-
2,018,000
-
2,018,000
-
-
274,008
274,008
(iii) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. Cash and cash equivalents bear interest
at market rates. The Company’s short-term loans and convertible loans are either non-interest
bearing or have fixed rates of interest and therefore expose the Company to interest rate fair
value risk.
17. Capital Management
The Company’s objectives when managing capital are to ensure that there are adequate capital
resources to safeguard the Company’s ability to continue as a going concern and maintain adequate
levels of funds to support its operations and development such that it can continue to provide returns to
shareholders and benefits for other stakeholders.
The capital structure of the Company consists of items included in shareholders’ equity and debt, net
of cash and cash equivalents. The Company manages its capital structure and makes adjustments to it
in light of changes in economic conditions and the risk characteristics of the Company’s underlying
assets. In order to maintain or adjust its capital structure, the Company may issue new shares or seek
debt financing to ensure that there is sufficient working capital to meet its short-term business
requirements. There were no changes in the Company’s approach to capital management during the
year ended June 30, 2015.
The Company is not subject to externally imposed capital requirements.
11
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
18. Income Taxes
The net tax provision differs from that expected by applying the combined federal and provincial tax
rates of 26% (2014- 25%) to loss before income tax for the following reasons:
Loss before tax
Combined federal and provincial rate
Expected tax recovery
Non-deductible expenses
Effect of change in tax rates
Changes in deferred tax benefits not recognized
Income tax recovery
Deferred tax assets and liabilities are attributable to the following:
Deferred tax assets (liabilities)
Property and equipment
Non-capital losses
Eligible capital expenditures
Share issuance costs
Finance costs
Convertible notes
Net deferred tax assets
Deferred tax benefits not recognized
2015
$
2014
$
(9,726,077)
26%
(2,528,780)
1,344,589
8,852
967,631
(207,708)
(1,823,535)
25%
(455,884)
234,593
-
221,291
-
2015
$
2014
$
(136,221)
1,324,749
365
47,516
13,650
(61,137)
1,188,922
(1,188,922)
-
201,928
363
19,000
-
-
221,291
(221,291)
-
-
The Company has non-capital losses of approximately $5,063,775 (2014 - $807,711) which are
available for deduction against future taxable income until 2034 to 2035.
The change in the statutory tax rates relates to enacted changes to tax rates effective at June 30, 2015.
19. Segment Information
The Company operates in one segment, the production of medical cannabis.
All of the Company’s assets are located in Canada.
12
AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Year ended June 30, 2015 and for the period from
September 11, 2013 (date of incorporation) to June 30, 2014
(In Canadian Dollars)
10.
20. Subsequent Events
The following events occurred subsequent to June 30, 2015:
a) 1769474 entered into a mortgage financing (the “Mortgage”) of $1,550,000 on its production
facility on approximately 154 acres of land located in Cremona, Alberta (“Mortgaged Property”).
The Mortgage has a term of six (6) months at a rate of 12% for the duration of the term, calculated
and compounded monthly, and is secured by a first mortgage on the Mortgaged Property and
corporate guarantees by the Company, CEO of the Company and a company owned by the CEO
and the President of the Company. 1769474 shall pay $15,500 per month towards interest and 2.5%
brokerage fees on the principal amount of the loan.
b) An aggregate of 1,760,000 common shares were issued on the exercise of 1,760,000 options for
gross proceeds of $9,600. Non-cash compensation charges of $1,358,518 were reclassified from
reserves to share capital on the exercise of these options.
c) An aggregate of 321,000 common shares were issued on the exercise of 321,000 warrants for gross
proceeds of $32,100.
d) The following stock options were granted to directors, officers, employees and consultants of the
Company:
Exercise Price
$
0.30
0.30
0.295
0.30
0.285
0.30
0.30
0.32
0.34
Expiry Date
August 10, 2020
August 14, 2020
August 26, 2020
September 1, 2020
September 1, 2018
September 8, 2018
September 8, 2018
September 21, 2020
October 9, 2016
Options
#
350,000
910,000
250,000
350,000
150,000
200,000
150,000
250,000
250,000
2,860,000
13